Expert: Estonian Rental Property Investors Are Back on the Market, but Not in Estonia

Estonian rental property investors have become more active in recent months, with their focus now turning to Riga, the capital of Latvia, where declining loan interest rates and the rapid development of new construction projects combined with favorable price levels are driving this new trend, describes Daniil Aal, head of business operations at the digital funding platform Estateguru.

According to Daniil Aal, activity in the Latvian real estate market began to grow already last year, when significantly more developers started seeking early-stage financing for their projects. "By now, rental investors have also joined the developers, wanting to expand their portfolios with Latvian real estate," confirms Aal.

According to Aal, rental investors who already own real estate portfolios in Estonia must first find a solution to their financing problem, since Estonian banks generally do not issue loans secured by Latvian real estate, and Latvian banks are typically not willing to finance purchases before the company has at least one year of proven cash flow on site. "This so-called market failure can be overcome with the support of investors on the Estateguru platform, who can finance safe and convenient real estate acquisition by Estonian rental investors in the Latvian market," says Aal, and clarifies that when borrowing through the Estateguru platform, real estate purchased in Latvia can also serve as collateral. According to Aal, an investor in such a situation actually has three possible solutions. "First, you can join forces with a local investor who knows the market and is willing to provide a direct loan, and then meet the conditions required to obtain a bank loan. Second, he can establish a company in Latvia and start smaller, to gradually create the necessary cash flow that opens the door to bank financing. The third option is to use a digital funding platform, such as Estateguru," describes Aal the options.

According to the expert, in addition to Estonian rental property investors, Lithuanians have also been making deals in Riga recently. "Real estate prices in Latvia remain significantly lower than in Estonia and Lithuania, while residents' purchasing power continues to grow. Riga and its surrounding areas have a total population of approximately one million people, but new apartments are coming to market in the same quantities as in Tallinn, where there are half as many people," explains Aal. According to the head of business operations at Estateguru, such a situation could even lead to a certain shortage of new apartments, as more and more Latvians wish to move from Soviet-era housing to new apartments.

Today, the Estateguru platform has multiple developers from both Estonia and Latvia who are also looking for investors in the form of loan capital for projects that have a strong business plan and real estate collateral. Last year, Estateguru investors financed new real estate projects worth more than 80 million euros. Aal notes that small investors now find it even easier to engage in active investment thanks to a legislative amendment that came into force this year, which now allows investment account funds to be placed in funding platforms.

Estateguru is Europe's leading real estate lending platform, offering real estate-secured loans to small and medium-sized enterprises and attractive returns to thousands of investors in financing these loans.

By bringing together developers and investors, projects become reality that make our living environment more modern, energy-efficient and distinctive.

Estateguru has helped realize over 7,000 real estate projects, financing them with a total of more than 850 million euros. Over 160,000 investors from more than 100 countries have joined the platform, and the average historical return for investors has been 10.17%.

Estateguru has a European crowdfunding service license.