Property Crowd Review
What we like
What we don't like
Key facts
- The returns are high - typically 10 to 13% pa
- The quality of information provided in the 'deal room' section of the Property Crowd website is excellent. All the key information is laid out very clearly, and links to all the key documents, including valuation reports, are provided
- Investment terms are attractive - typically 6 to 18 months. Not too long, but long enough to earn sufficient income per investment
- ISA option is available
- Investments are well structured, with an independent custodian acting for the benefit of investors. This reduces the impact on investors if Property Crowd ceases trading, and provides additional oversight
- Large sums can be invested
- LTVs are appropriate - typically 50-70%
- Property Crowd investors co-invest alongside professional investors who have underwritten the loan, performed full due diligence and retain a meaningful investment
- Minimum investment of approximately £800 per investment makes this more suitable for investors with larger sums to invest
- Investments are only available to investors who can demonstrate that they are either high net worth, sophisticated, institutional or a professional investor
- Deal flow so far has been only moderate (but this is expected to pick up)
- Investments are relatively complex. However this should not be an issue for the types of investors Property Crowd are targeting
- Loan types - UK real estate secured bonds. Senior and mezzanine tranches
- Collaterals - UK real estate (development assets)
- Protection fund? - No
- Autobid available? - No (not appropriate for these types of investments)
- Secondary market? - No
- Is platform profitable? - Not disclosed
- ISA offered - Yes
How does it work?
Property Crowd’s website is very simple to navigate and use, and is similar to others that fund development projects such as EstateGuru. The Property Crowd site contains all of the information that would be expected about each opportunity. The information provided is comprehensive and is well presented. The site provides details of the asset collateral, the development plans, the borrower, and financing structure. Several documents are also provided including bond documentation and a comprehensive independent valuation report.
So what’s different to other P2P investment sites? The first thing to note is that Property Crowd is only open to certain types of investors, who qualify as ‘High Net Worth’, ‘sophisticated’, or professional/institutional. Many P2P investors will qualify in one of these categories, but these requirements, together with the fairly large minimum investment size of around £800 per deal, means that Property Crowd won’t be suitable for traditional ‘retail’ investors with smaller sums to invest.
The other most notable difference is that investors purchase bonds, rather than a loan participation. There are some notable advantages to this, such as the appointment of an independent custodian to hold cash and securities on behalf of the bond investors, which helps to reduce ‘platform risk’ (i.e the impact of Property Crowd ceasing to trade). The bonds have zero coupon, and are issued at a discount to par, that provides investors with an IRR of between 10 to 13% typically. Property Crowd sells the bonds to investors over a period of several weeks. The prices of the bonds increase slightly each week to reflect changes to the number of days to maturity.
Property Crowd offers an Innovative Finance ISA (IFISA) for investors who are British taxpayers. Investors can invest up to £20,000 per annum in any of the Property Crowd deals under the ISA wrapper. The cost to investors of investing within the ISA wrapper is 0.95% per annum.
Our views on Property Crowd
We think Property Crowd fills a gap in the market, and we expect them to do well. It suits investors who are sophisticated, have larger amounts to invest, and are willing to take higher levels of risk. We think the higher risk is compensated by the higher returns of over 10%. Property Crowd has one of the slicker websites and the quality of information provided is good. A significant benefit is having each deal fully underwritten by a specialised real estate finance firm who retain significant ‘skin in the game’. We think this results in good alignment of interests.
Property Crowd focuses on funding real estate developments, which is at the higher end of the P2P investing risk spectrum. However, for investors who are willing to spend time selecting the best deals, and have a constructive outlook on the future of the British real estate market, Property Crowd is a good option.
To find out more about Property Crowd, click here. To read our interview with Charles Tan from Property Crowd, click here.
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