A decent real estate lending platform for investments in the Lithuanian property market
|Total Investment Volume||€26m+|
|Average annual interest||9.74%|
|Who’s eligible to invest||All natural and legal persons|
|Investment Type||Real Estate Lending|
|Auto Invest Function||Yes|
|Website Language||English, Lithuanian, German|
PROS & CONS
- Transparent T&Cs, procedures and statistics
- Decentralised management
- Low loan-to-value ratio
- No secondary market
- Withholding taxes
- Few new projects available
- Profitus makes a great first impression, having clear and detailed terms and conditions and investment risks as well as procedures regarding borrower reliability assessment and debt settlement. The statistics page provides a decent overview of the platform’s past performance (although it could be more detailed), and the team section covers all the employees in a very easy-to-navigate manner, with brief bios and links to LinkedIn profiles if you want to find out more about them. It even includes the company dog with “perfected surveillance skills” and a “high spirit” – a nice touch. One lacking element would be the company’s financial results, although you don’t need to be as much preoccupied with their financial condition as in some other cases (see the point below).
- Profitus only acts as an intermediary between the borrowers and investors – investing in a project listed on the platform, you are entering a loan agreement directly with the borrower. This means that if Profitus goes out of business, the underlying assets remain with you. Profitus also outsources big chunks of their operations – Paysera and Trustly help manage investors’ funds (these are separated from Profitus’s operational bank accounts); Sorainen – a law firm, coordinates the legal framework; and Creditinfo provides information for the risk assessment of projects.
- Profitus offers slightly lower interest rates than more mainstream real estate lending platforms, such as EstateGuru or Crowdestate. But it also lists projects with a lower loan-to-value (LTV) ratio of 51% compared to, for example, EstateGuru’s 60%. LTV shows the percentage of loan in the pledged property value, e.g., 50% LTV means that if a borrower seeks to raise €50,000, they need to pledge €100,000 in real estate as collateral. Of course, the lower the LTV ratio, the better, although it’s also worth pointing out that the real estate valuation can be somewhat subjective and depends on the valuation practices, so LTV does not always provide a clear-cut indication of actual risk.
- With projects lasting up to 18 months, an early exit option would be appreciated. For now, you have to wait until your investments mature to be able to cash out.
- Profitus will automatically deduct 15% of your earned interest within its tax retention policy. This is not the usual practice – on most platforms, investors are responsible for reporting their income from P2P investments in their home countries. Such a policy will inevitably decrease your capital available for reinvestment and might be a deal-breaker for some investors.
- At the time of writing, only two projects are open for investment, and since the platform launch, 182 projects have been listed, which gives an average of just above one investment opportunity per week. This is much fewer than on larger platforms, such as EstateGuru, and can be a significant problem. The projects get funded quickly, and there’s no auto-invest option, so you have to keep very alert to allocate your money effectively. Even then, a broad diversification may be hard to achieve, while the risk of cash drag will remain an issue.
Who is behind Profitus?
The Profitus team holds good cumulative experience in real estate, finance and business management. The founder and director, Viktorija Vanagė, is definitely a strong pillar for the team, with an impressive record in the real estate and FinTech scene.
Any more detailed insights into the company’s dealing are, unfortunately, lacking, including the funding sources and financial performance. All we can say really is that Profitus has managed to accumulate a decent total loan volume in a relatively short time (over €26 million). It has also been listed as one of ten promising Lithuania-based start-ups to watch in 2021.
What does Profitus offer?
Profitus lists real estate loans rated from A+ to D, depending on their risk profile. The risk assessment is based on an algorithm that considers the project owner’s creditworthiness, the project-specific risk and the collateral.
All projects are based in Lithuania, include residential, commercial and business real estate, and last between 6 and 18 months. All investments involve monthly interest repayments and principal reimbursement at maturity. This means that if you invest €1,000 for 12 months at a 12% interest rate, you’ll receive €10 monthly interest (minus 15% tax deduction) and get your principal back (the €1,000 you invested) after a year.
How much can you earn?
The average annual ROI currently stands at 9.74%, but your returns will largely depend on the project you choose. Interest rates vary between 5 and 13%, although most projects are in the 7-10% range. As of now, only two projects (1.1% of all) are delayed.
Profitus also provides a calculator, which helps to picture the payment schedule and the expected profit for each project. Remember, though, that Profitus will deduct 15% of all your interest repayments according to their tax retention policy.
Who is Profitus best for?
Profitus is a good option for investors keen on adding Lithuanian real estate projects to their portfolios and/or those willing to sacrifice higher returns for slightly higher security (lower LTV ratio) compared to more popular real estate crowdfunding platforms out there. However, if you like to keep things simple and limit the number of platforms you sign up to, there are better options in the real estate realm, such as EstateGuru, which offer a better flow of projects, higher returns, better diversification and handy auto-invest functions.
How to invest on Profitus
The registration process is, as usual, rather straightforward. There’s a twist, however, in how you confirm your identity, which you need to do to start investing. The most convenient way to do it is through Paysera. Alternatively, you can use the Know Your Customer (KYC) verification service, Ondato – you will need to take a selfie and a photo of your passport or ID card. A Paysera account comes in handy either way, though, as you can later use it for free deposits and withdrawals. After you’ve completed the verification, you can deposit funds and start poaching projects to invest in.
Profitus certainly shows some strong points such as good transparency, reliable team and CEO, and low LTV ratios. There is also a high demand for the projects they list and Profitus has a very good track record regarding successful project completions, which seems to prove that its business model and underlying assets are worthy. However, there are some small things that make investing more troubling than it should be, including tax deductions and the lack of a secondary market. On top of that, the limited number of projects will make you spend some time on hunting investment opportunities and can severely limit your diversification within the platform.
At P2PMarketData we are dedicated to providing unbiased reviews of peer-to-peer lending, real estate crowdfunding and crypto lending platforms. Among other, in our mission to bring more transparency to the market we closely monitor and track over 70 platforms funding volumes.
When reviewing an alternative investment platform, we consider a variety of factors such as:
- Number of investors
- Minimum investment requirement
- Historical annual returns
- Diversification opportunities
- Reinvestment opportunities
- Educational and informational offerings
- Platform fees
- Total capital invested
- Features (such as secondary market and automatic investing)
- General transparency (the difficulty of finding who the owners are, how they make money on the platform (fees), terms & conditions and more)
- Management team
We also look into the company’s online reputation (for example customer reviews, news, complaints, average monthly searches and social media).