Investor Academy Part 1: Understanding Mortgage Loan Investments on Indemo

This is the first in a series of articles, where you’ll find everything you need to know about Indemo, and investing in Mortgage Loans. We’ll be breaking down the basics, helping you understand exactly what kind of products are offered on Indemo, and what makes them unique.

To begin with, let’s dive into some of the most frequently asked questions we hear across our community.

What differentiates Indemo from other investment platforms?

Everyday investors have historically been limited when it comes to diverse and alternative investment products. Products like mortgage loans and discounted debt investments, both of which are available on Indemo, are usually reserved for high net worth, and institutional investors. They’re used to diversify the portfolios of these investors - offering stable and predictable returns that balance their risker and more volatile investments.

Indemo is changing this landscape by being the first ever B2C investment platform that offers DDI’s (Discounted Debt Investments) as an asset class available to invest in - opening up this market to retail investors for the first time ever. 

What kind of products does Indemo offer?

Indemo offers two key investment opportunities: Mortgage Loans, and Discounted Debt Investments. Both of these are backed by Spanish real estate, making them much more secure than many other traditional retail investment options. The returns offered by both of these investment products are both stable and predictable- in contrast to the high volatility of other investment products available on the market. 

Remember, these products may be new to you - but institutional investors have been using them for decades!

Mortgage Loans are backed by real estate, providing a real, physical layer of security and collateral. Indemo allows you to invest in Notes attached to these loans, and earn returns on the interest of repayments. 

Discounted Debt Investments are loans that are also backed by real estate, but have failed to be repaid. These loans go on the market at a massive discount on the value of the collateral - often between 30-50%. Investors purchase notes attached to these heavily discounted loans, and then earn returns once the real estate has been sold, or once recovery repayments commence.

Discounted Debt Investments can be bought and sold on Indemo’s secondary market. This means that you can invest at an early stage for a cheap price, and exit for a premium at a later stage. You can invest at later stages too, but at a higher price.

When investing in DDI’s there are two different strategies to consider - each with its own advantages:

The first strategy involves purchasing DDI’s at the earlier stages for the cheapest price (PTV). Since you’re buying them at the first step in the recovery process, there is quite some time left before recovery. The advantage to this strategy lies in the significant profit you can make if an out-of-court settlement is reached during these early stages. If this happens, then you’ll gain maximum ROI, whilst waiting a minimum time for exit. You can also always sell the debt on the secondary market at a more advanced stage at a premium.

The second strategy involves purchasing DDI’s at a more advanced stage, but at a higher price (PTV). The significant advantage to this strategy is that since you’ll be buying closer to the final step of the organic recovery process, you won’t have to wait as long before you can exit. An early out-of-court settlement can still be reached, but at this point it wouldn’t save much time and wouldn’t impact your ROI as significantly as in the first strategy. 

The difference between the two strategies is time. Buying early means an early stage out-of-court settlement will have a huge influence on your ROI. Buying later means you’re more or less at the finish line, and you can enjoy a healthy profit with less time to wait before exit.

Regardless of the strategy you choose, you’re still investing in real-estate at a significant discount, where the only real risk is time. If the DDI progresses organically through the standard recovery process organically, without any out-of-court settlements, then the ROI will be more or less the same whether it’s been purchased at an early stage or a late stage. If however, a repayment or settlement happens at the early stages, then returns can be significant.

Remember: If you invest at Stage 1 of the recovery process, you could exit at stage 2 with a 15% return. Someone else could buy at Stage 2 and then sell at Stage 3 for the same average return too. The key point here is that you can exit your investments at any point in the recovery stage, rather than waiting for it to be complete. You can discover more about the recovery process in our upcoming post.

Why are Indemo’s investment products unique?

Mortgage Loan and Discounted Debt investment opportunities have been around for a long time - generating stable, predictable and consistent returns. Historically however they’ve only been accessible to institutional investors. Indemo is breaking new ground by offering them to everyday investors for the first time, to start with as little as a €10 investment. 

Indemo’s approach is unique in that it allows everyday retail investors like yourself to access products that are usually reserved for the big players. The fact that all of our investment opportunities are backed by Spanish real estate, provides a significant safety net for investors - making them far more secure than other speculative options such as stocks or crypto.

Indemo’s secondary market is also unique, in that it represents the first ever time that everyday people can buy and sell asset-backed loans between themselves. More importantly, it allows investors to exit their investments early and gain profit faster, rather than wait for the entire recovery process to unfold.

We’ll cover more about Indemo’s secondary market in an upcoming blog post.

Why does Indemo focus on Spanish real estate rather than other countries?

Indemo has always had a strong connection with Spain. All of the investment products that you find on the platform originate from Spanish real estate assets.

We’ve chosen to focus on Spain for a number of reasons. The country has strong economic potential, an active real estate market, and has seen significant growth in the last few decades. The property market is in high demand, supported by local and international buyers, and the country enjoys a stable economy. 

Investment firms such as Blackstone, Cerberus, and Lone Star have taken a strong foothold in the country, driving real-estate investment and bolstering economic growth. Post-pandemic, the rise of remote working has also boosted the real-estate market, with more young professionals purchasing property to live/work in than ever.

Most importantly, all processes associated with real estate are governed by EU law - with a predictable and robust legal system that underpins the processes behind the products we offer.

What is the difference between the investments on Indemo, and those offered by other investment platforms like eToro or Trading 212?

To make informed decisions, it’s important for any investor to understand the difference between asset classes before making any investment. Indemo offers investments in “asset-backed loans”, which are different from stocks, bonds, or cryptocurrency because they are secured by real-world assets - in Indemo’s case, Spanish real estate. Many of the properties that back the loans are heavily discounted, meaning once they are sold for their full market value, investors can earn a healthy profit. 

The Spanish real-estate market underpins the products on Indemo. It’s strong, stable, and largely immune to the swings found in other markets.

The security provided by the backing of real-estate, combined with a logical legal recovery procedure make the returns from these kinds of products far more predictable and stable. This standardised legal recovery procedure forms a part of the law, and is the same regulatory process used by banks in the event of non-payments. In the event that a borrower defaults on their payment, the asset can be sold to recover the investment - providing even more security.. 

All this creates a far lower investment risk when compared to the speculative and volatile stocks and crypto available on other trading platforms.

Here’s a comparison:

Stocks: High profit potential, but unpredictable, and very vulnerable to market swings.

Bonds: Steady, decent returns which are great for diversification, but vulnerable to changes in interest rates and early cut offs.

Crypto: High potential profit, but extremely volatile with major risks.

Mortgage Loans / Discounted Debt: More stable and predictable due to the underlying real estate asset, and the general housing market. Offers a great balance between risk and reward, particularly when factoring in the discount on the asset. Unlike stocks and bonds, the real estate market remains flexible and fluid - meaning that even in times of economic downturn investors can always wait for a better time to sell.

Why are Indemo’s predicted returns so high?

Indemo offers predictable, stable returns of 10-15%  thanks to the security provided by Spanish real-estate backing. Whilst all investments come with risk, asset backed loans are a far less volatile product type when compared to the usual stocks and cryptocurrency.

There is a standard legal process attached to the recovery of these loans, which has to be seen through, regardless of circumstance. This legal process has two outcomes. Either a settlement is reached, or the property is sold at auction. Both of these outcomes provide returns for investors.

The risk therefore, is not whether the investment will generate returns, but rather how long it may take for a settlement to be reached, the underlying property to be sold, or for payments to be recovered. It’s important to remember this point, especially when factoring in your choices on the secondary market.

Indemo’s investment products are a good choice for those seeking to diversify their portfolio - providing a stable and predictable return that represents an ideal balance between risk and reward, and allowing everyday people to invest in Spanish real estate at around 30-50% below the market price. The security of this real estate, along with attractive interest rates makes these mid-term investments a great alternative to stocks and crypto. .

Beginning your Asset Backed Investment journey

As you start your journey on Indemo, and enter the world of asset-backed loan investments, we want you to feel informed, educated, and inspired.

We’ll be sharing a series of articles in the coming weeks that will help break down some key concepts, and demystify the exciting investment opportunities that we have available on the platform.

Stay tuned!