Want to invest in property – but without the hassle of a physical bricks and mortar asset to look after? Then investment ‘vehicles’ such as Peer to Peer lending and Crowdfunding is exactly what you’re looking for.
The two sound similar in that both offer ways of investing in property in a hands-free manner i.e. you provide the funding and someone else does the buying, makes sure the project runs smoothly, carries out the admin etc. All you have to do is sit back and wait for the returns. Sound simple? That’s because it is.
Both Peer to Peer Lending and Crowdfunding have become increasingly popular in recent times. That’s mainly because, firstly, people were looking for better returns than high street banks and building societies could offer post-recession. And, secondly, the new platforms have made it easier for developers and others, such as small businesses, to get a loan in the first place (banks and building societies having severely tightened up their lending criteria).
In fact, so mainstream have Peer to Peer Lending and Crowdfunding become that so far this year around £2.27 billion of finance has already originated through these platforms. The data, supplied by independent research company AltFi Data looks at lending by tech companies such as Zopa, RateSetter, Assets Capital etc.
Peer to Peer Lending explained
This is when you lend money to borrowers (either one borrower or a handful, depending on how the website works). Typically, the loan will be for anything from one to five years and you’ll get interest either at the end of each year or some other agreed time e.g. once the development is complete, together with your original loan).
The higher the level of interest, then obviously the riskier the borrower. However, all Peer to Peer lending sites in the UK are regulated by the Financial Conduct Authority (FCA). This means investors’ cash is ring-fenced and can’t be touched by the platform.
Crowdfunding explained
With property crowdfunding you can become a landlord by using your investment for a part- share in a buy to let, or even funding it outright. Like a ‘standard’ landlord, you would receive a monthly income based on your investment and also benefit from the capital appreciation of the property. Crowdfunding sites too are regulated by the FCA and again, like Peer to Peer investing, there can be losses as well as gains.
Sourced Peer to Peer Lending model
At Sourced, we offer the ability to invest securely in properties – both residential and commercial – with a return of 6% to 12%. Like most online lending platforms, we’re offering better interest rates than high street lenders because we’re cutting out the middle-man (the broker).
At the same time, property developers are benefitting by being able to access loans quicker. Borrowers are charged an arrangement fee, while investors pay a monthly servicing cost.
Once a development is completed (usually within six to 18 months), the investor receives their money first.
Find out more about our Peer to Peer Lending scheme at our website: www.sourced.co or give one of the team a call on: 0333 123 1330 today.
Author
Chris Kirkwood
