Your Investment Options on CrowdLords: Part 1
- Risk Range: A-C (low to medium)
- Projected Return Range: 9-15% p.a.
- Investment Term: 12 months to 5 years
It is well documented that there is a shortage of high quality rental accommodation along with a strong demand for investment stock. As a result, many developers specialize in developing high quality new builds or conversions and it is in their interest to sell them as soon as they can – ideally before they are completed. It helps their cash flow and satisfies their funders and as a result significant discounts can be achieved. CrowdLords offers investors the opportunity to invest alongside LandLords that use this strategy, or alongside developers who decide to hold onto some units themselves. This is usually achieved by dividing the investment into two tranches.
First we release Deposit Shares which as the name implies is used to pay the deposit and to secure the property. These investments carry the development risk and so in return are eligible to a larger share of the capital growth. Then once the development is completed we issue the rest of the capital as Rental Shares.
Where possible we favour Offplan investments that come with a rental assurance which can either deliver a steady income, or if the investment is leveraged with a mortgage, then good capital growth.
Buying Offplan Buy-to-lets is a common strategy amongst British ex-pats living and working abroad, however, at times they find that when they come to complete on the purchase that they struggle to arrange a mortgage leaving them with the option of walking away and losing their deposit or selling their position on the open market invariably at a loss.
So we created our Interim Equity option as a way to fill the funding gap, or to buy time before selling so that a more realistic price can be achieved. It is like a bridging loan only it is an equity investment where investors share in the income as well as receiving a pre-agreed capital gain at the end of the term.
It is this commitment to purchase the investors shares at the end of the term that makes Interim Equity such a good investment. As a bonus, the capital growth is not paid as a Dividend after tax, but as a capital gain, which removes the Corporation Tax burden and in some circumstances this can be more tax efficient for Investors.
As well as the tax efficiency, CrowdLords Interim Equity investments are usually fully managed by a lettings agency, that pay the rental income upfront, once the property has been completed.
Many Professional Landlords have, over the years built significant portfolios, often hundreds of properties, especially if most of the properties have purchased BMV and in areas where the average house price is still relatively affordable and gross yields are often 15% or more.
For a private property investor new to Buy-to-lets, investing in one or two BTLs to get started can be a high risk strategy. They often find that all the good opportunities are snapped up by professionals who have the right contacts and are able to complete the purchase before the ‘newbie’ gets a look in.
So, based on the principle that if you can’t beat them, you should join them, CrowdLords works alongside some highly experienced landlords who already have existing portfolios but are looking to release equity to acquire more properties. As a Crowd Investor investing alongside these proven professionals you benefit from their experience and share in their success
Click here for Part 2
- Understanding the difference between "first charge" and "second charge"
- Comparing IFISAs with Cash ISAs, what are the main differences?
- IFISAs change what the word "savings" means in the UK
- Frequently Asked Questions: What is an IFISA?
- Meet the Developer
- IFISA at the heart of UK property lending product change
- Crowdfunding and P2P Lending - Vive La Différence!
- Is this the year alternative finance goes mainstream?
- Crowdfunding, a game changer
- Crowdfunding marks the fall
- How do you choose an investment
- The Common Questions investors are Asking About the IFISA
- Investing in Developments - Understanding the risks and the rewards
- Why invest in Birmingham
- How do you decide which investment is best for you?
- The differences between Interim Equity and Full Equity
- Top 5 Myths and Truths about Property Crowdfunding
- A Closer Look at Due Diligence in Property Crowdfunding
- Introduction to ISAs
- Understanding the Capital Stack