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5 steps that help to invest


We all want to have savings so when the sky falls or quarantine stops, we would not need to look for them in the laundry or in socks under the mattress. However, how to save, if in one month we can only put away one or a few hundred. That money needs to work for you - confirms the founder of the crowdfunding platform with RE pledging Profitus, Viktorija Vanage.

According to Lithuanian Bank data, in the last 10 years, the wealth of Lithuanian households (cash and savings, properties, investment bank stocks, pension schemes, etc.) grew more than twice - from 24.9 milliards up to 50.4 milliard euros. Indeed, there is money in the market, only the right decisions need to be made so the money would increase.

Viktorija Vanage, says, that to make money work for you is very easy these days. There are quite a lot of alternatives, where to invest, yet deposit accounts in banks due to low interest and inflation became unattractive at all. Nevertheless, indeed, as much knowledge is not needed, as is when investing in stocks, obligations or fonds. Most importantly - only 100 euros is sufficient to start investing and earning money from it.

RE at all times was an attractive investment, however, investing in it by buying it is complicated and demands a lot of money. While on crowdfunding platforms, where loans for businesses developing RE projects, are given by many people, it is easy to invest with small sums and interest can be received quite quickly - they are paid back by parts during the completion of the project, usually, every month or every quarter. 

For those who wish to invest through crowdfunding platforms, the expert invites them to research this alternative investing. In Lithuania, it is still new, although globally it has been existing for over a decade, so there is a lot of information about it online in Lithuanian and other languages. For now, you can follow these 5 effortless steps and start your career as an investor:

1. How to choose a trustworthy crowdfunding platform?

Pick only licensed platforms. In Lithuania platforms are supervised and regulated by Lithuanian Bank. It will guarantee that platform's actions are supervised, it must follow strict procedures of the central bank as well as the law of crowdfunding and other legal requirements, ensure demanding audition of projects as well as guarantee the safety of investments by all means.

The list of licensed and legally operating platforms can be found here - https://www.lb.lt/lt/sutelktinio-finansavimo-platformos.
All the platforms must declare a specific statistic, e.g. about projects, whose owners do not follow engagements for investors, therefore, it is worth checking the websites of the platforms and understanding the data given. Additionally, Lithuanian Bank is obligated to announce this information on their website, it is updated monthly (https://www.lb.lt/lt/apzvalgos-ir-leidiniai/category.39/series.3914). You can find lots of interesting statistics about the capabilities of every platform and its activities.

2. How to calculate the optimal size of investment?

When investing in crowdfunding platforms, the size of investment is not constrained much - you can start from 100 eur. Even with such a small investment, during the period of time re-investing it, you can save quite a great deal of money as invested money will constantly increase.

The majority of the personal-finance consultants advise not to think that it is worth saving or investing only substantial amounts of money - you need to start by taking small steps and continue systematically. Then you can expect a great result, and your current savings will not devalue as if you would put them in a piggy bank.

Indeed, the more you will invest, the more you will earn. However, when investing more, it is worth allocating money into a few different projects in order to lower the risk - i.e. you need to diversify. 

3. How to diversify your investment portfolio?

Despite how safe is the system, there is always a chance for even the smallest unsuccess. When diversifying a greater sum of money, it is worth choosing different projects, so if the risk increases you would not lose all your money. 

Most importantly, as it is said, do not put all your eggs in one basket: invest in different projects that are located in different cities, pick different RE developers, balance higher risk with greater interest and lower risk with lower interest. Also, you need to check carefully the conditions of securing your investment.

4. How to pick the best projects? 

Investing in RE is reliable due to the guarantees given to investors (i.e. mortgaged RE), as well as operators of the platforms are obligated to select only reliable projects and to secure investors' money by all means. For now, the risk in the market is quite low and the extent of late interest is minimal.

It is because we value the trust of investors and we have strict requirements for project quality, for investment security (mortgaged properties), we carefully check the businesses that plan to borrow money on the platform and their given documents.

When picking a project, you should pay attention to these few aspects - the risk level, the details of description, the value of mortgaged property, liquidity and LTV.

The risk level is estimated according to the law, the internal estimation algorithm of the project and its owner. The results allow to rank the projects by different ratings ((A+, A, A-, B+, B, B-, C+, C, C-, D). The internal algorithm is calculated according to data from various official sources as well as with the help of internal analytics professionals.

Additionally, I advise everyone to read carefully the project description - is the information sufficient? Is the conception of the project detailed and attractive or potential buyers? If all the relative data, project visuals, plan of realization and span is given, the project should be successfully finished. 

The LTV (loan-to-value) of the project is a ratio of the loan and property value. It demonstrates how many per cent of the mortgaged property is from the loan. Therefore, if the borrower aims to receive 70 thousand euros, his mortgaged property has to be worth at least 100 thousand euros - in that case, LTV will be 70%. The lower the percentage of LTV, the better - because it means that more property is mortgaged to investors.

I recommend investing in those projects that have a primary mortgage of RE. What does it mean? As a guarantee, the assets of the project can have a first rank or a second rank mortgage. The main difference is that a primary mortgage is a guarantee for you, as an investor, to have the right to be the first one to claim the real estate if the project would fail. If the property is in a second rank, you will be able to claim real estate only after when creditors or investors, who have invested in the primary, rank would claim their property. Therefore, a risk emerges that RE or the sum received from selling it will not be sufficient to pay back all the investors.

5. What should you know and prepare for before starting?

Before starting to invest, primarily, you should decide, what your aim is - can you tolerate higher risk and hope to earn money quickly or do you prefer to gain money slower with lower risk investments?

Most of the platforms have quizzes on their website. You should fill it out to understand your expectations and abilities in order to take right decisions.

The signing up itself only requires an email address, your name and surname. In order to start investing, client identification is essential as well as more detailed information - personal identification or PaySera account.

All the platforms follow data protection laws, therefore, your data will be safe. Additionally, they collaborate with partners, who assure the security of transactions and data.

Finally, how to start? 

Everything is easy - research different crowdfunding fields, what crowdfunding platforms operate and gather the available information about them. It is sufficient for the start.

Pick a platform, sign up - then you will see the whole information about finished and active projects.

Analyze the projects, and pick the most attractive ones. Then decide, how much money and where you want to invest and do it! Good luck!

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