The right mix of securities

Posted on 21-05-2017 by D. Voesenek

We are regularly asked what collateral is attached to an investment proposition. Depending on the factors considered during the extensive screening process, the right mix of collateral is sought. Putting together the collateral package involves customisation and should go hand in hand with the interest rate. At Crowdrealestate, the mortgage collateral forms the basis. One of the many advantages of crowdfunding for real estate. The section collateral is increasingly prominent in the Dutch crowdfunding market due to defaults, and for good reason.

Mortgage collateral

The mortgage right is the most important security right you can have as an investor. A mortgage right is established on the property and guaranteed by an independent foundation. The mortgage right is established through the notary by means of a mortgage deed. If the initiator fails to meet his or her payment obligations, a claim arises, which can lead to the enforcement of the mortgage right. The amounts due are recovered with the enforcement.

Additional securities

To the extent deemed necessary and or that possibility arises, the collateral package may be supplemented by one or more additional securities. The collateral below has already been applied by Crowdrealestate and is only a selection of the many possibilities available.

Pledge deed

A deed of pledge is often attached to the mortgage deed and aims to ensure that the rights arising from an agreement go to the pledgee. For example, in the context of a let investment property, the rental income can be pledged. At the time of default, the rental income then becomes receivable and the outstanding obligations can (partially) be paid from it.

From a completely different perspective, a pledge can also be used for the shares. Apart from all other rights attached to the shares, this tool can serve as a big stick to ensure the continuity of the organisation. This is used if the actual management of the borrower and the parent entities consists of one and the same (natural) person. If this person is no longer able to perform his or her duties, the company may become rudderless. Because the independent foundation can (temporarily) take over the management, this scenario is ruled out.

Deed of guarantee

For the obligations arising from the loan agreement, a surety deed can be issued by, for example, the borrower's parent company. It can also be issued for income and expense items related to the property. Such as a surety bond for rental income and maintenance. The surety deed does not need to be notarised.

A bail bond can be of great value. Especially if the guarantor is financially stronger than the borrower himself, but also in the case of riskier real estate properties, the risk can become acceptable after a surety.

See how the above securities have been applied at Crowdrealestate here.