1.1 Background and motivation

Crowdfunding represents a disruptive innovation to the real estate finance industry; it enables the fairly closed and complex industry to introduce new ways of investing in real estate. With the rise of the popularity of real estate crowdfunding, investors are becoming more selective in their investment decisions. As a result, it is important to identify the drivers of successfully funded projects. Such drivers are relevant both for developers seeking financing and real estate crowdfunding platforms acting as intermediators. For platform developers, knowing the success factors is beneficial for a project's promotion to ensure successful funding.

This research investigates loan-based crowdfunded projects in the real estate sector. In particular, this study aims to identify the determinants of successful real estate crowdfunding campaigns. In order to do so, we systematically assess 195 real estate crowdfunding campaigns from four platforms: Housers, Urbanitae, Civislend, and StockCrowdIn. All these platforms are headquartered in Spain, a country which has one of the largest real estate crowdfunding markets in Europe (Brikkapp 2020a). The ultimate goal of this study is to identify the factors which might increase the demand for participating in real estate crowdfunding campaigns. We assess the impact of the funding target, the annual return, loan duration, several risk-related metrics, the minimum investment amount and several carefully selected control variables. We run Ordinary Least Squares (OLS) regressions and measure crowdfunding success by duration, i.e. how fast the funding target is reached. To understand the success factors better, we complement the regression analysis with an email-based surveys.

To the best of our knowledge, there are only two quantitative studies which use pre-campaign information and identify the determinants of successful fundraising in real estate crowdfunding. Borrero-Dominguez et al. (2020) analyse the success factors of loan-based real estate crowdfunding campaigns in Spain. The authors use campaign-specific data collected from a single real estate crowdfunding platform. In a recent study, Gigante and Cozzio (2022) analyse the success factors of real estate crowdfunding campaigns in Italy, based on data from one equity and two lending-based platforms.

We contribute to the previous literature in a number of ways. First, we investigate campaigns from several real estate crowdfunding platforms, resulting in a larger sample size. Second, similar to Gigante and Cozzio (2022), we use the novel measure of campaign duration for success. Third, we investigate success factors which have not been studied in the literature before. In particular, we assess whether the loan-to-cost ratio, the fundraising goal, and the type of the property affect the success of real estate crowdfunding campaigns.

1.2 Real estate crowdfunding

Real estate crowdfunding has disrupted the real estate industry by opening the market to more participants and providing diversification opportunities through an increased number of properties and the possibility to invest smaller amounts in each (Morri – Ravetta 2016).

Investors participating in real estate crowdfunding can choose between debt or equity financing. In real estate crowdfunding, debt investments mean loans secured by one or several specific properties until being fully repaid. Equity investments, on the contrary, imply the purchase of shares of a limited liability company holding the property. In this later case investors receive a portion of the rent or sales proceeds once the property is rented or sold (Shahrokhi – Parhizgari 2020).

Each real estate crowdfunding project typically consists of several steps. First, borrowers who seek financing register on a real estate crowdfunding platform and fill out an application for credit assessment. Afterwards, the platform performs due diligence and assesses the risks of the project. If the project is approved, the platform provides an offer to the borrowers describing the maximum loan amount, the interest rates, and the maturity. Afterwards, the investment opportunity is listed on the platform's website. From this point onwards, investors (lenders) can start investing in the project. After successful financing, borrowers pay a fee to the crowdfunding platform and start developing the desired business. Investors get notified about the project's performance on a regular basis and receive the return when due (Shahrokhi – Parhizgari 2020).

Real estate crowdfunding has several advantages both for developers and real-estate investors. The first advantage is cost-effectiveness. In the absence of intermediaries, real estate crowdfunding platforms can cut costs and offer lower commission fees both to the investors and developers, as compared to traditional ways of real estate financing (Miller 2015). Second, real estate crowdfunding has made investing in real estate possible for the wider public (Goins 2014). Real-estate developers benefit from attracting capital from a wider investor pool rather quickly, while investors benefit from a new real estate investment vehicle. The lower fees and the lower minimum investment amount enable investors to invest in several real estate projects, both long-term and short-term, bringing additional diversification benefits (Goins 2014). For developers, an additional benefit of real estate crowdfunding is that this type of funding can be characterised by a shorter execution time (Miller 2015). Traditional real estate financing deals require several months to be finalized; real estate crowdfunding shorten this process significantly (Baker 2016). For investors, an additional benefit of real estate crowdfunding is that this type of investment is highly transparent; information on fees, risks and returns are accessible to all investors, not just to fund managers as in the case of traditional real estate investment trusts.

Nevertheless, investments in real estate crowdfunding projects have some disadvantages as compared to investments in other real estate investment options, such as real estate investment trusts (REITs). First, investment opportunities in real estate crowdfunding projects are limited; new projects are listed infrequently on the platforms due to the time-consuming process of finding and assessing real estate properties to finance (Morri – Ravetta 2016). As a result, the benefits of diversification in one real estate crowdfunding platform can be limited. Second, real estate crowdfunding investments are illiquid; there is no developed secondary market (Goins 2014). Third, real estate crowdfunding investments require greater attention from the investors as they need to analyse the risk/return profile of the projects; tasks previously performed by fund managers (Morri – Ravetta 2016). Fourth, the rapidly growing real estate crowdfunding market lacks proper regulation (Shahrokhi – Parhizgari 2020). As a result, investors should choose platforms with a good reputation and constant reporting activities, and invest in projects they fully understand.

1.3 Real estate crowdfunding in Europe

In 2021, the global real estate crowdfunding market was valued at USD 10.78 billion (Polaris 2022). In Europe, the largest markets are in the United Kingdom, followed by France, Spain, and Germany. By the end of 2019, the number of European real estate crowdfunding platforms reached 150 (Brikkapp 2020b), while their compounded annual growth rate is estimated to be approximately 90% (Ernst & Young 2019).

For this study, the real estate crowdfunding market of Spain is of particular interest. Spain is ranked as the third country in Europe with 17 specialized real estate crowdfunding platforms and total volume of 171 million EUR (Brikkapp 2020a). Investors, both foreign and local, are interested in investing in Spanish real estate due to historical and geographical reasons. In particular, Spain has a favourable climate, access to the sea, and millions of tourists per year (Brikkapp 2020a). Moreover, the majority of real estate crowdfunding platforms operating in Spain are authorised by the regulator (Ziegler – Shneor 2020).

According to a recent report on the Spanish real estate crowdfunding market, 508 real estate projects were funded successfully by June 2020 (Brikkapp 2020a). Housers is the leading Spanish platform in terms of funding volumes and number of projects, followed by Invselar and StockCrowdIn. The average value of a Spanish real estate crowdfunding project is 305,000 EUR, with an average return of 9.90% (Brikkapp 2020a). The majority of the projects are debt-based, accounting for 79% of the total projects, while 21% of projects are equity-based (Brikkapp 2020a).

1.4 Success factors of real estate crowdfunding projects

The previous literature suggests that several factors might influence the success of crowdfunding projects in general, and real estate crowdfunding projects in particular (Deng et al. 2022; Jáki et al. 2022; Mazzocchini – Lucarelli 2023; Shneor – Vik 2020). In this research, we review four types of factors that might influence the success of real estate crowdfunding projects: campaign, financial, property, and platform characteristics. We pool results from the broader crowdfunding literature whenever deemed relevant, and rely on the literature on real estate crowdfunding whenever available.

1.5 Hypothesis development

Several factors might influence investors' willingness to participate in lending-based real estate crowdfunding campaigns. Whitecage (2018) argues that financial factors, such as the funding target, duration of the loan, loan-to-value, minimum investment amount, and annual return, are believed to be more relevant for the success of real estate crowdfunding campaigns than other factors. As a result, in this research, we pay special attention to the financial characteristics of real-estate crowdfunding projects, given their importance for the investors. (Other variables deemed relevant for the success of real estate crowdfunding projects will be used as control variables.) We formulate five hypotheses.

The funding target, the total amount the project developer plans to raise, can be considered as one of the key campaign characteristics. Empirical evidence in the broader crowdfunding literature tends to suggest that the success rate of the campaign is smaller, if the target sum is higher (Jáki et al. 2022; Shneor – Vik 2020). In a real estate crowdfunding setting, it is reasonable to assume that larger projects are considered riskier, and hence less demanded by investors. Therefore, we hypothesize that the funding target is positively associated with the duration. We propose the following hypothesis:

One key financial characteristic of any investment project is the return investors are expected to receive. For lending-based crowdfunding projects, Shneor and Vik (2020) report that the return is a significant determinant of funding success in all 15 reviewed studies. In real estate crowdfunding setting, Borrero-Domínguez et al. (2020) find that the higher the return, the more investors are ready to fund the project. Regarding how quickly the funding target is reached, Maier (2016) documents that the time required for successful funding is shorter when the return is higher. Hence, we expect that the annual return has a negative effect on duration; a higher annual return attracts more investors and therefore the funding target is reached faster.

Another key financial characteristic of lending-based investment projects is the loan period, defined as the number of months for which the loan is requested. In lending-based crowdfunding settings, Shneor and Vik (2020) find convincing empirical evidence that the duration of the loan is significantly associated with success. Maier (2016) report that the time required for reaching the funding target is longer for projects with a longer maturity. The author also reports that the effect is especially strong if the platform has listed a similar project with a shorter loan period in parallel. At the same time, Borrero-Domínguez et al. (2020) document that projects with longer loan duration attract fewer investors. Therefore, we hypothesize that projects with shorter loan periods are expected to have larger demand and hence shorter duration.

Project riskiness might also be crucial when investors evaluate real estate crowdfunding opportunities. In lending-based crowdfunding setting, several authors document a negative association between the riskiness of the project and the funding amount (Borrero-Domínguez et al. 2020; Shneor – Vik 2020). Regarding how quickly the funding target is reached, Maier (2016) finds that the time until successful funding is shorter if the project is less risky. For real estate projects, the LTV and the loan-to-cost ratio (LTC) are two important risk-related metrics. The LTC compares the loan amount to the total costs of the real estate project. A higher LTC ratio means that the borrower covers a larger part of the construction costs with the loan and, consequently, such projects are riskier. We expect that higher project risk, measured by a relevant risk-related metric, makes investors less confident in future returns and discourages them from investing in the real estate crowdfunding project Hence, we formulate the following hypothesis:

The minimum investment variable captures the smallest amount an investor can invest in a single project. The minimum investment amount should be negatively associated with project success due to adversely affecting diversification opportunities of the investors (Lukkarinen et al. 2016). Hence, our final hypothesis is formulated as follows:

2.1 Sample

First, we identified 63 real estate crowdfunding platforms. We primarily drew on loan-based real estate crowdfunding platforms listed in Borrero-Domínguez et al. (2020), Garcia-Teruel (2019), and Rommelini (2019). We added a few additional platforms to the list by screening real estate crowdfunding investment blogs.

A platform was included in the final sample if the following criteria were met:

1. The platform is active at the time of collecting the data (18 January 2021).

2. The platform operates in one of the Eurozone countries.

3. The platform specializes in real estate crowdfunding.

4. The platform maintains information on both current and past crowdfunding campaigns.

5. The platform discloses detailed information about the funded projects. In particular, the platform publishes information about the duration of the project (start of the funding period and end of the funding period).

The flowchart in Fig. 1 reveals additional details about the sampling process (number of platforms included/excluded). Four real estate crowdfunding platforms met the above listed inclusion criteria: Housers, StockCrowdIn, Civislend, and Urbanitae. Although we did not have an inclusion criterion for the country (other than operating in the Eurozone), each platform in the sample is headquartered in Spain. Housers is the largest platform in the sample, accounting for 310 funded projects and a total accumulated investment of 121,254,080 EUR as of 28 January 2021. It is one of the leading European platforms for investments in real estate assets (Housers 2021). StockCrowdIn, Civislend, and Urbanitae are smaller platforms, with a total accumulated investment ranging from 12.6 to 69.7 million EUR (Brikkapp 2020a). Each platform has a threshold for the minimum investment amount – 50 EUR at Housers and StockCrowdIn, 250 EUR at Civislend, and 500 EUR at Urbanitae.

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Flowchart of the platform selection process

Source: authors.

Citation: Society and Economy 46, 2; 10.1556/204.2023.00025

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Information about the real estate crowdfunding projects were manually retrieved from the platforms' websites (housers.com, stockcrowdin.com, civislend.com, and urbanitae.com). The projects from the platforms were included in the sample if they met the following inclusion criteria:

1. The crowdfunding campaign has already been finalized and the project has been funded or repaid.

2. The project can be classified as a loan-based crowdfunding project.

3. In order to eliminate duplicates in project-related variables and avoid biases, if a project had more than one funding round, only the first round was included in the sample.

195 projects met these inclusion criteria: 129 projects from Housers, 39 from StockCrowdIn, 12 from Civislend, and 15 from Urbanitae. This sample size is two times larger than the one reported for Italy (Gigante – Cozzio 2022), and three times larger than the one used in a previous research for Spain (Borrero-Domínguez et al. 2020). Variables of interest were manually collected from the project descriptions. If some variables were not reported in the textual or video description of a project, documents attached to the projects were screened. Typically, loan-to-value, loan-to-cost, and promoter's previous experience in real estate crowdfunding were not reported and required additional screening.

2.2 Duration as a measure of success

In the wider literature on crowdfunding, the most widely used indicator of success is whether the funding target was reached or not (Deng et al. 2022; Jáki et al. 2022; Shneor – Vik 2020). In real estate crowdfunding, platforms typically disclose limited amounts of information, if any, on failed projects. As a result, an alternative indicator of success, labelled as duration, has emerged. Gigante and Cozzio (2022) use duration as a success measure to investigate the success of real estate projects in Italy. Duration captures the popularity of the real estate crowdfunding project among investors, it shows how fast the funding target is reached. In addition, the time required for funding is essential for project developers: the faster they raise the necessary funding, the faster construction work can start.

To calculate duration, the number of days required for the project to reach its funding target, we subtract the ending date of the crowdfunding campaign from the starting date. Since the distribution of the variable is skewed to the left, we use the natural logarithm of the variable as a dependent variable in the regressions.

2.3 Independent and control variables

We assess the impact of the key variables of interest on campaign success while controlling for several other campaign, property, financial and platform characteristics. A brief overview of the independent and control variables is provided in Table 1.

3.1 Regression models

In the dataset, there are missing values for four out of 13 explanatory variables due to the lack of information published on the real estate crowdfunding platforms. To deal with missing data, the mean imputation method is used; the missing values are replaced by the mean of the corresponding variable (Schafer – Graham 2002). To detect outliers, we use the box plot method. For numeric variables, we calculate the first and third quartiles as well as the interquartile range (IQR). We consider the values below Q[1]−1.5*IQR or above Q[2]+1.5*IQR as outliers (Dawson 2011). Outliers are substituted by employing the one-sided winsorization technique at 95% level that replaces outliers with the maximum or minimum threshold values as appropriate. This widely used approach eliminates the influence of abnormality and unequal variance at once.

The definition of the variables in Equation (1) is shown in Table 1.

In order to avoid biased results, we do not include highly correlating variables (correlation coefficient larger than 0.7) at the same time in the regressions (Moore et al. 2013). To evaluate the severity of multicollinearity among independent variables, the variance inflation factor (VIF) is used. The VIF shows how much the variance of the coefficient estimate is being inflated by multicollinearity. In line with the suggestions, VIF value should be less than 5 to avoid potential multicollinearity problems (Rogerson 2001).

In order to check the robustness of the findings, we run several additional regressions. First, instead of applying the winsorization technique for outliers, we exclude them from the data. Second, we do not include those explanatory variables in the same model where the correlation coefficient among the variables is higher than 60%.

3.2 Email-based surveys

To better understand the determinants of successful real estate crowdfunding campaigns, as well as to gain additional insights from professionals, we surveyed experts from two real estate platforms in the sample: Civislend (Pedro Ruano Mendoza, responsible for risks) and Urbanitae (José María Gomez-Acebo, head of institutional investors). In addition, we also inquired Crowdestate (Loit Linnupõld, founder and CEO), a leading real estate crowdfunding platform in Europe financing 316 real estate projects and serving more than 55,000 active users from 128 countries (Crowdestate 2021). We conducted email-based surveys with the professionals from the real estate crowdfunding platforms. In the email-based survey, we asked respondents' opinion about the factors affecting the success of a real estate crowdfunding campaign and sought explanation for some of the study findings. For example, we inquired why apartments as a property type reach the funding target quicker than villas.

4.1 Descriptive statistics

The final sample includes 195 projects collected from four real estate crowdfunding platforms operating in Spain. In Panel A of Table 2, the descriptive statistics of the dependent variable are shown. In the sample, the minimum time required to fund a project is one day while the longest time is 110 days. On average, a real estate fundraising campaign lasted for 20.55 days.

Panels B and C of Table 2 show the descriptive statistics for the independent and control variables, respectively. The average return is 9.43%, and on average there are 472 investors contributing to each project. Almost half of the projects raised funds for acquiring a property (45%). In the sample, residential properties account for the huge majority of the projects: apartments are responsible for 64% of the projects, followed by regular houses (15%), and villas (11%).

Finally, we have evaluated the severity of multicollinearity among the independent variables. The average VIF value among the variables was 2.83, with the highest value being 5.41. As a result, multicollinearity should not be a serious concern in this research (Rogerson 2001).

4.2 Factors associated with duration

In order to identify the factors affecting the success of real estate crowdfunding campaigns, we run OLS regressions with duration as a dependent variable (Model 1). We also test the robustness of the results by excluding outliers (Model 2) and variables where the correlation coefficient with any other variable is higher than 60%. The correlation coefficients between the variables are shown in the appendix of the paper (Table A1). In one specification, we exclude the variable LTC as it correlates highly with LTV (Model 3), while in another specification the minimum investment variable is excluded as it correlates highly with the platform dummies (Model 4). The regression results are summarized in Table 3. Unless indicated otherwise, all the variables discussed below are robust across various model specifications and significant at the 5% level.

As hypothesized (H1), the funding target (ln_funding) affects the duration of real estate crowdfunding projects significantly positively. The larger the project, the more time is required for raising the funds. This finding is in line with the vast literature on crowdfunding in domains other than real estate, assessing typically the association between reaching the target amount and the funding need (e.g., Mollick 2014; Petitjean 2018; Deng et al. 2022; Jáki et al. 2022; Shneor – Vik 2020).

We could not document any significant association between the annual return and the duration, hence H2 is rejected. Nevertheless, according to the CEO of Crowdestate the annual return is a key parameter affecting the success of a fundraising campaign; the higher the interest rate offered, the better, regardless of the increased risk. Although a typical investor prefers projects with low risk, when Crowdestate sought funding for low return-low risk projects, investors did not find it attractive at all. Investors are willing to take additional risk assuming that they are compensated by higher returns. The expert from Crowdestate concluded that investors prioritize higher annual return (in the first place) and the loan period up to 12 months (in the second place), while other factors are less relevant.

The opinion of the CEO of Crowdestate is in line with the findings of Shneor and Vik (2020) for lending-based crowdfunding projects in general, and Gigante and Cozzio (2022) for real estate crowdfunding projects in particular: the return on investment (ROI) is crucial for campaign success. A potential explanation why we did not find any significant association between the annual return and the campaigns' duration could be related to multicollinearity. The VIF value, showing how much the variance of the coefficient estimate is being inflated by multicollinearity, is 4.99 for annual return. This VIF value is the third highest among the sample variables. The correlation between the annual return and several variables found significant in this research is strong. In particular, we can observe a strong negative correlation between the annual return and the loan period (ρ = −0.48). At the same time, the annual return is negatively correlated with the platform dummy variable for Houser (ρ = −0.46), and positively with the platform dummy variable for Urbanitae (ρ = 0.55); both dummy variables being significant in several model specifications. It might well be the case that due to the significance of the variables correlating strongly with annual return, the coefficient for annual return becomes insignificant.

It is worth noting that in alternative model specifications (results not reported here for brevity), we used another proxy for project success: the average investment amount. The average investment amount was calculated as the ratio of total funding to the number of investors. Larger average investment means that, on average, investors are willing to invest more in the project and consider it as a good investment opportunity. According to Ralcheva and Roosenboom (2016), successful crowdfunding projects have larger average investment amounts. In the regressions with the average investment amount as a dependent variable, we find that the annual return is positively associated with the average investment amount at a significance level of P < 0.001; a typical investor invests more in real estate crowdfunding projects providing higher returns. All in all, although we found that the annual return is not associated with the duration, its effect on average investment is in line with previous research documenting that higher promised return increases investors' willingness to participate in crowdfunding campaigns (Borrero-Domínguez et al. 2020; Shneor – Vik 2020).

As hypothesized (H3), the regression results reveal that the maturity of the loan (loan.period) is significantly positively associated with the duration of the crowdfunding campaign; investors are less willing to contribute money to projects where the maturity of the loan is longer. Longer maturities, ceteris paribus, imply higher uncertainty to investors. The low demand for longer real estate projects might also be explained by the lower return provided to investors manifested in the negative correlation coefficient between the loan period and the annual return (ρ = −0.48). These findings are in line with Maier (2016) and Borrero-Domínguez et al. (2020), documenting that real estate crowdfunding projects financed by loans with longer maturity attract fewer investors and require more time. A similar observation was documented by Gigante and Cozzio (2022) for real estate crowdfunding projects funded in Italy. The authors report that a one-month increase in the duration of the investment increases the time to reach the target amount by 0.643 days.

Industry experts also confirmed that one of the most important factors for investors when evaluating real estate crowdfunding projects is the maturity of the loan. Crowdestate reported that investors are looking for short-term investment opportunities, their preferred loan term is typically less than 12 months. Loans with longer maturities, especially if coupled with low returns, are not attractive enough for investors. According to the representative at Civislend, their investors prefer projects with a duration of less than six months. When considering the trade-off between the maturity of the loan and returns, investors prioritize loans with shorter periods even if they would be compensated by additional returns. Even when Urbanitae offered much higher returns than the industry average for projects with longer duration, investors still preferred the projects with shorter maturities. The lack of investors' trust in real estate crowdfunding platforms and the desire to minimize the risk might explain this behaviour. Both Civislend and Urbanitae expects that investors' trust will increase through the positive experience with successful projects, and the platform will be able to increase the demand for projects with longer maturities.

None of the risk-related metrics (level of project riskiness, LTV and LTC ratios) were associated significantly with campaign duration, hence H4 is rejected. Although a typical investor prefers projects with low risk, when Crowdestate sought funding for low return, low risk projects, investors did not find it attractive at all. Experts at Crowdestate also reported that investors typically seek projects with low LTV (preferable below 50%). In our sample, 14 out of the 195 projects had LTV ratios higher than 50%. From these 14 projects, none of them were classified as high risk, according to the classification provided by the real estate crowdfunding platform after carefully assessing the riskiness of the projects as part of their due diligence process. Three out of the 14 projects were even reported to carry low risk. At the same time, the funding need of projects with high LTV was lower than the sample average (280 vs 370 thousand EUR). Hence, one possible explanation for documenting no association between the LTV ratio and campaign success is that the LTV ratio is below 50%, the preferred threshold by investors, for over 90% of the projects in our sample. In addition, the projects with LTV ratios above 50% had smaller funding needs and were considered carrying low or medium risk by analysts. A similar observation holds for the LTC ratio. Typically, lenders finance real estate projects with an LTC of up to 70–80% (Long 2011; Liebeg – Liegler 2022). In our sample, only eight real estate projects had an LTC ratio higher than 70%, and five projects had a ratio above 80%. At the same time, none of these projects were classified as high risk by the platforms. The funding need of projects with high LTC was also lower than the sample average (250 vs 370 thousand EUR). In addition to the fact that none of the projects with high LTV/LTC ratios carried high risk as classified by the platforms, investor behaviour might also provide a plausible explanation for our findings: it might well be the case that real estate investors tend to prioritise returns on investment over risk, assuming that the risk is reasonable (not classified as high by the platform).

As hypothesized (H5), we find that the minimum investment amount (ln_minimum investment) significantly and positively affects the duration (Table 3). On the one hand, a larger minimum investment limits the diversification opportunities of the investors (Lukkarinen 2016). On the other hand, a lower minimum investment amount makes investment more affordable to small investors. This latter argument is in line with the negative correlation between the minimum investment amount and the number of investors (ρ = −0.25); a lower minimum investment amount tends to be associated with a higher number of participants in the real estate crowdfunding projects.

Our findings related to the control variables reveal that the fundraising goal might also affect how much time it takes to reach the funding target. In particular, we document that real estate crowdfunding projects raising money for land acquisition have a 0.53% higher duration than projects raising funds for construction. Real estate projects in earlier stages (such as land acquisition) most probably have lower popularity among investors due to the additional risks associated with the longer building process. Investors might associate land acquisition with additional financing needs when the construction begins, while construction type projects most probably do not require additional funding rounds and hence, they are perceived as less risky investments and the demand for them is higher. When surveying platform representatives about the popularity of a particular fundraising goal among investors, the expert at Civislend argued that projects raising funds for land acquisition possess higher risk than construction projects; land acquisition is typically the first stage of a real estate project. More risk averse investors typically prefer construction projects due to the lower uncertainty associated with it, even if they are compensated by higher returns.

At a 10% significance level, Urbanitae can be characterized with the fastest funding process. On the one hand, Urbanitae offers relatively high annual returns for an average real estate campaign. On the other hand, Urbanitae provides detailed information about the project promoter (previous experience with real estate crowdfunding), and shares detailed information about the property (size, price, comparison with similar properties). Industry experts unanimously argued that publishing detailed information on the projects increases trust in the platform, which in turn makes investors more willing to participate in the crowdfunding campaigns.

4.3 Policy implications

The findings of this study are relevant to the key participants in the real estate crowdfunding market. Real estate crowdfunding platforms evidently play a crucial role in the success of the crowdfunding process. In the future, the platforms should continue performing careful due diligence to assess project riskiness. Once the risk is tolerable and the project is approved, the platform should provide an offer to the borrower describing the maximum loan amount, the interest rates, and the maturity. This offer should be in line with the funding needs of the real estate developer (loan amount), reflect the riskiness of the project (interest rates, covenants if necessary) and consider the preference of the investors (short maturity). When screening potential projects, in order to assure successful fundraising, the platform should prioritize those real estate developments which are highly popular among investors. This research suggests that the platforms should prioritize projects which aim at raising funds for construction; such projects reach the funding target faster and attract larger average investments than other type of fundraising goals. At the same time, the platforms should carefully balance between the expectations of the investors and the needs of the real estate developers. The expert from Crowdestate ultimately concluded that investors prioritize higher annual return (in the first place) and a loan period up to 12 months (in the second place), while other factors are less relevant. Hence, while investors prefer high annual returns and short maturities, real estate developers desire low returns (and hence low borrowing costs) and long maturities (and hence higher liquidity).

Regarding the real estate developers, they should aim at raising funds for projects which are demanded by the crowdinvestors and use their traditional financing methods for the remaining projects. Our findings reveal that the most preferred projects by the investors include constructions-type projects. As investors prefer loans with short maturities, real estate developers might consider splitting large projects into several phases, for example, into multiple buildings in case of a multi-building project. In general, the more projects real estate developers can crowdfund, the better. The most important advantages of crowdfunding include the short execution time and the cost-effectiveness (no intermediary), assuming that the project is large enough and the fixed costs can be spread among many participants.

In the surveys, real estate crowdfunding experts emphasized the importance of constantly providing relevant information to the investors. They argued that the transparent flow of information significantly affects project success in the short term and platform success in the long term. Hence, providing accurate and up-to-date information in a timely manner is in the interest of both the real estate crowdfunding platform and the real estate developer raising funds from the crowd. As reported by all surveyed professionals, trust in the platform is an essential component of crowdfunding and hence platform success. More detailed information about a project and the project developer is a signal of transparency and can therefore lead to increased trust and successful funding of a project (Deng et al. 2022; Jáki et al. 2022; Mazzocchini – Lucarelli 2023; Shneor – Vik 2020). Ernst & Young (2019) also confirms that trust in the platform is important in successful real estate crowdfunding.

Finally, crowdinvestors should be aware of the popularity of some projects. If they wish to invest in various real estate projects and enjoy the benefits of diversification, they should do so quickly for projects with smaller funding targets, shorter maturities and for those raising money for construction. In addition, investors should also act quickly if the wish to invest in a project listed on Urbanitae; those projects generally have a shorter duration compared to projects on other platforms.

4.4 Limitations and future research

This research has at least two limitations. First, as no information is available on failed projects, we could not use the most widely used measure of success: whether the funding target was reached or not. The real estate crowdfunding industry has just started to develop rapidly, as a result many platforms are quite young and do not report failed projects. At the same time, only a few real estate crowdfunding platforms reveal information about the duration of the campaigns, the measure of success used in this research. Consequently, the number of observations in the sample is limited. Second, in the Eurozone, the duration of the real estate crowdfunding campaign was available only on Spanish real estate crowdfunding platforms as a result of which we had to limit the dataset to one country. Consequently, we could not assess crowdfunding campaigns from various regions and the role geographical factors might play in the success of real estate crowdfunding projects.

There are a number of future research directions emerging from this study. Upon further development of the real estate crowdfunding industry, assuming that more information on failed projects is published by the platforms, factors why real estate crowdfunding projects fail and do not reach the funding target could be identified. In this case, the most widely used indicator of success, whether the funding target was reached or not, could be used.

Moreover, it would be interesting to assess the motivation of investors and identify potential differences in preferences between real estate crowdfunding investors and investors in other domains of crowdfunding. In addition, future research might aim at identifying differences between investor's preferences when investing in real estate crowdfunding projects and in any other real estate investments. Finally, future research may investigate another dimension of real estate crowdfunding project success: subsequent repayment of the loan by the project developer. It would be valuable to assess factors leading to payment delays, failed executions, or any other problems arising after the funding target was reached.