PROPERTY CROWDFUNDING SITES

elliott25

anyone had any experience with any of the UK sites, like UOWN or Crowd2Let?
cannot find reviews on Crowd2let anywhere, they offer a development investment for 12 months at 12% with return at maturity regardless of sale of property, it sounds too good to be true.... Anyone with experience??
thanks

droopsnoot

elliott25 said:

anyone had any experience with any of the UK sites, like UOWN or Crowd2Let?
cannot find reviews on Crowd2let anywhere, they offer a development investment for 12 months at 12% with return at maturity regardless of sale of property, it sounds too good to be true.... Anyone with experience??
thanks

You're right, that does sound too good to be true. And you know what they say about that, of course. Does the site suggest that they are FCA-regulated? You'd have to ask yourself what kind of guarantee you have of that return, other than the company themselves, which can be liquidated at any time.

You might want to have a look through the "Savings and Investments" section of the forum and see if any of these sites have been mentioned. There are quite a few similar threads on there.

mjm3346

Crowd2let - never mind a possible 12% over a year that's no use if you've losing capital 

1. Loss of Capital
Property prices can go down as well as up and different property types or those in different areas may be more or less susceptible to reduced or negative growth. There is a risk that you may not get back what you put in if property prices fall. You should not invest more money through the platform than you can afford to lose without altering your standard of living.
1. Illiquidity
Any investment you make through the platform will be highly illiquid. There is no market for these shares, and you must be prepared to hold the investment for the full term.
1. Dividend Risk
If a property receives rent this will be paid to the investors as a dividend net of any fees, costs and expenses. However, there may be times when the property is untenanted, and no rent is collected or when the costs of maintaining the property are higher than expected.
1. Exit risk
The property market can change, it may be difficult to sell the property at the targeted exit date and you may need to hold the investment for longer than the expected term.

mjm3346

and

1. 10. Financial Services Compensation Scheme
Your investment in shares is not covered by the Financial Services Compensation Scheme.

elliott25

crowd2let offer of 12% has no risks of capital loss etc. because it is a loan note that does not depend on sale of property at end of term.

 does anyone have experience with this particular company, where they received their capital back on time?

HappyHarry

elliott25 said:

crowd2let offer of 12% has no risks of capital loss etc. because it is a loan note that does not depend on sale of property at end of term.

 does anyone have experience with this particular company, where they received their capital back on time?

Loan notes have risk of capital loss, if the funds cannot be repaid. 

Anyway, this isn't a loan note, they are offering untradeable shares in their special purpose vehicle. From their "How it works" section, especially point 5;

2. You add any amount you choose, in multiples of £500, to your account using your secure Personal Portfolio Dashboard. This can be done by either a simple debit card transaction or an online bank transfer. Your funds are held securely in a stand alone, “ring fenced” client account with Mango Pay.

3. You see a Crowd2Let property investment package similar to EXAMPLE 4 on our INVESTMENT EXAMPLES page. The total package price is £90,000 and you decide to invest £1,000 from your account in that particular property deal.

4. To keep the maths simple we will assume that another 89 investors also contribute £1,000 to the crowdfund to fully fund the property at £90,000, in reality individual investment amounts vary in multiples of £500.

5. Crowd2Let forms an SPV, Special Purpose Vehicle, in the form of a limited company named after the address of the property and 180 shares are issued within the company. Each investor within our example is issued with a share certificate for 2 shares, ie their £1,000 investment as each share is worth £500.

Assuming this is all above board, there are still many risks to the investment, and as you would own shares in a SPV, you will have no recourse to the FSCS if things fail. 

The package you buy into covers the purchase of the property, solicitors fees, a maintenance package and profit for Crowd2let. A question to ask would be, "If the total package raises £200,000, how much of that is actually invested in property?". i.e. if the property was purchased for £150,000 then you are down 25% immediately. What happens if the property is untenanted and there is not enough income to cover the maintenance? What if the property does not rise in value? What if the property has been purchased from a friendly contact at way above the market value? What if the property is sold below market value, maybe to another friendly contact, even though you may not want that to happen?

Crowd2let seem to have little "skin in the game", i.e. they get their profit from property sales and maintenance. There seems little incentive for them to ensure high quality tenants are sourced who pay their rent on time.

12% returns? This seems rather high. I am not aware of many properties whose rent exceeds 12% of the property value, so the 12% figure is either fanciful, or is dependant on large property price increases over the minimum 5 year term.

This is not an investment that most people should be making. It is high risk, the potential reward is unclear, the timeframe is uncertain, it is not tax efficient (CGT on profit and dividend tax on any returns) and the charges taken from your money are unclear. 

Funseeker

I am curious why the FCA or others is not proactive against these schemes when they are marketed so openly? Am I wrong in thinking they are unregulated collective investment schemes (S235 of the Financial Services and Markets Act says a CIS is an investment in which investors do not have day to day management of their money). Its supposed to be "criminal" to market unregulated ones, but if you report a firm, FCA or other enforcers don't seem to care to prosecute them for marketing.  Why wait until investors have lost money and then say "you shouldn't have invested in that"?