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  • Peer to Peer Lending

    Our first crowd funding raise

    If you've followed my posts for a while or seen me speak you'll see that I've always been really focussed on making sure that my investors fall within the PS13/3 exclusions and that my project offerings are not deemed to be collective investment schemes. For that reason I’ve only taken on larger investors even though many investors with less than £250k have wanted to invest.

    I’m really thrilled that we have now partnered with Simple Equity for them to be our regulatory platform for our investors. I’m taking my investors to them and they’re running all the KYC, AML, FCA regulation and legal aspects of taking the funds from the investors. We leaving a little on the table for their regular investors to pledge a minimum of £5k at a time into a large property with all in costs of £4.7m and an estimated GDV of £8.3m.

    This is game changing for us as it means we can focus on developing our properties alongside investors without the risk that we fall within the lines of a regulated industry. The FCA has an excellent guide on what is and isn’t covered here: https://www.fca.org.uk/consumers/crowdfunding

    My first property is here: https://www.simpleequity.co.uk/property/detail/302

    It will be interesting to follow and see how it goes with the general public and not my regular investors.

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    East London based property developer, investor and speaker

    East-Eight.com

    Follow Me: Facebook Twitter Snapchat

    Hi Nicole,

    congratulation on how you are developing you biz, I am doing something similar, we should catch up one day for a chat.

    Just a quick one from the P2P initial page (I did not log in..) 

    """quote"""

    Summary of Raise
    Purchase Price - £2,800,000
    Total Costs - £4,678,100
    Final Projected GDV - £8,365,052  
    Projected Profit on GDV - £35.9%  

    """unquote"

    It seems to me that the Projected Profit on GDV should be 44% and not 35.9%, give the number above.

    Can you elaborate please - thanks.

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    Thanks for pointing that out LondonSW. That's just because the return is being calculated post finance and the GDV is pre-finance. I will amend so it's comparing apples with apples.

    Always happy to chat.

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    East London based property developer, investor and speaker

    East-Eight.com

    Follow Me: Facebook Twitter Snapchat

    I did imagine so.

    I will drop you a private message with my details.

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    Hi Nicole

    How did you raise the money? Is it an existing crowd funding company not sure where we start on this approach but obviously very interesting . Did you use a SPV? General points at th estart woukld help . Ive taken on a few investors just want to scale up and do it properly .

    Cheers

    Kim

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    Nice to chat the other day on LinkedIn. I've raised the money from friends, contacts and other developers so far. The equity I'm putting in is from my cash reserves.

    The crowd funding company, Simple Equity, has been in operation for at least 3 years.

    There will be an SPV which the investors will be purchasing shares in. The SPV is already set up and already owns the property.

    It's an interesting way of scaling up the business. For me it's also about removing the regulatory issues and assisting with the admin.

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    East London based property developer, investor and speaker

    East-Eight.com

    Follow Me: Facebook Twitter Snapchat

    I wish you the best of luck.

    To me this is high risk id question as an Investor why equity is being offered and not security.

    I prefer the tried and tested 1st charge. Loans not Equity.

    Capital is at risk and returns are not guaranteed or secured.

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    THIS PROPERTY TRIBES ACCOUNT IS NO LONGER USED. DO NOT SEND PRIVATE MESSAGES.

    YOU CAN REACH ME AT BESPOKE FINANCE for HMO Mortgages, Cheap Life Insurance and Limited Company Buy-to-Let on 08009202001

    Adam - the investors *own* the company and are shareholders of the company which owns the property so where is the risk in that? Obviously there are inherent risks in all transactions but not with security of ownership. 

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    East London based property developer, investor and speaker

    East-Eight.com

    Follow Me: Facebook Twitter Snapchat

    loan-based crowdfunding gives the investors your personal guarantee (and that of others involved), it gives investors a first or seccond charge on the property ensuring priority payment in the event of collapse.

    It gives investors a fixed return on there investment, if those they are investing in fail to preform it does not matter (to an extent) as their returns is backed by that security.

    The platforms that offer these loans typicaly conduct due diligence - so checks are made on the applicants such as Credit Checks, Loan Exposure, Income and Expendature, Indipendent Valuation and so forth.

    You ask the difference between owning a share in a company that owns a property and having security on the property:
     - It is that shareholders are paid LAST. Any debts will be paid first and shareholders only gets what are remaining, typicaly nothing in the event of a default.

    You are raising £1.4m but the purchase price is stated as £2.8m. Is the other £1.4m a loan? but the total costs you note as £4.6m so i should be asking is any of the £3.2m a loan.
    If it is then it is those that get repaid first and NOT those that are investing in you in the event of a defualt.

    This is why I prefer loan-based crowdfunding it gives that security.

    investment-based crowdfunding we are talking high risk - this is what you are offering. The FCA describes it like this:

    We regard investment-based crowdfunding in particular to be a high-risk investment activity. As well as the risks associated with loan-based crowdfunding, you should also be aware that:

    • it is very likely that you will lose all your money. Most investments are in shares or debt securities in start-up companies and will result in a 100% loss of capital as most start-up businesses fail
    • your capital will not be repaid and/or dividend or premiums will not be paid if the company you invest in defaults or there is a fraud
    • if you hold shares in a business or project, it is unlikely that income in the form of dividends will be paid. The value of your investment may be diluted if more shares are issued, and many start-up businesses undergo multiple rounds of funding
    • be prepared to wait for a return on your investment, as even successful start-up businesses tend to take time to generate income
    • if firms do handle clients’ money without FCA permission or authorisation, there will be no protection for investors in place. This is a particular risk if a platform fails and becomes insolvent
    • most platforms do not have a way you can cash in your investment (a secondary market)

    This is what I mean by High Risk - Investment Based Crowd Funding I have to ask myself why Equity and not Security.

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    THIS PROPERTY TRIBES ACCOUNT IS NO LONGER USED. DO NOT SEND PRIVATE MESSAGES.

    YOU CAN REACH ME AT BESPOKE FINANCE for HMO Mortgages, Cheap Life Insurance and Limited Company Buy-to-Let on 08009202001

    Adam - login and read the investo pack and it will answer all those questions. I'm putting the rest of the equity it along with my business partner, Avi. We're then getting a conservative level of gearing subject to the always difficult valuation.

    Also you're confusing the types of crowdfunding somewhat. How is a property going to be worth absolutely zero? I've got a dog of a property at the moment that I wish I hadn't bought but it still has a value. The information you've posted is more pertinent to someone raising finance for a business venture rather than a property development.

    It's just horses for courses. I don't like debt and prefer equity. All brokers, such as yourself, tell me I'm crazy and I give away more of the profit, but it's what I like. I like to work with a partner with a vested interest in the property and not just the hideous fees and interest rates many bridging lenders charge.

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    East London based property developer, investor and speaker

    East-Eight.com

    Follow Me: Facebook Twitter Snapchat

    To be fair the FCA there refers to crowdfunding of normal startup businesses, e.g. a new IT company raising funds on the likes of Seedrs. The situation with a property development business is rather different.

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