#5667 Development loan - 2.stage (Estonia) Funded: 05.12.2018
- The loan is used to continue construction works.
- The loan will be repaid from sales revenue of a completed development project.
- The loan is secured with a first rank mortgage.
- The building permit allows to build a 6-storey apartment building with 34 apartments. The total area of all apartments is 2,228 m2. 12 of the 34 apartments have been booked already.
- Website of the development project: https://jaama169.ee/
- The property is located in the Annelinn district of Tartu, about 4 km from the Town Hall Square.
- The area has a very good infrastructure, the area’s roads are covered with asphalt, and the region has a very good public transport connection.
- Works completed as at today:The project of the external networks and roads/plots are completed; water, sewage, and rainwater systems are constructed; the bottom part of the parking lot is finished. The internal rainwater system is 30% and the drainage system 35% completed. The walls, stairs, and flooring panels of the ground floor and first floor are installed. The foundation of the building and the insulation of the first floor are completed.
- The borrower's representative Alo Arumäe has a long-term experience in real estate development.
- The borrower has previously raised capital through EstateGuru platform with Jõe 2b residential development loan. As of today, the building is finished and three apartments out of four have been successfully sold and the majority of the loan amount has been also repaid to the investors. In addition, the borrower has also raised capital for Pärna st 33a apartment building construction in Tartu and has been paying the loan interest payments in a correct manner. Currently, the completion of the apartment building is in the final stages and 7 apartments have been sold out of total 12 apartments.
Three lines business plan:
Plot purchase and the construction cost: € 2 700 000
Planned sales revenue: € 3 600 000
Profit without financing expenses: € 900,000
Tartu is the second largest city of Estonia, following Estonia's political and financial capital Tallinn. Tartu is often considered the intellectual centre of the country, especially since it is home to the nation's oldest and most renowned university, the University of Tartu. The city also houses the Supreme Court of Estonia and the Ministry of Education and Research. Situated 186 kilometres (116 miles) southeast of Tallinn and 245 kilometres (152 miles) northwest of Riga, Tartu lies on the Emajõgi ("Mother river"), which connects the two largest lakes of Estonia. The city is served byTartu Airport.
|Loan Contract Number|
Collateral value €1,010,000
Projected LTV 69.0%
Loan Period 14 months
Schedule Type Full bullet
Mortgage Rank First rank
Property Type Apartment building
Loan Type Development loan
Who can invest on EstateGuru?
You must be at least 18 years old and have a bank account in any of the EEA member states or in Switzerland in order to lend through EstateGuru. We also have to perform certain "know your customer" checks before you can start investing with EstateGuru.
What is the minimum investment amount?
The minimum investment amount is €50.
What is the predictable rate of return and interest rate?
Depending on the project characteristics the annual interest rate can range between 8% and 13%.
How is my investment secured?
All the loans are backed with a mortgage. Once the loan is fully invested, the borrower has to go to the notary office and enter into an agreement with the Security Agent to create a mortgage. The mortgage will then be registered at the Land Register (with the Security Agent as mortgagee on behalf of the investors). The Security Agent is a separate limited liability company whose primary purpose is to hold securities for the benefit of investors making investments via EstateGuru. The name of the entity is EstateGuru Tagatisagent OÜ. The entity is controlled by the leading Baltic law office of Jesse&Kalaus
What are the benefits of investing via EstateGuru?
EstateGuru makes it easy for investors to access a variety of real estate investments with a relatively small amount of capital. The minimum amount for investment is €50, which enables investors to create a diversified portfolio. All loans are secured with a mortgage.
What happens to my established contracts if EstateGuru goes into bankruptcy?
EstateGuru is a facilitator of real investments, we do not offer the management of assets. All investment contracts are signed between the borrower and the investor, EstateGuru simply facilitates this transaction. All client funds are separated from EstateGuru’s operational funds. Should EstateGuru suffer financial difficulties or go bankrupt, client funds are safe and can still be accessed. In such an unlikely event, a contractual entity will be appointed to take over the role of EstateGuru to serve all the investments.
What regulations apply to EstateGuru?
The Estonian Financial Conduct Authority (FCA) has confirmed in 2014 that any laws or regulations that apply to credit institutions or to broker-dealers do not apply to us as EstateGuru is not a finance provider but a facilitator. The FCA expected to release a new marketplace lending specific regulation in 2017.
Does EstateGuru guarantee my loans?
EstateGuru is not a bank, thus we do not fall under the scope of banking laws and regulations. Like with most forms of investing, peer-to-peer lending carries a degree of risk. We reduce this risk to our investors by conducting thorough due diligence and by taking asset security on every loan, in case the borrower is unable to repay their loan. EstateGuru does not guarantee your loans.
If all loans are secured, why don't the borrowers approach banks?
After the credit crunch and the resultant recession, the risk appetite of banks was reduced significantly, which means that banks have tightened their lending criteria. Banks have strict criteria, which is not borrower friendly and thus many loan applications are rejected by banks. EstateGuru is a small and flexible organization which is willing to help companies that are denied financing by banks despite their strong business plan and solid collateral.
What is the difference between secured and unsecured lending and why is secured lending better?
An unsecured loan is a loan which does not have any collateral in place, such as land or apartment, and is solely based on a borrower’s credit history and potential ability to repay. Secured loans have assets as collateral so that, if a borrower cannot repay the loan, EstateGuru's partnering law firm Jesse&Kalaus will start the asset sales process. Hereby, the risk of losing the money is minimized.
How do I start investing in EstateGuru?
First you need to sign up as an investor on our platform. Then you need to visit your email account and activate your user account. Before you are allowed to start investing, you are required to send us an accurate copy of your government-issued identification document. Transfer money to your EstateGuru virtual account. Choose a loan you would like to invest in. All loan repayments and interest accrued is held on your EstateGuru account
What are the fees for investors?
No fees apply to investors. All expenses are covered by the borrower.
Is it possible to invest though a company?
Yes. You need to create an investor account with your own name and in the end of the registration form, you have to choose “Select this if you represent a company”. Make sure to add the full name of your business and the correct registry code. Before investing you are required to send us an accurate copy of your government-issued identification document.
Do I earn interest on funds which I have not yet invested in loans?
We do not pay interest on uninvested funds. To get the best return from using our platform you should invest your money into open projects to minimize uninvested funds. EstateGuru also has an Auto Invest function which will take care of your investments without you having to worry about it.
If I make an investment into a loan application, when will I start earning interest?
You will start earning interest after the required documentation and creation of pledge is completed.
What happens when a payment is delayed?
As soon as the borrower is late in repaying an instalment, we will make contact on behalf of our investors to find out the reason behind the delay. In case of a delay, the borrower shall pay a fine specified in the general loan terms clauses 9 and 10. When the borrower faces financial difficulties, we will try to find the best solution for both parties. If the borrower is not able to repay the loan, the borrower will be given the option to take a repayment break. If the borrower is still unable to repay the loan, we will cooperate with the law firm Triniti, who will act towards recovering the debt.
What happens when the borrower wants to extend the loan period?
In case the borrower wants to extend the loan period, EstateGuru will investigate the reasons and assess the situation accordingly. If the loan period is to be be extended, the borrower will be obliged to pay a fee to cover additional documentation expenses.
How do you ensure that the borrower is able to repay the loan?
The aim of inspecting the borrower is to assess the company's ability to pay back the loan. We do a thorough investigation of the borrowers’ background, creditworthiness and current obligations. If applicable, the business plan and financial statements will also be investigated.
Is the interest rate fixed?
Yes, the interest rate paid by the borrower is fixed throughout the loan period. The payment frequency and interest rate can vary depending on the loan type.
Am I obligated to pay tax on interest that I receive?
The interest that you receive from borrowers is gross income, which means that EstateGuru does not deduct any tax from the amount. All interest earned from loans is treated by tax authorities as investment income and thus subject to income tax. Investors have the possibility to postpone paying the income tax by investing through a juridical entity, but will still be liable for tax. EstateGuru does not provide tax-related advice and recommend that you turn to a local tax advisor for additional information.