The Wealth Scene chats to Sven Bunek, founder and CEO of BancoInvest.
BancoInvest is an Estonian registered company working with property investments. The company is owned and operated by Swedish professionals. Reason for choosing Estonia is a favorable taxation system. Estonian companies do not pay corporate tax and easy access to qualified staff at low cost was also a factor.
The manager and owner, Mr. Sven Bunek has been working in the investment sector for more than 20 years, previously working as a tax lawyer in Sweden and Spain.
With experience gained from larger insurance companies as well as operating his own Insurance brokerage/Investment company, he has an understanding of client’s needs and desires. For the past ten years he has been devoted to alternative investments.
Sven also holds seminars and workshops on the subject of investing in debt instruments, especially tax liens in the USA.
You are working with US properties, why?
The property market in the USA is unusual for a couple of reasons.
First, House Flipping (property bought and sold more than once a year) is a 16 Billion USD market (2017), up 27% from 2016, representing more than 200.000 houses sold. The market shows significant growth potential especially in the segment of affordable properties, priced 125.000USD-250.000USD. There is a strong demand in that segment due to a shortage.
Second, the tax system in the USA, especially property tax, opens up for some exciting ways to acquire properties in the right price segment.
Explain how the tax system can provide properties?
In the US all properties are taxed with a local county tax of 2%-3% of the tax assessed value. These taxes go to pay for schools, police and other county services. If not paid by the property owner and after several reminders, the county has a legal right to sell the tax debt on a public auction to recoup unpaid taxes. The incentive for buying delinquent taxes is the penalty that is attached to the tax debt. The penalty varies from 12% up to 36% per year. The property owner now has two years to repay the tax debt and the penalty, if he for some reason does not pay back, then the debt owner initiate a foreclosure and takes over the property, free of any charges on the property. The right to foreclose is written in state law and is there to protect the debt owner’s initial investment.
So a property owner who does not pay his taxes could end up losing his property?
Yes, if not paid within the redemption time. The legal system protects the investor, which is unique.
Who buys these tax debts?
Both tax debts and other debts are bought up mainly by large hedge funds. They buy in bulk from Banks, Mortgage companies and tax debts are purchased from the local county also in quantity. Buying and selling debts is not new; it has been going on for a long time. Buyers of debts are interested in earning interest, when the interest stops, then a hedge fund will typically sell the debt and recoup their initial investment.
What is it that you do and how does it work?
Our approach is to buy the non-performing debts from the hedge fund. It can be a mortgage or a tax debt. Since they are non-performing (interest is not paying) the fund is interested in selling and this creates an opportunity to purchase at low prices. The price that we pay is around 30%-40% of the value of the property. We then decide if the properties should be renovated or sold ”as-is. ”The whole concept is built on buying at 30%-40% and offer it to the market for 50%-60% of the value. By doing so, we attract not only House Flippers but also first-time buyers and property developers.
How is the security for my invested money?
All properties are pledged in favor to our investors on a first charge basis. It means that regardless of what happens with our company, the investor has good security. Properties are bought at 30%-40% of value which translates to an LTV (Loan to Value) of 30%-40%. Banks usually lend out money to properties at an LTV of 75%-80%. So it’s fair to say that the underlying security is good.
How is the Bond setup?
The bond is registered with NASDAQ in Tallinn, Estonia and has its ISIN number. The terms are in the Bond memorandum. Duration of the Bond is 24 months, and the yearly coupon is 12%.
Will I own the property?
No, all properties are owned by the company. However, all properties are pledged in favor of the bondholders (Investors) on a first charge basis.
Who can invest in your products?
Investing in our products are only open to High Net Worth or Sophisticated Investors. We do not offer any investments to retail clients.
Are there any guarantees with investing with you?
All investments carry risk. The 100% risk-free investment does not exist. What we have done is to minimize insecurity in our products. In our experience, one of the biggest reason why an investor chooses to say no, is because of something that made him insecure. Here is what we have done to make our investors less insecure. All properties are purchased at low cost 30%-40% of market value. In case of a fire-sale, it should be reasonably easy to sell off and recoup the initial cost. All properties are pledged in favor of bondholder on a first charge basis. The Bond also has an ISIN number which means it’s registered and the registrar has approved the terms & conditions.
I want to know more, how do I contact you?
Easiest is to send us an email at email@example.com with your contact details and the best time to contact you. We will then call you up. We prefer using Skype since we can then do an online presentation for you. However, we can call your landline/mobile phone as well.
Thank you for your time today Sven.