26.11.2020

How inRento works?

Gustas Germanavičius

How inRento works?

inRento is a buy-to-let crowdfunding platform, authorised and regulated by the Bank of Lithuania. Our mission is to make one of the most common investment types-rental property investment, more accessible to everyone. For the first time, investors will be able to invest in rental properties just from 500 EUR on a European regulated platform.

So how does it work? 
When investors sign up on the inRento platform and open a Paysera account, they are able to invest in carefully selected properties from all around Europe and start earning monthly rental income. inRento connects real estate businesses with investors and creates an easy and secure method to facilitate the transactions.

How are the deals structured?
Because we care about the risks, the investments are being structured as loans which are secured with mortgage security. Because the investments are structured as loans, they have a combination of fixed-interest rate and variable interest. In simple terms, this translates that if the property would be vacant, the borrower will be obliged to pay the fixed interest rate. If the property would not be rented out for a longer period, the interest rate is being increased 2.5-4X times, in order that our investors would receive the rental yield. (The exact terms will be found in each project description and contract).

What happens if the borrower doesn’t pay?

In case the borrower would fail to meet financial obligations to the investors, inRento will take all the necessary measures to resolve them in the name of investors and if needed enforce the mortgage and repossess the property.

How is the rental yield spread between the investors and the borrower?
While assessing the loan applications, we strive to reach an agreement with the borrower that 80% of the rental income would be paid out to the investors. If the property is rented out, the investors will be distributed with 80% of the rental income, but if the property would lose its tenant, the borrower will be distributing the interest payments. The 20% which is left to the borrower covers the administration costs, minimum upkeep and other expenses. While owning a rental property by yourself can look like an attractive option, for some, there are few elements that can make it upsetting. Landlords managing multiple properties can tell you that sometimes the hassle of dealing with problematic tenants or fixing broken furniture, can make you wonder whether owning or administering the property by yourself even make sense.

Do investors participate in the capital appreciation of the property?
Because we strive to create an investment experience which would be as close as possible to owning an actual rental property when / if the property would be sold more costly than it was acquired, the capital growth-share would apply to the investors. We are targeting the investor share for the capital growth to be in the range of 50-70%.

Let’s take a look at this example:
Loan value: 100,000 EUR
Capital growth share: 70% investors / 10% inRento / 20% borrower
Proportional sales price to the loan value: 110,000 EUR
Duration: 2 years.

The investors would receive additional 7,000 EUR, while inRento would earn 1,000 EUR and the borrower would earn 2,000 EUR. Given such an example, investors would earn an additional 3.5% annual return, which combined with 6% would make an annual return rate equal to 9.5%.

Considering the arguments above, it becomes easy to understand that inRento model is based on incentivising the borrower to produce the highest possible return. The higher the return is for the investor, the higher it is for the borrower. If you would like to begin investing in buy-to-let crowdfunding opportunities, press the sign up button and begin generating passive income from rental properties.

 

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