Create an Auto Invest Portfolio on Estateguru and set it up correctly

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Reza Machdi-Ghazvini,CAIA
Last updated on 03 September 2021

EstateGuru Auto Invest Portfolio: how to create it and set it up correctly

If you invest in real estate loans on EstateGuru, you should use the automatic investment function Auto Invest. The Auto Invest feature is convenient because it takes a lot of work off your hands. You only need to make a few settings at the beginning to invest fully automatically in real estate loans on EstateGuru. The Auto Invest feature comes in two versions, the advanced version is open to investors who invest at least €250 per loan.

In this article, we will show you how to properly set up the Auto Invest feature before activating it.

Auto Invest function

You can find the Auto Invest function in the menu on the left, click on the link "Auto Invest".

EstateGuru Auto Invest

EstateGuru will show you the Auto Invest function, for which EstateGuru has applied some standard settings. Further up in the screen, you will see that the Auto Invest function is currently disabled.

All investors can adjust the settings Amount for a loan, Term, Repayment type and LTV (Loan to Value ratio).

EstateGuru Auto Invest advanced settings

The advanced settings can only be changed if you invest at least €250 per loan. On the website, EstateGuru justifies this as follows:

EstateGuru Explanation for advanced settings 250 euro

EstateGuru wants to prevent small investors from automatically investing in real estate loans with the highest interest rates without diversifying their portfolio and looking at the loans in detail. Small investors should be forced to look at the loans before they invest.

EstateGuru Auto Invest forecast of available loans

The Auto Invest function at EstateGuru displays you a forecast of available loans, which is a very handy feature-. You are shown how many loans are expected to match your preferences in the next month and how much money would be invested each month. This way, you can quickly determine if your settings are fine.

Set up EstateGuru Auto Invest correctly

Note: The content of this article is for general information purposes only and does not constitute any investment advice or recommendation. The information is based on our personal experience and financial knowledge. Every successful investor should do extensive research and make personal decisions based on his/her personal goals.

The default settings in the Auto Invest function are broad and hardly limit the offered loans in which would be invested. If you want to invest your money as soon as possible, this may make sense for you.

The default amount for a loan (maximum investment amount per loan) corresponds to the minimum amount you have to invest per loan. We consider the default setting of €50 to be reasonable. If you want to invest your investment amount quickly, you can also increase the value.

You should adjust the Auto Invest settings until they match your personal investment goals and there are still enough loans available to spread your investment amount.

You can set the following settings on EstateGuru:

Default settings

  • Amount for one loan: maximum investment amount per loan

  • Term: maximum term of the loans

  • Repayment type: how the loans are repaid, balloon, full balloon and all balloon types

  • LTV: maximum loan-to-value (LTV) ratio

Advanced settings

You can only change the advanced settings if you set the amount for a loan to at least €250.

  • Collateral: Collateralization of the loans ranking first or second

  • Incremental loans: whether it is allowed to invest in incremental loans

  • Refinancing loans: if it is allowed to invest in refinancing loans

  • Interest rate: maximum interest rate of the loans

  • Countries: Estonia, Finland, Germany, Latvia, Lithuania, Portugal, Spain and Sweden

  • Invest all available funds: whether to invest in loans even below the maximum amount (amount for one loan). For example, if you have €70 left in the account and want to invest a maximum of €100 per loan, the available €70 would be fully invested with active setting.

Auto Invest portfolio settings for conservative investors

Especially conservative investors, who prefer reliable returns and quick availability of their money, should set the Auto Invest function correctly.

Loans on EstateGuru are not brokered with buyback guarantees. Loans with delays remain in the investor's portfolio (holdings) and are not repaid until EstateGuru has been able to find a solution.

To minimize the number of loans in trouble, you should generally invest in loans with shorter terms and lower LTV ratios.

Interest rates also play a role because you have to expect the highest risks with the highest interest rates.

Amount for a loan

Compared to other P2P platforms, the minimum amount you need to invest per loan is already above average at €50. Since you should spread your investment in P2P loans as much as possible, it would make sense to use the default setting of €50. If you want to adjust the interest rate setting, you have to invest at least €250 per loan.

However, we believe that you can sufficiently control the risk via the maturities and the loan-to-value ratio.

Term

Most of the real estate loans on EstateGuru have a maturity between 12 and 18 months. Although there is a secondary market available for you to exit your loans in a timely manner, you will then have to find a buyer who will buy the loans from you. You should rely less on this and, we think, a maximum term of 12 months is reasonable.

Repayment type

The repayment types bullet and full bullet differ in whether the interest is paid regularly or at the end of the loan term. With a full balloon, interest is not paid until the end of the term.

In principle, we would therefore advise conservative investors to rather invest in balloon loans.

However, since you only invest in real estate loans with a maximum term of 12 months anyway, you could also invest in full balloon loans. The accrued interest at a maturity of 12 months should not increase the overall risk too much.

LTV

The Loan-To-Value ratio should not exceed 65% to limit the proportion of loans that are too highly leveraged relative to their collateral.

Collateral (Advanced Settings)

As a conservative investor, it makes sense to invest only in loans with senior collateral.

Summary for conservative investors

  • Maximum investment amount per real estate loan €50

  • Maximum term 12 months

  • Repayment type only balloon (possibly also full balloon)

  • LTV up to 65%

  • Only senior real estate loans

Auto Invest portfolio settings for risk-conscious investors

If you're looking for double-digit returns, you'll find them on EstateGuru. However, the interest rate setting, the most important setting for risk-taking investors, is only available if you invest at least €250 per loan.

In our opinion, the Auto Invest feature only makes sense for risk-tolerant investors if they can achieve the same spread (diversification) of their investments as a conservative investor.

For example, if a conservative investor invests €500, he can invest his capital in 10 real estate loans (€50 per loan). To achieve the same degree of diversification, a risk-conscious investor needs an investment amount of at least €2,500 (€250 per loan).

Amount for one loan

The advanced settings, which include the interest rate setting, are only available to investors who invest at least €250 per loan. Therefore, you must specify €250 in the amount for one loan setting. We consider higher amounts to be less useful, as they contradict the principle of risk spreading.

Term

Most real estate loans on EstateGuru run 12 to 18 months. For longer terms, you will receive higher interest rates, so you should preferably invest in real estate loans with terms up to 18 months.

Repayment type

You can keep the default setting All types.

LTV

You should choose between up to 70% and up to 75%. The experience in the lending business has shown that  the riskiest loans not automatically lead to the highest returns. Therefore, up to 70% may make more sense.

Security (advanced settings)

If you want higher interest rates, you have to accept higher risks. Therefore, you should invest in senior and subordinated loans.

Interest (advanced settings)

The most mistakes are made with the interest rate settings. Many investors think that if they only invest in loans with the highest interest rates, they will then also achieve the highest returns.

As a consequence, they build a portfolio that consists to a very large extent of delayed or defaulted loans. That is why you should not only invest in the loans with the highest interest rates.

Real estate loans with an attractive return and risk ratio often have interest rates that are slightly above average. EstateGuru shows 8%+, 9%+, 10%+ and 11%+ as possible interest rates. The average is 9%. For us, 9%+ seems to make sense as a setting; those who are particularly risk-taking can also select 10%+.

Summary for risk-conscious investors

  • Maximum investment amount per real estate loan €250

  • Maximum term of 18 months

  • Repayment type All types

  • LTV either up to 70% or up to 75%.

  • Senior and subordinated real estate loans

  • 9%+, for very risk-taking investors 10%+.

Checking your EstateGuru Auto Invest portfolio

After you have set and activated the Auto Invest feature, you should check your portfolio after 3-4 days on EstateGuru. Especially on EstateGuru there can be bottlenecks in the loans offered and it is not uncommon that you have to wait a little longer until you are fully invested.

If it takes a little longer, that's still no reason to panic. Regardless of whether you follow a conservative or offensive strategy, pretty much all loans run for at least 12 months. A few days are not critical.

If you want to be invested quickly, it can also make sense to use the secondary market on EstateGuru and then activate the Auto Invest function.

Auto Invest does not invest

Sometimes it can happen that the Auto Invest function does not invest. Often investors then assume that the function is not working properly. The real background is often that no loans were offered that match the settings of the Auto Invest function.

For example, if you only want to invest in loans with an LTV of maximum 60%, but no loans with LTV ratios below 60% have been offered in the last two weeks, the Auto Invest function has correctly invested in no loans for you.

What do I do if there are no loans available on EstateGuru?

In this situation, you have no choice but to be patient on EstateGuru.

Alternatively, you may be able to buy loans on the secondary market, provided the loans offered match your investment strategy.

How often should I check my Auto Invest portfolio?

The loans on EstateGuru run on average for at least 12 months. If you are fully invested, it should be enough to check your loans once a month (or less often).

If you have a riskier investment strategy, it may make sense to check your investments more often.