Start – Blog – Experiences with EstateGuru during the Crisis
Disclaimer: This is not financial advice! You can sign up for EstateGuru through this link, which will give both you and me a small commission, but this is still not a recommendation!
In March, I introduced EstateGuru, and a lot has happened since then. At that time, I had invested in 90 projects; now, it’s 247. Back then, nearly 95% of the projects were on schedule, but now only about 85% are.
Three projects of mine are in default, which in banking terms means they are “defaulted,” and the debtor is bankrupt. The projects are located in Estonia, Finland, and Germany. I had written that one should not worry because the debts are registered in the first lien position, meaning the project will simply be auctioned off and you’ll get your money back, as the entire value of the project isn’t collateralized. Allegedly, the process takes, on average, just over 10 months. The statistics can also be verified on the EstateGuru website. Since the entire time since the platform’s inception is shown and I joined later, my numbers, of course, look different. In one project, I’ve been waiting nearly a year now, and the auctions are constantly being repeated. Apparently, selling the project isn’t as easy as expected.
Interestingly, EstateGuru has now written twice in quick succession (see here and here) about what happens when loans are in default. There was also a message saying that in the coming months, more projects will be seen with delays. This is no surprise, as construction materials have become extremely expensive, and some projects will falter.
Am I worried? No, but I’m a little annoyed with myself because, in one project, I was simply too “greedy.” Normally, my investment per project is a maximum of 250 euros and 50 euros per stage. Here, I manually invested 500 euros. In some projects, you get a bonus if you invest more, and an expected return of 11% sounds great, right? Also, I knew the building in Finland.
Now I have listed the project on the secondary market to see if anyone is willing to take the risk. I would lose 7 euros in that case. Otherwise, I’ll have to wait. Even if this project had to be completely written off, I would still be well in the plus with a current return of 9.57%. Since the LTV (Loan-to-Value Ratio) of the projects I invest in is always below 70%, usually at a maximum of 60%, a project would have to lose 30-40% of its value before I would face a total loss. Still, this has been a lesson for me—I will no longer buy manually, even if there’s a bonus.
And of course, it would be nice in terms of a FIRE strategy to invest enough money so that passive income is generated every month. But even though EstateGuru does everything to ensure you get your money back eventually, it doesn’t help if you need the money now, at the time when it should have been repaid. The calculation of investing 60,000 euros there and having 500 euros in passive income per month at a 10% annual return is not realistic. Also, there aren’t enough projects available, at least not according to my investment criteria, to invest that much, even if I wanted to.
Does EstateGuru still make sense for me? Yes, definitely, as part of a mix with other investments. But it is absolutely necessary to implement a strategy that you feel comfortable with. If the situation in Europe escalates further, there could be a larger default, and that is something you have to be aware of.
If you sign up for EstateGuru through the following link, you and I will both receive a small bonus.