Real Estate Crowdfunding in Eastern Europe
Reinvest24 is a real estate investment platform that allows users to invest in property in the upcoming capital of Estonia, Tallinn, and Latvia’s capital, Riga. All of the shares are in Euro and it is possible to invest in both residential and commercial property.
|Business||Real Estate Lending & Equity|
|Founders||Tanel Orro & Kirill Tripolski|
|Operating in||Estonia & Latvia|
CEO Tanel Orro explains how Reinvest24 works
Reinvest24 Pros & Cons
- High rental & capital return
- Carefully selected properties
- Experienced team
- All alternative investments with potential for high returns come with high risk
- Low amount of projects
- No Early Exit option and projects can take longer than expected to finalize
Characteristics of Investment
- Rental Yield: 5% – 15%
- Loan Durations: 9 – 60 months
- Currency: Euro
- Collateral: Real Estate
- Minimum Investment: 100 Euro
- Investment Structure: Direct
Real Estate Projects on Reinvest24
Reinvest24 has a simple informative overview of the different real estate projects on the platform. The most basic information such as gross and net rental yield and location of the property is displayed when browsing available properties. When choosing a project you will see a gallery of photos showing the property, the project and a map of the area with the location of the property.
The in-depth information about each project is divided into four categories:
- Object overview: Description of the project, the area, why the team chose this location and how the value can increase.
- Investment Case: Detailed explanation of how the money will be used, the exact plan for the property and time frame for the project.
- Financials: The property valuation, amortized purchase cost and the latest valuation of one share.
- Technical overview: This information is the important legal documents about the property a real estate investor would expect to see, e.g. a floor plan, building plan, area plan and the Land Register document.
Buyback Guarantee on Reinvest24
There is no buyback guarantee on Reinvest24, but this normal on this type of platform. Usually, a buyback guarantee is used when a third party is acquiring the investment opportunities or there are no assets backing the loans. With this platform Real Estate is the asset securing the loans and it is all done in-house without use of originators/third party brokers, which makes the process more transparent. The properties available for investment is searched and found by the experienced team behind Reinvest24 and the investors own loan shares in the companies that own the property.
What Happens if the Platform Bankrupts?
There are two different types of investment structures in P2P investing:
- The direct structure means you are buying a claim/share against the company directly.
- The indirect structure means you obtain exposure to a project by investing in a project or loan issued by a platform company to the loan originator.
Reinvest24 has a direct investment structure and as an investor you will therefore own a claim against the company that controls and owns the real estate. Two companies are involved in the legal structure: Reinvest24 OÜ where investors hold their funds and choose the investments and the property purchase company which is structured as a Special Purpose Vehicle (SPV). This means that the investors give a loan to the SPV and that loan is used to buy the selected property. The property shares are then divided by the investors according to amount provided to the investment.
So, what is a Special Purpose Vehicle (SPV)? The SPV property company structure is a subsidiary company which is bankruptcy remote from the p2p platform Reinvest24. The SPV owns the selected property and the responsibility includes maintenance of the property and management of tenants. The platform uses SPV to keep each investment separate, manage the expenses, minimize the risk and improve the transparency. Every property has its own SPV and if Reinvest24 goes bankrupt the investment and properties should not be affected nor be part of the bankruptcy estate. This results in a share-like structure, even though the investment is actually structured as a loan to the SPV. This means that every investor own property shares according to the amount invested, which is under the control of the investor, who is free to sell when it pleases.
Real Estate as Collateral
In the unlikely event of a default in the SPV property company, it is the real estate collateral that helps secure an investor’s principal balance. At Reinvest24 the total value amount of the property is bought by the crowd without additional external financing from a bank or other mortgage financing institutions. This asset can depreciate and realize a loss for the investor in the case of a bankruptcy. This could happen if for example tenants misuse the place or don’t pay rent for too long a period. This unlikely event is most likely rare and have so far not happened on the platform. All the properties are commonly insured.
The primary market for manual investing on Reinvest24 is simple and displayed as you can see in the image below. The most common information such as funding target, net rental yield and gross rental yield is available when browsing properties on the platform. At the moment there are two types of Real Estate investments on the platform:
All the properties that have the same gross and rental yield are short-term loans (6-9 months) with a purpose of finishing the construction works and selling the apartments. No rental yield will be earned from these properties but you will receive interest on the loan.
Investors will benefit from them the same way as owning them (rental yield + property value appreciation over time). The purpose is to produce long-term monthly income from the rental yield. The gross yield is the total income of the property and net yield is the profits paid out to the investors after the operating costs. There is no planned exit dates for this type of properties, but investors can exit by selling their shares on the secondary market. The properties are so far all located in Tallinn, the capital of Estonia – an upcoming tech city in the Baltics.
Auto investing is not yet available at Reinvest24 and as the platform is new in the market the amount of projects available is rather low and the track record is short. Therefore, researching and picking out each project individually is the ideal situation with a new platform like Reinvest24.
Reinvest24 do not offer a Secondary Market or any other ways of exiting the investment early and as the projects can take longer time than expected you can be sitting on the investment for a long time.
Nice to Know for Investors
Registering at Reinvest24 is very simple. Creating an account as an individual requires just an email and a password. The platform complies with KYC (Know Your Customer) and you need to provide an identification document to withdraw money from the platform.
Deposit & Withdrawal Process
Depositing funds to your investor account is done in three steps:
- Transferring money into the Reinvest24 account with any of the below listed funding methods.
- Your funds will be available for investment within the day of confirmed arrival to Reinvest24 (usually 1-3 banking days).
- After the funds are received and added to the account, you will receive an e-mail confirmation.
Withdrawing funds is the simplest process of the two. It consists of clicking “withdraw funds”, entering the available amount and waiting the 1-3 business days. There is no minimum withdrawal restrictions and no further additional fees or commission for withdrawing the funds. Remember, depending on their fee structure, your own bank might charge fees for handling the transaction or exchanging currency.
- Bank Transfer
- Transfer Wise
- Currency Fair
Under your profile you will be able to see all the properties you are invested in, but the portfolio overview is very scarce and can be improved a lot. Even though the amount of information about the investments so far is very low, Reinvest24 has a feature that almost no other platforms provide and that is the future estimated income on a yearly basis. This is something every platform should have, and even though other information is still lacking, you get an overview of all transactions made on your account and with a few properties that is enough to quickly get an idea of your portfolio situation.
You must pay taxes according to the legal regulations of your country of residence. Please contact your tax department for detailed information.
Reinvest24 FAQ: “Do I have to pay taxes on profits earned?”
ReInvest24 is reachable by email and are fairly quick to answer questions. The team is still small so don’t be surprised if you get a reply from the CEO or any other significant person in the company. The down to earth approach and seemingly good costumer relations is a benefit of the platform and is to be experienced before the platform becomes larger.
Who Can Invest?
Reinvest24 platform allows everybody to invest, who is older than 18 years old whose active legal capacity is not restricted. In order to proceed to investment stage, you need to verify yourself.
ReInvest24 FAQ: “Who can become a Reinvest24 investor?”
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).