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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 Klaipeda, Lithuania. The offer consists of a commercial object located in an attractive part of the city, at Taikos pr. 101, Klaipeda (referred to as T101-5, Klaipeda).
The project owner has established a 10-year rental contract with the tenant.
The seller is currently carrying out the final stage of development works at the premises. The project owner will purchase the real estate with exterior works finished, although the tenant undertakes to fully equip the premises with an investment in the interior of at least 30,000 EUR. We will keep investors updated on the progress of the project.
The 77.52 m² premises generate a rental income of 1085.28 EUR per month, which represents 8.9% of the total annual rental income.
The net monthly rental income for investors (after deducting the administration costs) is currently 868.22 EUR. This amount is distributed proportionally to the amount invested, expressed as a percentage of 7.12% per annum, taking into account the current rental situation.
Klaipeda is a promising Lithuanian city, the only one in the Baltic Sea with an ice-free seaport.
Reasons to invest in the project T101-5, Klaipeda:
Attractive rental yield;
Long term: 10-year rental contract (tied with inflation);
The tenant is investing at least EUR 30,000 in the installation of the premises;
The building was renovated in 2021;
The premises were valued by an independent valuer at EUR 163,350 (amount inclusive of VAT);
Bistro type restaurant, the owners of which are expanding their activities in Klaipeda. The tenant pays EUR 1085.28 per month for rent.
The rental contract is valid until 2031-12-01. Rental income (interest) for the current period is indexed every January 1st, using the average annual consumer price index (CPI) calculated by Statistics Lithuania.
Financial terms of the investment:
Maximum term: 120 months (10 years)
Rental income share: Investors: 80% / Project owner: 20%
Fixed-interest rate: 2%
Increased interest rate: 7.12%
Security: 1st charge Mortgage
InRento investors are 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 and the investors is set at 80/20, meaning that the borrower is obliged to distribute 80% of the income to the investors. Current absolute income is 1085.28 EUR per month, which results in 868.22 EUR net income distribution to the investors, or in a percentage value equal to 7.12% per annum with the given situation of the tenancy.
The capital growth distribution:
5,000 - 14,999 EUR - the capital growth will be distributed in the following structure: 45% investor / 40% borrower / 15% InRento.
15,000 - 29,999 EUR - the capital growth will be distributed in the following structure: 50% investor / 40% borrower / 10% InRento.
30,000 - 49,999 EUR - the capital growth will be distributed in the following structure: 55% investor / 40% borrower / 5% InRento.
50,000 EUR and more - the capital growth will be distributed in the following structure: 60% investor / 40% borrower.
Rental income (interest):
Rental income (interest) is paid to investors on a monthly basis (on the 27th day of the month). If the 27th day is a non-working day, then the next working day.
The first interest payment will take place on the 27th day of the month after the mortgage agreement is concluded.
The project owner (borrower)
UAB „Barentas“, is an established legal entity that serves as a special purpose vehicle (SPV) to increase investment security for loans from InRento. The head of this company, Nerijus Baliūnas, has more than 8 years of management experience having been active in investment activities for more than 7 years. He has also launched and sold his company and currently, N. Baliūnas works in the ‘’Business Angels Fund II’’, which owns up to 7.5% of the holding company of UAB ‘’InRento’’.
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 scenario of the tenant cancelling the tenancy, 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 7.12% 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: 40% investors / 40% borrower / 20% 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.