The appeal of real estate as an investment remains strong, but the path too participation is evolving. beyond traditional property ownership, a growing number of platforms offer investors the opportunity to tap into the rental market through crowdfunding and other innovative approaches. This article examines the key differences between directly purchasing rental properties and utilizing these alternative investment methods,exploring the associated risks,potential returns,and strategies for building a diversified portfolio,with insights from recent market trends in Lithuania and abroad.
– What are the key differences between directly purchasing property for rental income and alternative ways to participate in the rental real estate market, such as through crowdfunding platforms?
“I think the best way to answer that question is to evaluate different investors. Often, individuals who directly purchase rental properties do so because they simply enjoy ownership, having a tangible asset to manage, or they are very professional investors who are purchasing hotels, not necessarily individual apartments.”
“Frequently, people think they are investing in an apartment, but in reality, they are buying an apartment to rent out and don’t fully account for the time commitment involved in managing it. It all comes down to the cost of your time, and of course, your expenses. Anyone who has rented out properties knows how time-consuming it can be. Therefore, how profitable that investment is ultimately depends on the individual, their management skills.”
“When we talk about platforms, there are many available today, from A to Z, and their risk profiles vary significantly. I wouldn’t be inclined to evaluate returns in isolation, as they often depend on the investor’s knowledge and the amount they invest in that specific investment type.”
– Regarding investment in physical properties for rental, the average rental yield was slightly over 5% in 2025. Isn’t it the case that inflation has been higher at times in certain years? We’ve certainly seen years where that was true. In those cases, the investor doesn’t lose money and survives on the rental income, but inflation reaches double-digit percentages.
“Yes, that’s fundamentally true. When inflation is high, those with significant assets benefit. Returns and their volatility generally differ depending on the asset class, but financial markets typically react positively to inflation, with the exception of fixed-income bonds.”
“In most cases, investors earn a monetary amount because the numbers change, but does the value actually change? Not usually. We don’t yet have as much experience in financial markets in Lithuania, as we are a very small country and a relatively new economy. Consequently, there is limited data available. Lithuanians often assume that real estate prices will constantly increase.”
“The reality is that the nominal number grows, but does the real value of money grow? Since we started from a low base, it has grown practically throughout our history, except for certain recessions. However, if we were to look at Western economies, such as the United States over the past 100 years, adjusted for inflation, the value of real estate has changed by only half a percent per year. A half-percent return. What can we realistically take from that? Real estate prices do grow, and practically always over longer periods, but does its value grow? If you don’t do anything with that asset, it usually doesn’t.”
“Professionals are able to create value by doing two things. There are many ways to do this, but two are easily understandable. First, we make improvements and changes to the asset – let’s call it development. Second, professional property managers can take the same asset and optimize it, optimize the rent, raise prices, and ultimately increase the investment return. In other words, increase the value of the real estate through the prism of investment return. Without thinking that simply buying an asset will automatically increase its value – the nominal value may, but if you do nothing, will that investment return be positive? That’s a very good question.”
– Let’s return to alternative ways to participate in the rental real estate market, such as through crowdfunding platforms. Is there a difference in returns if, roughly speaking, I invest in a brick – for example, I buy an apartment somewhere in Šeškinė and rent it out, or do I do it through a crowdfunding platform? How do risk and return differ here? Theoretically, we are still participating in the rental real estate market, but in a completely different form. What would be the differences here?
“If I could put it briefly in numbers, as you mentioned, simply buying an apartment often yields a single-digit percentage return. But if you use bank leverage, that return automatically becomes double-digit.”
“When evaluating the differences between platforms and direct property ownership, it’s important to understand one thing. The majority of platforms where you invest, for example, in Lithuania, are financing real estate projects, but as an asset class, it would be more accurate to compare them to private debt. Private debt typically has a double-digit return. However, you don’t own the property itself, but you also don’t need to manage it. Depending on the service provider, that real estate investment is usually secured. Simply put, this means a mortgage is signed and the real estate is pledged in the name of investors to guarantee obligations.”
“When it comes to returns and risks, I think the key thing to understand is that there is no single best asset class and no single best service provider. The best thing you can do is diversify. I believe a healthy portfolio should include both asset classes, as, as I mentioned, real estate value tends to grow over longer periods, while debt is fixed.”
“If people are considering where to invest, the best thing to do is invest in what you understand, and don’t rush, start with small amounts and grow.”
“So, if the asset isn’t growing, we have a fixed return, which becomes very attractive in that market. Again, that return also depends on the amounts invested and the investor themselves. But I think, if people listening to this show are even considering where to invest, the best thing to do is invest in what you understand, and don’t rush, start with small amounts and grow.”
– I would just like to briefly inform our listeners that our podcast is not investment advice, historical returns do not guarantee future results, and investing always involves risk.
Speaking about your company – you are actively expanding abroad and now offer the opportunity to invest in real estate projects in Ireland, Spain, Italy, Latvia, and Poland is now your largest market. Why are you expanding abroad, why these markets specifically, and how do the returns differ in each country?
“By expanding abroad and offering the opportunity to invest in different markets, we provide investors with the ability to diversify across geographies, but also across niches. For example, the type of projects we invest in in Poland are not readily available in Lithuania. Very recently, we financed a 5-star hotel with 260 rooms. That’s one example. We’re talking about a 5-star hotel, which is not common in Lithuania.”
“Another example – a project we financed in Poland is a former film studio with 17,000 square meters of space. Previously, the entire building was used as a Harry Potter amusement park, with the franchise purchased. Again, we’re looking at objects that, no matter how proud we are, as a country and as a nation, simply don’t really exist in Lithuania.”
“Answering the question about the markets, how they are structured, we simply look at what we do in Lithuania and don’t do in Poland, and vice versa. In each country, we look for a niche where banks don’t do their best work. A simple example: in Lithuania, banks don’t often finance state auctions or competitive bids because the term is simply too short. That’s one niche where we provide investors with an opportunity.”
“In Italy, we are working on allowing investors to invest in hotel renovations. Why? Because in Italy, banks are reluctant to finance hotel loans of less than 10 million euros. Small hotels that need a few million euros for renovations find it difficult to obtain financing because those amounts are quite large even in Italy.”
“These are examples of how we identify niches we can take. Why are we doing this? Many, especially financial technology companies, like to say, ‘We will compete with banks.’ I think it’s not really possible to compete with banks, and when there is such an illusion of competition between service providers, the investor loses. What we are really trying to do is look at each market and find where we can have a bank client, but not bank projects. Because the amounts, settlement categories, simply don’t fit for the bank, and in this place we can offer a very competitive return to people and compete with private loan funds.”
– If we talk about a typical investor on your investment platform and look from the first year to now, how are the amounts, investor expectations, and experiences changing? Is the appetite growing?
“When we financed our first projects, if I remember correctly, the second project’s financing was 100,000 euros, and it took us more than a month to finance it. Now we finance 2 million euros in one day. At that time, no one was talking about investments, and there wasn’t even much appetite for people to be interested and deepen their knowledge about investing. The very first investors, even if they were very professional, did so more from an educational perspective, starting with very small investments – a few hundred or a thousand euros.”
“Naturally, over time, by demonstrating solid results, we have earned investors’ trust. The investors themselves have grown, their numbers have grown, their profile has grown, and today we serve clients from across the European Union. We have both small investors who invest a specific amount of money each month and view it as a passive investment, but we also have very professional international investors who invest 100,000 euros in one project.”
“Today, the investor profile is very broad and changing, but it’s just nice to see the journey we’ve taken as a team. And now, when you asked how it has changed, I just remembered those first years – it was really difficult.”
– Let’s talk about a realistic situation. Suppose an investor has 50,000 euros. What arguments would there be for and against investing everything in real estate, say, an apartment in Vilnius, or splitting that amount across several rental real estate projects through a platform?
“I think that’s each person’s answer, and I think the best decision a person can make is to invest in themselves. Try to make those investments, start with small amounts, and see if they understand the risks, both in terms of the service provider and the project risk.”
“Regardless of the decision a person chooses, it is always very important to diversify not only geographically but also over time. Many people talk about the importance of diversifying across countries, but very few talk about the importance of making investments, spreading them over time.”
“There’s a good English term called ‘dollar-cost averaging’ – for example, if you are considering investing in stocks, according to this theory, it is more beneficial to make investments over time. This is because you essentially reduce price differences and equalize that amount.”
“Take the S&P index, probably the most popular in the world. It is said that over the past 100 years it has grown by an average of 8% per year, but it has grown from the starting date to the last one, from which the data is taken. But, for example, if you buy when the stock value was highest that year and then fell, those 8% are not always achieved, and in principle that 8% return is very individual, depending on the investor.”
“Here’s an example of why, even if you diversify widely, in the case of this index covering 500 companies, an investment made at the wrong time, no matter how good the investment product, may not generate a good return. Therefore, in conclusion, the best thing is, as I mentioned, to learn to diversify both geographically and over time.”
