This article was posted on delfi.lt
InRento, the Lithuanian start-up that won the award for the best investment technology, has attracted a total of €15 million in investments in just a few years of operation. The platform, which offers an innovative way of investing in real estate rental projects, has no late or defaulted projects and generates an average annual return of 12.43%.
"We are not the largest in the competitive alternative-investment market, but we do not set ourselves such a goal - we focus on quality of service. We can be proud not only of our successfully growing investor community, but also of our excellent track-record: since the beginning of our activity, we have had no late or defaulted projects, and all the projects we have completed have generated higher returns for investors than originally indicated", says Gustas Germanavičius, founder of InRento platform.
Rising Euribor interest rates have opened the way for the development of the rental market
With the rising Euribor interest rate, businesses faced significant challenges - the rising cost of financing conditions led to a steady decline in the number of people buying their own homes, forcing development projects that depend on end-user sales to slow down.
The rental market has benefited from this change, as the reduction in the availability of owner-occupied housing has opened the way for growth in the rental market. The general situation in the country has also contributed to the conditions stimulating rental demand - the increasing number of migrants and the start of the school year have attracted more people looking for temporary housing to Lithuania's major cities.
"With population growth and tourism steadily increasing the demand for accommodation, our loan portfolio focuses on these two most stable sectors of the rental market. We are already seeing a strong increase in occupancy and we are seeing prices rising, which is set to continue. The situation in Vilnius is currently very favorable - professional landlords can expect returns of 8% or more on new-build apartments, which is very high in Western Europe," says Germanavičius.
With a solid community of more than 17,000 investors, the InRento platform is becoming an increasingly attractive source of alternative financing for buy-to-let developers against the backdrop of rising interest rates.
"Larger, more experienced developers are starting to turn away from banks and are looking for alternative sources of finance, as in the current environment, borrowing from banks is losing its advantages. With the rise in Euribor, rental property managers may have to pay 9-10% interest per annum on their bank loans, and with the interest, they have to start repaying the principal of the loans immediately, which is why we are getting a lot more requests to finance a project, because on the platform, only the interest is paid each month, and the loan amount is paid back when the project is completed. This is one of the reasons for the growth in the volume and quality of the InRento platform," comments G. Germanavičius on the changes in the market.
Those who blindly dove into investing had to swallow a bitter pill
The founder of the InRento platform, who has increased the amount of investments raised by 50% in just half a year and crossed the EUR 15 million threshold, notes that in order to be successful in investing, one should not be tempted by nice numbers, as the high returns promised are usually accompanied by higher risks.
"InRento focuses on lower- and medium-risk projects with a stable rental income stream, which is not as affected by changes in property values on the market as development projects. All investor investments are secured by real estate collateral. In most projects, the interest rate paid by the borrower does not exceed the amount of the rental income, which reduces the borrower's default risk.
"Economic changes in a country, region or market segment may result in underperformance - falling property sales prices or rising costs will have a direct impact on the returns investors earn. The current situation with rising interest rates is a good example that this is not just theoretical.
While many people who have been attracted to higher-risk investments have had to swallow a bitter pill over the past year, our numbers are telling - we have not had a single project in arrears since our inception, and all payments have been made on time, despite the rapidly increasing funding volumes," says Germanavičius.
As one of the advantages of the InRento platform, he also highlights the monthly interest payments, which allows to effectively track the progress of the project and to see possible delays in time. In addition, interest rates are indexed to inflation in the respective projects to protect investors' interests in the long term.
Provides the opportunity to invest in buy-to-let projects without having a large capital base
G. Germanavičius notes that for Lithuanians, renting has always been one of the most attractive areas for investment. However, the unstable economic situation, rising prices and the increasing interest burden encourage many people to give up the idea of buying their own home for investment. A home bought with a loan can become a burden when times get tough, so you should consider whether buying a property in the long term will give you the returns you expect, by weighing up the possible scenarios.
"InRento is an alternative tool for investing in buy-to-let projects. At the very beginning of our activity, we decided that the minimum investment would be EUR 500, and this amount was chosen for a reason - so that potential investors could understand and assess the risks and opportunities of the projects before making a decision to join our community," says G. Germanavičius.
- When evaluating projects worthy of being included in the crowdfunding platform, InRento's specialists apply a variety of criteria, the most important of which are the existing or planned rental flow, the reputation of the project owner and the liquidity of the asset.
We also apply our quality strategy to investors - it is better to have fewer of them, but with a more informed decision. This allows us to ensure operational efficiency and at the same time a higher quality of service with individual attention to each investor."