Crowd funding – are the current offerings credible?

by Readers Question

8:35 AM, 24th March 2015
About 4 years ago

Crowd funding – are the current offerings credible?

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Crowd funding – are the current offerings credible?

I’m keen to hear other peoples views on crowd funding buy-to-let property. I saw in the news today that one firm had just received over £5m of funding so clearly someone thinks this is a big opportunity. In the question below I have named some firms I know of but please remove these if this breaks any of the forum rules – I have no association with either other than a small investment in one of their properties (total investment is £1,100). Crowd funding - are the current offerings credible

Question:

I’m interested in hearing other people’s views on crowdfunding within the property market. I’ve seen a few companies start up over the last couple of years and they appear to be growing quickly, companies such as The House Crowd and Property Partner. They buy the properties through limited companies in the form of SPVs and then sell shares in the SPV so you can invest with a very small capital outlay – as low as £50. They also attempt to create a secondary market, so in theory, you can exit without having to sell the property.

Specifically I’m interested in discussing if fellow landlords would invest into these companies properties. Do these companies exist purely to allow people who would otherwise be unable to invest, either due to capital or skill barriers, “own” a property? Would any current landlords invest in any of their offerings? What else would they need to do to gain your investment?

I don’t want to focus on the individual companies merits but instead focus on the general model they all adopt. I do have a small investment with each (less than £1100 in total) but am otherwise not connected with any of the firms mentioned.

Regards,

David Simms



Comments

Mark Alexander

8:40 AM, 24th March 2015
About 4 years ago

Hi David

It is too early to say whether these schemes are a good idea yet because they are very new.

The general concept is good for investors seeking a passive route into property investment and without having to commit large resources. However, there is an extra layer of costs so the returns are likely to be lower generally. On the other hand though, there may well be economies of scale that come into play and the spread of investment risk will no doubt appeal to people too, hence the interest to date.
.

David Simms

18:51 PM, 24th March 2015
About 4 years ago

Hi Mark,

I'm interested that you refer to this as a route to passive investment, while I agree with you, the implication is that this is similar to investing in a property fund. Reading beteeen the lines this would imply that it is not a real alternative for current landlords. From other articles on Property118 the two disadvantages would appear to be lack of leverage and having to outsource property selection. The latter in particular I would assume current landlords see as their competitive advantage.

I would be interested to hear an opposing view on this if any other current landlords see this as a core to their future investment plans.


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