Notice to small portfolios: it is now possible to invest in the purchase of real estate from 100 euros and to draw rental income from it. The investor holds a real estate certificate, ie a debt security that gives the right to 100% of future income generated by rents and real estate capital gains. An opportunity offered by the Belgian start-up Scargo which put a first property up for sale on Wednesday 2 November.
The idea of François Kiesecoms, ex-CEO of the legaltech Legacio, is to democratize real estate investment and allow everyone to become an owner in a few clicks via Scargo. “For many, and especially for young people of my generation, the personal contribution is a real obstacle to real estate investment, especially in an economic context where rates are soaring, underlines the young entrepreneur. The rate of 20-year loan, which was trading at 1.3% in 2021, today reaches between 3 and 4%.
The idea of François Kiesecoms, ex-CEO of the legaltech Legacio, is to democratize real estate investment and allow everyone to become an owner in a few clicks via Scargo. “For many, and especially for young people of my generation, the personal contribution is a real obstacle to real estate investment, especially in an economic context where rates are soaring, underlines the young entrepreneur. The rate of 20-year loan, which was trading at 1.3% in 2021, today reaches between 3 and 4%. Concretely, Scargo selects properties that can generate interesting rental income and increase in value over time. Once the building has been unearthed, the price is negotiated, the compromise signed and the property put online on the platform in order to be financed by individuals who buy one or more fractions of 100 euros. The maximum investment is set at 5,000 euros per property. “The main difference with a real estate share or a fund is that here the investor can choose the properties in which he will invest and thus constitute his own investment strategy”, explains François Kiesecoms. The investment made via Scargo gives the right to receive monthly rents generated by the property in proportion to the fractions of 100 euros purchased. These give right, in the same way, to the capital gain generated at the time of the resale of the property, generally 7 to 10 years later. What return to expect? The performance and profitability announced will depend on a property to another, depending on the market. Let’s take the example of the first property that is open to financing, it is a building located in Antwerp. “If you invest 1,000 euros, you can expect a gain of 88 euros per year, assures François Kiesecoms. Part of this return comes from rents. You will receive part of these every month, less charges and the repayment of the loan, which generates a little more than 46 euros per year, i.e. a little less than 4 euros paid monthly, to which is added the capital gain that you will generate on your fractions which I estimate at a little more than 41 euros per year as well.” Some properties will be bank financed, others will not. The cost of the Antwerp project is 50% financed by a bank loan and 50% by investors. “But 100% of the income generated goes back to the investors, assures the founder of Scargo. The loan makes it possible to activate the leverage effect and to offer higher profitability.” Profitability estimated in this case at 8%. The amount that is raised from the bank and investors includes the acquisition price of the property, but also ancillary costs, such as registration fees, works, refreshments, furnishings, etc. A model that aims short-term rentalScargo works with the BeeBonds crowdlending platform, which enables it to market its placement offers to the general public. “What we find a lot on crowdfunding platforms are real estate development projects. Developers who build new buildings and who, to finance the construction or part of the project, appeal to the public. They will return an interest that is fixed for a period of three years in general. Scargo is on a different model: we offer investors fractions of properties that will be rented tomorrow. The return generated will be relatively stable over the long term. “The strategy of the Belgian start-up focuses on short-term rentals, i.e. it bets on properties and markets that are interesting for rentals aimed at tourists and business travelers who will be staying between 1 and 30 nights. “This strategy makes it possible to increase the profitability of properties and to offer attractive conditions to investors, explains the entrepreneur. In addition, our long-term vision is to allow investors, during their trips abroad, to to be able to stay in the properties they invest in. But that’s for later when we offer properties across Europe.” Because, once its model is well established, Scargo aims to buy properties located in France, the Netherlands or Germany. “But one thing at a time”, smiles François Kiesecoms who intends to remain focused on Belgium at first, by offering investors one property per month. What are investors really buying? Investors will not actually own the property itself, but they will hold a real estate certificate, a debt security that gives the right to future income generated by rents and real estate capital gains, in proportion to their investment. This type of debt is easy to assign, making buying and reselling fractions much simpler. This also has an impact on the taxes to be paid. The investor will pay a withholding tax of 30% on the rents and the real estate capital gain, as for a dividend of a share or a bond. For the resale, it will be necessary to go to the place of secondary market Euronext Expert Market, a platform through which you can trade unlisted securities, on which there is already liquidity. “Scargo will do everything to make the experience as simple as possible, assures François Kiesecoms. investment will be maximized if you stay in the project until the resale of the property, expected within 7 to 10 years.”Anne-Sophie Chevalier