A crowdfunding website says it has purchased its first investment property after £360,000 was invested by over 40 individuals each lending for six months or more.
CrowdProperty says each investor will get a 10 per cent gross return for the money they have loaned over six months.
Their funding will buy a former public house in Tunbridge Wells which already has detailed planning consent to convert into two retail units on the ground floor, three one bed flats on the first floor and a further one bed flat on the second floor.
CrowdProperty is a peer-to-peer lending platform designed to facilitate loans between private individuals and property professionals. Since its launch in September over 2,500 people have visited the website with 650 projects submitted for consideration.
Very few will make the grade according to Simon Zutshi, founder director of the site. Since launch we have had a constant flow of interesting projects to look at but very few stand out after the due diligence process, which is deliberately robust he says.
The revenue model for CrowdProperty involves borrowers paying a one-off three to five per cent arrangement fee, and passing the full amount of the gross interest payable on the loan to the individual lenders.
Borrowers can apply for up to 100 per cent finance on new developments at between nine and 11 per cent interest per annum, or up to 80 per cent loan to value for refinancing projects at five to six per cent per year.
CrowdProperty says it secures all loans with a first legal charge against the property asset lent against - in much the same way as a bank or building society would.
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Comments
Crowdfunding is a good idea in theory, but it's not without its downsides. As Simon Zutshi says, they've had plenty of interesting projects in the pipeline but hardly any have made the grade because they're not strong enough investment opportunities.
It is good to see due diligence being carried out - assuming that this is indeed the case - as there is often the perception that these initiatives/fads/schemes, whatever you want to call it, are not entirely trustworthy. I doubt this is the future of investment, but it once again shows the power of the internet.