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.
I’ve actually written quite a bit about Scalable Capital already, but here’s a small update: If you’ve closed a portfolio once, you can no longer create a new one using the same email address. In other words, I was asked to open a new portfolio with a different email address. Of course, I’m not going to do that. If Scalable Capital resolves this issue, I’ll open a RoboAdvisor portfolio there again. For now, I’m only using the Direct Broker. I do get a small referral fee for this link.
Why Scalable Capital at all, if I’m so happy with Growney? Simple: Growney is definitely very easy to use and I truly recommend it to anyone who has little time or little knowledge. But, for more experienced investors, the data at Growney isn’t updated very frequently. You don’t get real-time prices. Recently, I sold something, and it took over a week before I even saw any change in my portfolio, even though the money had already been in my account. In that regard, Scalable Capital is definitely better.
In addition to the RoboAdvisors, I’m also seeing more and more decentralized finance (DeFi) and similar providers being promoted in the FIRE movement, like EstateGuru and Bondora. Both platforms aim to help build passive income. EstateGuru, for example, offers the opportunity to participate in property transaction financing. In most cases, you’re entered as a creditor in the 1st rank in the land register. So, the likelihood of losing everything is quite low.
You need to keep your nerves here, though, as payments are constantly delayed, and I’ve had a loan default. It can take months before money starts coming back in. Diversification is important here too—different countries, different types of loans, etc.
With Bondora Go & Grow, you’re financing consumer loans. In this product, the portfolio is managed by Bondora, which means slightly lower returns (6.75%, not guaranteed), but also fewer decisions to make. It’s not possible to invest a large sum all at once. The maximum amount you could invest monthly used to be €200, but now it’s €1,000. Withdrawals incur a fee, by the way—this applies to EstateGuru as well.
I’m writing this article because I often find in conversations that managing one’s finances is a topic many struggle with, especially among students and pupils who haven’t learned it at home. So, I’ve written an article that I can always share:
I’m a big fan of budgeting, which means I plan relatively precisely how much money I want to spend on what each month. To make sure I don’t run out of money before the end of the month, I set aside money for different purposes at the beginning of the month into (virtual) envelopes. For example, for:
Household
Subscriptions
Mobility
Savings
Vacation
My experience is that if you don’t budget, you end up spending more money than you intend to. Especially when it comes to saving, I find it important to set aside the savings amount right at the beginning of the month, rather than saving whatever is left over at the end. Budgeting also makes decisions easier. For example, if I want to learn a new instrument like I did last year, I can determine how much I’m willing to spend on lessons, equipment, maintenance, etc., in order to stay within budget.
In the past, this was quite a complex process. You could use paper envelopes for different categories, plus a checking account, plus a savings account, etc. Or you could keep a household ledger. That requires a lot of discipline and can be time-consuming. Managing everything from one checking account still feels tricky to me.
How does it work exactly?
I share some details about my budgets here. Every month, I set aside money for the following areas:
Mobility: €100. I don’t own a car, and I get around by walking, cycling, sometimes using Cambio, occasionally taking an e-scooter or Moia, and I also use the HVV (Hamburg Public Transport) or the train. I don’t want to spend more than €100 a month on all of this. Most of the time, I stay well under €100, but when I have to make a longer trip, like to Berlin, it’s good to have a reserve. When e-scooters first came out, I initially spent a bit too much on them; of course, it was new and fun, but then I realized I was spending too much on them.
Health: €50. I have health insurance with a deductible, and I set aside money for that every month. In addition, I pay for anything the insurance doesn’t cover. If there’s any money left over at the end of the year, great, then it goes into my investment account.
Subscriptions and Membership Fees: €70. This includes Apple Music, my membership with D64, etc. I find it important to keep subscriptions separate because even if each one costs only a few euros a month, it adds up over the year.
Household Account: I won’t reveal the exact amount, but we try to stay within budget here. Ideally, you have a shared account with the other household members.
Vacation Fund: I am currently saving for this with Growney.
Pocket Money: €200. Yes, I pay myself pocket money 🙂 I use it, for example, to buy fish sandwiches. But I also try not to spend it all so that I can treat myself to something more occasionally. I also financed my flute this way.
Savings: I won’t disclose the exact amount, but I diversify my savings across different platforms—Growney, EstateGuru, Scalable, my financial advisor, and a solid reserve (3-6 months of salary) in a high-interest savings account.
In addition, there are areas for which I prefer to have separate accounts:
A small business account, through which I handle everything related to my side business (teaching assignments, book royalties, Google AdSense for income, web hosting, etc., for expenses). I like to keep this separate because the tax office will eventually want a piece of it, and it’s also easier for me to manage the taxes this way.
A property account, where everything related to my real estate is handled, such as rent, loans, management fees, property tax, etc. Occasionally, something needs to be repaired, and it’s always good to keep this separate from other budgets to avoid confusion.
If I had everything in one account, it would be complicated to keep track of. Sure, it’s possible, but I prefer to pay for the ability to keep everything separate and have things run automatically. Yes, it doesn’t sound particularly minimalist with multiple accounts, but I try to keep the effort as low as possible so that I don’t have to spend too much time on it.
Current accounts with sub-accounts
As I mentioned, some neobanks now offer current accounts with sub-accounts. N26 was, in my opinion, quite ahead with their Spaces. It’s a really good idea, especially because it encourages people to start budgeting their money. But for everything to run automatically, these Spaces need to have their own IBANs. Initially, they didn’t have them, but now they do. Unfortunately, the money didn’t always arrive reliably in my sub-accounts. And the support wasn’t very helpful. I don’t see why I should pay to be treated poorly. Even though N26 was the only one of the candidates to offer me an overdraft right away, which can sometimes be quite helpful.
bunq was my favorite for a long time, partly because they offer features that were really helpful, such as virtual credit cards. This allowed me to assign a unique virtual credit card to each sub-account. It was a great feature because I didn’t have to move money around all the time; I could book things like MOIA directly from the Mobility account. Unfortunately, like with N26, I ran into the problem that money didn’t always reliably show up in the sub-accounts after the German IBANs were introduced. When Google sent me a message that a payment had been returned, and bunq then told me that I wasn’t cooperating because I wasn’t getting Google to release more information, that was the final straw for me. I had already been frustrated with bunq’s overcharging, then the really rude support – no, I don’t want to pay for that, no matter how good the account is. So, I left quickly.
Now I’ve ended up with Vivid and am testing their offer. Like bunq, Vivid also offers virtual credit cards, but you have to pay €1 for each. I think it’s worth it. Vivid also doesn’t offer a debit card, which is a shame because you still need one often, something that both bunq and N26 provide. The signup process wasn’t entirely smooth for me, with lots of problems. BUT: The support is incredibly friendly AND actually helpful. Let’s hope it stays that way and that I’m not treated condescendingly like I was at N26 at some point. N26 also had great support in the beginning.
Vivid has the downside that its interface has too many bells and whistles I don’t need and can’t hide. I don’t want a stock rewards account, and the cryptocurrency features aren’t something I need, especially since you don’t have your own wallet. I would find that really interesting. But the Vivid account solves my problem of wanting to budget and automate things. However, I still have my salary transferred to a classic account with ING. Eventually, I would like to only have one account.
I also find Tomorrow interesting and would love to use them, but unfortunately, they don’t offer IBANs for their Pockets, which are similar to the Spaces at N26. When I asked, they said it was on their radar, but they couldn’t say when it would come.
What I don’t understand: Why aren’t direct banks doing anything about this? DKB offers an additional account, and so does ING, but more than one isn’t possible. Both banks responded with corporate blah blah to my inquiry. Both offer free current accounts and could finally make money from current accounts. But something is stopping them. I find it completely incomprehensible.
Conclusion
In conclusion, it can be said that no bank completely solves the problem. While direct banks offer very friendly support, they fail to launch accounts that enable proper budgeting. And the neobanks mainly suffer from poor and unfriendly support (except for Vivid), as well as bugs or missing features that don’t occur with the larger banks. I believe there is a real opportunity to solve this problem, but maybe not enough people see it as an issue that they can’t manage their finances without budgeting 🙂 Or when you think of overdraft fees, maybe these are just too good a source of income for banks to want to help customers manage their money more wisely.
I’ve written quite a bit about Scalable Capital over the years, so here’s my retrospective after 5 years of experience. In May 2016, I opened my first portfolio with a 10% VaR (Value at Risk), and a year later, I opened another with a 20% VaR. In 2016, I also gave a sum of money to my financial advisor, but a few months later, so the data isn’t directly comparable. My advisor charges 1% and reimburses kickbacks and account fees, so the fees are roughly comparable. The data, here the time-weighted returns, don’t exactly speak in favor of Scalable Capital:
Portfolio
2016 (Partial Year)
2017
2018
2019
2020
2021 (YTD)
Total
SC 10% VaR
2,96%
1,83%
-4,92%
13,43%
-3,55%
1,44%
10,09%
SC 20% VaR
–
3,87%
-6,88%
14,26%
-10,45%
4,59%
2,64%
Financial Advisor Portfolio
0,45%
8,91%
-9,06%
19,08%
4,3%
6,83%
32,01%
5 years is still not a long time span, but the performance is far from what my financial advisor achieves. The 20% VaR portfolio was also rarely above the 10% VaR portfolio. Therefore, I decided to close that portfolio (this can be done via the profile), and I’ll continue monitoring the 10% VaR portfolio.
What also contributed to my decision was the data protection incident in October 2020 and the way Scalable Capital handled it. When I asked in the chat, I was pretty much brushed off. And if you search for the information on their website, you’ll find a link somewhere in the footer, but it seems like it hasn’t been updated in a while. At Scalable Capital, I will keep my above-mentioned portfolio and also my Free Broker investment.
If you sign up via my referral link at Scalable Capital, you and I will receive a small bonus! There are no additional costs for you.
Growney
I came across Growney through a tip from Finanztip. I was looking for a way to invest money for my children with less than €10,000 in initial capital. There is no children’s account available there, which has the disadvantage that the saver’s allowance is used up. But, what I found convincing, is the option to give relatives the IBAN of the portfolio (which is called the “investment goal”) so they can simply transfer money, which is then invested according to the chosen strategy. I no longer have to worry about it myself. Investments can start with €500 or €25 monthly.
I also set up a portfolio for myself, and what I really like is the option to invest entirely sustainably.
Growney does not offer an app. Initially, this isn’t a big deal, since most users already have too many apps installed. However, navigating through the mobile site is a bit cumbersome, as the login link is initially “hidden” in the burger menu.
What stands out is that it takes unusually long for a deposit to be invested. This is not clearly explained. Money that was credited two days ago is simply still displayed as cash. Unlike Scalable, it also seems that there is no real-time display of the portfolio value, and sometimes it doesn’t even seem to be updated daily. Growney may not be as sleek as Scalable, but that’s really not important.
If you sign up via my referral link at Growney, there’s a bonus for you and me (this bonus changes from time to time, so please check what is currently available).
I am a big fan of Ben Felix, and one of his videos really made me think about the question of whether it’s better to buy or rent a property. His statement: If the annual rent is less than 5% of the property purchase price, renting is cheaper. However, he also mentions that this rule of thumb is a significant simplification. The video:
Brief Summary:
The comparison between renting and a mortgage payment contains a logical flaw. His argument is that you should compare costs that are non-recoverable.
In the case of renting, it’s relatively simple: you sum up the rent over a period and get the costs that you can’t get back.
In the case of an owner-occupied property, however, it’s different because…
The acquisition costs are non-recoverable (brokerage fees if paid, notary, property transfer tax, etc.)
The interest payments are non-recoverable.
The maintenance costs are non-recoverable.
And now it gets interesting: the capital costs are non-recoverable.
What does this mean? If I invest €150,000 of equity into a property financing, I no longer have the opportunity to invest that €150,000 elsewhere. Let’s assume I would have achieved a 6% return after taxes over 20 years (the FAZ talks about 8.5% before taxes, but let’s calculate conservatively), then we get about €331,000 that I didn’t earn because the money is tied up in the property. At the same time, I (hopefully) have an increase in the value of my property. Let’s assume the property is worth €600,000 at the beginning, and we assume a value increase of 3% per year, then in 20 years, I would have €484,000.
Additionally, there are maintenance costs of about 1% per year, which totals €120,000 (not including the value increase, but ideally that should be considered). On top of that, there are the acquisition costs as mentioned earlier, which add up to €50,000. The interest costs for a loan with a 3% rate over 20 years would be about €220,000. Then there are the taxes, which we’ll estimate at €200 per year, totalling €4,000 over 20 years. The total costs therefore come to €725,000. Against this, we have the €484,000 increase in the property’s value, but also the fact that the loan is not even half paid off, with €246,000 still owed to the bank. So, if I were to sell the property now, I would only have a profit of €238,000 that could offset the €725,000 costs. My net costs would be €487,000.
In comparison, if I could rent the same apartment for €2,000 per month and account for a 1% rent increase per year, I would spend about €528,500. This also challenges the statement that renting is better if the annual rent is under 5% of the property’s purchase price, as with €2,000 rent, we are far below the 5% threshold, yet the costs are higher. But it doesn’t have to be like that.
The model has many pitfalls. Historical data on property or stock market returns don’t necessarily predict the future. We’ve experienced three crashes in the last 20 years, while the FAZ looked at a much longer period. The model also assumes I don’t make early repayments, which would reduce my interest costs, but at the same time lead to higher opportunity costs. The effect of spreading acquisition costs like notary fees over a longer period if I stay in the property longer could be negated by higher opportunity costs from other investments. This can happen, but it’s not guaranteed.
Can we generally say whether buying or renting is better? No, we always make assumptions about how alternative investments and property values will evolve. And other factors, such as the following, aren’t considered:
With the property, I am tied down (even if I could rent it out if I had to move elsewhere).
I have no landlord who can evict me or just annoy me (although maybe the other co-owners in a condominium could do that).
I pass on a value to my heirs, who won’t have to worry about all the points mentioned above.
Ben Felix’s video has once again shown me that there are no simple answers to complex questions. At the same time, providing such complex answers doesn’t necessarily make you popular.
I was a very happy bunq user until… today. The huge advantage of bunq is that you can create online credit cards and that all subaccounts also have their own IBANs.
The plastic cards work most of the time but, unfortunately, they do not always work. I had more than one situation where I wanted to pay with the maestro card but it didn’t work. Unfortunately, I could not detect a pattern here since there was even a maestro sign on some of the card machines.
Also, not all companies accept the Dutch IBAN. That’s actually not ok as you should be able to use every account in the EU, that’s what we have SEPA for. But Google, for example, does not send you AdSense earnings to the Dutch bunq account when your Google account is located in another country. And I had long arguments with other companies that did not want to send money to my Dutch account or did not want to take money from that account. This is time-consuming. It is probably not bunq’s fault but it is a problem if you plan to use bunq seriously.
What really concerns me is that there are some hidden costs that you have to pay in addition to the high monthly cost. I pay 7.99€ per month, which is actually a lot more than I would have to pay for any other bank account. N26 still has a free account and also Spaces, sub accounts, without an IBAN though. But if you want to add cash to your bunq account, you will have to pay 1.5% of the sum you want to add, at least if you want to add more than 100€. This is written in light grey in small letters in the interface, so light and small that I did not see it. Such a shame, and the support has been extremely unfriendly here. I guess it is more expensive to get a new paying customer than to refund a customer to prevent him from leaving, but this is a lesson that bunq still needs to learn.
To sum up, I cannot recommend bunq, even if there are some features that I really like.
