EstateGuru has been operational since November 2014 and is headquartered in Tallin, Estonia. The special feature of EstateGuru is that it started to offer loans to business customers for only short and medium term real estate project: it is a consumer-to-business lending platform. More recently, the platform marketed normal corporate loans backed by a collateral property.
Each project comes with a detailed description and pictures, when available, or renderings of the planned real estate development:
The minimum amount to participate in a project is EUR 50; if the required loan amount is raised within the subscription period, the loan agreement is concluded.
Some loans pays monthly interests, others pay interest plus the principal back at the end of the project. Each loan is secured by a real estate property, usually with a first rank mortgage, the Loan-to-Value cannot exceed 75% and the property value is not determined by EstateGuru but by an accredited real estate appraiser.
In 2017 EstateGuru introduced the Auto-Invest feature: this means you can either micro-manage each investment you make or let the platform do the job, according to your chosen set of parameters.
Given the relative high minimum investment amount, the average duration and the fact that you rarely receive cash flows during the life of the loan, I tend to choose investments manually without using Auto-Invest. The platform does not provide statistics on the loan performance or recovery rate based on certain characteristics like Country (EstateGuru operates in the three Baltic states), loan type (development, bridge, business): in general be sure the mortgage is first ranked and the LTV is lower than 65%.
The platform does not offer a buyback guarantee: if the borrower defaults, EstateGuru manages the sale of the collateral; in practical terms, this means that it is hard to lose a big part of the investment but the sale process can take (sometimes) years to resolve. The soundness of the loan depends on the investment audit, the initial market value appraisal and the marketability of the collateral.
There is no secondary market on the platform, investments are tied up until the end of the respective project term and cannot be liquidated…plan accordingly.
In order to achieve a sufficient loan diversification, the total investment in the platform should be at least four-figure and a time horizon of several months is required before investing the whole sum. Given the nature of the investment, real estate in the Baltics, the bigger risk I see in EstateGuru is a Ukraine-like ‘interest’ by their neighbour Russia; hopefully this will stay just a fringe scenario, but you never know.
The registration to the platform is quite easy and follows a standard KYC process (email, SMS, copy of passport check).
There are no costs for investors and the platform is funded by a percentage premium, between 3 and 4%, of the loan amount.
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