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.
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.
Bulkestate Partners
This platform is partnered with Ober Haus and Starlex Real Estate, two leading real estate agencies in the Baltics and Latvia respectively.
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
The investing part of the platform consists of loans to property developers. This is something I’ve seen on other platforms like Property Partner in the UK and Housers in Spain.
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.
Group Buying
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.
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.
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.
My Experience
I invested in 6 projects so far and one is already completed, giving me the expected returns. The others are all still active and apparently going well, so I expect to receive the interest as promised in the coming months.
I’m happy with Bulkestate so far, although obviously it’s still early days.
Final Opinions
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.
I’ve been interested in trying these real estate P2P sites, if you were to suggest the one with the lowest risk/reward ratio, what would you pick? Bulkestate has given me a good impression so far with their low LTV ratios, zero defaults and good rates, but there are so many platforms out there that there might be better ones
The ones I highlight in this post are all good in my opinion, so it also depends which geographical area you want to invest in.
Sounds very interesting and it seems to be an emerging market. I’ve tried a bit of p2p lending but I’m now looking into crowdfunding as an addition to my portfolio. Think I’ll start with housers as I’m also based in BCN but I may also open an account with the minimum quantity here just to get a feel for it. Many thanks for providing info on these sites, it’s a great help and much appreciated.
You’re welcome Tom, it’s my plan to keep writing about my experiences with these platforms.