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I am exploring the possibility of putting part of my emergency funds into short term property lending platforms like Bridgecrowd or Crowdproperty which offer 8-10% returns pro rata. Has anyone had experience of lending in those or similar. Are they reasonably safe places?
Look forward the thoughts of the experienced folks here.
Interesting. I have chosen to diversify any monies not in properties, as I like the rate of return from direct investment but can different exposure through alternatives albeit at lower rates of return. Alongside shares, I have money in zopa and funding circle, which offer decent rates, zopa has a security fund against defaults and credit checks people taking the loans. Funding circle lends to businesses.
Hi Mr PAYE,
Good to hear your thoughts. What is the returns zopa and funding cycle offer? Do they have a 100% record of repayment?
Some related topics:Crowd funding - too easy to raise money? Debating crowdfunding/P2P lending from a ... "Sorry the money is gone" - crowdfunding
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
There are risks with any loan you make and you need to assess the return against the level of risk to make sure you are comfortable. I can only speak for CrowdProperty but we take as many precautions as possible to protect our lenders in the following ways.
1) The most important point is that CrowdProperty will always take a first legal charge on the project. This means that in the unlikely event of a default we could step in and manage the project to return the funds back to the lenders. So far we have facilitated loans for 27 projects worth £11.7m and have a 100% track record in that no one has lost any money with loans through CrowdProperty.
2) We are very careful about the loans we put on the platform. We carry out extensive due diligence to make sure it is a great project and the borrowers and their teams are capable of delivering the project. We only lend to property projects as this is our area of expertise. Our core team has over 80 years of development experience. There are certain criteria which need to be met such as the project must generate at least a 25% profit on cost.
Another consideration is how long you want to invest your money for. The length of loan on CrowdProperty is a minimum of 6 months and maximum 24 months. Typically, most loans are about 15 months. You get to choose which projects you want to lend to.When you put money into a project, you need to understand that the funds are locked in until the end of that project, after the capital and interest is paid. We have had a few loans which have taken longer than expected. In that case, the lenders have earned some extra penalty interest. Having learnt from this, we always add a few extra months onto the loan term which means than most loans are actually now paid back slightly early.
Thank you for your interest in CrowdProperty and I hope you can support some of the projects in the near future.Kind regards,Simon Zutshi
Founder of CrowdProperty
Thanks for the detailed response on the operations of CrowdProperty. A question that crops up is if a lender signs up for a fixed period and the project over runs, is there an exit clause for the lender, as he would be more interested in getting access to his lend funds rather than a higher penalty return.
hi Arun, I have been lending to property developers privately and via crowd funding platforms since 2011. You are welcome to email me at email@example.com to set up a call
best wishes, Denise Naylor
With the majority of these kind of loans with us and other platforms, there is no exit clause This is because the funds are tied up in the project. As we all know, sometimes property projects take longer than expected and that's why when determining the term of the loan, we add extra time onto what the borrower thinks they need. This helps to reduce the number of over running projects. Also the borrower pays penalty interest if they over run so they are incentivised to refinance elsewhere if need be to pay back the Crowd in time. This has worked well so far.
I hope this answers your concerns. Why not come and give us a try. If you register on the platform as a lender (which is free) we will send you notifications of all new projects and invite you to the pre launch webinars the night before each new project launch, on which you get to understand the project and ask the borrower any questions you have. This means you can decide if you want to lend or not. You can lend anything from £500 up from your savings, business or in some cases your pension. You can earn a secured 8% p.a. (Capital at Risk)
Hi Simon,Thank you for joining the conversation and bringing clarity to your proposition. Happy new year!
Thank you Vanessa, Happy New year to you as well.