Real Estate Crowdfunding and Group Buying Deals
Bulkestate is primarily a Real Estate Lending platform that allows investors to lend directly to property primarily in Riga, the capital of Latvia. Besides that, this platform offers the unique option of Group Buying Projects, allowing you to buy one whole apartment if there’s investors for the other apartments in an entire building sale. All loans are in Euro and secured by collateral.
|Business:||Real Estate Lending & Equity|
|Countries:||Latvia, Finland & Bulgaria|
Office location in Tallinn
Table of Contents
Bulkestate Pros & Cons
Characteristics of Investment
13,6% – 15%
3 – 12 months
Asset as Collateral ⇙
Minimum Investment ⇙
Direct Investment Structure
Real Estate Projects on Bulkestate
As the real estate projects are carefully selected on Bulkestate, the platform has not launched an excessive amount of projects to the investors on the platform. The real estate loans are displayed in a simple informative overview, but without any filtering or sorting options. Going to investment opportunities, browsing the different projects gives you the most important information needed. The loans needed are usually in the range of 14-16% interest rate, anywhere from 50.000 euro to 1,75m euro. The presentation of the different opportunities is displayed as seen in the image below.
Example of a Successful Repaid Real Estate Project on Bulkestate
Marijas Street 14, Riga – Latvia
In June 2019 the investment project Marijas Street 14 was launched on Bulkestate, being the largest funded project on the platform at that time funding 1,75m euros. After being fully funded in the same month, it has now been repaid early at the end of November 2019. Before the sale, the borrower managed to carry out partly renovation works on the building and improvement of the surrounding area.
While most of the real estate projects in the Baltics reaches 15%, the annual return for Marijas Street was 17%. The risk was minimized by securing the collateral with a first rank mortgage at an LTV of 62%. An additional incentive cashback related to the amount lend gave investors up to 21,39% p.a. and resulted in some lending up to 250.000 EUR.
Only after a little over five months since being crowdfunded, the property was successfully sold in a single deal, completing the project in full for the investors and covering principal loan and accrued interests for all lenders before maturity.
The repayment of loans before scheduled maturity is one of the options that attract real estate developers to using debt-based crowdfunding, as it enables flexibility for borrowers to freely maneuver towards reaching the best possible outcome.
- 80 Apartments & 5 commercial premises
- Historical Architecture
- One of the most valuable and significant areas in the historic city center of Riga.
- Loan amount of 1,75 million EUR
- An annual return of 17% with cashback depending on the amount of up to 21,39%
- Some investors contributed up to 250.000 EUR
- Loan-to-Value of 62%
- Initial loan term at 12 months, realized loan term at 5 months after an early sale of the property.
- Secured with a first rank mortgage as collateral.
How Does Group Buying on Bulkestate Work?
Bulkestate Group Buying is a unique and innovative way of buying only an apartment when a whole building is sold to potentially get a better deal for both the buyer and seller. This is not seen on many other crowdinvesting platforms if any other open online investment platforms offer this service at all.
A group buying deal or bulk-deal is offered when an owner of an apartment building wants to sell the entire building at once, yet allowing buyers to only purchase one or more apartments instead of the entirety. This means that as an investor your buying an entire apartment, and receive the full legal owner title if purchased. You can arrange to visit the apartment before you make the reservation fee, yet the deal is only successful if there is a potential buyer for every apartment in the building and all apartments are bought so the bulk-deal can take place.
Buyback Guarantee on Bulkestate
Buyback guarantee on Bulkestate is not offered since every project is backed by collateral in Real Estate. This is typical for this type of more serious real estate crowdfunding platform since that type of “guarantee” would just be an extra layer and cost to the investment which wouldn’t change the fundamentals.
Most Buyback Guarantees are put in place with platforms that offer loans acquired by 3rd party Loan Originators, typically consumer loans without collateral and in countries with very high risk and sometimes used as an argument to make something that looks very risky and not that investable seem more secure. On this platform, the investment case is acquired by Bulkestate themselves and further reviewed by their Investment Committee.
What Happens if Bulkestate Closes or Goes Bankrupt?
There are two different types of investment structures in Crowdinvesting:
- 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.
Bulkestate has a direct investment structure and ensures the security of investor’s funds by signing a cession agreement with conditions that costumers money does not represent funds of their company and is administered separately from the platform company assets. This means that in the unlikely case that the platform faces insolvency, closes down or goes bankrupt it does not affect the risk of losing investments not yet disbursed to the borrower.
In case of bankruptcy, the liquidator or bankruptcy trustee manages investor assets separate from the creditors of the platform company. Undisbursed funds are kept separate from the operational bank account and if a specific crowdfunding project is not 100% funded, all investments will be returned to investor’s accounts.
Real Estate as Collateral
When a loan misses payments and if it eventually defaults, there is still land, property and apartment or other types of real estate that can be sold and hopefully recover 100% or at least some of the remaining outstanding principal. At Bulkestate the average Loan-to-Value is currently at 55,86% which means that the loan amount covers a little more than half of what the estimated value of the real estate is worth in sale. This collateral for the loan gives security to lenders and having real estate as collateral reduces the risk of a total loss of capital, though that it can still happen in some cases.
Depending on the project type, quality of the real estate, location, and much more, the time it takes to sell the asset can vary and the estimate of value can be wrong. At this platform, they do an extra effort for this not to happen by having every deal go through an Investment Committee that consists of experienced real estate, investment, and finance experts.
The primary market on the platform with standard manual investing is displayed in a simple way, with an overview of every project. Bulkestate is a fairly new platform with high due diligence so the amount of projects is so far not very high, therefor sorting or filtering on the projects is not available.
There are two types of real estate investment types on the platform(Lending & Equity):
Development Lending Projects
Bulkestate provides mostly real estate development lending projects, with an annual fixed return as either a bullet or annuity loan. The projects are mainly renovation, building new or restoring historic buildings. All loans are backed by collateral as either a mortgage or by equity in the real estate company.
Four key characteristics that describes the lending real estate projects on the platform:
- Annual return – high interest rates above 10% and up to 16% (+ potentially a bonus for certain amounts)
- Mostly bullet loans and a few annuity loans with monthly principal repayments – Loans are usually re-payed in somewhere between 12 – 24 months.
- Some projects have fairly low Loan-to-Value and is normally from 40% up to 75%.
- The collateral is mostly structured as a mortgage loan, but can also be found collateralized by shares in the real estate company behind the project.
Group Buying Equity Projects
So far three out of five Group Buying equity projects have been completed by having the individual apartments sold out at discounts of 38%, 35% and 19% on the €/m2 market price. These equity projects allows investors to buy into an entire apartment together, by each participant buying at least one apartment/unit to enjoy rental income and appreciation on the equity invested.
Three key characteristics that describes the group buying equity real estate on the platform:
- Structured as a normal apartment purchase, with owner title to the buyer.
- Administration is completely on the buyer, this simply enables group purchasing for better discounts.
- Resell option as pleased, it becomes the investors apartment and can be sold whenever.
The Bulkestate Auto Invest is one of the most simple in the market. Because of the simple straight forward supply of lending projects they provide, there are only two main options to differentiate the automatic investing: Minimum return (annual interest rates) and the maximum term (repayment period).
Other than these two simple factors it requires you to set a maximum investment amount to put into each loan. This simple setup makes sense, as there are not that big differences in the types of projects – though a function for choosing mortgage or equity collateral would be good.
On Bulkestate there is no Secondary Market for the lending projects they provide. There is no early exit option for the investments and this means every lender have to wait for the repayments to get the invested capital back. As most loans are bullet loans, most capital will be bound in the full loan period according to the terms provided in the contract. As this platform facilitates more and more projects, it is expected that there will be a secondary market some time in the future when it makes sense, as this will enhance the liquidity in the investment and reduce the risk of total lost capital (as long as someone wants to buy the debt).
Nice to Know for Investors
Deposit & Withdrawal Process
Depositing funds to your investor account is done in three steps:
- Transferring money into the Bulkestate account with any of the below listed funding methods.
- Your funds will be available for investment within the day of confirmed arrival (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 for 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.
There are no investor fees for joining Bulkestate and accessing the investment opportunities. We do not collect additional fees for investment payments, however, please pay attention to your residing countries tax rules and your bank’s price list for possible transfer fees or taxes.
Bulkestate FAQ: “Are there any fees for investors?”
Bulkestate is always reachable by email and is fairly quick to answer questions you might have. A lot of answers can be found in their FAQ, but if you need support and are in no rush, reaching out in email (firstname.lastname@example.org) will do the trick. If you wish to get in direct contact with the platform, they are available on phone (+371 24 20 20 24) within business hours (GMT+2 Monday to Friday, 9.30 to 18.00).
Who can invest?
Is Bulkestate Regulated?
Bulkestate is authorized Financial Institution in Estonia and regulated by the Estonian Financial Supervision and Resolution Authority as well as the general commercial legislation from EU and Estonia applies to Bulkestate operations.
|Total investments:||€14,2 million|
|Average loan term:||12 months|
|Number of investments:||24.189|
|Number of Lending projects:||85|
|Number of Equity projects:||4|
|Countries of operation:||3|
Please note that this overview may contain affiliate links. It means that a commission is earned if you decide to invest after using the link – of course without additional costs to you. The information on this site does not constitute investment advice and is solely to give you a simple and easy overview of the platform. Always conduct your own due diligence and consult your financial advisor before making any investment decisions.
* Historical return is not a guarantee of future return. The number is directly from the platforms website bulkestate.com as the displayed weigthed average annual return on the last update of this article: May 18, 2020.