Crowd-funded HMO/buy to let – new business opportunity?

by Readers Question

12:49 PM, 8th January 2014
About 7 years ago

Crowd-funded HMO/buy to let – new business opportunity?

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Crowd-funded HMO/buy to let – new business opportunity?

With the ever increasing popularity of peer to peer lending sites like Zopa, Ratesetter, Rebuilding Society etc, why has some enterprising group come up with a way of participating in the burgeoning rental sector for those without the resources or time to commit to a full BTL of their own? I’m sure many would jump at the chance of earning 8, 9, 10 or more % on part of their savings, plus the possibility of a substantial capital gain, rather than suffering the paltry rates offered by the traditional banks or building societies. Investors could club together, from a minimum investment of, say £1000, to buy into a property portfolio starting at £100,000-500,000, each receiving an appropriate % of rental income and capital gain at the end of the investment period ( 5 years?).

I would jump at the chance, and would welcome feedback from others keen to join in this market without committing £100-£200k to a single property investment and all the personal time commitment that goes with it. Crowd-funded buy to let

Thoughts?

Derek



Comments

Mark Alexander

12:52 PM, 8th January 2014
About 7 years ago

Hi Derek

This has already been done to varying degrees of success - see >>> http://www.thehousecrowd.com/

or search Google for "crowd funding buy to let"
.

13:02 PM, 8th January 2014
About 7 years ago

Hi Derek,

There are peer to peer funding platforms for property, the most notable one being Assetz Capital.

http://www.assetzcapital.co.uk

As for investors clubbing together to pool resources for BTL, I am afraid that that falls under new FCA regulations and it is illegal to even talk about such a scheme in the open market place, including on-line.

Anything that pools investors money or constitutes a JV kind of arrangement where someone inputs money and receives a profit share is highly regulated since 4th January 2014. All people being exposed to such an offering have to be pre-qualified before even being told what the offering is. This is to protect unsophisticated investors from the many sharks touting for JV money and loans to do property projects that never materialise.

We have a discussion about it on Property Tribes if you are interested to learn more about the new regulations:

http://www.propertytribes.com/fca-regulations-jvs-and-unhappy-armchair-investors-t-8329.html

Michael Holmes

14:25 PM, 8th January 2014
About 7 years ago

Reply to the comment left by "Vanessa Warwick" at "08/01/2014 - 13:02":

What nhappened to Free Speech?

16:03 PM, 8th January 2014
About 7 years ago

To be honest, looking at the returns of 6% - 7.5% (as illustrated by thehousecrowd), without the power of leveraging that you gain from using a mortgage/loan product to buy a property, I think I would rather invest in equities. Well selected funds can easily out perform the sort of numbers suggested above with the added benefit of being highly liquid should you wish to sell your investment.

For me, the main appeal of investing in property is (1) the leveraging of other peoples money, (2) diversification from my equity portfolio. If you are not able to utilise the advantage of leverage, then I do believe that long term...stock market investments (especially in funds that are diversified and reduce risk of volatility) will in long term out perform property investments.

Jim

Mark Alexander

16:48 PM, 8th January 2014
About 7 years ago

Reply to the comment left by "James Tallis" at "08/01/2014 - 16:03":

I agree and that's why I have avoided it too 🙂

May be the right thing for some though.
.

derek lightfoot

17:43 PM, 8th January 2014
About 7 years ago

Reply to the comment left by "Mark Alexander" at "08/01/2014 - 16:48":

First of all, many thanks to those who have responded with suggestions for existing schemes of this kind. I checked out "the House Crowd" and I'm considering a small investment there to "test the water". I don't think that a guaranteed annual return of 6% plus 50% of any capital gain upon sale (which is triggered once the property valuation exceeds 25% of the total acquisition cost) is to be sniffed at - potentially 18.5% return if the property is turned around within 12 months (unlikely) or 12.25% if this occurs within 2 years (probable) This compares reasonably with my current SME investments in Thincats where my average returns are 10-11%. Anyway, for better or worse I'm going to give it a punt and I'll report back with either great, good, bad or disastrous feedback for those interested!. Thanks again for the tips.

Phil Ashford

22:55 PM, 8th January 2014
About 7 years ago

Mark Alexander

23:04 PM, 8th January 2014
About 7 years ago

Reply to the comment left by "Phil Ashford" at "08/01/2014 - 22:55":

Hi Phil

I read the thread about this over on Property Tribes via the link posted by Vanessa.

I have followed many of your posts on several fora and I appreciate that working your way through legislation and the statute books is very much your thing, you have an amazing talent for it so thanks for posting here.

Do you think the likes of House Crowd are caught by this new FCA ruling and if so what do you think are the ramifications?
.

Jonathan Collins

18:17 PM, 10th January 2014
About 7 years ago

Reply to the comment left by "Vanessa Warwick" at "08/01/2014 - 13:02":

Hi Vanessa, is there a specific qualification required to offer an investment opportunity of this type (if so what?), or is it just that you now have a default duty of care to ensure the investment is suitable for the investor?

8:31 AM, 11th January 2014
About 7 years ago

Hi Jonathan,

I was not offering any kind of investment opportunity. I was advising of a company that offers a peer to peer lending platform.

As the person loaning the money to the peer to peer platform does not get any form of profit share from what the investor makes, it does not fall under the new FCA PS 13/3 regulations anyway. The platform is also fully regulated and compliant with the FCA.

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