Making Residential Buy-to-Let Investments Great Again
Why PropTech1 invested in Beanstock
One of the main reasons why the real estate industry is lacking behind in terms of digitalisation is that incumbents, due to constantly rising real estate prices, used to make money in their sleep, thereby smothering any need to improve and evolve.
But if real estate is such a safe asset class, why don’t more people invest in properties? While investing in listed companies is possible from the comfort of one’s own sofa for anyone with a mobile phone and a bank account, investing in real estate is a troublesome and laborious process for retail investors. That’s why we at PropTech1 are constantly on the lookout for more user-friendly ways to participate in this asset class. We’re excited to introduce you to Beanstock, whose goal is to bring real estate investing into the e-commerce age by allowing investors to make high-quality and individualized real estate investments from the comfort of one’s own sofa.
Simplified: there are three ways to invest in real estate. The most traditional way is to buy a property, of which you then own 100%. The second way is to co-invest in the same property together with other buyers, thereby sharing ownership. The third way is to invest via a fund, typically a publicly listed real estate investment trust (REIT).
REITs are often undervalued and non-transparent, hence increasing the complexity for retail investors.(1) Co-ownership, best known for Pacaso’s success during the pandemic, often brings additional complexity — starting with the question: Whose name is listed in the land register? This question becomes particularly important once there is disagreement or even fraudulent behavior in the partnership. However, the most important reason not to opt for one of the two models, which have numerous advantages over the traditional model, is that e.g. on our home turf Germany private property owners are offered a generous tax advantage. Profits from the sale of real estate registered in the name of a private individual can be retained in full after a holding period of ten years — TAX-FREE PROFITS!!!!
(An anonymous man once said: “Germans enjoy saving on taxes more than having sex!”)
Buying real estate usually starts with finding the target property, provided one has done a thorough analysis and understands the economics of the property market targeted (development of financial KPIs etc.). The most obvious ways to find properties are online via marketplaces like ImmoScout24 in Germany or Zoopla in the UK that list many professional sellers or eBay Classifieds or Craigslist that list mostly private sellers or traditionally through offline brokers. In our experience, it is easier to buy festival tickets than to get the chance to bid for a Berlin apartment on ImmoScout24. Searching for listings on ebay Classifieds becomes a full-time job, as communication with private sellers can be disastrous, ranging from bad pictures, missing documents, etc. Finally, the local real estate market is so fragmented that it becomes almost impossible to find the best partner who is able and willing to meet one’s needs. And that’s just the beginning of your real estate journey. Next, one needs to find the best partner for financing, notaries to actually complete the transaction, one may want to renovate before renting out the property to optimise rental returns, and finally, there is the need to manage your investment on an ongoing basis. That’s a lot of work!
As a result, investing in property is perceived as a complex and opaque process that creates high barriers to entry. After seeing different approaches, the co-founders Emma and Alexander convinced us that Beanstock removes the friction of a property transaction from start to finish, enabling people like you and me to benefit from the huge potential behind this asset class. The startup enables property buyers to search, buy, finance, and manage vetted buy-to-let (BTL) opportunities entirely online. The founders’ vision is to enable BTL transactions at the touch of a button and become to BTL transactions what Robinhood is to stock trading.
BTL is a huge untapped market in Europe. There are about 1 million transactions per year in the retail market, representing a total addressable market (in the EU alone) of €135 billion. In France, the share of BTL in the total transaction volume has almost doubled in the past 5 years from 16.7% to 30.2%.(2) However, surveys show that demand is far underrepresented: 70% of French adults want to invest in BTL, but only 10% actually do so. A recent study shows that more than 9 million people between the age of 18 and 25 plan to buy real estate, while a total of 26 million people seek to invest in real estate in Germany alone.(3) Residential rental property is becoming one of the most popular asset classes for retail investors. Even without in-depth knowledge, retail investors understand the benefits of real estate investments. However, without an experienced investment advisor to control the frictions of a property transaction from start to finish, the non-professional investor will continue to miss out on the opportunity to participate in the success of this asset class.
Over the past 18 months, Beanstock has built an asset-light value chain with scalable workflows that save about 125 hours per transaction (you heard that right, freeing up your time for other fun activities!). Using a hub-and-spoke strategy, Beanstock launched its services in more than 20 cities in France in 2021. The platform has already supported more than 350 retail investors in their buy-to-let projects and manages assets of €50 million. By integrating and digitising every step of the transaction, Beanstock has unprecedented access to BTL data: It not only collects supply-side data, as most property portals do, but also controls demand, mortgage, and operational data. Thanks to this unique access to data, Beanstock is able to develop proprietary products to further increase efficiencies along the whole value chain of a real estate transaction.
Emma and Alex won us over after the first conversation. Coming from an environment of high operational and supply-side constraints at Glovo, they understand perfectly how to incentivise all participants in a real estate transaction towards the same goal: Higher transaction velocity due to better matching with high acceptance rates, resulting in higher profits due to significantly reduced operating costs. Beanstock is the simplest and most innovative way to invest in residential buy-to-let in Europe. We firmly believe that Beanstock will fundamentally change the experience of investing in real estate. Welcome to the PT1 family, Emma, Alexander and the entire Beanstock team!
With its latest Series-A financing round of €12 million, Beanstock plans to strengthen its presence in its home country of France and expand into 30 other cities in Spain, the UK, Italy, Greece, Belgium, Germany, Portugal, and the Netherlands. PropTech1 is very well-positioned to pave the way to conquer the German retail BTL market. Our network can make valuable contributions along the entire value chain, from sourcing supply to financing, renovating, and managing the properties. PropTech1 is excited to partner with an all-star team of co-investors including 360 Capital, Axeleo, Realty Corporation Ltd, Entrée Capital and FJ Labs. Even more exciting is that our portfolio founders Arkadi Jampolski and Jan Hase of Wunderflats have also made angel investments in the round. Beanstock has built a world-class consortium to capture the international BTL market.
Find out more about Beanstock and become part of the team! Follow PropTech1 on LinkedIn, Twitter, and Medium to find out all the news from our portfolio.
(1) https://seekingalpha.com/article/4495251-reits-misunderstood-undervalued
(2) https://ec.europa.eu/eurostat/cache/digpub/housing/bloc-1a.html
(3) https://www2.deloitte.com/content/dam/Deloitte/at/Documents/real-estate/at-property-index-2021.pdf
