Each project in Reinvest24 lack basic info, therefor I gave questions for CEO about few projects.
The expected returns are not true on Reinvest24, because there is 2% buying fee.
Apartment development in Tallinn´s tech hub
- What is the value of collateral?
- Do you have official valuation by authorized person/company?
- Is there any person bringing additional personal guarantee?
1) The development laon with 13% fixed interest ( interest calculated from the day placing the investment ):
a) We set the collateral always +20% of the initial funding target. Since it is a development project, the property will have the value on that range once the development is completed. It is hard to estimate the actual value of the collateral at the moment while the construction works are ongoing. We always use local established real estate agency´s for appraisial reports ( in Estonia either Uusmaa or Doomus ).
b) No, we do not have an additional personal guarantee on the project. We use collateral agent ( independent law firm ) for that.
2 . Luxurious rental apartment in Tallinn city center Project:
- Who does the management?
- What is the management cost of the rental?
- How do you come with yield?
- Is it yield for rental or for loan?
The SPV does the management ( registered under Reinvest Holding company ) and the annual reports of that SPV is publically available ( investors will be provided with the income reports ). We make our rental yield calculations rather conservative:
The gross rental yield is calculated with 40% yearly vacancy rate ( on the high season the vacancy will be close to 0%, but on the low season it could be 60-70% ). 50 eur per night is slightly lower then what other same size apartments are rented for. The net yield 8,3% is the yearly profit after the booking.com / airbnb fees, Reinvest24 fee, utility and operating fees. The 8,3% is conservative estimation, we rather try to under promise and over deliver.
And the same goes for the collateral, it will be set +20% of the initial funding cost and we will have all the properties revalued once a year or after achieving a major milestone.
Do I understand correctly, that rentals, does your daughter company?
That is correct, all the SPVs are registered under our holding company ( Reinvest Holding OÜ ). I attached the whole company legal structure for better understanding. The gross yield is the SPV total income in rental projects. The difference between gross and net comes from all the operating costs + the 10% platform fee. The net yield is the profit paid out to the investors ( from rental projects monthly ), also including the platform fee.
b) the project with equal gross and net yield is not a rental projects, it is a development loan with a fixed annual interest rate. We are in process of updating the property section interface to separate the development loans from rental properties more clearly.
Development projects – is it your related company as well who is doing the development or is it non-related third party?
Yes the SPV is related to us. At first we planned to make this kind of projects as an equity investments, where we developer and sell the property and the investors will benefit from the capital growth. Later on we changed this concept to development loans with a fixed interest, since it is more clear, understandable and p2p investors are familiar with this concept. And some of our equity investment opportunities into rental properties also include developments that bring capital growth.
with most of our rental properties we don’t set any exit date, as the goal is to provide long term passive income.