The Baltics are one of the hotbeds for crowdfunding innovation in Europe; new platforms keep popping up every year and existing ones keep getting better and better.
Today I want to focus on one of my favorite platforms, Bulkestate, which was founded in December 2016 and has a financial institution license in Estonia (EU). The people behind Bulkestate are from Latvia.
The Bulkestate platform, as the name implies, enables real estate investment project crowdfunding and apartment bulk-deals for a price lower than the market value.
Their website is available in multiple languages: English, Ukrainian, German, Estonian and Russian. That gives you a clear idea of their target markets.
The vast majority of the deals available on Bulkestate are in Latvia, although I’ve also seen one in Bulgaria.
The founders are from Riga and are experts in that market, so they are trying to stick to their core competencies and focus on a few quality projects at a time. In this sense, they are different from the other bigger platforms like Housers and EstateGuru that also have a secondary market and go for high volumes.
I think this is a good sign and expect EstateGuru to have a significantly higher default rate due to the sheer volume of deals that they are putting up on their site, which to me means that there is a lower amount of due diligence on each project.
The bulk of the investors that use Bulkestate hail from Germany, Estonia with a trend for new investors from Denmark, Holland, Spain and Portugal.
These are their main stats as of August 2019:
- 13000+ Investments already made
- 54,57% Average LTV
- 12 Average loan term (month)
- 15,36% Average annual return
That’s not bad at all. On other platforms such as the Spanish or British ones, the returns are much lower. Usually, this would indicate that the investor is accepting a much higher degree of risk, but in this case, speaking from experience, I can say that it’s mostly a question of bigger growth opportunities that are currently found in the Baltic states.
There are currently over 3000 investors registered on this platform, hailing from 63 different countries. If you’re a real estate developer, you can also find investors for your property by applying with Bulkestate and submitting your project proposal. They will then vet it and you’ll have a chance of getting approved to join the platform.
How is the Latvian Market in 2020?
The Latvian market is the most underdeveloped in the Baltics at the moment, which means that Bulkestate can get better returns. Residential properties in Tallinn or Vilnius, for example, are around 10% higher than in Riga.
While many investors are concerned about a real estate bubble developing in the Baltics, we can say that Latvia is not really at risk, and if there were to be such a bubble, it would first be observed in hotter cities like Tallinn and Vilnius.
Bulkestate aim for purchasing properties at 15% discount at a minimum. As savvy investors know, the profits are made when you buy and not when you sell. Therefore, it is essential that properties are purchased at a good discount.
Who is Behind Bulkestate?
Igors Puntuss is the CEO at Bulkestate and he comes from a real estate background. Before founding Bulkestate he was working with large real estate investment projects together with his cofounder.
Originally Mr Puntuss was looking to open an investment fund, but eventually decided to go for a crowdfunding model in order to shift away from having one or a few big investors and move towards lots of passive investors who share the profits. I asked Bulkestate directly to see if they could give me further information about this early decision. Here’s what they said:
The investment fund requires significant set-up and maintenance costs to ensure compliance with all regulatory requirements without necessarily increasing investor protection. As we aim to retain a relatively small volume of funds under management, the fixed regulatory costs would reduce returns we can deliver to investors. Therefore, we decided in favor of the crowdfunding model which is more self-regulating.
Also, large active investors sometimes can play a large role in the whole real estate development project, and most of the time the participation from this large investor is holding back and delaying the process itself, as they always are interested in overseeing and managing the whole project.
As it is known, real estate development projects have to be executed perfectly to increase the profit as much as possible, and delays can largely impact the profitability of the project, hence, passive investors can sometimes be the best option for real estate project financing as it allows the developer to work uninterrupted.
That makes a lot of sense to me. I hadn’t considered the fact that a large investor can hold back a project, and I think that’s one more point in favor of crowdfunding real estate projects.
The founding team had no experience in IT or building crowdfunding platforms, so they had to hire an outside firm to build the platform in 2016.
The leading members of the team are all disclosed on Bulkestate’s About page.
They are also upfront in saying that some of the borrowers might be related to Bulkestate in several ways:
Please note that Bulkestate may provide loans to the borrowers (legal persons) related to Bulkestate, its shareholders, beneficial owners or managers (e.g. by an overlap of ultimate beneficial owners). By using our services, you accept this and this is not deemed to constitute a breach of duty of care by Bulkestate.
I don’t see any real problem with that. As investors, we are always ultimately responsible for making our own due diligence on each project, and can’t rely on the platform doing that job for us, since the default bias of the platform is to put up more projects for us to invest in.
This platform is partnered with Ober Haus and Starlex Real Estate, two leading real estate agencies in the Baltics and Latvia respectively.
I wasn’t familiar with these two companies, so I asked Bulkestate about what the partnership involves. Here’s how they explained it:
Ober Haus is one of the most respected valuation companies in Latvia. During our due diligence process, we always ask to evaluate the property using Ober Haus’s services, and after that, it is re-evaluated by our in-house experts to ensure that the property is worth as much as it is indicated in the valuation report. The same goes for Latio which is also our partner and provides precise valuation reports.
Starlex is an experienced real estate company, which helped us to carry out the group-buying deal in Meža Street 4. Also, Starlex is actively working to help us with bringing in new group-buying deals.
Additionally, our latest group-buying deal in Blaumaņa Street 9 would not be possible without our partners InCity. They brought the project to us and they now are handling the selling process of the property.
Overall, we are happy and grateful to have to possibility of working together with such professional and experienced partners!
Note how well Bulkestate were able to answer all my questions in very good English and providing very comprehensive replies. This is really something unique among P2P and real-estate crowdfunding platforms from the Baltics.
A lot of them reply to questions in broken English and basically copy-paste from their own website without thinking about the investor’s question in a deeper way. I really appreciate how serious Bulkestate takes interactions with investors. This definitely increases my trust in the platform in a big way.
What Types of Buildings does Bulkestate Go After?
Every time I visited the Baltics, I’ve always noticed that as you go outside the historical centers of the major cities, you’ll find a lot of Soviet buildings that look absolutely horrible. Not only do they look depressing, but the majority of them are in a state of decay and some even in danger of collapse.
The reason is that these buildings were built fast and cheap with the idea that they would only ned to last 50 years before being replaced. However, with the failure of the Soviet Union everything changed and the building plans were all abandoned. Hence, we are now at the expiry stage of these buildings, and it would not be a wise investment to buy property in them due to the structural problems they have.
Therefore, Bulkestate only goes for buildings that were built before the war and are the traditional type that are meant to last hundreds of years.
Bulkestate partners with the top two real estate companies in Riga to make sure that they have accurate valuations of the properties and avoid situations where the projected value is inflated. They have also hired an in-house evaluation expert who double-checks these valuations.
Investing in Property Development Loans
Like many other platforms, Bulkestate allows you to do things in a completely passive way by using Auto Invest. Auto Invest is an investment tool that automatically invests available funds on behalf of investors, basing on their chosen criteria. Once investors set their investment criteria, Auto Invest automatically places orders for matching settings. Investors can review, adjust or pause Auto Invest at any time. There are no additional costs for using Auto Invest.
The minimum investment is 50 EUR and there are upper restrictions on how much you can invest.
A downside to investing on Bulkestate that you should know about is that there is currently no possibility to withdraw invested money before the scheduled repayment date. That means that there is no secondary market, so before you invest make sure you won’t need the money before the loan repayment date.
A common question when dealing with such platforms is about what happens if Bulkestate declares bankruptcy. There is reassuring information on this front. Bulkestate solvency does not affect the risk of losing investments, as the investors buy claims rights along with the associated security when making an investment. In case of bankruptcy, the liquidator, separately from the assets and creditors of the company, manages all investor assets. Investors’ funds are safe in a separate escrow account apart from the Bulkestate operational bank account. Thus, if a particular crowdfunding project is not successful and investors fail to raise the necessary funding, investors do not incur any losses and receive all the investments to their accounts.
Of course, as you would expect, Bulkestate has a comprehensive FAQ section which you can go through. In fact, I recommend doing so especially if this is your first contact with such investment platforms.
What is perhaps more interesting and eye-catching due to its novelty is the group buying facility. This consists of structuring group buying deals to acquire small size (such as one apartment) real estate at wholesale prices (sales price of an entire building). I like the idea a lot and look forward to how this section developers. At present, it seems that it’s still in its fledgling stages.
There is currently an offer on apartments in Bulgaria, but I wasn’t impressed at all by their design nor the Booking.com reviews of the resort they are part of. If I were to buy property online with full ownership it would have to be much better than this. The potential savings via the group purchase don’t justify it for me.
However, this doesn’t mean that I don’t like the group buying facility. I am quite excited by it simply because it’s the first time I come across a platform that is geared for this, and I look forward to what other opportunities arise.
The only other opportunity that has been previously available in the Group Buying section is one for apartments in a nice building in Riga. The building looks much more enticing to me than the Bulgarian one, and the deal was successfully completed. What I think Bulkestate should provide is some way of administering the property after the purchase is completed, and helping investors resell it on the open market. I am not interested in traveling to Riga or Bulgaria to manage the sale of the apartment, but I definitely see the attractiveness of the group buy discount and the possibility to resell immediately after at the market price for a tidy profit.
All in all, I think Bulkestate is a very promising platform. I would suggest sticking with the Investment part of the site for now, until the Group Buying part takes off and we can see some success stories.
When I reached out to Bulkestate to ask them what their plans are for the Group Buying part of the platform, this is what they had to say:
As of 2019, we have been working to elevate both sides of our platform and the total volume sold in group-buying is close to our crowdfunding volumes. Also, our team has been working intensively to ensure that the crowdfunding and group-buying projects keep coming in.
So I’m looking forward to see this part of the website developing further. As I said, it’s quite unique in a sea of copycat platforms.
I also wanted to get more information about how the group buying really works, and whether it is feasible for foreigners not living in Latvia to get involved without hampering their chances of turning a profit due to not being on the ground.
I asked them:
Who is the typical buyer of these apartments? Are they local people? As an investor myself, I find it hard to justify such an investment without going to see the property or having any use for it myself. Do you offer any management services for rentals? How would a foreign investor like me make money on these bulk deals?
Here’s what Bulkestate replied:
It differs from case to case, mostly these are locals who are interested to purchase apartments for themselves or to rent them out.
Of course, we are interested to increase the number of foreign investors that would use our group-buying services. As the apartment prices are pretty low in Riga, foreign investors could purchase and rent out the apartments earning from 5-8% per annum. Additionally, as the prices are increasing in Riga, investors can earn additional funds by exiting the project in a few years when the price of the apartment would have increased.
We always mediate the legal side of the deal; hence, the investors would not have to worry about the purchasing process itself. The most time-consuming thing for a foreign investor would have to be the renovation of the apartment and finding potential lessors. But in this case, we can help to find a construction company that could renovate the property if necessary, and also, we can connect our investors with local real estate agents who can rent out the property.
I’m still not entirely convinced that it would be a profitable endeavor as I really don’t like dealing with contractors or renters, so a turn-key solution would be much more attractive to me. However, I am visiting Riga later this year for the P2P Conference so I will use that opportunity to visit some properties and familiarise myself with the city.
Lack of a Blog
I also think it is important for Bulkestate to have a blog. That will add credibility and a more personal touch to the experience of investing on this platform. Right now, the only news we can get about Bulkestate comes from their Facebook profile, but not everyone has Facebook and I don’t think that should be the primary location where a crowdfunding platform posts its news.
I would much prefer to see a blog that details the important milestones and growth of the platform, as well as real assessments of what worked and what not in previous investments.
Given the fact that they have very capable people on their team who have loads of experience and can speak and write perfect English, I think Bulkestate is losing a good opportunity by not having an active blog.
How to Sign Up to Bulkestate
Any business or any person over the age of 18 can invest on Bulkestate, and the signup process is pretty straightforward:
- Create an account
- Add funds to your account
- Invest in some projects
Deals on this platform are snapped up quickly as there are many investors willing to invest and not enough supply. This is a problem with many platforms at the moment as the interest in such platforms has skyrocketed in the past couple of years, and many investors are flocking to invest their money.
Once you’re signed up you can access detailed information about every deal that is open to investment. Once you make your decision you can go ahead and invest with a minimum of 50 Euro.
I have 5 completed projects so far, and a return on investment of 14.39%.
Apart from these concluded investments, I have several more that are all still active and apparently going well, so I expect to receive the interest as promised in the coming months.
As you can imagine, I have no complaints on the returns and performance of my investments so far.
I like the fact that the LTV ratio is quite low at around 50%, and also that they are very selective with their projects. Loans are between 3 and 24 months which means that our money is not tied up for that long, another plus in my opinion.
If you’re familiar with investing on P2P lending platforms that specialize in consumer loans (like Mintos) you’ll notice that there is no buyback guarantee on Bulkestate, but this is normal since the loans are backed by real estate. Therefore, it is not a problem or a downside of this platform.
There is the possibility of using an auto-invest system, which is essential for me since I don’t like to spend a lot of time on these investment platforms. I’d rather set things up and let the auto-invest system do its job.
I remind you that so far there have been no defaults on Bulkestate, and while that does not guarantee what will happen in the future, I think it’s a good sign to take into consideration.
As a downside, I’d put the fact that there is no secondary market, so if you need immediate liquidity you’re going to run into trouble as you’ll be forced to wait out the loan repayment. On the other hand, the reason that they don’t have a secondary market is that this is a smaller platform as we mentioned earlier, so even if they had a secondary market chances are it wouldn’t be very active anyway. The lack of the secondary market is compensated by the fact that loan terms are not that long.
As is standard with many of these platforms, there are no fees to be paid by the investors to join or use the platform.
If Bulkestate ends up going bankrupt (which is always a possibility you should consider) you can rest assured that all investments are secured by being separated from Bulkestate’s assets. This means that Bulkestate’s creditors will not have any claim on your money in the eventuality that Bulkestate folds.
As always, if you have any questions about Bulkestate or online real estate investment in general, please leave a comment below and I’ll do my best to answer your queries.
Bulkestate is currently making a name for itself in the real estate crowdfunding sector. The platform focusses on well-selected projects, rather than a multitude of investments – a plus in my opinion. I think that it’s a good option for anyone who wants to start building a real estate portfolio.
- Low LTV ratio
- The platform focuses on few quality projects at a time
- Loans range between 3 and 24 months
- Auto Invest feature
- If the crowdfunding project is not successful, investors do not incur any losses and receive all investments to their accounts
- No defaults so far
- No Secondary Market
- No blog