Q: What is Real Estate Crowdfunding Dot CoZa?
A: Real Estate Crowdfunding Dot CoZa is an online funding platform that enables funders to find investment opportunities for real estate projects and developments. The platform also serves as a venue for property investees and developers to present their projects and ideas to secure an alternative source of finance, helping them find like-minded people willing to invest.
Q: What is so special about it?
A: What makes Real Estate Crowdfunding Dot CoZa so unique is that it presents investors with opportunities and services that they would not have come across using traditional means. Furthermore, it also allows investees to reach a wider audience. This audience also creates opportunities for smaller investors to enter the development market without putting up more capital than they are comfortable with.
Traditionally, commercial real estate has been the investing ground of the wealthy and high net-worth individuals. High prices, stringent lending criteria, and specialized knowledge were often barriers to enter the marketplace for smaller investors, limiting their ability to participate in this most lucrative part of the real estate investing.
Real Estate Crowdfunding Dot CoZa opens the door to smaller funders and investors to participate in these gainful investments.
Q: What is the difference between “Investee”, “Investor” and “Funder”
A: Investee is a person or a company who has received funds in order to realize profit or an advantage for its investors.
Investor is a person or a company that provides funds to investee for a gain.
Funder is a person or a company that funds a project for a gain. Such funding can be equity based or debt based.
At the moment we only facilitate equity funding.
Q: What is the difference between equity funding and debt based funding?
A: “Debt funding” involves borrowing money from the Funder which is to be repaid back to the Funder with interest.
“Equity funding” involves raising money by selling interests in the company or a property.
In other words, Equity funding is money/funds being raised/received in return for equity – in form of shares, percentage or portion – of the company or a property.
In property terms investors/funders provide money to own shares in the property. They give money based on the accepted valuation of the property.
i.e. If the property’s value is R 1 000 000.00 – by equity funding R100 000.00 – investor will own 10% of the property. As such he is one of the owners and shareholders.
Debt funding is providing funds/money on a loan basis in return for a gain – normally interest and funding charges apply.
A Funder who provides equity – i.e. Bank – does not own the property. The Investee, who received the funds, would own the property. Normally, as security to the Funder, a first covering mortgage bond is registered over the property in favor of the Funder. This secures Funder’s interest in case investee is not able to pay the loan back.
It is important to mention that Real Estate Crowdfunding Dot CoZa is equity based funding platform.
Q: How can I raise finance through Real Estate Crowdfunding Dot CoZa?
A: You cannot finance your property or project through Real Estate Crowdfunding Dot CoZa at the moment as the law the prohibits that way of funding.
If you have a property opportunity, a project or a development – you can raise equity funding by getting partners with money on board.
If you have secured the property below the value and there is equity more than the property’s value – you might be able to raise equity funding needed and stay in the deal for the extra equity available.
Q: How does the platform work?
A: Investees list their projects, investment properties, and/or developments on the website looking for funds. They pay the administration fee of R5000.00 (which is refunded if their project is successful), supply and upload all relevant documentation, explain the project/investment/
Funders come to the website looking for opportunities to invest in. They find an appealing opportunity, they register their interest, receive the documentation, investigate it and, if happy pledge funds towards the opportunity.
Q: How does the whole process work?
A: In short, this is how the process works:
Investee registers on the website
Investee registers and lists his/her investment/development/project on the platform with brief project/property description
An email is sent out with required documentation
Investee pays R5000.00 admin fee and supplies all the documents
Documents are thoroughly checked by a real estate professional – property investment/development/project goes live on the website
If documentation is not satisfactory – more documents are requested
Funders register on the website:
Funder goes through the property investment opportunities available
Registers his/her interest in opportunities that look lucrative
Detailed information regarding the opportunity is emailed to the funder
Funder scrutinizes the documentation from various opportunities and chooses the ones of interest
Funder logs into the website and pledges investments amount
Reference and banking details are emailed to the funder
These are to be used to pay the amount pledged into the lawyer’s trust account
Funder pays the pledged amounts with relevant references
If funding is successful:
Funder is notified, a (SPV) PTY registered for this purpose and meeting of shareholders arranged to take it further
Lawyers proceed with the transfer
If funding is not successful – all amounts paid are returned to funders
Investees are notified accordingly and then can choose to list the property on:
Maximum One Property Group to broker the deal
JB Auctioneers for a quick sale
Repackage the deal and relist on Real Estate Crowdfunding Dot CoZa (admin fee applicable)
Q: How much does this cost?
A: Real Estate Crowdfunding Dot CoZa is free to register for everyone.
If an Investee is looking to list an opportunity for funding – an admin fee of R5000.00 is payable. This admin fee is in lieu of the work needed and associated with scrutinizing the property and funder documentation. This is done by a qualified employee at Real Estate Crowdfunding Dot CoZa.
This R5000.00 admin fee is refundable in full if the fund raising is successful. If funding is successful, a 5% raising fee is charged against the funds raised.
If fund raising is not successful – the fee paid will go in lieu of the administrative work done by Real Estate Crowdfunding Dot CoZa.
Q: Is this a registered business or some fly-by-night business?
A: Baarang Investments Pty (Ltd) t/a Real Estate Crowdfunding Dot CoZa is registered with the Estate Agency Affairs Board, a Registrar of Companies and in the finalization process of registration with the Financial Services Board.
Real Estate Crowdfunding Dot CoZa director is also a director of other companies – like Maximum One Sai Dai Property Group – a company duly registered with all relevant authorities including Estate Agency Affairs Board. It has been in operation since 1993 as a Close Corporation and converted to PTY company in 2006.
Q: How do I know that is not a scam or Ponzi Scheme?
A: Each property that is successfully funded is transferred into a SPV (Special Purpose Vehicle), a shelf Pty company that was formed specifically for this purpose. The company has no debts or track record.
The shareholders are starting with a “clean slate” and decide on the way forward.
All investment amounts pledged and paid are connected and referenced to a specific property. If that specific property is not funded – the monies are refunded.
There are no “investor pools” or any vague and unclear allocations of monies pledged. Each amount paid is tied to a specific property and particular funder, with a clear paper-trail for investment and tax purposes.
Q: Is my money protected in case something goes wrong?
A: There are number of Government regulatory bodies that need to be adhered to, namely the Estate Agency Affairs Board and the Law Society and Financial Services Board.
Estate Agency Affairs Board (EAAB) is a regulatory body for all property agents and brokers. Part of the annual payment that all agents and brokers have to pay to EAAB includes protection of the public against malpractice and unscrupulous estate agents and brokers.
In addition, once the registration with Financial Services Board is finalized – it will be another regulatory body protecting the public. This serves as another layer of accountability.
Furthermore, all amounts pledged and paid by funders are paid directly into the lawyers trust account. The trust account is a special account where the funds of investors are kept.
This means that the monies are secured in the trust on behalf of the people who deposited/transferred the funds. These funds are protected by professional insurance as well as the Law Society.
Q: Does Real Estate Crowdfunding Dot CoZa check documentation supplied?
A: Yes, we personally check all the documentation supplied to us.
We ensure that relevant and necessary documentation has been submitted by the property investees and developers.
While the utmost care is taken on our side, please note that we can not be held responsible for the information supplied. It is the funders’ responsibility to scrutinize the documentation, inspect the property, conduct relevant Due Diligence of the property, area, projected returns, figures provided, market and sales and rentals, and so on.
Also, markets, economies, politics change all the time – so will conditions for property investing and developing and thus it is of utmost importance that all information is checked and verified by funders.
Q: What should be checked in the Due Diligence by investors and funders?
Due Diligence is crucial when investing in any asset class.
In the case of property, one should check the following documentation, including but not limited to:
Town planning information
Record of Decision – if applicable
Any and all studies relevant to the property and/or development – environmental studies, geotechnical studies, traffic studies, hydro studies, heritage studies and so on
Planned future expansion in the area – by private entities as well as public and local authorities
Local Authorities plans for the future in the area
Local Authorities plans for the future roads and infrastructure
Income and Accounting
Current and projected income and profits
Verify sales and rental figures in the area
Verify property’s current and potential income and expenses
Maintenance and cost thereof done on the property previously and needed in the future
Tenant deposits on hand
Contracts and service agreements in place – i.e. security, cleaning, maintenance, rental management, and so on
List of employees
Inspect the condition of the property, its neighbors, and the surrounding area
Inspect tenants currently on the property
Scrutinize current leases
Copy of the title deeds
Copy of occupation certificate
Copy of municipal accounts
The above list is by no means a final and complete list of items to be inspected, but rather a suggestion of what information should be looked at when selecting an investment opportunity.
For a more detailed list please click here.
Q: What types of investment products does Real Estate Crowdfunding Dot CoZa offer?
A: We offer our investors a platform to access commercial real estate and property development. This, in broad terms, means access to a variety of real estate industries, namely:
Industrial Real Estate
Commercial Real Estate
Retail Real Estate
Residential (multi-unit) Real Estate
Special use/Specialized Real Estate
The platform enables funders and investors to participate in the above property types with smaller amounts then it was possible before.
One can invest as little as 1% of the property investment and enjoy the same returns (relative to their input) like majority shareholders.
Q: What are the investment minimums and maximums?
A: The minimum investment is different for each investment, but can be as low as R10,000.00.
The minimum amount will depend on a few factors – the type of property offered, price, amount of funding needed, percentage of funding needed in relation to the price, and so on.
We typically do not have maximum investment limitations other than those set by the factors mentioned above.
Q: What types of properties can I invest in?
A: Real Estate Crowdfunding Dot CoZa specializes in commercial real estate assets, which may include, but are not limited to apartment buildings, self-storage facilities, office buildings, industrial facilities, retail shopping centers, new developments, mixed use developments, and so on.
Q: How do investees benefit?
A: Investees and funders benefit in number of ways:
Possibility to onboard new partners and raise cheaper money then the bank
Increased investment portfolio diversification
Lower investment minimums
Development and property profits, returns and cash flow
Access to a number of property investment opportunities at any given time
Q: How are investments pre-vetted before coming onto Real Estate Crowdfunding Dot CoZa?
A: Real Estate Crowdfunding Dot CoZa undergoes an underwriting process prior to placing investment opportunities on the our platform.
Underwriting may include an assessment of the real estate company, the location, the property and a review of all third party reports. It also includes the scrutinizing of all documentation supplied by the investee.
However, please note that by no means does Real Estate Crowdfunding Dot CoZa guarantee the investment or returns stipulated.
The success of any property investment and/or development depend on many external factors out of the control of Real Estate Crowdfunding Dot CoZa – i.e. politics, economic conditions, area conditions, council’s plan in the area, and so on.
So, it will be on each funder and investor to carefully assess each investment and make their own conclusion about the investment and opportunities.
Q: When will I begin to receive any return on investment?
A: Each property opportunity will be different and your returns and timing will depend on many factors.
Examples of time-altering factors could be:
Whether the property is already income generating or not
Build time or improvement/repair/renovation time
The debt book
All funders are responsible for carefully inspecting the property and its cash flow in order to understand time frames.
Be sure to check the “financials” information for each investment as it will vary.
Q: What risks are associated with RECF investments?
A: Different type of property opportunities and developments come with their own types of risks.
Be sure to read the disclosures related to risks associated with each investment, these will be offered through Real Estate Crowdfunding Dot CoZa before you invest.
There is so much that can be said about investment risk – whether it is the risk in your control or risk outside of your control. The main thing to remember is: There is no such investment as a risk-free investment.
While we always minimize the risk all investors and funders need to make sure that they familiarize themselves with the property and it condition, documentation, area, market, and so on.
The more you know – the better decision you will be able to make.
Q: Where and how can learn more about evaluating properties and opportunities?
A: In short – Google is your friend.
On a more serious note – we are busy putting together an educational program that will assist property investees, investors and developers with gaining valuable information and improving their knowledge. Watch this space!
Thank you for your interest in RECF!