Estateguru is one of the few P2P lending platforms that is acknowledged as a trustworthy platform. The unique features of Estateguru overshadow all other P2P lending platforms from Europe. Through my own experience with Estateguru, they have proven to be the best place to get a high return in contrast to all my other investments (stock, crypto, index funds, and other P2P lending platforms).
- Loan types: Business loans, development loans, and bridge loans.
- Loan terms: Typically 12-18 months
- Interest rate: 8-12%
- Auto-invest: Yes
- Buyback guarantee: No
- Fees and costs: Fees on the secondary market
- Minimum investment: €50
- Currencies: EUR
- Secondary market: Yes
- Bonus: 0,5% extra interest in 3 months
- Sign-up link: EstateGuru
Why I Invest on EstateGuru
EstateGuru is a one-of-a-kind platform in my eyes. EstateGuru is crowdfunding the loans using their own platform, without any loan originators. While platforms like Mintos and Grupeer is handling the loan originators very professionally, EstateGuru don’t have the loan originators and their obligations to keep track of.
Many P2P lending platforms offer ratings of their loan originators. While this is a nice risk management tool, EstateGuru does not have loan originators. Therefore, they have made an easy and simple to understand dashboard, to track diversification.
Furthermore, EstateGuru does not issue buyback guarantees. Why do I see this as an advantage? Well, the buyback guarantee is only good as long as the loan originator has money. If the loan originator has no money they cannot pay the loan back to the investor. With EstateGuru, you are bound to go through the entire loan period. In addition, EstateGuru has secured collateral on all loans. Just in case the borrower ends up defaulting. At the writing of this review, EstateGuru only had 3,3% of loans in default.
The next reason is the interest rate. EstateGuru has some competitive interest rates compared to the risk. My experience is that EstateGuru is amongst the lowest risk to the highest reward in P2P lending currently. I will go into more detail with this in the review.
The last reason is transparency on EstateGuru is industry best practice right now in my opinion. EstateGuru shows the business address of the borrowers, the collateral value and the physical address of the collateral. The only thing missing is the financial condition of the borrower. However, this can be a difficult step to overcome with private companies.
What is EstateGuru P2P Lending Platform?
EstateGuru is a P2P lending platform that focuses on real estate loans. There is at the writing of this review 41.000 investors. They have issued a total of €185,000,000 worth of loans. The historical returns is 11,89% with an average loan size of €145.000, to an average loan-to-value (LTV) of 59,3%. There is 3 types of loans issued on the EstateGuru platform: Development loans, business loans, and bridge loans.
Development loans: A development loan is a loan issued for the planning process or the construction of the property itself.
Business loans: A business loan is to support the day-to-day activities and is used for business expansion, acquisition of equipment or cover current obligations.
Bridge loans: A bridge loan is a short-term loan for used for current obligations before getting permanent financing options, enhancing the value of a property or selling the underlying asset.
The minimum investment is €50 when using the simple auto-invest or manual investing. However, when unlocking the detailed filter for the auto-invest, the minimum investment is €250.
EstateGuru issues their loans to businesses in Estonia, Latvia, Lithuania, Finland, Spain, and Portugal. However, the focus of their business in loans in Estonia and Latvia.
EstateGuru has their headquarters in Estonia and has offices in Latvia, Lithuania, and UK.
How Does EstateGuru Work?
EstateGuru is both a lending company and a P2P lending platform. First of the lending part of EstateGuru is not that interesting for me.
However, if you are seeking funding for real estate projects you can request EstateGuru for a loan with 3 different repayment schedules and get approval within 24 hours assuming your project passes due diligence. This allows the borrower to customize their loan to their cash flow situation.
EstateGuru is simple as a platform. It works by small to medium-sized businesses seek funding, EstateGuru takes on the due diligence process, if it passes it is posted for funding on the platform for the investors to earn interest as a return for the funding.
The loans listed on EstateGuru holds valuable information to the investor, for the sake of the investors due diligence process. The loan overviews are publicly available for the investors during the funding. The loan overview holds the executive summary, loan terms, interest rate, repayment type, repayment schedule, LTV and much more.
The funding of a loan takes up to 15 calendar days + 10 working days. When the loan is funded the loan agreement can be found. The loan agreement is your legal claim against the borrower.
After the funding, the information gets disabled for non-investors (unless the project can be found on the secondary market). From here the investors who joined the project can see the detailed schedule of repayments.
Getting started on EstateGuru
Getting started on EstateGuru is really simple. First, register at EstateGuru (using this link you will earn 0,5% additional interest in the first 3 months). This requires the usual registration process for online banking/investing (proof of identity, bank account verification, and setup of investment account).
The second step is to deposit some funds to your investment account. You can invest from only €50, so the barrier-to-entry is very low.
The third step is to select a loan. Browse the primary market for loans that suits you and invest slowly, to get a feel for the platform. Use the information provided to make your own due diligence.
The fourth step is basically just waiting for the financing round to reach an end. When the loan is funded the borrower is notified and their funds will be transferred for their project.
The last step is to collect interest. The borrower will make their repayments and once the loan is fully paid, you can invest your funds plus accumulated interest in new projects.
While it is set up to look like a 5 step process, it is simply just a 2 step process (based on actively managing the investment). The first step is to deposit funds. The second step is to invest in a project that suits your demands. Now you will collect interest. The funding, borrower management, due diligence, and all other described steps are done by the EstateGuru team or automatically.
How To Invest on EstateGuru
EstateGuru has 4 different approaches to invest. The primary market, the secondary market, simple auto-invest, and advanced auto-invest. The main difference on the 4 is that the secondary market has a 2% fee of the transaction amount, and to unlock the advanced auto-invest your minimum investment becomes €250.
The primary market is where the investments is initially posted. This is where you find the loans that are open for investments. Using the primary market is free of charge it is also here all the details are presented.
This is where you as an investor go to look for fresh loans. This also where you get a full overview of the open loan book with the vital details. The vital details are information such as loan amount, LTV, loan term and amount of the loan funded. If there is a shortage of loans, the loans get funded quite quickly. The overall information provided in the overview is good for a quick decision. However, I would advise you to take your time, there will always be a new investment opportunity.
The secondary market is as the name suggests. Whenever an investor wants to get out of his/her investment, they can post it their loan for sale to other investors. The seller of the loan will pay a 2% fee to the administration of the secondary market.
In the secondary market, it is only possible to purchase the full amount for sale. So if someone is selling a loan part at €100, it is only possible to purchase that €100. Two investors cant pickup €50 worth of the loan each.
The seller and buyer are dividing the interest between them. The seller is entitled to all interest payments made before the sale, while the buyer is entitled to all interest earned after the sale.
EstateGuru is equipped with 2 types of auto-invest “styles”. The first one is the simple auto-invest. The simple auto-invest is only to control the investment amount, loan term and loan type. This provides limited customization. However, it is possible to invest using the advanced settings by adjusting the “Amount for one loan:” to €250.
Their argument for setting the €250 per loan is based on their own stress test. They claim that a diversified portfolio can handle economic situations, hence the minimum investment of €50.
If you want to be fully in charge of the customization, you need to set the investment per loan of €250. This will allow for additional adjustments, but when investing smaller amounts (like me), it also means less diversification.
While the additional options is nice, it is frustrating that only “rich” investors can benefit from using the advanced auto-invest option.
EstateGuru Team And Organization
EstateGuru’s team is combined of people with financial and digital backgrounds. The founder and CEO Marek Pärtel has many years of experience in real estate investing. Furthermore, he is an angel investor, hence he has an eye for investing and know what the investors want.
The co-founder and risk manager Kaspar Kaljuvee has more than 10 years of experience being an appraiser for commercial real estate.
In other words, the management has a lot of experience behind them. They are not newly educated people with no experience (Like the management of Kuetzal was). However, the operation employees are a bit more “green” with less experience.
EstateGuru has a lot of positive reviews on TrustPilot. Most reviews report of the returns are as promised, low default rates, good open communication, and generally good performance.
The few bad reviews seem to be people that are caught with defaulted loans and did not understand the risk P2P lending and lacked diversification in their portfolio.
EstateGuru’s Financial Statement
EstateGuru has public financial statements which can be found at the bottom of their website. The general investor register is growing very potent.
The general financial status of EstateGuru is okay. They have only been profitable in 2018 (lastest numbers), and have a relatively high debt-to-equity ratio. The debt-to-equity tells us something about how leveraged they are. The metric tells us if they are financing their operations through debt or their fully owned funds.
However, I feel they have forgotten an important Key Performance Indicator (KPI), Return On Assets (ROA). The ROA tells us something about how good they utilize their assets to earn money. In had a net income of €119.259 and €384.017 in assets. This gives them an ROA of ~30% which is very good. In other words, consider your loans on EstateGuru as assets, if you should have the same ROA (theoretically) you would need a return of 30% on the loans.
Is EstateGuru Safe?
Overall the platform is built around trust. However, I miss some aspects from a transparency perspective. E.g. the loan agreement between EstateGuru and the borrower.
It is one thing to provide the investor with a loan agreement between the investor and borrower based on EstateGuru’s terms. However, as an investor, there is no inside to what EstateGuru and the borrower has of agreements. One thing I critically miss is the interest margin EstateGuru earns. The interest is already quite big, and EstateGuru has to make money as well.
So what is the effective interest rate for the borrower?
When this is all said and done, this is a minor issue compared to many other platforms. EstateGuru has some top-notch transparency when comparing to other platforms. In addition, they also have has management that has been in the lending industry before. Again something that other platforms haven’t got.
What are the Risks of Investing Through EstateGuru?
Investing on EstateGuru carries risks with high returns. I have made a post about the risks of the 7 P2P lending risk if you are interested in reading that.
However, I will concentrate on the specific risks of EstateGuru in this review.
- Defaulting borrower
- Collateral value
This is one of the more obvious risks. As EstateGuru has no buyback guarantees, the risk of a defaulting borrower is present and should be weighted when investing. The mitigation strategy you can use is to limit the LTV, so the loans won’t be too high in relation to the project funded. Furthermore, you can look at the value of the collateral and assess the area (if it is a property) and understand the market situation in the area. This will most likely be to must work for the average investor, but mitigation worth considering if you are serious about the due diligence.
The collateral value is also a risk that can threaten the investors return of principal. However, only if the borrower defaults. The collateral is used to repay the investors in such cases. However, if a recession was to occur which would lower the value of the collateral, the principal from the investors is at risk.
EstateGuru is illiquid. The only way to exit loans is through the secondary market. The secondary market is not the prioritized area for investors as most of the loans on the secondary market is late. Furthermore, the new loans are on the primary market.
The general statistics of EstateGuru can be found at the bottom of their website, however, I would like the summarize the most essential here.
EstateGuru has a very positive track record. So far I haven’t heard about anyone losing their invested principal, but only the interest on the loan. This means that despite an occasional default, EstateGuru is good at recovering the funds from the collateral.
The statistics also show no loss of capital. However, it might take some time to collect the funds from the collateral (a property might be difficult to sell, or not to the price wanted).
Overview Of Fees And Costs Using EstateGuru
There is not much to comment on in the fees and costs of using EstateGuru. They only charge 2% of the transaction amount to the seller on the secondary market. Everything else is free of charge.
Experience Investing With EstateGuru
EstateGuru has been a pleasant investing experience so far. I have no negative comments so far. I have the critique that it should not only be for “rich” investors to use the advanced auto-invest options.
The only adjustment I would like is monthly interest. Only for the principle of cash-flow. The borrowers can choose to have a loan that pays interest monthly, quarterly, per half-year or yearly.
EstateGuru Investment Strategy (My Personal Strategy)
My strategy on EstateGuru is very simple. I select auto-invest and with a minimum of €50 per loan with no upper limit on the loan period.
If I had somewhere between €2.500 to €5.000 invested in EstateGuru I would start to consider making the advanced auto-invest. But the €250 per loan is quite a tall barrier with my small funds.
EstateGuru Bonus (EstateGuru Promo)
If you are interested in using EstateGuru, you can sign up using THIS LINK and get 0,5% additional interest in the first 3 months.
Frequently Asked Questions About EstateGuru
Is EstateGuru Safe to Use?
On EstateGuru, specifically, the risk is defaulting borrowers, change in collateral value and illiquidity.
If the borrower defaults there is no guarantee that your money will be returned to you. However, there is not lost any money on EstateGuru yet, due to their good debt collection process.
Who Can Invest On EstateGuru?
Everyone in EEA member states (including Switzerland) at the age of 18 can invest with EstateGuru. EstateGuru uses a “know your customer” process to check before investing can start.
What is the minimum investment?
EstateGuru has a minimum investment of €50 per loan. However, if you want to use the advanced auto-invest options the minimum investment is €250 per loan. There is a simple auto-invest option for minimum investments of €50.
BuyBack Guarantee on EstateGuru?
EstateGuru issues no buyback guarantee. However, EstateGuru secures collateral, hence any project is backed up property or personal guarantees.