Investment idea: Crowd sourcing platform for investing in property.

For those of you who like to invest in peer to peer lending you might be interested in this alternative, House Crowd. They pool together money from a crowd of investors and then invest in property in the UK.

They offer 2 options; either a rental income only, which generates a 7.5% PA return. Or, what is in my opinion the better option, a 6% PA return with a 50% share of the capital gains when they sell the property which is in 5 years +


Advantages:

Provides passive income.
Offers a better return than savings (Interest rates may rise in the future, but for now interest rates are so low and I see them remaining low for a while)
Allows investors with to invest in property with a small amount of capital.


Disadvantages:

1000 minimum investment.
You can not release any potential capital gains on the property price until they have sold the property, you have no say when this might be.
Although If you wish to get your initial money back you can sell your shares back to House Crowd, but you loose any potential gain if the property price has gone up

I haven't invested any money in this, as for me I can get a better return by investing in offshore property. But for those in the UK, and other countries as well, with a small amount of capital to invest. I think that this is a good option.

 

oh I forgot to say, the site is called the House Crowd, link here: http://www.thehousecrowd.com/

 

Nobody has anything to say about this idea? It offers good returns and seems like a good idea... but I'm not sure if it's too good to be true.

Has anyone been involved in anything similar?

 

Sounds like a modern Mezzanine fund.

 

We are obviously reading from different Authors.

My understanding, and looking around at the world confirms this, the UK is heading into a severe recession/depression which will render any potential capital gains null and void. In effect, there is a very real chance of an investor loosing his/her shirt in this scheme.

 

I checked out the website and apparently it is debt free and the houses are bought way under market value (to reduce exposure) from banks etc. Even if long term you don't expect capital gains, 7.5% is much better than 3-4% in the bank.

 

Humm, yes the UK might be headed into severe recession or depression. But it shouldn't effect rental property that much, people always need somewhere to live. Even if the amount it can be rented out for decreases for a few years. It will return back to normal. And this company doesn't use any borrowing to purchase property as far as I am aware. I just thought it was a good investment to bring to the table.

 

Time Shares with a twist?

 

I know of someone doing a similar thing in the US. His comment was "It is like a feeding frenzy, people are throwing money at me"

 

I have seen something similar, also from the UK, Student Housing.

The company buyes up a building close to a University, last one I saw was a derelict listed building in Manchester or something similar.

They do it up and your money gets you a single room in the building which then gets rented out to students. With no work around more people are going to head to higher education in the hopes that it will get them a job.

Apparently a very popular investment choice, according to the email they sent me...

We thought 40,000 for a single 'pod' was a bit steep, listed buildings are just adding to the cost of renovating. Then you would have to pay for someone to look after the place and pay for the damage caused by students (can you even get insurance for renting to students? Surely that is self inflicted damage) Then you would need to be mates with the guy doing the renting to make sure your 'pod' was the first to be rented out each time and to ensure that you had the best screening.

Then the education bubble will burst as people realise that getting yourself massively in debt doesn't actually guarantee you a job anyway.

 

You don't pay any of the loan back until you are earning over a certian amount. At the moment it is 20k, I believe, on the new system. Once you are earning it just comes off of your pay automatically, it's like an extra tax. And if it's not all paid off within 20 years you don't have to pay any more. So going to university isn't actually that expensive. And a degree won't guarantee you a job but employers are very unlikely to even give your CV a second look without having a degree.

 

Hi mate, just checked this out and it looks like a great business model!

Aside from the potentual downside in the world at the moment, it looks fantastic.

No debt tied to it, guaranteed returns each year (would be interesting to see how guaranteed this is is the housing market really tanked though)

But at the end of it all, you have a share of an asset that has no debt tied to it and thats pretty damn hard to find when investing in housing. You would think it would allow major market conditions to be handled extreamly well even if the return YOY was reduced due to bad times. As long as the property can be held onto, you still have an asset.
Good find!!

 

The only advice I would offer, is to be sure of the credibility of the operators you are giving your money to. Try to ensure they are not really selling aeroplanes instead of rental property shares.
It's kind of like a REIT, isn't it?

 

Yep. Due diligence is always important. What is REIT?

 

If you read through the FAQ it goes into all of who holds what and how you are protected. Seems a pretty clean business model with the money only able to go into each house, not the overall company. Protecting your investment from a possable company collapse. Each house is its own company, seperate from the parent company setting up the deal. Money never enters the parent company (apart from some clearly defined service fees)

 

Real Estate Investment Trust (might be more of a common Australian term).

In Aus the trust is a better vehicle than a company for multiple investors buying real estate. There are many (usually unlisted) which are single asset.

 

Ah ok, thanks bordsilver.

 

From the little I've currently researched into the idea (and from similar past products I've looked at) it doesn't look too bad. As you mentioned due diligence is needed to ensure that they aren't falsely marketing the investment and that the fund can't be gouged for fees by the managers after a year or two. The second one is very hard to know a priori as the terms generally specify an exclusive manager (linked to the people marketing it) with very harsh penalties/costs for the trust to break free from them.

The only other thing is that large single building property funds generally have a key tenant like a government department or a blue chip electricity company etc which is fundamentally what is underwriting the income guarantees so it's always important to consider what might happen at the end of the initial lease period and if you are happy with the balance of risks and opportunities.

 

Has anyone seen on gumtree a company calked "The Pad", they let houses out (i guess aimed at students). Do it on a per room basis and everything is included, even a cleaner in some. Most houses i saw were 5-6 bedroom from 145-200 per room/wk.

Seemed like a good way to get high return and also able to keep an eye on tenents each wk.

Going on the company mentioned above, it seems they also source tenents and as they have an interest in return and resale price, they would keep a close eye on who is in the rental property. Maybe they aim it at simlar demographs?

 

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