What is this real estate investment startup?

Bricks or Bricks.co launched in 2020 in Montpellier. This startup specializes in real estate investments. The goal? Allowing users to own a part of one or more accommodations from €10. However, despite the great promise, the startup seems to have been under fire from critics for several weeks now. In question ? Collection for the month of April 2022.

Cédric O’Neill and Nebojsa Stovanovic: The Story of the Bricks Co-Founders

Cédric O’Neill is a graduate of the University of Montpellier and HEC Paris. Passionate about entrepreneurship, he primarily worked as an editor at Tech Crunch. He has launched several projects, the best known being 1001pharmacies.com, a website to digitize sales of products commonly sold in pharmacies. The goal? Give the possibility to those who do not have a pharmacy nearby to obtain their medicines.

In 2020, the Montpellier resident joined forces with Nebojsa Stovanovic to found Bricks, the start-up specializing in rental investment. Cédric O’Neill becomes president of the start-up. For his part, Nebojsa Stovanovic is positioned as CTO, Chief Technology Officer.

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Bricks.co: What is it?

Brick.co wants to democratize real estate investing and, more particularly, rental investing. In fact, the site promises to be able to create an account in a few minutes and start by betting from €10 on real estate.

How it works ? Specifically, the property is rented through the platform, as it is 100% financed. Thanks to the rent charged each month, you can receive an amount of money equivalent to the percentage you invested in this property. For example, you buy 10% of a rented apartment for a rent of €1,000, so you get €100 per month.

For its part, Bricks generally buys buildings offered for sale, allowing it to invest in a house or several apartments. He negotiates the value of the sale and finances this investment in part thanks to the bricks collected on the spot, that is, the money bet by individuals, and a loan generated by the company. You’ll see later, this model might not be right for Bricks.

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How Bricks Work: Who Really Owns the Building?

Bricks takes its name from the brick system configured by startup. These bricks are made up of €10 increments. By investing €100, you get 10 bricks. This is what allows you to earn royalties on startup properties, because, yes! You do not own the property.

We explain to you. To own a property with several people, you must, in particular, go through SCI, a civil real estate company. This therefore allows everyone to receive rents in proportion to the investment placed in a property. However, this is not the case for Bricks, which continues to own all the buildings and apartments acquired. Platform users therefore receive royalties.

This system has one advantage: taxation. In fact, since Bricks users do not own the property, they do not have to pay property taxes. In fact, they own “stocks” of buildings. However, they are subject to a single tax of 30%. The latter only applies to capital gains. Thus, you are only taxable after you have received more than your base amount. To take the example above, once you have put €1,000 into a property, i.e. 100 bricks, you will only be taxable after the 10thandmonth, as you will have received more than €1,000 in rent (€10×100).

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Real estate investment: what is the profitability with startup Bricks?

The site promises good profitability, even if the exact percentage of that profitability remains somewhat unclear. In fact, on various pages of Bricks, you can see different numbers. The startup sometimes promises a return of 11%, sometimes closer to 10.5%.

It is also not specified whether this profitability is gross, even though the numbers presented on the website suggest gross profitability. However, it should be noted that it is very rare in France to exceed 7% profitability on a property. Doing a little research, we found another mention of profitability, this time net, which would be around 4.5%.

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2022: Bricks’ unexpected success

During 2022, Bricks is enjoying great success, thanks in particular to a report from Capital that mentions the Montpellier startup. Some goods and buildings sell out in seconds. Cédric O’Neill himself said he was surprised by the enthusiasm generated by Bricks.

The startup registers more than 200,000 users, of which 25,000 are brick owners. The founders of this rental investment project launched a marketplace that allows some to earn a capital gain on their bricks by reselling them to other users. Some can be made with up to 10% margin, depending on the value of these investments estimated by Bricks.

Today, Bricks has 35 properties with a total value of approximately 45 million euros. The startup also reinforced its teams to meet the demand. Currently, the young shot has 45 employees.

Bricks in 2022: Record fundraising and investor reviews

Despite its success, Bricks continues to be highly criticized by various stakeholders. As you can imagine, the question of startup profitability arises. Indeed, it is criticized for not being profitable, namely due to the loan system initiated to finance the buildings that are then offered in brick. However, Bricks is remunerated with a 10% commission on sales and 1% of the value of the property per year, in order to finance the management of the various buildings and apartments. But that doesn’t seem to be enough.

The other criticism leveled at Bricks comes from the fundraising held in April 2022. The startup wanted to allow users of the platform to invest in the project. Initially, she intends to raise 5 million euros. More than 20 million are raised by Bricks from the site’s subscribers. The initial business was to allow users to invest through royalty contracts, such as for buildings. The goal is then to allow those same users to exchange or resell them.

However, not everything went as planned. Indeed, officials asked Bricks to turn the contracts into royalties, into financial bonds. Although not planned, fundraising will ultimately be in the form of shares, with the risks that this entails for investors. Problem, they were warned only after the survey, in a short video that does not go back to all the details of this change, an attitude that annoyed investors.

Bricks.co Projects

These various problems do not seem to dampen the morale of the founders of Bricks, who have many projects in the pipeline with the possibility of buying houses, commercial establishments or accommodation abroad, even through the bricks system.

Bricks.co also wants to go international by opening several offices in Europe, starting with Spain, Belgium, Italy and the United States. The fundraising is also expected to increase Bricks.co’s equity to allow it to invest in buildings with peace of mind.

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