Arenal Live, a loan with a 33% return
Investing in the coastal real estate sector is one of the most attractive options when it comes to residential investments. Our success story today reaffirms this argument. Furthermore, it highlights that, thanks to real estate crowdfunding, it is not only accessible to every budget but also possible to invest in a loan with a very high return.
In March 2021, we introduced our community of investors to Arenal Live, a residential development located on the island of Menorca consisting of 32 homes spread across three buildings and a private complex with gardens, a gym, spa, business center, and a cafeteria.
The project was launched by Azur Estates, experts in luxury housing promotion in the Balearic Islands and the Costa del Sol, with a fundraising target of 1.8 million euros to finance the exercise of the purchase option that the developer had on the land.
5-point increase in the final return
Over 500 investors decided to participate in this operation, structured as a fixed-rate loan with an estimated total return of 27% over 18 months. Although this timeline extended by a couple of months, the final result can only be described as very satisfactory: the final return increased to 32.8%, nearly 5 percentage points above the initial projection. The IRR (Internal Rate of Return) also improved, from the starting 17.2% to the final 18.3%.
Several factors influenced the successful execution of the project. What are they?
- The project is promoted by a company affiliated with Azur Estates, a company with over 40 years of experience in the local real estate sector.
- The residential complex is situated in a superb, well-established area in the municipality of Es Mercadal, northeast of Menorca, just 3 minutes from Arenal de Castell Beach.
- The development had a granted license under the previous urban planning regulations. Such projects cannot be carried out under current regulations, making this building particularly attractive due to its uniqueness in Menorca.
- The project was 42% completed and was acquired from a financial institution at a price below its appraisal value. The developer had also confirmed its high commercial potential.
- The project’s developer invested their own capital in it, aligning the interests of all parties involved in the investment.
Advantages of investing through crowdfunding
The Balearic Islands are one of the regions with the highest housing prices. In 2022, the average price per square meter was 3,290 euros, second only to Madrid, and well above the national average in Spain, which stood at 2,051 euros per square meter, according to Fotocasa.
In this context, the return on investment in housing in the Balearic Islands does not offer the best figures compared to other regions. Fotocasa’s analysis concludes that buying a residence for subsequent rental in these islands yielded an average return of 5.2% in 2022. However, the annual return obtained by Urbanitae investors with the Arenal Live project exceeded 18%. All of this was achievable with the possibility of tailoring the investment volume to their capabilities or strategy, starting from 500 euros.