|Criteria||From a+ to d||Project rating|
Macro Location Analysis
EvoEstate Risk rating is of an informative nature only & can not be considered investment advice.
The InRento team is launching a new buy to let investment opportunity located in Kaunas, Lithuania. The investment case consists of two apartments located in the city centre, address: Šiaulių g. 35, Kaunas (referred to as S35, Kaunas). The medical facilities are just 2 minutes away by walk from the bus and the train stations.
This project has an A Risk Rating. The building was originally constructed in 1984 and will be completely renovated by the end of this year (2021). Although the premises are not yet decorated, the tenant will complete the interior by investing at least EUR 80,000. The project owner has established a 10-year rental contract with a medical clinic.
The usage of the premises (by Registry centre) - medical, Kaunas has a shortage of medical usage facilities inside the city. The total area of the premises is 177.19 m² (106.6 m² and 76.59m²), currently, while the tenant is still finishing the interior, the monthly rent is 50% lower - 885.95 EUR. However, the tenant will start to pay full rent - 1771.9 EUR from December. Until then, the project owner will be paying the investors a 6.01% fixed interest rate and when the tenant will pay the full rent, the monthly rent will reach 6.01%.
This project on the InRento platform will be funded over 3 stages: 1st in August, 2nd in September and 3rd when the tenant has the interior decorated.
Reasons to invest in S35 in Kaunas:
Medical clinic, which already has clinics in the cities of Klaipėda and Vilnius, the company specializes in the treatment of children.
The rental contract has a 10-year duration, currently, while the tenant is still finishing the interior, the monthly rent is 50% lower - 885.95 EUR. However, the tenant will start to pay full rent - 1771.9 EUR from December. Until then, the project owner will be paying the investors a 6.01% fixed interest rate and when the tenant will pay the full rent, the monthly rent will reach 6.01%.
The rental contract is valid until 2031-07-15 and for each of its years, the price will be increased according to inflation. The tenant also has a pre-emptive right for property acquisition when the project owner would sell.
Financial terms of the investment:
InRento investors are effectively granting a loan to the borrower. The loan is secured with a first-charge mortgage, which in case of the borrower’s inability to fulfil financial obligations would be used to repossess the asset.
The revenue-share between the project owner investors is set at 90/10. Until the tenant begins paying full rental income, the borrower will distribute 6.01% fixed-interest payouts.
The capital growth distribution:
15,000 - 29,999 EUR - the capital growth will be distributed in the following structure: 50% investor / 45% borrower / 5% InRento.
30,000 EUR and more - the capital growth will be distributed in the following structure: 55% investor / 45% borrower.
Rental income (interest):
The funding term for this project is 60 days. Rental income (interest) for investors will be calculated from the time the asset is mortgaged against the loan.
The first interest payment will take place on the next 25th day of the month after the mortgage agreement is concluded.
The project owner (borrower):
MB „Rego Properties“ - is a company serving as a special vehicle for InRento investments. The CEO of the company - Andrius Rimdeika is a former investment banker, who has worked in investment firms such as ”Morgan Stanley” and “Prime investment”.
When is it possible to "exit the project"?
When the project is fully funded you will be able to sell your investment on the secondary market. The fee for the secondary market transactions is 2% of the principal value, which is charged to the seller.
What happens if the tenants leave the property?
In a tenant cancelling the tenancy scenario, the borrower is liable to pay a 2% annual interest rate for the first 6 months of vacancy. If the borrower does not rent out the assets within 6 months, the fixed-interest rate would be increased to 6.01% per annum.
What will happen when the property is sold?
When the property is sold at a higher price than it was acquired, the capital growth will be distributed in the following structure: 45% investors / 45% borrower / 10% InRento. The project owner assumes potential loss if the property is sold at a lower price.
Key investment risks:
Risk of falling prices: The price of the property might fall due to the increase in supply or decrease in demand in the area or other economic factors.
Liquidity risk: The borrower might be unable to find a buyer in order to sell the property.
Tenant risk: Although the assets are currently fully rented out, there is a risk that the asset can lose a tenant and it can take time to find replacements.
Investing with InRento, is similar to owning a rental property, however with us you don't have to worry about day-to-day property management and in the periods of vacancies, the borrower is required to distribute fixed-interest payments, which protects your bottom line.