CrowdLords was one of the first property crowdfunding property investment platforms, launching in the UK in 2015. The founders could see the attraction of the start-up crowdfunding model used by CrowdCube, Seedrs, and others, where in return for their investment, investors received shares in a new business with the hope that one day, there would be an exit that would provide significant profits.
What they didn’t like about investing in start-ups in this way was that the valuations that formed the basis of the investment were, at best, unverifiable and in many cases downright ridiculous. In addition, the likelihood is that most start-ups go bust and even if they don’t the likelihood of the company being bought or listed is very low indeed.
So, by taking the same proven model and applying it to property they could address all the weaknesses. The value of a property investment can be verified by an independent RICS valuation. The property’s ability to generate income, and therefore distributable profits, can be accurately estimated and the likelihood of finding a buyer, and therefore enabling your investors to recover their investments, along with a capital gain, is much higher than with a business.
They launched what they described as the first, true property investment platform in that they had a ‘two sided’ model. On the one hand they served landlords and developers seeking investments for their projects and on the other provided would be investors a choice of pre-screened, pre-packaged investments with varying risk/return profiles.
‘We set out to make property investment easier, more accessible, and more productive for more people, initially through buy to lets. However, almost immediately the Government announced the additional stamp duty on buy to let properties and that made it harder to source properties that fitted our model,’ said founder Richard Bush.
As a result, CrowdLords now offers short term investments into residential developments as well as buy to let investments. ‘Because property crowdfunding was very new at the time, investors preferred short term investments and the move to include developments was very well received.
Historically, the only people given the opportunity to make money from residential developments were super high net worth individuals with hundreds of thousands of pounds to invest. We have lowered the entry point to as little as £1,000,’ Richard explained.
Richard and his team take their responsibility for their crowd investors’ funds very seriously. ‘We were adamant from the outset that we had to do everything we could to protect our users’ investments and so we created a framework, whereby, the ultimate control of the funds was in the hands of an independent director, appointed to the Special Purpose Vehicle (SPV) Limited Company that facilitates the investment.
It is an additional cost that might lower the returns by a percentage point or two, but it provides reassurance way beyond the cost. As far as I know, we’re the only true crowdfunding platform that provides this extra layer of protection,’ Richard pointed out.
Currently CrowdLords is, on average, funding a new investment every month as the number of users increases, largely through referrals from existing users. Their growth has been much slower than that achieved by others. ‘Building a sustainable marketplace takes time and patience.
As long as our investments continue to perform to plan, our investors receive a good return and are happy with the service, then we are content to grow at a slower rate,’ Richard added.
The team at CrowdLords are continually looking to enhance their proposition and plan to launch debt and even ISA based products in 2018 so that they can, if required, provide the full range of finance needed by developers and landlords removing the need for bank finance altogether.
Investment in property comes with risks as well as the possibility of rewards.
For more information visit here https://crowdlords.com/full-risk-disclosure
CrowdLords Limited 