Marek Partel founded EstateGuru in late 2013 and the company issued its first loan at the beginning of the next year. Today, the company has a presence in eight European countries, serves more than 80 000 investors around the world, and has issued over €360 million worth of loans.
We asked him about the reasons for establishing the company, their business model, and how he sees the future of investment.
This interview was originally published by EDASI
When you started EstateGuru, did you expect it to be so successful? What was the opportunity you saw in the market?
By 2013 I had spent years working as a real estate developer and I understood the frustrations and limits of opportunity that the sector faced very well. One of the main reasons many small and medium property developers struggle is because they have no access to credit. Real estate development is, by its very nature a speculative endeavour, by which I mean that you invest in a project because you hope to make money somewhere down the line. To do this, most younger companies need a reliable credit line. Traditional banks are not set up to help with this. Firstly, they don’t understand the industry, which leads to them being overly conservative in their approach to risk. On the other side of the coin, I was also an investor, and I saw that many people would love to be able to invest in real estate, but traditionally that required a lot of money. I wanted to bring these two sides together. I believe that the opportunity to invest in real estate should be open to absolutely everyone.
EstateGuru Fast Facts
EstateGuru uses the crowdlending model. Can you explain how that works in a bit more detail?
We issue loans to Small and Medium Enterprises in eight European countries. The borrower needs to submit an application with a business plan and supply us with a mortgage on real estate as collateral for the loan. We generally have a limit on the loan to value ratio of 65%, but in practice, it is around 54%. The loans are short-term, which in our case means between 12- and 18-months’ duration. Once all our stringent risk and credit criteria have been met, we publish the project on our platform to our investors. We have a mix of retail investors and institutions who will then decide how much they want to invest in each project. The smallest amount an individual can invest is €50. Other than a nominal withdrawal fee, there are no charges to the investor. This ‘crowd’ of investors act as a bank for our borrowers and often we find fairly large loans financed in a matter of minutes.
What are the key benefits for your investors? Why should they choose EstateGuru rather than equity investing or the stock market?
It isn’t really an either/or choice as far as I’m concerned, I would advise any investor to look into all possibilities. The first rule of investing is diversification to reduce risk. In investing, the old saying not to put all your eggs in one basket is very true. Of course, the first thing people think about is the rate of returns on their investment, and in this area, we have managed to consistently deliver over 11% per annum to our investors, with no capital loss over seven years. The fact that all our loans are secured with a mortgage, and a first-rank one in 97% of them, adds a layer of security that most other crowdinvesting models fail to match. Furthermore, and to get back to diversification, the number of projects on our platform, the different loan types, the low amount needed for each investment, and the fact that investors have access to eight countries means it is really easy to build a very diversified portfolio on our platform.
All investments, including real estate, are speculative in nature and involve substantial risk of loss. We encourage our investors to invest carefully. We also encourage investors to get personal advice from a professional investment advisor and to make independent investigations before acting on information that we publish.