The following article was published in "Verslo Žinios" news portal.
The rental properties investment platform InRento, which has been operating in Lithuania since December 2020, is gaining momentum. The unique idea of the platform – to make one of the most attractive types of investment accessible to everyone – was embraced by both the venture capital fund and people considering safer investments.
"Our mission is to ensure an easy-to-understand investment process with lower investment risks," explains Gustas Germanavicius, the founder of InRento. "It is directly related to cash flows from the rental property: the platform allows for investment in carefully selected real estate rental projects in Lithuania and other countries, guaranteeing the highest standards of security and transparency."
According to Germanavicius, the buy-to-let property is probably the most popular investment most people have ever considered at least once. However, to buy a property to rent out to tenants requires considerable capital and the subsequent allocation of time for these activities. InRento opens up new opportunities to receive income from property rental with an investment of as little as €500, without worrying about finding tenants or managing the property.
Medicine from inflation
InRento investors can choose one or more real estate asset types on the platform and the amount they would like to invest. The website provides all information about the property and the annual rental yield. In addition, the built-in calculator helps to estimate what kind of return will be generated by an investment. Currently, the average investment of InRento's clients is about €1,000-2,000, but there are also those with investment portfolios worth more than €100,000.
Unlike other traditional crowdfunding platforms focused on short-term lending, InRento's operating principle centres around building your own real estate rental portfolio. It is also different from any other platform from the perspective of the amount of capital required for investment and risk probability.
"The owners of a buy-to-rent property get income only if they lease the property. When an asset is empty, it doesn't generate any returns. To reduce risks, our investments are formed as loans secured by a mortgage. As a result, InRento investors receive fixed interest from project owners, ensuring a rental yield regardless of whether the property is leased. At the same time, it makes investments safer: if the project owner doesn't fulfil financial obligations to investors, InRento takes all necessary measures to resolve them on behalf of investors and, if necessary, execute the mortgage and take back the property," says Germanavicius.
It is essential to note that InRento's rental return is only partially fixed. Rent cost for a real estate asset, which defines how much income investors will receive, is linked to the inflation rate and indexed accordingly. When inflation makes rents more expensive, gains for investors increase. Also, investors will benefit not only from the lease of property: if the assets are sold at a higher price than purchased, investors get a share of the capital gain. The history of the real estate market shows that real estate value is several per cent ahead of inflation in the long run. Therefore, the InRento platform can be called an "antidote to inflation", effectively protecting invested funds from depreciation.
Investors on InRento don't have to worry about the administration of leased assets, which is often the most disturbing part for people renting their property. InRento is a great option for those who don't have the capital to acquire their own property yet and those who have the money but don't have the time to take care of the property.
So easy, even mom gets it
Germanavicius is no stranger to the real estate investment market. He is a licensed financial investment advisor and co-founder of Europe's largest real estate crowdfunding aggregator together with a partner a few years ago. Having spent a time in the field, he noticed that although there were plenty of crowdfunding platforms on the market, all of them focused on financing real estate development, with practically no opportunities for investing in lower-risk real estate. That was the reason that led Germanavicius to create InRento. However, he wouldn't make the final decision without the help of... his mother.
"She turned to me for advice asking, where to invest €20,000? I could have listed the options, but I knew my mom would understand neither the products to invest in nor the risks, as it would be too complicated for her. And if a person does not dig deeper into what they are doing with their money and what they are risking, this means the investment product is simply not suitable for them. This is often the case with investing in real estate development projects, although the returns do seem tempting. My goal has always been to encourage people to save money by investing wisely, safely and consciously. So I created InRento with people like my mother in mind," says Germanavicius.
Germanavicius says that simplicity, clarity, and low risks are the core principles of InRento. The team pays a lot of attention to the relationship with customers to ensure that every client is well aware of the risks by using comprehensive questionnaires and conducting personal interviews with investors. Two out of four members of the InRento team are licensed, financial advisors.
So far, all projects offered on the platform are in Vilnius, Lithuania, but the plan is to expand to foreign countries, embracing the markets entrepreneurs know well. Confidence in the project's success was bolstered by external support: in February 2021, when InRento secured investments from the Estonian fund Startup Wise Guys.
"The platform is licensed by the Bank of Lithuania operating under the rules of crowdfunding regulation. The fact that institutional investors trust us only confirms that we are on the right track, and I really think we created a product that was missing in the market. The investments we received allowed us to grow faster and give people wider opportunities to invest in real estate leasing. In the upcoming months, we plan to attract additional funds and expand InRento's operations," reveals Germanavicius.