Utilisateur:Hugofsh989/Brouillon

Property crowdfunding

Property crowdfunding is an alternative to invest in business property or we could say it is pooling money together from a group of investors to make an investment. After having existed for many years, It has been used by the new banking technologies. Since 2012, this new service known a high demand, especially in the property domain. The rising demand has led to a large number of companies that set up their own crowdfunding platforms. Platforms for participatory financing of construction or renovation and financing of real estate to share rental income are developing in Europe and worldwide.

Equity based Crowdfunding (real estate equity)

Equity investments (like owning shares in an apartment building) that allow investors to share in cash flow from rents and appreciation when the property is sold. Equity-based Crowdfunding is one of the fastest growing models, up by 295%, to GBP 332m raised in 2015, compared to GBP 84m in 2014. A sizeable part, GBP 87m of the total Equity-based Crowdfunding volume, is from real estate Crowdfunding, wherein a syndicate of individuals receive a legal share of a property, typically through equity into a registered security in a special purpose vehicle (SPV) that is operated by the online platform.

Lending-based Crowdfunding (real estate debt)

Loans that are secured by real estate (similar to a bank making a loan); these loans pay monthly interest and the investment is secured by the property. Peer-to-Peer Business Lending remains the largest model by volume in the UK online alternative finance market. In total, nearly GBP 1.49bn was lent to SMEs in the UK. This represents a 99% year-on-year growth rate and 194% average growth rate between 2013-2015. Peer-to-Peer Consumer Lending reached GBP 909m in 2015, compared with GBP 547m in 2014. With a 66% year-on-year growth rate and a 78% average growth rate for the period 2013-2015, the Peer-to-Peer Consumer Crowdfunding for real estate enables more investors to have access to pre-vetted real estate investments that were historically unavailable outside of close-knit circles.

Crowdfunding in the world

Around the world, crowdfunding real estate is growing strongly, rising from a collection of $ 1 billion in 2014 to $ 2.57 billion in 2015.Participatory construction requires more funds and can appeal to a large number of people, through the internet and especially social media.Investors' funds are generally repaid at the end of the term, with interest or in the case of construction, the investor may become the owner or holder of a unit.

Crowdfunding in the UK

In the UK, web based equity crowdfunding has always been a regulated activity. The operation of a crowdfunding website requires permission for the activity of “arranging deals in investments” from the FCA (article 25(1)), the same permission granted to conventional corporate finance firms. Generous tax incentives are offered through the Enterprise Investment Scheme (EIS) to UK residents to invest in young tech companies.

Crowdfunding in the UK post Brexit

Property crowdfunding is an investment that is weathering the doom and gloom predicted by the results of the referendum and is propelling more and more people into the heart of political discourse in an increasingly tribal setting. Investors remain confident in the returns that bricks and mortar can provide, many individuals still see property crowdfunding as a safe bet to grow their money in a post-Brexit world.

Benefits and disadvantages of property crowdfunding

The benefits of property crowdfunding

Investing in property crowdfunding allows for a regular income from a rental property, without the hassle of having to manage the maintenance of the property itself. It is also a way to get involved in property investment in a diverse way, allowing you to invest into commercial property types, without needing a huge amount of capital at hand. Property crowdfunding can also have a range of social benefits, platforms claim to bring derelict properties back into the market or help construct new housing communities all while offering a transparent and professional property management service.

The disadvantages of property crowdfunding

Crowdfunding platforms all charge a flat fee on each investment, some also apply a fee to rental payment, or when you decide to cash in your investments. The biggest downfall of property crowdfunding is that your initial capital is not entirely safe, you may lose what you put in as property and rental prices change subject to the real estate market and or the company. You do not have any control over what happens to your property, the price of the rent and who will occupy it. Lastly, investments in property crowdfunding are not protected by the Financial Services Compensation Scheme meaning you should only pay what you can comfortably afford

Safety of property crowdfunding

Property crowdfunding is controlled by the FCA and follows a strict code of conduct. All listings on crowdfunding websites offer extensive details that are checked and verified to ensure that investors have all necessary information to base their decisions on. Crowdfunding property sites vary in quality and therefore those who invest are very much reliant on the quality of the site chosen. Each property crowdfunding site will have different terms and conditions regarding investments. Therefore, it is up to investors to know the rules, not make assumptions, and carry out research on said project(s) and area(s) before investing.