One of the most critical factors in planning investments and ensuring their safety is diversification—spreading investments across different assets. Different countries offer even more opportunities for diversification. This gives investors the chance to choose where they can earn more, as inflation and overall economic conditions vary from country to country, impacting the interest rates at which businesses borrow for real estate development. Profitus Chief marketing officer Monika Lencickaite explained the advantages and disadvantages investors can expect when investing their money across different countries.
In simple terms, the more markets there are, the more opportunities each investor has to choose the most suitable projects and plan the most efficient return on their investments. Additionally, this ensures safety, as economic indicators rarely fluctuate simultaneously in different countries. How to choose a country for investment? The main criteria for selecting a country for investment can be objective and subjective. Objective criteria include assessing the potential return on investment. Subjective criteria vary for each individual but are often related to how well they know and trust the country they are investing in. We have noticed that investors willingly invest not only in their own country but also in neighboring countries like Latvia and Estonia, as neighboring countries are easier to understand.
"For one of the first business projects in Riga, converting a polyclinic into apartments and commercial spaces, the first financing stage required 3.1 million euros, which was raised in just 5 hours on the Profitus platform, mostly from Lithuanian investors. Currently, 11 stages of this project have been financed, raising a total of 4.6 million euros. Another highly attractive project in Latvia is the expansion of a well-known car wash brand from Lithuania. For these car washes, 2,558 investors have already raised 1.94 million euros through different stages," said M. Lencickaitė. According to her, both projects are exceptional: the first for the amounts required and the speed of fundraising, the second because it is commercial real estate.
Although we are neighbors with Latvia and Estonia, the situations in these countries are different. Currently, the real estate market in Lithuania is perhaps the best, with a stable and mature real estate market, high rental income, and steadily rising housing prices. However, both Latvia and Estonia have a strong business drive to develop projects and a high need for financing. The Latvian market is quite similar to Lithuania's, with slightly lower real estate prices and significant growth potential. The Estonian market is currently developing rapidly, offering a wide range of investment projects and high return potential.
For those wanting to invest in foreign projects but unsure how to proceed, there is no need to fear—the Profitus team carefully assesses project risks in both Lithuania and other countries, said M. Lencickaite: "Each real estate project is given a rating, meaning we evaluate the risks and prospects of the project, analyze the market itself, the country's economy, the developer's experience, and the business plan. Essentially, the evaluation of foreign projects does not differ from that of Lithuanian projects—we need to assess the same aspects and understand the market differences well. For this, we have a strong team of risk and real estate analysts with extensive experience in this field."
If investing individually, not through a dedicated platform, the investor has much more work to do. First, they need to understand the legal and regulatory environment—before investing, it's important to understand the legal landscape of the foreign country, including property acquisition and management rules and restrictions. This may include tax policies, rental regulations, land use rules, and more. The current economic environment is also very important—the specific country's economic situation and outlook. This includes GDP growth rates, unemployment levels, inflation, currency stability, and other macroeconomic factors. The investor should also research the real estate market conditions. It's important to assess future demand and supply, trends in price growth or decline, and sector differences, such as residential, commercial, and industrial real estate markets.
Economic Indicators of Countries as a Key Criterion
Evaluating the economic situation of foreign countries is crucial to understanding and predicting how the real estate market will perform in the future, how developers will find buyers for properties, and repay debts. If an investor lacks specific knowledge about the economy or real estate markets, objectively assessing the prospects of another country is not easy, especially if it is as large as Spain, where the real estate situation can vary greatly by region. "We offer expertise and specialists and have partners in each country, so the ability of Profitus to assess foreign real estate markets and their prospects is entirely different from that of individual investors. Currently, between foreign markets we have the most projects in Latvia, but our criteria for selecting projects are much broader. We also evaluate the type of business projects being funded because, for example, a strong brand can successfully expand both in Lithuania and abroad," said M. Lencickaite.
Investments Do Not Disappear During Turmoil
If unrest arises in the foreign country where investments have been made, there is no need to worry about losing the investments. According to a Profitus representative, housing prices in Kyiv initially fell when the large-scale invasion began but quickly returned to relatively high levels and have remained there. "Ukraine is not even an EU member, and we live in a much safer environment. Yes, economic fluctuations are possible, but that is why it is beneficial to invest in multiple countries and projects, as diversification always reduces risks. It is also important that the projects invested in have a duration of 12 months. Such a term is safe. Let's remember the Covid-19 pandemic and our reaction to it—at that time, investments on the Profitus platform even increased because people, being at home, saved money and had time to explore investments. The pandemic could have negatively affected investment, but the opposite happened," explained M. Lencickaite.
We became leaders in Lithuania by the amount raised annually in 2022, and last year we also led in the growth rate of active investors. Thus, more and more objective indicators show the growing trust among people and companies entrusting us with their savings, as well as smaller banks and real estate developers. The leading position in our own country provides additional opportunities in others. Profitus is already among the top three platforms in Europe for real estate project financing. So, we do not enter other markets empty-handed—we have solid trust, reliable results, and clear goals that we achieve every year.
The crowdfunding platform Profitus raised 59.2 million euros in 2023, financing 431 project stages. Profitus unites a community of over 37,000 investors, has raised over 175 million euros in six years since 2018, and has paid over 10 million euros in interest to investors, with an average annual interest rate of 12.14%.
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