Real estate crowdfunding – An alternative source of financing

Sammanfattning: The goal of this paper is to examine the possibility to use crowdfunding as an alternative to the traditional real estate financing solutions. We have decided to focus on the project owners’ perspective contrary to the investors’ side. During the 80’s and 90’s there was a great influx of venture capital to the start-up market, however, financial crisis of 2000 resulted in a faded interest regarding investing in start-ups. The financial crisis and the new rules regarding banks outgoing loan balance, introduced after the crisis of 2008, Basel III, which created a real estate market that is very hard to penetrate for new developers and small businesses. When the real estate market was at its peak in Sweden it was common to find projects were banks represented 90 percent of the total capital, but the equivalent number today is commonly not representing more than 60 percent. The current state of the market creates a rough climate and difficulties for developers, who are continuously searching for new capital. This is where the notion of crowdfunding becomes important and where support from companies such as Tessin gives a developer the opportunity to bring forth the capital needed to create a project that will create value for its investors. Whether crowdfunding is a complement to traditional funding is what this paper aim to answer. The focus company of this research is Tessin, through conducted interviews, and secondary research about the company and the real estate market, this paper aspire to find out what is a reasonable goal for real estate crowdfunding in Sweden and for Tessin as a platform.