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  • Peer to Peer Lending

    Property crowdfunding - who is making money?

    When it comes to crowdfunding for large-scale property projects, I am sitting on the fence and will make up my mind when I see investors getting a return.

    Please share here if you are an investor who has got an actual return from a property crowdfunding project - either debt or equity.

    Something occurred to me that causes concern, additional to those I have expressed previously.

    On Companies House you can see all the charges against a property. Therefore potential lenders know whether they are first, second, or third in line for security.

    However, there is no reference or notification of private lenders who have lent money (who do not have a charge) or invested via crowdfunding.  I suppose this fact is irrelevant to those who have charges, but not to those who don't.

    Sorry if I am being dim, and I fully accept that I might be, but how does a bank know - or do they care - if a project has already been crowdfunded and what does it mean for investors if a bank has charges on the property as well?  I am assuming the bank will be paid back first, before investors/shareholders?

    I am wondering if developers might be able to achieve 100% funding if they use a combination of bank finance and crowdfunding?

    This could increase the risk for investors imho.  They are essentially unsecured lenders/investors who will be pushed down the pecking order for pay-outs if bank charges are involved.

    Additionally, if the developer has no skin in the game, then they are not risking their own funds, but receiving management fees for managing the project. Therefore the longer a sale takes, the more money they make.  If the project sells at a loss, break even, or nominal profit, the developer has made their management fees, the bank gets repaid, and the investors/shareholders probably do not get back their original stake.

    I am assuming that FCA regulations would dictate that, if bank lending is involved, this should be disclosed in the crowdfunding prospectus, but could bank lending be brought in after a crowd-fund?  If so, this would make it even more high risk.

    Again, I might be missing something here and more than happy to be corrected if I am wrong in what are nothing more than assumptions.

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    Hi Vanessa,

    I have several investments in crowdfunding deals via Simple Crowdfunding, in sums from £100 to £100,000.

    So far, I have one that has completed and the money has been successfully returned with profits.  Others have yet to mature.

    My investments are of various types, including equity and debt, and one is an IF ISA.

    In most cases, investors are SHAREHOLDERS so they are not unsecured lenders but are part of the company that may go to banks for further lending.

    On one of the projects only that I'm involved in, investors are not shareholders but instead have First Charge over the property.  In this case, the exit for lenders will be when the borrower gets a mortgage at the end of the refurbishment project.  So we won't 'go down the pecking order'.

    I hope this helps.

    Angela

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    Author of The Complete Guide to Property Strategies and The Complete Guide to Property Investing Success
    Learn more at http://www.completepropertysuccess.co.uk

    I also post property updates on my Facebook Page

    "It is the small decisions you and I make every day that shape our destiny" Anthony Robbins


    Thanks Angela. That is very helpful.

    Could you let me know the financials of the project that has completed i.e. how much money you put in and how much return was achieved?

    Wow - putting in £100K! - you must have had a great deal of confidence in the project and the developer undertaking it!

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    Hi Vanessa,

    The project that completed was a planning gain project.  I put in £500 which was birthday money from my husband last year lol:-) in June 2017 and got back £549 on 7th November 2017.  The project was Green Lane Garages, Norfolk with Grace Charles.

    I subsequently went along to an investor day GC ran, but afterwards decided not to go ahead as a private investor on further projects... That was not on a crowdfunding basis, but as an individual investor.

    The project I've put £100k into is with East Eight / Nicole Bremner, again via Simple Crowdfunding.  This is Amhurst Road, Hackney.  I have every confidence in Nicole and the team to deliver !!!

    I like crowdfunding and devote a chapter to it in my new book, which is due out end of May.

    I don't put all funds into crowdfunding.  I have also paid off several mortgages, which Dave prefers - I like the fun of investing but he's boringly risk averse!

    Angela

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    Author of The Complete Guide to Property Strategies and The Complete Guide to Property Investing Success
    Learn more at http://www.completepropertysuccess.co.uk

    I also post property updates on my Facebook Page

    "It is the small decisions you and I make every day that shape our destiny" Anthony Robbins


    Thank you for your first hand experience Angela.  Very helpful to hear from someone actually doing it.

    When do you expect the Hackney project to be closed out?  It was partially documented here for those that are interested.  The thread has not been up-dated for 7 months, the last up-date being in early October 2017 saying that breaking ground would happen in a few weeks.

    Please let me know if we can assist with creating awareness of your new book as well. Smile

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    Thanks for asking how you could help with regard to my new book Vanessa.  It would be great to hear from you with any thoughts you may have on that.  I feel a bit bad that I haven't made any plans for it!  (Hopefully the publisher won't read this lol).

    I haven't read through that whole big thread of Nicole's that you linked to... but I have a feeling the Hackney project you mentioned may have been an earlier one?  I know it's her favourite area and that she's done other projects there too.  The one I invested in only signed investors up in March 2018, a couple of months ago. 

    The expected completion date for construction is May 2019; with investors' exit being upon sale of the flats. 

    Thanks,
    Angela

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    Author of The Complete Guide to Property Strategies and The Complete Guide to Property Investing Success
    Learn more at http://www.completepropertysuccess.co.uk

    I also post property updates on my Facebook Page

    "It is the small decisions you and I make every day that shape our destiny" Anthony Robbins

    Apologies for any confusion, but the SCF website does not appear to have any dates of when the projects were released.

    However, checking the website shows that none of Nicole Bremner's projects have paid back investors yet, including the first Hackney development linked to above.

    With regards to your book, perhaps we could arrange to interview you and run a competition to win copies? Smile

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    Hi Vanessa,

    I believe that Nicole's former projects were more 'buy to keep' with a view to repaying investors upon refinancing, so I suppose that takes a while.

    That would be good re the book!

    Thanks,
    Angela

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    Author of The Complete Guide to Property Strategies and The Complete Guide to Property Investing Success
    Learn more at http://www.completepropertysuccess.co.uk

    I also post property updates on my Facebook Page

    "It is the small decisions you and I make every day that shape our destiny" Anthony Robbins

    Snap, i'm also investing in the Hackney project - yes i believe its summer 2019 when they're due to complete. Nicole seems like a safe pair of hands given her experience and collaboration with  her colleague Avi (very experienced developer), so look forward to seeing how it pans out.

    Good luck with the book! Smile

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    Hi Property Twins,

    Thanks re the book!

    Good to hear from a fellow investor in the Hackney project.  Yes, Avi being the very experienced developer.

    Good luck to us both with the investment!

    Angela

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    Author of The Complete Guide to Property Strategies and The Complete Guide to Property Investing Success
    Learn more at http://www.completepropertysuccess.co.uk

    I also post property updates on my Facebook Page

    "It is the small decisions you and I make every day that shape our destiny" Anthony Robbins


    I approached Simon Zutshi's site   https://www.crowdproperty.com with a project .  I thought the website's fees of over £50,000 - that's just their fees, not the interest payable on the loan, was extortionate.

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