- BitOfProperty is one of the startups that took part in the 100 Wolves Pitching Competition and it helps turn an ordinary person into an investor in real estate.
The 100 Wolves Pitching Competition gives startups a chance to pitch their ideas in front of an investment board that can grant them €50.000 in funding. One of those startups is BitOfProperty, which lets people from all over the world get involved in real estate.
A platform for investments in rental properties
Karl Vään founded BitOfProperty in 2018, from an idea that came “from personal frustration of not being able to get exposure to real estate investments with little capital”. A lot of research on the market followed, and then the solution became clear: a product “catered towards fractional investments into rental properties”.
BitOfProperty works in a pretty simple way: you just buy shares of a property and then the startup will take care of all operations, from the legal documentation to maintenance and repairs and rent collection. Of course, you can also sell your shares, if you want to withdraw from the platform or cash out your investments.
For now, there are only properties from Tallinn, Estonia available on BitOfProperty, but Vään says that they are working on expanding in the near future. Another aspect which could prove challenging for some is the fact that only wire transfers are accepted currently, but it seems like before the end of 2020 there will be a way to add money to your platform account from a debit card, and Vään says that they are also working on accepting cryptocurrency.
Regarding the success of the platform, Vään has noted that “we are approaching 26 consecutive months of rental payments and having 0% vacancy up until now”. The user base has grown with about 160% in a year and the main value points for the investors are considered diversification and stable income.
Each property has a separate SPV
“For the structure, we have used a common industry practice, which is setting up a separate SPV for each property. SPVs are created by us, but we have added a security agent into the structure as well to a hold first rank mortgage of all the platform investors”, Vään mentions.
Talking about why they chose to follow this practice, Vään cites three reasons: cost efficiency, the fact that it is already a practice known by most investors and because it is “simple and intuitive, so we do not wish to overcomplicate things”.
It seems like expanding in other markets is the main priority of BitOfProperty, Vään linking this directly to the success of the platform. “We need to be consistent in our work and keep on pushing as much as we can to improve,” he says, talking about the rate of success in funding properties, which is marked as 57,14% on the BitOfProperty website.
Almost half a million euros have been invested already
The website also states that, up until now, there have been 26 months of rent paid and €432,220 invested, and Vään says that the startup has “turned almost half of the AUM around on the marketplace”.
It is a 4-step process, according to the BitOfProperty website, implemented for investors. First, they open an account, then they add money to it and start building their portfolio. After that, they can just earn passive income or decide to exit their investment and sell the shares they bought back on the marketplace.
This type of fractional investment into rental properties has grown quite well in markets like Australia, but it found its way towards Europe at a steady pace, and now potential investors have some good options to choose from. There are other similar platforms, like Bulkestate, EstateGuru or Crowdestate, but these operate in a different way than BitOfProperty and are seen as more of a crowdfunding initiative.
As Vään himself says, “the platform we are building is one of a kind, and it has been developing more and more to become a property exchange, but there are only few companies in the world who are doing it”.
BitOfProperty is certainly a startup to keep your eye on, even if you are not into real estate investments. Their promises of giving you the opportunity to earn passive income are well-founded, and it can serve as a simple, yet relatively cheap first step into the real estate market. If they manage to expand outside of Tallinn, the company will surely find some more success and become more attractive to investors.