Real Estate Crowdfunding by Experienced Professionals
CrowdProperty is one of the larger P2P Real Estate Lending service in the United Kingdom. While offering both residential and commercial property, this platform provides high quality first-charge UK property loans secured by collateral to investors with a UK bank account. As required by many investors they offer a tax-free lending account through the CrowdProperty ISA.
|Business:||Real estate lending|
|Founders:||Andrew Hall, Michael Bristow & Simon Zutshi|
|Operating in:||United Kingdom exclusively|
|IFISA:||Innovative Finance ISA Available|
|Requirement:||UK Bank account|
CrowdProperty Highlights 2020 Video
CrowdProperty Pros & Cons
- High first-charge secured returns
- High quality projects
- Large amount of good projects
- FCA regulated & authorised
- All loans are secured by real estate collateral
- Auto-Invest is available
- No direct investor fees
- Tax-free ISA available for all UK citizens
- All alternative investments with potential for high returns come with high risk
- No Buyback Guarantee (Collateral instead)
- No Secondary Market
- Requires UK bank account to start lending
Characteristics of CrowdProperty Projects
- Interest Rates: 7% – 8%
- Loan Durations: 6 – 24 months
- Currency: British Pounds (GBP)
- Asset as Collateral: Real Estate
- Minimum Investment: 500 GBP
- Investment Structure: Direct
Real Estate Projects on CrowdProperty
As the borrowers apply for property development loans they are carefully selected, accepted or denied to be presented to the investors on CrowdProperty. The presentation of each different project is very comprehensive on this platform and exceeds any other similar platform in terms of the information that is presented to the lenders. This involves a longer video presentation, 10 of the most important metrics such as Estimated sales value(GDV), Initial LTV, Loan to GDV, Cost of Work, RICS Valuation and more. Other than this, a thorough description of strategy and vision is presented, the A, B, and C exit strategy together with a very comprehensive description of the borrower and team behind the project. The very good and deep research description presented simply might be the reason why this platform has large amounts of projects with few numbers of investors – the high-end lenders with larger amounts are present on this platform.
Below is an image of six fully funded projects and the usual way it is presented on the platform, with the most basic metrics return, term, amount, LTGDV and LTV. To see the full description clicking on the loan will take you to the page and is as presented in the following about a randomly selected successful repaid project.
Example of a Successful Repaid Loan Project on CrowdProperty
244 Castle Street, Dudley – England
The borrower of this loan was the company ‘Property Dreams Come True Limited’ and has owned this property in the Metropolitan Borough of Dudley since 2015. The property comprises the 1st and 2nd floor of the three-storey building held on a 999-year lease.
The reason for the loan and the project in works is because planning permission was granted to convert the commercial space into a 12 bedsit House in Multiple Occupation. All rooms en suite with communal kitchen on each floor.
The total estimated costs of this reconstruction are £213,000 while the costs of finance, fees, and contingency are estimated at £70,000 – so a total of £283,000.
The RICS valuation at that time was estimated at £125,000, while RICS view on GDV after the completed unit was £410,000.
46 Dedicated CrowdProperty lenders successfully funded the desired £250,000 for a minimum of 6 months and up to 12 months, providing £75,000 on completion of the loan agreement and £175,000 towards the costs of works. The loan was successfully repaid to the lenders with an interest of 8% p.a.
- Loan amount of £250,000
- An annual return of 8%
- RICS Valuation: £125,000
- Est. Sales Value (GDV): £410,000
- Minimum loan length: 6 months
- Maximum loan length: 12 months
- Loan-to-Value before: 60%
- Loan-to-Value after: 61%
- Secured with a first rank mortgage as collateral.
- Number of investors: 46
Exit Strategy for the Build, Remortgage and Let:
- Plan A: Through local agents
- Plan B: As JV with local partner
- Plan C: As Rent to Rent
Exit Strategy for Type of Tenants:
- Priority 1: Key workers (Hospital tech. and nurses)
- Priority 2: Blue collar workers
- Priority 3: LHA tenants
How Do the CrowdProperty ISA and CrowdProperty Pension Accounts Work?
The lender base at this platform is typical when looking in comparison to the overall P2P sector according to research done by Cambridge Center for Alternative Finance, the platform states in their FAQ. The majority of their lenders are over 45 years old, enjoying both the ISA Account and Pension Account option.
CrowdProperty ISA Account
Having an Individual Savings Account (ISA) at CrowdProperty lets you shelter your savings and investments from tax. The Innovative Finance ISA (IFISA) allows individuals to use part, or all of the annual ISA allowance to lend funds through peer-to-peer lending. It is only possible to open one of each ISA per tax year(One Innovative Finance ISA, one Stocks & Shares and one cash ISA). The annual ISA allowance may vary from year to year, but the 2018/19 tax year is 20,000. You can learn more and stay updated on the Government Website for Individual Saving Accounts(ISA’s).
CrowdProperty Pension Account
On CrowdProperty it is possible to invest for your pension in peer-to-peer lending through either a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS). In most circumstances, pension lending is free of tax, yet it is not all pension providers that authorize peer-to-peer lending. If P2P Lending is not authorized by your pension provider, but you still want to pursue it is recommended that you seek advice from a qualified independent financial adviser.
No Buyback Guarantee on CrowdProperty
There is no Buyback Guarantee offered on Crowdproperty, as it is usually not requested or necessary with most of this type of collateral backed lending. It is rare to see Buyback Guarantees with high-quality first charge secured property lending because this type of lending has the property as a sort of ‘guarantee’ for the borrower to pay back the loan – if the borrower doesn’t pay, the platform will have the right to put the property for sale to cover the outstanding principal and interest.
Most platforms that offer Buyback Guarantee is typically facilitating consumer loans or other types of lending with no or low-value collateral, through 3rd party Loan Originators and maybe even in high-risk countries. If your interested in learning more about this topic, take a look at these articles about Buyback Guarantee and 3rd party Loan Originators.
What Happens if CrowdProperty Closes Operations or Becomes Insolvent?
There are two different types of investment structures in Crowdinvesting:
- The direct structure means you are buying a claim/share against the company directly.
- The indirect structure means you obtain exposure to a project by investing in a project or loan issued by a platform company to the loan originator.
CrowdProperty operates with a direct investment structure so that the first charge security on all property projects on investors’ behalf still stands if the platform were to become insolvent/bankrupt. As an FCA regulated lender, they must have and do have a back-up service provider in place to take over operational management and administration of existing loan contracts between lenders and borrowers. This means that in practice if the platform fails, it would not affect all of the investor’s existing loans – Loan repayments from borrowers would keep being received and these would still be processed and distributed accordingly to the lenders.
In case the platform closes operation, this mechanism would safeguard all lender’s money and keep it secured against the property assets, so if a developer defaults, the back-up service provider operates as this platform would and take over the project to attempt paying back capital and interest to lenders. The FSCS does not cover insolvency of Peer-to-Peer lending platforms and the platform, therefore, keep money that has not been lent to borrowers in individual investor wallets separate from the platform’s own money. The money is not kept on the balance sheet as an asset and therefore would not be available to creditors in the event of platform insolvency.
First Charge Secured Property as Collateral
If a borrower defaults on its obligations to pay back the loan, CrowdProperty has secured the loan by having the first legal charge over the property. This means that they can and will seize ownership of the property and by definition have the same level of security that a mortgage company has, meaning it is not possible to have better security in the property. Once the ownership is taken, their in-house experts will analyze the best way to recover lender’s capital and interest returns. This involves, for example, considering market conditions, the status of the project and the current level of debt. Before this matter becomes necessary, the platform tries to have the highest level of security possible to ensure that the projects are safe lending money to.
This process is what they call The CrowdProperty Shield and consist of three steps:
- ‘Rigorous Due Diligence’
In-house experts thoroughly asses each loan application, scrutinizing the developer and the partner’s track records. They operate with certain loan-to-value and loan-to-cost percentages for the different types of projects and for example must a project meet their 25% profit-on-cost criteria. Apart from this, they rely heavily on the RICS valuation and uses an independent valuation to make sure that project figures can be confirmed.
- ‘First Charge Security’
The 1st legal charge gives the legal right to take over the property in case of default, it is an essential, non-negotiable criterion for borrowing on the platform. This goes hand in hand with the third step in their lender protection setup, because if borrowers default the right experts can take over the project for completion and therefore is unparalleled expertise an important part of securing investor’s money to the very end.
- ‘Unparalleled Expertise’
The platform works in partnership with the borrower up until the project is completed so that if a borrower were to default the experts can easily take over the rest of the process. All possible options will be considered and if necessary, the team completes the project if that is the best way to return lender’s capital and interest.
The primary market for manual lending on CrowdProperty is displayed simply in the overview of all live projects currently running for funding at the moment. As there is a very good due diligence process the platform is not booming with projects all the time, but it is enough to keep a satisfying level of investments to avoid too big a cash-drag.
Below is an image of the Live Projects page. You will find the most important information about a loan project in a summary, such as interest rate, term, amount, LTGDV, LTV, how many investors already on board and how much they pledged.
When clicking the project you will find one of the most comprehensive overviews of loans in the market, which usually a video, plenty of images of the project and surroundings and all the most important metrics to do a fact-based evaluation and idea about the project. Below are full images of the Chesil Beach, 262 Portland Road, Weymouth phase 1 project, though the Strategy & Vision description is much larger than is visible in the below image. You can see all live projects on the CrowdProperty platform at all times without having an account.
The AutoInvest feature on CrowdProperty is one of the more well functioning automatic investment tools because they keep an eye on the supply so it matches the supply of projects on the platform. A percentage of each loan will be allocated to the AutoInvest and then split proportionally among everyone automatically investing in the market. There may be times where your unable to open an AutoInvest account on a new account, due to extremely high demand and therefore it is shut off to ensure funds that lenders already allocated are being utilized. The automatic investment then becomes available again when there is a greater supply of projects. It is possible to set it up for both Standard, ISA and Pension accounts.
On CrowdProperty there is no Secondary Market to access the money early if necessary. When you lend money through this platform, you commit to lending the money for the specified term on the loan project. During the term of the loan, you will receive interest and capital repayments when the borrower pays on time, though it is not possible to withdraw early the capital invested. Most platforms develop secondary markets by time as more and more projects are launched and the volume of new projects is at a satisfying level, as it will enhance the liquidity in the investment.
Nice to Know for Investors
Registering at CrowdProperty is very simple, filling out your name, email and password will create an account at the platform. Though to start lending, you need to create a Standard, ISA or Pension lending account by filling out the needed information to do so, such as your UK bank account, documents to prove identity and other requirements to create an FCA authorized investment account. After registration of your lending account, you are ready to start manually investing or setting up the AutoInvest.
Deposit & Withdrawal Process
Depositing funds to your investor account is done in three steps:
- Transferring money into the CrowdProperty account with your UK bank account or after all opening stipulations have been covered off, any of the below mentioned currency converting services.
- Your funds will be available for investment within the day of confirmed arrival (usually 1-3 banking days).
- After the funds are received and added to the account, you will receive an e-mail confirmation.
Withdrawing funds is the simplest process of the two. It consists of clicking “withdraw funds”, entering the available amount and waiting for the 1-3 business days. There is no minimum withdrawal restrictions and no further additional fees or commission for withdrawing the funds. Remember, depending on their fee structure, your bank might charge fees for handling the transaction or exchanging currency.
- Bank Transfer
- Currency Fair
Interest earned from any loan is treated as investment income by HM Revenue & Customs . The return you receive on your investment is paid gross; no tax is deducted “at source” by peer-to-peer lending platforms. Our investors are responsible for the payment of any tax due of them to HMRC. Tax will be payable at your marginal rate.
CrowdProperty FAQ: “Do i have to pay tax on my interest?”
CrowdProperty is reachable by email and is striving to get back within 48 hours on weekdays, to give answers to any questions you might have. Most of the frequently asked questions can be found in their FAQ, but if you want a direct dialogue writing them on [email protected] will let you do that. If you need or want to talk with them directly on phone, they can be reached on phone (020 3012 0161) within normal business hours (UK Time, Monday to Friday, 09:00 – 17:00).
Who can invest with CrowdProperty?
Any individual can invest with CrowdProperty provided they are over 18, have a UK bank account and have a proof of identity and address within the EU.
CrowdProperty FAQ: “Who can invest?”
Is CrowdProperty Regulated?
CrowdProperty is authorized and regulated by the Financial Conduct Authority with the registration number 723959. The platform is not covered by the Financial Service Compensation Scheme.
|Total investments||£85.2 million|
|Total principal returned||£38.8 million|
|Total investor earnings||£4.1 million|
|Total actual defaults||0%|
|Total number of loans||212|
|Total units funded||1,041|
|Total number of investors||10,959|
|Average borrower contract rate||9.99%|
|Average actual borrower rate||11.17%|
|Average lender contract rate||7.98%|
|Average actual lender rate||8.87%|
At P2PMarketData we are dedicated to providing unbiased reviews of peer-to-peer lending, real estate crowdfunding and crypto lending platforms. Among other, in our mission to bring more transparency to the market we closely monitor and track over 70 platforms funding volumes.
When reviewing an alternative investment platform, we consider a variety of factors such as:
- Number of investors
- Minimum investment requirement
- Historical annual returns
- Diversification opportunities
- Reinvestment opportunities
- Educational and informational offerings
- Platform fees
- Total capital invested
- Features (such as secondary market and automatic investing)
- General transparency (the difficulty of finding who the owners are, how they make money on the platform (fees), terms & conditions and more)
- Management team
We also look into the company’s online reputation (for example customer reviews, news, complaints, average monthly searches and social media).