Real Estate Investment Glossary

Accredited Investor
Law 05/2015, which regulates crowdfunding in Spain, defines accredited investors as individuals or entities meeting certain criteria. For example, business owners who satisfy two of the following conditions: owning assets worth over one million euros, annual revenue exceeding two million euros, or equity of 300,000 euros or more. Accredited investors can also be individuals earning over 50,000 euros annually or with financial assets over 100,000 euros, who request to be considered as such and explicitly waive their status as non-accredited clients.

Amortization
The partial or full repayment of a debt, such as a mortgage or loan. In the case of a fixed-income security, it refers to the issuer returning the principal to the investor.

Bank Guarantee
A guarantee issued by a financial institution on behalf of a client.

Bankarization
Refers to companies' dependence on bank financing. As noted in the preamble to Law 5/2015 on crowdfunding in Spain, this strong reliance on banks has impacted the Spanish economy, sometimes resulting in excess credit and at other times in credit shortages.

CAPM (Capital Asset Pricing Model)
A financial model that explains the relationship between an asset’s systematic risk and its expected return. CAPM calculates an investment’s expected return as the risk-free rate plus a risk premium based on the asset's beta (a measure of its volatility relative to the market).

CNMV (National Securities Market Commission)
The CNMV is Spain’s regulator for securities markets. Its primary responsibilities include ensuring market transparency, fair pricing, and investor protection.

Crowdequity
A type of crowdfunding where investors receive equity in a company in exchange for their financial contribution. Crowdequity allows startups and growing businesses to raise capital from numerous small investors, who in turn gain a stake in the company and can benefit from its future success and value growth.

Crowdfunding
A collective financing method where funds are raised for a project or venture through small contributions from a large number of people, typically via online platforms.

Crowdlending
A form of collective financing where investors lend money to individuals or companies in exchange for a financial return, which includes the repayment of the principal with interest. Also known as P2P (peer-to-peer) lending, crowdlending platforms assess borrower credit risk and manage repayments. It allows borrowers to bypass traditional intermediaries like banks, while offering investors potentially higher returns than standard savings products.

Debt Operation
Debt operations involve lending money to a real estate project developer, with returns consisting of a fixed portion and a variable portion. The fixed return is a predetermined percentage of the loan, while the variable return depends on the project’s success.

Diversification
A strategy that spreads investments across different assets to reduce risk. It’s a basic financial principle aimed at balancing potential returns and risks by investing in various assets with differing risk profiles. By diversifying, one asset’s risk can offset another’s, leading to lower overall investment risk.

Dividend
The portion of a company's profits distributed to its shareholders. Dividends, along with potential capital gains from share price appreciation, are a primary source of stock returns. However, the general meeting may decide not to distribute dividends in certain cases.

Equity
Equity refers to ownership or capital. In investments, equity operations involve investors acquiring ownership in a company in exchange for financial contributions.

Equity Operation
Equity operations involve providing capital to a developer for a real estate project. The return depends on the project's success, typically measured by the sale of the property. Profits from the sale are distributed to investors based on their equity share.

Financial Leverage
The use of debt to increase the potential return on an investment. In stock markets, leverage refers to the ability to make a large investment using relatively small amounts of capital.

Fintech
A blend of "Finance" and "Technology," fintech refers to businesses that leverage technology to design, offer, and deliver financial products and services.

Guarantee
A security or assurance of a primary obligation. It can be a document in which a third party guarantees the fulfillment of a credit obligation, or a set of assets securing a loan or other financial operation. A guarantor promises to meet an obligation if the primary party defaults.

Income Operation
Income operations involve purchasing real estate to generate returns from rental income. The rent paid by tenants provides the primary return on the investment.

Institutional Investor
Large entities like banks, insurance companies, investment funds, pension fund managers, etc., that have substantial amounts of money available for investment.

Integrity
Crowdfunding platform administrators must demonstrate professional integrity, adequate knowledge, and relevant experience. According to regulatory guidelines, integrity refers to personal, commercial, and professional conduct that raises no concerns about an individual’s ability to manage a platform responsibly.

Investment Fund
A pooled investment vehicle that gathers capital from multiple investors to invest in various assets.

Investment Limit
Crowdfunding regulations limit the amounts that non-accredited investors can invest—no more than 3,000 euros in a single project or 10,000 euros across projects on the same platform within a 12-month period.

Investment Portfolio
A collection of diversified investments held by an individual or institution.

Lemon Way
A limited liability company based in France and accredited by the ACPR as a hybrid payment institution. Lemon Way operates in Spain under authorization from the Bank of Spain and is widely used across Europe, including by crowdfunding platforms.

Liquidity
The ease with which an asset can be converted into cash without significant loss of value.

Loan to Cost (LTC)
A metric in real estate financing that compares the loan amount to the total project cost. LTC indicates the percentage of the project cost financed through debt.

Loan to Value (LTV)
A financial ratio comparing the loan amount to the value of the property used as collateral. A lower LTV represents lower risk for lenders because the loan amount is small relative to the property’s value.

Maximum Fundraising Amount
Law 05/2015 caps the amount that can be raised per crowdfunding project at two million euros annually. If the project targets only accredited investors, the cap increases to five million euros.

Minimum Investment
The minimum amount required to participate as an investor in a specific project.

Non-Accredited Investor
An investor who does not meet the criteria for accredited status under Law 5/2015.

Participatory Financing Platform
Under Law 05/2015, these platforms are authorized by the CNMV to facilitate crowdfunding, crowdlending, and crowdequity investments.

Payment Institution
An entity authorized by the Bank of Spain to provide various payment services, including deposits, withdrawals, transfers, and the issuing of payment instruments.

Real Estate Investment
The purchase, ownership, management, rental, or sale of real estate for the purpose of earning a profit.

Risk
The likelihood of a negative event, such as the loss of invested capital, that could impact the success of an operation.

SME (Small and Medium Enterprise)
A company with fewer than 250 employees and either an annual turnover of less than 50 million euros or a balance sheet total below 43 million euros, as defined by the European Union.

Subscription Agreement
A contract between an investor and a company that outlines the terms and conditions of an investment.

Valuation
The process of determining the market value of a property or asset.

Value of the Property or Asset
The most likely price at which ownership of a property or asset can be transferred in a competitive market.

Viability
The ability of a company to sustain profitability and continue operations in the long term.