Profit sharing, fixed interest, or hybrid. Which model is right for you?

In short

• Profit sharing provides 50% of the net profit after sale, with no interim interest.
• Fixed interest offers, for example, 8 to 10% per year, regardless of the project result.
• Hybrid combines 4 to 6% interest with approximately 25% profit sharing.

Anyone who invests in real estate will sooner or later face the same trade-off. How much security do I want, and how much room do I leave for returns? At Dutch Value, we translate that trade-off into three clear models. Each model has its own character. No single model is best for everyone.

Returns and security, an age-old trade-off

The principle is simple. The more you share in a project's results, the greater the potential. At the same time, your return then depends more on the outcome. The more fixed the agreement, the more predictable the yield. Between these two lies a range of possibilities, and that is precisely where your choice lies.

In all three models, you invest in a specific project. We purchase a villa on the Costa del Sol, renovate it, and sell it again. A project typically lasts 6 to 18 months. The difference between the models lies in how you are rewarded.

Profit sharing, sharing in the appreciation

With profit sharing, you receive 50% of the net profit after the project is sold. There is no interim interest payment. Your return is derived entirely from the realized sale and is paid out immediately upon completion.

This model suits investors who do not need the capital during the term. You fully share in the value increase generated by careful purchasing and renovation. If the sale price is higher than expected, you benefit directly. If it is lower, you feel that as well.

No single model is best for everyone. The best model is the one that fits your horizon.

Fixed interest, predictability first

With fixed interest, you receive an annual return on the invested amount, for example, 8 to 10% per year. This is contractually fixed and independent of the project result. The term is 12 to 36 months.

If desired, we can discuss security in the form of collateral, such as a mortgage on the property. This makes fixed interest the most predictable model. The trade-off is that you do not share in any additional proceeds upon sale.

Hybrid, the best of both worlds

The hybrid model combines an annual interest rate of, for example, 4 to 6% with profit sharing of approximately 25%. You therefore receive a fixed interim payment and share in the profit after the sale.

This model limits risk compared to pure profit sharing. At the same time, you retain a portion of the upside potential. It suits investors looking for diversification within a single investment.

How to make your choice

Start with your horizon and your need for income. A few questions can help with that.

• Do you need these funds in the coming years, or can they grow steadily over time?
• Are you looking for fixed, predictable income, or would you prefer a share in the profits?
• How does this investment fit into your overall portfolio?

If you do not need the capital and want to maximize your potential returns, profit sharing is the logical choice. If you are looking for fixed income, a fixed interest rate is a better fit. If you are unsure, the hybrid model offers a balanced middle ground. Always discuss your choice with your own financial advisor.

Fixed in advance

Whichever model you choose, the terms are fixed in advance in a notarial agreement under Spanish law. You will receive a full risk assessment with every project proposal, so you know exactly where you stand before you sign.

Stated returns are indicative and not guaranteed. Investing in real estate projects involves risks. You may lose all or part of your investment.