Builders have several options for financing their construction projects. Equity is rarely sufficient. Builders should have enough equity to use it for unforeseen expenses and as collateral. In addition to the construction loan granted by a bank, which is considered a senior loan, builders can borrow a subordinated loan to gain more financial leeway. It depends on the choice of the right subordinated loan provider. The self-sufficiency subordinated loan has led to high losses among private investors. As a private investor, you can arrange a shareholder subordinated loan to a real estate company with other investors.
- A subordinated loan can be used in addition to the priority loan of a bank for mortgage lending .
- The subordinated loan gives the client more financial leeway.
- Private investors can grant a subordinated loan to a real estate company in the event of a crowd investment.
- The subordinated loan is ranked between senior loan and equity.
Not only large real estate companies, but also private builders who want to build a detached house can borrow a subordinated loan to increase their financial leeway. Such a subordinated loan may be taken up with another bank. This receives by the registered mortgage also a security. However, the subordinated loan provider is worse off in terms of security. An example of how the repayment of a subordinated loan can fail is the self-sufficiency loan.
Eurofunding offers the possibility of investing in real estate at attractive interest rates
Eurofunding, private investors have the opportunity to participate in the financing of a property with low payments. At Eurofunding, private investors can invest amounts starting at € 500. If many private investors invest more, they will quickly raise the necessary funds to complete the construction project.
The real estate company concludes a contract with the provider of the shareholder subordinated loan. If it is a crowd investment, a contract is signed with each participant. It stipulates at which time the repayment will take place, which interest will be granted and how it will be repaid. Those granting the subordinated loan may additionally participate in the profits, turnover or value of the real estate company.
The investor is not involved in possible losses of the real estate company. However, as a rule, he has no voting rights, no right to petition and appeal, no right to speak and no right to participate in the shareholders’ meeting.
The bank or private investors granting a subordinated loan take a higher risk, as they are worse off in the payback. For private investors, a subordinated loan in the form of crowd investment may be interesting, as it promises lucrative interest rates.