Marketplace lending will play a vital role in the future of the world’s economy

Marek Pärtel, Co-Founder & CEO of EstateGuru

Life has patterns and it’s enormously important to find yours. Everything will fall into place once you do. My mission in life over the last six years has been to help entrepreneurs who own small and medium-sized companies to realize their plans and allow people to gain financial freedom by investing in property-backed loans.

It all began in 2008 during the last big financial crisis. It may not have been comparable to the current one regarding its reach and impact on the planet, but it nevertheless had a far-reaching effect on the financial world and how financing works. I experienced this crisis very deeply and personally. Basically, I lost almost everything I had, at the time. It hurt, but more than that – how the banks reacted to the crisis hurt more. Banks essentially stopped financing anything and viewed entrepreneurs as if they could not be trusted. It was so abnormal. I got the idea to start a crowdfunding business in order to help entrepreneurs like myself. Thus, the vision of a crowdfunding business model and EstateGuru was born.

I feel proud of what we have achieved so far. I’m especially happy because my idea has inspired and helped so many businesses in Europe. More than that, our company and our people have been trusted by more than 45 000 investors across the globe. They are part of the hundreds of entrepreneurial success stories we’ve created for people who’ve managed to establish their businesses and proper credit history to the point where the traditional banks are now happy to lend them money. This is the example of trust and cooperation the world needs right now. 

EstateGuru’s business model has been to finance projects which have solid collateral, using first-rank mortgages, which is the most straightforward and secure type of funding in real estate lending. Thus far, people tended to focus only on the interest rates but I’m more than sure that this will change. This is where my background in the real estate industry really comes into play. You have to have real things, not just numbers on paper. If an 11% return on your investment is something you can reliably expect to get even in a crisis, then its value is rationally and emotionally much more than just that 11% and people will start looking at other things as well besides the interest rate. Real estate – even the name of it is real. Real estate is something you can see, touch, experience and feel. And people always need a place to stay, a place to live. Even if they don’t travel and go out for some time. They still need a home. At the same time stocks have a largely emotional value, you either believe in the business model and the team or you don’t.

Our stress tests show that our investors’ outstanding loan portfolios have a sufficient buffer to overcome these hectic times. Our analysis proves that our investors would start losing the principal of their investments only if the default rate of the portfolio is more than 30% and we then sell the collaterals for less than 60% of the valuation. To date, our default rate is about 6% and we have recovered the almost half of loans at a return of 10,4%. The business model of EstateGuru is geared to keep delivering for our investors also during difficult times.

We take risk mitigation very seriously and that is why our historical LTV has remained below 60%. Furthermore, most of our loan collaterals are related to the residential segment, where the negative effect will be the lowest, as living spaces remain a primary need for humans. We have been and will remain conservative in making credit risk decisions. Our risk team is making adjustments to the conditions of new loans on a daily basis to be aligned with the economic situation and outlook. As shown by the previous economic crisis, even if real estate prices drop in the short-term, they eventually rise again. Furthermore, this is not a crisis of the real estate market specifically.

Marketplace lending as a business model has proven itself over ten years of existence; the sector is growing rapidly and adding value to the economy. The sector will be stronger after the crisis. Different studies show that the share of alternative property financing has grown multiple times within the last 10 years and it will increase substantially both during and after this crisis.  Our goal is to be leaders in this field in terms of quality, stability and technological innovation. I encourage you to come on this journey with us and we promise to protect your capital and create balanced real estate investment opportunities across Europe with the utmost care during these turbulent times.

Life has patterns and it’s enormously important to find yours. Everything will fall into place once you do. My mission in life over the last six years has been to help entrepreneurs who own small and medium-sized companies to realize their plans and allow people to gain financial freedom by investing in property-backed loans.

It all began in 2008 during the last big financial crisis. It may not have been comparable to the current one regarding its reach and impact on the planet, but it nevertheless had a far-reaching effect on the financial world and how financing works. I experienced this crisis very deeply and personally. Like most other entrepreneurs back then, I lost almost everything I had at the time. With the financial crisis brought on by the American banking industry, our local banks stopped lending and refused any form of mutually beneficial cooperation. This was unexpected as they stopped financing almost any business.

The only way to survive and save your assets in this half-apocalyptic world was through cooperation with private investors. This was the stimulus needed to create a platform powered and united by private investors. Around five years after the crisis of 2008, while all the loans together with returns had been paid back to private investors and the first property financing platforms had been established in the USA and the UK, the idea had reached maturity and EstateGuru was born. Its purpose was to help realise business plans and dreams and to help entrepreneurs like myself.

I am very proud of what we have achieved so far. I’m especially happy because my idea has inspired and helped so many businesses in Europe. More than that, our company and our people have been trusted by more than 45 000 investors across the globe. They are part of the hundreds of entrepreneurial success stories realised thanks to EstateGuru. We are already helping businesses in six countries and more than one million investments into property-backed loans have been made through our digital platform – one couldn’t even dream about this in 2013.

EstateGuru’s business model is to finance projects which have solid collateral, using first-rank mortgages, which is the most straightforward and secure type of funding in real estate lending. While investing, people too often pay attention only to the promised interest rate, without considering the concrete investment product and how the capital is secured during market declines. If a 7-12% return on your investment is something you can reliably expect to get even in a crisis, then its value is rationally and emotionally much more than just that 11.87% on average. It means that people will start looking at other things as well besides the interest rate.

Real estate is something you can see, touch, experience and feel. And people always need a place to stay, a place to live. Even if they don’t travel and go out for some time. They still need a home on this planet. At the same time stocks have a largely emotional value, you either believe in the business model and the team or you don’t.

Our stress tests show that our investors’ outstanding loan portfolios have a sufficient buffer to overcome these hectic times. Our analysis proves that our investors would only start losing the principal of their investments if the default rate of the portfolio is more than 30% and we then sell the collaterals for less than 60% of their valuation. To date, our default rate is about 6% and we have recovered the majority of defaulted loans at a return of 10,4%. The business model of EstateGuru is geared to keep delivering for our investors even during difficult times.

We take risk mitigation very seriously and that is why our historical LTV has remained below 60%. Furthermore, most of our loan collaterals are related to the residential segment, where the negative effect will be the lowest, as living spaces remain a primary need for humans. We have been and will remain conservative in making credit risk decisions. Our risk team is making adjustments to the conditions of new loans on a daily basis to be aligned with the economic situation and outlook. As shown by the previous economic crisis, even if real estate prices drop in the short-term, they eventually rise again. Furthermore, this is not a crisis of the real estate market specifically.

Crowdfunding as a business model has proven itself over the ten years it has existed; the sector is growing rapidly and adding liquidity to the economy during complicated times. The sector will be stronger after the crisis. I believe that the share of alternative financing will increase both during and after the crisis. This is confirmed by the acute interest in our loans shown by institutional investors. EstateGuru has all the possible prerequisites for becoming the funding channel for EU institutions’ credit lines to help SMEs.

To sum it up. Our goal is to become the leading property lending and property-backed investments platform in Europe in terms of quality, stability and technological innovation through economical cycles. I encourage you to come on this journey with us and we promise to protect your capital and create balanced real estate investment opportunities across Europe with the utmost care during these turbulent times.

Thank you for being with us and changing the world for the better!

Thank you for being with us!

Marek Pärtel

First seen on EstateGuru