28 IN - Auction ProductEquity
EvoEstate presents its Investors another exclusive opportunity to invest an opportunity originated by Inveslar’s parent company. This opportunity offers expected returns estimated by the deal originator of at least 14.33% in 15 months. However, this is in the worst scenario projected by Inveslar. Attached in the documentation you can find out 3 scenarios with different sales prices, which in some cases even projects up to 27.65% returns.
The purpose of this investment is to buy a property which was acquired in an auction well bellow the market price. The funds will be used to also cover the acquisition expenses and renovation costs.
The total amount of the required capital is 144,183 EUR. This project is not listed on Inveslar platform, because this investment is provided by its parent company exclusively to EvoEstate investors. Inveslar offers to invest into fixed intrest loan for this project.
This is the closest alternative which you can find in that price range in the given city. However, this building needs a full renovation ranging in price from 500€/m2 to 700€/m2, therefore it would be necessary to invest at least 300.000€. Then there is the problem that it would be necessary to divide the apartments horizontally (if possible) to be able to sell individually the floors, with the consequent accesses (more investment), because it could be very difficult to sell a house of 600 m2. Besides, this building seems not to have parking either and that's a problem in the center of the city.
Nonetheless, it’s important to understand that even though this is highly undervalued property, Tarragona real estate market isn’t as liquid as Barcelona’s or Madrid’s.
Current investment opportunity needs a minimal reform such as changing the locks, installing security systems, etc. The transactional data suggests that couple of years ago neighbourghing property was sold for 300,000€.
Margin of safety
There are 2 components providing margin of safety to the investors. The duration of the project: it’s noted that the developer expects to sell the property within 15 months, however, this duration could be much shorter because the expected renovation duration shall be shorter than a month.
Another component of margin of safety is the property acquisition price which even after the acquision taxes & costs outcompetes other properties in the surrounding area.
Up to an IRR of 10%, 100% of the net profit of the operation will go to the Investors. Once the IRR of 10% is exceeded, 20% of the net profit of the operation will go to the Company and the remaining 80% to the Investors.
EvoEstate success fee
EvoEstate does not charge any investment fees to the investors if the returns are 18% or below. In case the investment yields returns above 18%, EvoEstate will charge 20% from the surplus, i.e. the investment yields 20%, EvoEstate will charge 0.4% from the invested amount, while returning 19.6% to the investors.
- This investment will become active once the fundraising for the whole amount of 144,183 EUR is completed or the deadline on December 1st is reached.
- There is no need for any development licences for this renovation.
- Attached in the documentation you can find the business plan in english and supporting documents in Spanish.
- If there will be a higher demand for this project than 25.000 EUR another investment vehicle will be established.
- EvoEstate will not with-hold taxes, unless you are a private client and resident of Estonia.
Summary of Risks
The investment in this project involves the following risks: risk of not obtaining the expected monetary return, risk of falling prices, risk of not completing the financing, political risk, risk of rising rates, risk of lack of liquidity to recover the capital invested, risk of total or partial loss of the invested capital and risk of fraud.
Risk of falling prices: That the price of the property falls due to the increase in supply or decrease in demand in the area. There may also be a general fall in property prices due to many factors.
Liquidity risk: Unable to find a buyer when you want to sell the property.
Mitigation: The sales team knows the dynamics of the market and is structured with a team of partners in intermediation services to reduce this risk.
Risk of rising rates: Increase in the cost of financing in the purchase of real estate. What would push down the demand of the housing market.
Political risk: What happens if political instability grows during this year.
Risk of loss of total capital or of not obtaining the expected monetary return: It is important to keep in mind that there is no safe investment, and as in any investment, there is always the risk, not only of not obtaining the expected returns, but of losing all of the invested There may be a bankruptcy or bankruptcy by the developer or the estimates of your business plan for various reasons are not met.
Fraud risk: It should be noted that there may be a risk of fraud due to the improper use of the money obtained for the project. There may be fraudulent use of money from any real estate transaction.