Author Topic: Rental property crowdfunding in UK  (Read 1644 times)

frugledoc

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Rental property crowdfunding in UK
« on: January 15, 2015, 01:56:03 PM »
https://resources.propertypartner.co/why-property-partner-began/

I think this is a great way to invest in UK rental property without a mortgage.

One of the things putting me off buying rental property is I don't really want to put much time into it at the moment and this basically takes all of that away.

Anybody have any thoughts on this? 



iamlindoro

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Re: Rental property crowdfunding in UK
« Reply #1 on: January 15, 2015, 02:05:01 PM »
Not UK, but what I've read about US Real Estate crowdfunding on Biggerpockets has made me very wary indeed about it.  Some high profile and very expensive failures.

http://www.biggerpockets.com/forums/520-crowdfunding-real-estate

If you don't have enough to get into a property yourself, what's wrong with a REIT?

frugledoc

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Re: Rental property crowdfunding in UK
« Reply #2 on: January 15, 2015, 03:30:56 PM »
Quite like REITS too.  In fact the UK stock market just listed its first residential property reit recently which I will probably buy in my pension.


rathga

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Re: Rental property crowdfunding in UK
« Reply #3 on: January 18, 2015, 05:00:51 AM »
I've just requested an 'invite' on propertypartner, so I don't know quite what their approach is - but from the blurb on the front page it seems like it might be similar to the house crowd: http://www.thehousecrowd.com/ (or http://www.p2pinvestmentreview.com/platforms/house-crowd)

These guys basically purchase and refurbish rental property funded by multiple small investors, 1,000 each or more.  They also fully manage the property afterwards, so it is a complete armchair investment.  The idea is to sell the property after a minimum of 5 years if majority of investors agree, and the platform will broker the sale.  Investors get 75% of the equity upside (and net rental income in the meantime) with the platform taking 25% as their fee.  With UK property they estimate 15%+ returns with this method.

The main problem I have with the concept is it really, really sucks compared to doing an actual BTL property yourself as a private landlord:
(i) no leverage/mortgage to boost returns - you should be aiming for minimum 12% and more like 30-40% return on equity really
(ii) no tax advantages - the vehicles they use have corporation tax, and you pay income tax on the rent coming out, and capital gains tax on the profit.  If you do it yourself it is far more tax efficient, especially if you re-cap the mortgage rather than sell and never incur capital gains
(iii) they are exclusively around manchester/liverpool at the moment, which makes 'diversification' on their platform a bit of an illusion
(iv) if anything happens to the platform in the 5 years, you are in a fairly messy situation (but this goes for most P2P/crowdfund platforms)

Against this you have to balance that it is (i) amchair investment and easy (ii) you do not need a massive deposit (iii) it is unlevered and you don't have to worry about mortgage rates etc. (iv) you can get a bit more diversity than putting a huge amount of money into one property.  Therefore it might be worth dipping your toe in if you don't have the money or don't want the hassle to do a regular BTL, as you say, but also be aware that it is much less lucrative - and possibly not much better than stocks/other P2P platforms.  But worth a portfolio allocation certainly.

You may also note that from the platform's perspective, this is a highly lucrative venture - they are basically getting other investors to buy houses for them and they get a 25% stake in every single one of them for 'free'.  Wish I'd thought of it first!  I'll be interested in seeing if propertypartners has the same model or not.