Crowd funding buy to let houses

padington

Anyone else think this might have serious implications for more up side in the market ?

I'm tempted to say it could be quite a game changer, culturally crowd funding In the UK is very popular and lots of people all over the world with saving might see this as a clever bet.

I predict the boom of booms (2012- 2024) coming our way, followed by the crash of crashes (post 2024).

Sapphire

May I ask what you are talking about?

padington

Sapphire wrote: »

May I ask what you are talking about?

http://lmgtfy.com/?q=Crowd+funding+buy+to+let

PixelPound

There is quite a bit of reading material on it

http://www.thisismoney.co.uk/money/mortgageshome/article-2636370/How-crowdfunding-making-cheaper-property-investor.html
http://moneyweek.com/property-crowdfunding-may-look-tempting-but-its-very-risky/
http://www.theguardian.com/business/2014/jun/14/crowdfunded-buy-to-let-new-way-property-ladder

But you have to think about how do you get your money out, for instance under your prediction its 2024 and you are saying "sell, sell, sell" but only own 5% of a house, some also want to sell but over 50% think there's little likely of a crash. It might be hard to dispose of your share if people generally are expecting a crash.

padington

nic_c wrote: »

There is quite a bit of reading material on it

http://www.thisismoney.co.uk/money/mortgageshome/article-2636370/How-crowdfunding-making-cheaper-property-investor.html
http://moneyweek.com/property-crowdfunding-may-look-tempting-but-its-very-risky/
http://www.theguardian.com/business/2014/jun/14/crowdfunded-buy-to-let-new-way-property-ladder

But you have to think about how do you get your money out, for instance under your prediction its 2024 and you are saying "sell, sell, sell" but only own 5% of a house, some also want to sell but over 50% think there's little likely of a crash. It might be hard to dispose of your share if people generally are expecting a crash.

A micro market may develop with websites all of their own which could increase liquidity for this market or buy back options could be constructed but yes you are right, this new development will probably bring new unique problems as well as unique opportunities.

Either way, I expect more and more people to own a fractional part of a buy to let building in the future.

michaels

Ooh, sounds like a timeshare...where do I sign on the dotted line?

chucknorris

michaels wrote: »

Ooh, sounds like a timeshare...where do I sign on the dotted line?

I must admit I haven't read the detail, but it could be a type of fractional ownership which differs from timeshare, in that you actually own a percentage of a particular property. Perhaps someone who is keener (less lazy) in this instance than I am, could elaborate on the details. I have no interest in investing further in property, but if I was and couldn't buy on my own, I would really be concerned about the fees and how you get your money out.

Generali

TBH this sounds like a residential REIT. A REIT is a type of structured investment in property.

cells

Generali wrote: »

TBH this sounds like a residential REIT. A REIT is a type of structured investment in property.

What is needed is a residential ETF

An ETF being a fund that buys or sells the underlying asset. An example might be a gold ETF where one share equals one ounce.

of course normally ETFs can only be done with fungible assets like copper grain gold shares etc but with a big enough pool of homes you could get close with residential property.

The huge advantage of a property ETF would be a decrease in transaction costs which are now very high. For example if I wanted to buy a million pound home and you wanted to sell that to me we together would have a transaction cost in excess of £50,000

If however I and you did that via an ETF we would only have to pay the 0.5% shares fee or just £5,000 transaction.


A geared ETF of 4x would be ideal. It would be like buying a BTL with a 25% mortgage. The gearing further reduces the transaction fees and in this example we woupd only pay £1.25k transaction fee rather than £50k

Of course this assumes that there is somewhat of a balance between sellers and buyers. If the ETF has many more buyers than sellers the ETF would see the same transaction costs as it grows. Likewise if it shrinks. But overall it will be a decrease in transaction costs as there will be some biuers and some sellers all the time.


Other advantages include economics of scale and a much more hands off investment.

You would of course make 1 share not equal to 1 house but maybe 1% of one house. So a london ETF might have a share value of £5k and 100 shares equals one average London house.


I think such an ETF would very rapidly grow to maybe as much as 100,000 properties.


Edit. Almost forgot you can also put them into an ISA and get capital gains and divi tax perks too

michaels

cells wrote: »

What is needed is a residential ETF

An ETF being a fund that buys or sells the underlying asset. An example might be a gold ETF where one share equals one ounce.

of course normally ETFs can only be done with fungible assets like copper grain gold shares etc but with a big enough pool of homes you could get close with residential property.

The huge advantage of a property ETF would be a decrease in transaction costs which are now very high. For example if I wanted to buy a million pound home and you wanted to sell that to me we together would have a transaction cost in excess of £50,000

If however I and you did that via an ETF we would only have to pay the 0.5% shares fee or just £5,000 transaction.


A geared ETF of 4x would be ideal. It would be like buying a BTL with a 25% mortgage. The gearing further reduces the transaction fees and in this example we woupd only pay £1.25k transaction fee rather than £50k

Of course this assumes that there is somewhat of a balance between sellers and buyers. If the ETF has many more buyers than sellers the ETF would see the same transaction costs as it grows. Likewise if it shrinks. But overall it will be a decrease in transaction costs as there will be some biuers and some sellers all the time.


Other advantages include economics of scale and a much more hands off investment.

You would of course make 1 share not equal to 1 house but maybe 1% of one house. So a london ETF might have a share value of £5k and 100 shares equals one average London house.


I think such an ETF would very rapidly grow to maybe as much as 100,000 properties.

Perhaps the Wilsons could set up as a limited company and cash out by selling shares

cells

michaels wrote: »

Perhaps the Wilsons could set up as a limited company and cash out by selling shares

Not the same that would be closer to a reit

an ETF can expand and shrink.