This is a must watch for sophisticated and high-net worth property investors, looking for higher returns on their investments.
Want to invest in property – but without the hassle of 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 platforms must adhere to regulatory standards and protect investors’ cash is ring-fenced and can’t be touched by the platform in a segregated client account.
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. It is common for crowdfunding platforms to pay out a monthly income based on your investment in addition to the capital appreciation of the property. The main difference to P2P Lending, being that crowdfunding is equity-based rather than debt based. 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 up to 12%. Like most online lending platforms, we’re able to offer better returns than alternative investments because we’re cutting out the middle-man (the broker).
At the same time, property developers are benefiting by being able to access loans quicker. Borrowers are charged an arrangement fee, while investors pay a monthly servicing cost.
Investors receive capital repayments at the end of the loan term along with interest rates repayments. If a borrower defaults on a loan, Sourced will act on behalf of the investor in an attempt to recover their funds.
As with any kind of lending, an investor’s capital and unpaid interest is at risk of default, and investors should ensure they have satisfied themselves of the risks and should never lend more than they can afford to lose.
Find out more about our Peer to Peer Lending scheme at our website: www.sourcedcapital.co or give one of the team a call on: 0333 9009 999 today.