House Flipping: Reviving the Real Estate market

Fellow Funders Real Estate launches new funding round for Re-Aviva’s House Flipping Puerta de Hierro project.

The RAE (Spanish Royal Academy of Language) defines the term “paradox” as “a saying or fact that is contrary to logic”. Well, the housing market situation during the pandemic forced confinement turned out to be paradoxical. The real estate market was one of the hardest hit by the health crisis, forcing the various players to cut costs and seek alternative sources of financing. As a result of force majeure, our homes became our most valuable asset. However, this increase in value was inversely proportional to the variation in real estate operations and transactions.

Fortunately, the time for recovery has come in the best way one could wish for, as a “V”. This letter starts the word “sale” in Spanish. Just like the letter V, whose extremes are at the same height, it is the real estate market. It not only returned to its pre-pandemic peak but surpassed it.

Maximum number of transactions since 2008

According to data provided by ABC, a total of 267,715 real estate transactions took place in Spain during the first half of this year. This figure exceeds the 266,018 transactions recorded in the first half of 2019, before COVID-19. Moreover, this figure marks an all-time high since the outbreak of the 2008 crisis.

Vaccination is advancing rapidly and effectively, as well as the accumulated savings during the pandemic increases investment forecasts. Real estate has been revalued by telecommuting and in the face of possible future health crises. All this forms an explosive cocktail that has “rekindled” the real estate flame stronger than ever.

The other significant post-COVID paradigm shift concerns the sources of financing for developers. Banks tightened the financing conditions for real estate developers after the financial crisis. Consequently, alternative financing became a necessity. After COVID, alternative financing became a priority due to the increased timelines for projects under development during the pandemic.

Fellow Funders supports the industry.

Fellow Funders and alternative financing come into play. Our company launched the real estate division in April to help revive the sector. So, what better way to do it than with a developer such as Re-Aviva? Re-Aviva came to us with a business. A business that has usually been developed by individuals and small entrepreneurs in Spain. However, it has not reached the professionalization that other countries such as the United States have. This business is known as house flipping.

This activity, which consists of acquiring real estate to renovate and revalue it before its sale, had some previous references in our blog. Regarding the projects together with Re-Aviva, we have chosen some that transform commercial premises into residential buildings (often also incorporating storage rooms).

These projects are especially attractive to our investors due to their interesting short-term profitability and controlled risk. For this reason, we raised 2.5 million euros for the rehabilitation of three spaces located in the Madrid areas of Delicias, Cuzco and Fuente del Berro in our first three rounds.

New projects on the horizon

However, Fellow Funders Real Estate does not stop there. It expects to close 2022 with a total investment of 15 million euros.At the moment, hand in hand with Re-Aviva, we aim to reach the figure of 3 million with the addition of our next project: House Flipping Puerta de Hierro.

The project aims at purchasing commercial premises in Puerta de Hierro (Madrid) to transform them into housing and storage rooms. For this purpose, we opened a €510,000 equity crowdfunding funding round. The company expects to sell the storage rooms soon and avoid resorting to additional bank financing, increasing the estimated profitability, which initially stands at 14% in 10 months.

Fellow Funders has high expectations for this round and the rounds to be launched on the platform in the coming months. Our company found in house flipping an opportunity to revive the real estate market, as well as to provide moderate risk projects and short-term returns for our client’s investment portfolios. We encourage you to invest in them through our platform!

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