Investments in real estate drag. But not everyone can save up enough money for a whole apartment, find a good deal, or find good tenants. This is why the Investown project was made. Its goal is to let small investors into the real estate market. But how does a project like this one work? And should you put money into it?
Investown review at a glance
Investown is a place in the Czech Republic where you can buy and sell real estate. Or, to be more specific, into loans that are backed by property.
The way Investown makes money is quite complicated: On the one hand, some companies borrow money from Investown so they can buy apartments to rent out. On the other hand, there are some small investors who help pay for loans.
Investors are paid not with interest but with a share of rent. The company rents out the apartments right away and gives 90% of the money it gets back to the investors. This way, you can earn between 4% and 6% per year (or, on average, 4.5%).
Users can choose which properties to invest in, with a minimum investment of 500 crowns for an apartment. Investors get their money back at the end of the investment period, which is usually between 48 and 60 months. But for a small fee of 0.9%, the investment can be stopped early. More will be said in the next part of this review.
- A simple and clear platform
- Minimum investment CZK 500
- Support for the Czech language and payments in crowns
- Mobile application
- Unclear project structure
- A fee of 0.9% for early termination of investment
- Investments are limited in time
Investown – Basic Information
Investown is an investment platform based in Hodkovice, Czech Republic, operated by Investown Technologies s.r.o. since 2019. It is not supervised by the Czech National Bank, and its investment focus is participation in loans, with an expected return averaging approximately 4.5% per year and investment horizons ranging from 6 months to 10 years.
Early withdrawal from the investment is allowed, and the minimal investment required is 500 CZK, with payment methods limited to bank transfers and the investment currency in CZK. Investown does not offer an auto-invest feature or a secondary market and has no investment fees, but charges a 0.9% fee for early termination of the investment.
Services and Products
First, we need to look at what services Investown offers and how the whole project works.
Investown is an investment platform that lets you make 4-6% per year (4.5% pa on average) on the money you put in. The money from investors is used to buy new apartments, which are then rented out by the company to make money. The investors will then get back 90% of the rent that were paid.
The process of investing is very easy. The investor signs up, transfers money to the platform, and then invests that money in any real estate. Then, every month, Investown puts his profits right into the investment account.
REAL ESTATE OFFER
There are a lot of properties to choose from, and the number keeps growing. In April 2022, the portfolio had almost 150 rental apartments, of which about 60 were available for investment.
For each offer, you’ll find a short description of the apartment, its location, photos, and 3 key parameters:
- Expected Appreciation: For each apartment, you’ll see the current annual return, which is equal to 12 times the last month’s rent. About 4.5% per year is the average return.
- Target amount: The total amount of money that investors can put into the property. Once the goal amount is chosen, the opportunity to invest is gone. One property can be bought with as little as 500 crowns and as much as 1,000,000 CZK.
- Usually 4 to 5 years, this is the amount of time that your money will be locked up in an investment. After this time, the money the investors put down will be sent back to their account, and the apartment will be put back on the market.
If you want to get out of the investment early, you give your share back to Investown, which usually buys it back within 72 hours. The only bad thing is that you have to pay a 0.9% fee.
OWN A HOME WITH INVESTOWN
The new service is for renters who want to buy a home but can’t afford to do so yet.
This is how the service works: First, you fill out an application, and then Investown checks you out. If your application is accepted, you choose a property that Investown will buy and then rent to you.
As a renter, you will be able to buy the property for a fixed price (100% of the original price + 2% increase each year). You don’t have to worry about real estate prices being too high while you save for a mortgage.
When a user invests in 10 different opportunities or more, they automatically become a premium member.
Investors with a premium account can take advantage of special investment opportunities that regular investors can’t get. Most of the time, these properties are in good areas and offer higher returns. Another benefit is getting help right away or having regular access to analysis of the real estate market.
How does it (really) work?
Investown buys apartments based on a special algorithm that decides which ones to buy. Then, he rents out the apartments and manages them. In exchange, he gets 10% of the rent paid. The rest, or 90%, is split among the investors.
The business model, on the other hand, is a bit more complicated.
Investown is a broker for loans, so it does not buy real estate. In the terms and conditions, it says that the company signs credit agreements with third parties and gives them credit to pay for a certain piece of property.
In the SZ article, you can find more important facts:
“Investown is looking for good apartments that could make money in the long run. Then, the subsidiary company buys the property and takes care of it, fixes it up, rents it out, etc.
So, just to be sure:
Investown finds apartments for investors and gets money from them. When an interesting apartment comes up, they give the money they’ve collected to their subsidiary company, which buys the apartment and rents it out. Some of the rent money goes to the investors, and some of it stays with the company.
RENT INSTEAD OF INTEREST
As it might seem at first, investors do not buy shares in real estate. Instead, they give money to a business that buys the property. The reward isn’t interesting in the traditional sense, but a portion of the rent (if any is collected).
Purely hypothetically, if Investown didn’t get any rent, you would give them a loan with no interest. In the terms and conditions, it says that there will be no profits if there is no rent. And you won’t believe it, but we found two of these deals on Investown.
Returns and risks
About 4.5% per year is the average yield. But the income isn’t guaranteed, so if any of the tenants stop paying or the apartments are empty, the investors won’t get anything.
What about danger?
Investments are not covered by insurance, so there is a chance that the money you put in may not be returned on time, in full, or at all. But since the loan collateral is so good, this is not likely to happen.
The investors have a stake in the loan, which is backed by a claim on the property and a lien on the property. This means that the borrower, which is a part of Investown, backs the apartments that were bought.
Fees at Investown
Setting up an investment account and keeping it up to date are both free, as are making deposits and withdrawals through a bank transfer.
The only fee that Investown talks about is a fee for leaving early. So, you will have to pay 0.9% if you want to get out of the investment before it matures.
There is no fee to use Investown as a broker. But we can find a performance fee here that is the same. Investown keeps 10% of the rents that are chosen, and the other 90% is split between the investors. But you don’t “see” this fee because all costs and fees are already subtracted from the revenue shown.
Registration and payments
It’s easy to sign up for Investown and only takes a few minutes.
Who is behind Investown?
Investown Technologies s.r.o., which was founded in 2019, is in charge of the platform. But the platform didn’t really start working until April 2021.
Filip Suk, an expert in financial technology, and Alan Pock Vyn, the current CEO of the startup, came up with the idea for Investown. The Seed Starter fund of Czech Social Insurance and the European Investment Fund through the Lighthouse Ventures fund gave money to the project. The startup incubator UP21, which is run by Karel Janeek, is also a partner in the project.
The company asked the Czech National Bank for a license to be a payment institution in the year 2020. But she didn’t get the license, so she changed the way her business worked. Now, Alan Vyn says that Investown doesn’t need a license because it buys property with its own money.
Investors sign a business contract with the company Investown Technologie s.r.o., but the offered property is owned by the subsidiary company Investown Family s.r.o.
Experience with Investown
Investown is liked by many. After less than a year of service, the service has more than 40,000 customers, and that number is only going to go up. Investown wants to link up with the George app from eská spoitelna. This would let the service reach hundreds of thousands of people who might be interested in using it.
Current clients put a lot of importance on high-quality loan collateral and low risk.
But you will also hear criticism, which is what we were most interested in.
Several investors have pointed out that Investown clients don’t benefit from the rise in real estate prices. And, let’s be honest, apartment prices have gone through the roof in the past few years, so investors are losing a lot.
In a strange way, if the property’s market value goes down, so will the value of the loan collateral. So, investors take on the risk of a falling market (lower collateral), but they don’t get any benefit from a rising market.
Another problem is the low yields, which don’t even cover inflation at the moment.
WHAT TO WATCH OUT FOR?
- When you use Investown, you don’t buy real estate shares. You give the money to the company that buys the property.
- 10 ZDP says that income, like any other income, is subject to income tax.
- There is no guarantee that Investown will let you get your money back early.
- If a lot of investors pulled out of the investment early, Investown would gradually buy back the shares. At the moment, however, selling investments is easy and usually takes less than 24 hours.
Investown is without a doubt a great project with a lot to offer. But it’s not the only project like it.
For instance, RONDA INVEST lets people invest in loans backed by real estate. Ronda will offer similar returns and good loan collateral, but it will pay interest instead of a share of the rent. Upvest is a close competitor, but it works on more risky development projects.
Do you want to use a bonus of CZK 500 to start investing in real estate? Just sign up for an account with RONDA INVEST and put 10,000 crowns in it. The bonus amount will be added to your first monthly payment.
Of the foreign projects, EstateGuru stands out because it has higher interest rates, around 10% p.a., which make it stand out.
You can also invest in real estate through securities, which has a big perk: if you meet the 3-year time test, you don’t have to pay income tax on the money you make. Real estate funds, which tend to be expensive, are a good example of this. Exchange-traded funds (ETFs) or shares of companies that buy rental homes are cheaper alternatives (REITs).
IS INVESTOWN WORTH IT?
Inflation from one year to the next was over 10% in March 2022, and economists don’t see much hope for the next year. The MFR says that the average rate of inflation in 2022 should be 8.5%.
At this point, the question is whether or not an investment that gives you a 4.5% return every year makes sense. Some banks also offer savings accounts that earn around 4% a year. With the difference that savings accounts don’t put you at risk and you can always get your money.
If you want an investment that could give you a return that is higher than inflation, you can almost only choose stocks (we do not count high-risk investments such as cryptocurrencies). As a point of comparison, the average return on the US stock market is about 10% per year (as measured by the S&P 500 index).
Brokers like Degiro or XTB can help you buy individual shares or share funds. And if you don’t know how to choose stocks, we recommend the Czech platform Portu, which will put together a custom stock portfolio for you.
When it comes to making money, Investown isn’t very exciting. But Investown will not let you down if you are looking for a safe investment with steady returns.
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