I remember reading an article about crowd funding moving into property around four years ago, I was sat in my study at home thinking about the possibilities this would open and how it will change the sector as a whole.

Imagine being able to purchase and trade shares of property, getting all of the benefits of owning a property yet being able to spread your risk across multiple properties.  It’s mind blowing.

I was fortunate to consult to one of the UK’s largest property crowd funding businesses “Property Moose” based in Liverpool and London.  It was an amazing eye opener to see the excitement around crowd funding and how investors were reacting to different types of investment opportunities, the investment the company made in technology, while building the foundations for a global market leader was incredible.

Four years on and unfortunately crowd funding hasn’t had the change in the industry most people expected particularly myself, there are lots of debates as to why this hasn’t happened and I am not saying companies like Property Moose haven’t been successful as many have but they haven’t made the changes they were expecting, the stats speak for themselves and show that the market share of crowd funding in property has been slowly declining particularly as FCA regulation gets tighter, making it tougher for new companies to enter the market.

My personal view is there are other challenges. One being that the return the investor gets depends on how well the property is managed, the idea of purchasing a new and exciting structure doesn’t unfortunately remove all of the issues with investing in property.

The main reason I feel this hasn’t been as successful as it could of potentially been is mindset. Let me explain.

Swiftly after learning about crowd funding I was introduced to peer to peer lending, initially this was through a business funding on Crowd Cube.  The concept of peer to peer lending is very similar to crowd funding but with one major difference, that difference being peer to peer lending is DEBT and crowd funding is EQUITY.

What I mean by this is if you invest in crowd funding you are exchanging your cash for equity in the opportunity, whereas in peer to peer you are exchanging your cash for a debt that is owed to you plus the agreed interest.

Peer to peer has boomed over the past three years, companies such as lendy, assets and the house crowd who offer peer to peer have not just grown but are still growing at an exceptional rate.

The draw to peer to peer for investors are typically higher returns than crowd funding and shorter terms typically 6/12/18 or 24 months depending on the opportunity.

I mentioned earlier in the blog the word mindset, I know this word is the current buzz word for gurus and that’s not my intention.  I use the word when talking about how investors approach investing in different opportunities and choosing between crowd funding and peer to peer.

When I first started researching peer to peer to become an investor I spoke with over 20 investors who all had experience in investing in both but they viewed the choice as EQUITY V DEBT.

When investing in equity often the hesitation is you are getting equity which triggers your mind to think when and how will I get my money back, all crowd funding platforms have exit strategies and terms, typically 3-5 years but you still have a hurdle in your mind.

Whereas when investing in debt you know the lender has to pay you that back, it’s a loan so in your mind you are more comfortable that it will be repaid, obviously the terms are typically shorter which helps you valuate the risk quicker but the reality is investors view debt as an easier investment and decision to make.

I have invested in a number of equity and debt opportunities through different platforms and I find myself spending a lot less time considering a debt investment due to this mindset.

The question is just how big can peer to peer grow in the property sector?

If you found my blog interesting please share, also look out for my next blog when we discuss this and other property topics.