crowdfunding

January 21, 2022

Kuflink: My Review of this P2P Property Investment Platform

Nick Making Money, Saving Money, Investing reviews, property, crowdfunding 11 Comments

Today I am looking at P2P property investment platform Kuflink.

I have been investing with Kuflink for five years now, so this is a fully updated repost of my original review.

What is Kuflink?

Kuflink is an online platform offering opportunities to invest in loans secured against property. These loans are typically made to developers who require short- to medium-term bridging finance, e.g. to complete a major property renovation project, before refinancing with a commercial mortgage.

Kuflink offer three types of investment, as follows:

Select-Invest (individual loans)
Auto-Invest
Tax-free IFISA (Innovative Finance ISA)

Auto Invest and IFISAs both automatically invest your money across a number of loans and pay a fixed interest rate, typically between 7 and 9%. You can choose a 1-year, 2-year or 3-year term, and interest is paid annually (it is automatically reinvested at the end of each year with the two-year and three-year products). The Auto-Invest product is basically the same as the IFISA, but without the tax-free wrapper.

At one time only the Auto-Invest option was available for IFISAs, but nowadays you can choose your own investments if you prefer. The great majority of Self-Select loans on the Kuflink platform are IFISA-eligible. If you check out the Self-Select listings on the Kuflink website (see image below), this will tell you whether any particular loan is IFISA-eligible or not.

Individual Select-Invest loans pay interest rates varying between about 6 and 7.2%, depending largely on the LTV of the loan (loan to value, a measure of how secure the loan would be in the event of a default). The higher the LTV, the riskier the loan, and – other things being equal – the higher the interest rate paid in consequence. You can see a screen capture below of three Select-Invest loans available on the platform at the time of writing.

As a reasonably experienced P2P investor, I put my money into Select-Invest loans. These typically have a duration of six months to a year and (as mentioned above) pay interest from around 6 to 7.20 percent. That obviously isn’t as much as some P2P property platforms (e.g. BLEND), but I think it represents a fair balance between risk and reward. Kuflink also invest in every loan themselves up to 5% of the value of each loan – so, as the expression goes, they have skin in the game.

My Kuflink Review

I found signing up with Kuflink a quick and easy process. They do the obligatory money-laundering checks, but in my case anyway this was all done electronically behind the scenes. I uploaded a copy of my passport and was approved almost immediately. I started by depositing £500, but you can start with as little as £100 if you like.

Initially I put my money into a 12-month loan paying 7% annual interest. One good feature I didn’t grasp initially is that with Select-Invest loans interest is paid monthly. So once a month I receive interest payments on all the loans I am currently invested in. This is paid into a wallet, from which you can either withdraw to your bank account or reinvest.

Kuflink recently introduced an option to have monthly loan repayments automatically reinvested rather than paid into your account as cash. This effectively boosts your interest rate by the power of compounding, as you then receive interest on the reinvested payments as well. Currently this option is available for most, but not all, loans on the platform. You can see which of your loans compounding is available for via your Kuflink dashboard.

I have continued to invest in Kuflink, and have also reinvested in new loans when the original ones were paid off. Another good feature is that money invested in a loan but not yet released to the borrower attracts interest which is paid as cashback once the loan has gone live.

There have been no defaults so far on any of my loans, and Kuflink say on their website that to date nobody has lost a penny on their platform. I have experienced short delays with loans being repaid, but in such cases you continue to earn interest, of course.

Secondary Market

A new feature on Kuflink I like is the Marketplace (secondary market). Here you can buy loan parts from other investors who want to sell up early. You can also put up for sale any (or all) of your own loan parts.

The number of loan parts listed in the Marketplace went up in the early months of the pandemic, as many investors understandably wanted (or needed) to access their cash. This created short-term buying opportunities which I was happy to take advantage of. Loan parts offered via the Marketplace typically have only a few months to run, so you can expect to get your capital back quickly (and can then reinvest it if you wish). Only loans in good standing with monthly repayments up to date may be listed on the Marketplace, so that offers some reassurance against default – though of course it is by no means a guarantee.

In recent months the number of loan parts listed on the Marketplace has reduced considerably. And those that are tend to be snapped up quickly. As a would-be investor this is slightly disappointing, but it does indicate that people are keen to take advantage of the opportunities on offer. It also means that if you want (or need) to exit a loan early, accessing your money should be a quick and easy process.

Pros and Cons

Based on my experiences, here is my list of pros and cons for the Kuflink investment platform.

Pros

1. Easy sign-up process.

2. Low minimum investment.

3. All loans secured against property.

4. Choice of investments and approaches.

5. Manual and auto-invest options.

6. Kuflink invest in all loans themselves, so they have a strong incentive to ensure they are safe and secure.

7. They also cover the first 5% of losses on any loan before investors are affected (although this has never happened yet).

8. Money invested but not yet released to the borrower attracts interest which is paid as cashback once the loan has gone live.

9. In-depth information is provided on the website about all loans, so you can see exactly how your money will be used (and by whom).

10. There have been (according to Kuflink) no investor losses to date.

11. Customer service (in my experience anyway) is fast, friendly and helpful.

12. There is a 14-day cooling off period for new investors.

13. Marketplace (secondary market) for buying and selling loan parts.

14. No charges to investors lending on the primary market and only a 0.25% fee if you resell a loan part on the secondary market.

15. On most loans you can opt to reinvest monthly repayments to boost your net interest rate.

16. Tax-free IFISA option available.

Cons

1. Rates paid aren’t the highest in P2P lending.

2. Delays with some loans being repaid (although investors do earn extra interest if this happens).

3. No mobile app [UPDATE FEB 2023 – An app is now available.]

Conclusion

Overall, my experiences with Kuflink so far have been entirely positive and my investments have been generating the promised returns. I started cautiously with them, but have gradually built up the amount I have invested on the platform. Although – like all property P2P platforms – they were adversely affected by the pandemic, they appear to have come through it strongly, with new loans now being added almost daily.

As mentioned above, although Kuflink don’t pay the highest rates in P2P lending, I think the returns on offer are realistic and sustainable. The steady expansion of the platform seems to testify to this, as does the fact that they have received several industry awards. These include Best Alternative Business Funding Provider in the Business Moneyfacts Awards in both 2018 and 2019 and Best Service From an Alternative Funding Provider in 2020.

Kuflink are also highly rated on the independent TrustPilot website, with an average 4.6 out of 5 (‘Excellent’). At the time of writing 82% of reviewers award them the maximum five-star rating, which is among the highest figures I have seen for a financial services platform.

As with all P2P lending, your money does not enjoy the same level of protection as bank and building society accounts, which are covered (up to £85,000) by the Financial Services Compensation Scheme. Nonetheless, the rates of return on offer are significantly better than those from most financial institutions. And the fact that all loans are secured against bricks and mortar – and Kuflink themselves have cash invested in them – clearly offers some reassurance.

From my experience, Self-Select loans tend to fill up quickly. On the positive side, this shows investors have confidence in Kuflink and want to invest through the platform. On the minus side, it means there are typically no more than two or three new loans open for investment at any time.

Clearly, no-one should put all their spare cash into Kuflink (or any other P2P investment platform). Nonetheless, it is certainly worth considering as part of a diversified portfolio. Not only are the rates of return much higher than those offered by banks and building societies, they are relatively unaffected by ups and downs in the stock market. P2P loans aren’t a way of hedging your equity-based investments directly, but they do help spread the risk.

If you have any comments or questions about this review or Kuflink in general, as always, please do leave them below.

Disclosure: As stated above, I am an investor with Kuflink myself, and if you invest £500 or more via my link above I will receive a bonus for introducing you. Money is at risk. You should always do your own ‘due diligence’ before investing, and seek advice from a qualified financial adviser if in any doubt how best to proceed.

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January 6, 2022

Spotlight: The Blend Network P2P Property Investment Platform

Nick Investing crowdfunding, reviews, property 2 Comments

Today I am spotlighting BLEND, a peer-to-peer property platform that lends to established businesses (mostly experienced property developers). BLEND’s loan-based crowdfunding platform was founded by a team of former investment bankers with substantial experience in real estate and finance.

What Does BLEND Offer?

BLEND offers individuals the chance to invest in loans secured against property. They specialize in loans in geographical areas that banks and other lending platforms typically pay less attention to, e.g. Northern Ireland, though they fund projects across the whole of the UK. Loans are typically for small developments or building renovation/conversion projects. Some examples are shown in the screen capture below.

As mentioned above, all loans are secured against property. The LTV (loan-to-value ratio) is usually quite low, giving greater security for investors. Interest rates on offer range from 7 to 12 percent.

BLEND has some similarities with Kuflink, which I reviewed in this blog post a while ago (and invest in myself). Both offer the opportunity to invest in secured loans. Kuflink typically offers lower interest rates, however, between 5 and 7 percent. The risk level with Kuflink loans is (arguably) lower, but it should be said that BLEND so far has an unblemished record, with no loans in arrears or default.

The minimum investment on BLEND is £1,000, which means it is really aimed at high net worth and professional investors. It’s also worth noting that only a small number of new loans tends to be available at any given time and they typically sell out very quickly.

Using the AutoLend feature is recommended to ensure that you don’t miss out when a new loan comes on to the market.

Secondary Market

One drawback with any type of property investment is that it’s not as liquid as (say) equity-based investments. BLEND does offer a way around this with its secondary market, however.

Lenders who wish to liquidate early can sell their loan parts on the secondary market. Note that finding a buyer on the secondary market may take time and there is always a risk of no-one wanting to buy your loan part. You can start selling a loan in multiples of £1,000 on the secondary market as soon as funds have been released to the borrower.

Unlike the primary market, as a lender you will be charged a secondary market fee of 0.60% (or £6 for every £1,000 of capital) on capital outstanding. BLEND only charge this upon the successful resale of the loan portion you have listed in the secondary market. The secondary market is free for buyers.

Pros and Cons

A full list of Pros and Cons for BLEND is shown below.

Pros

1. Easy sign-up process

2. Well designed, user-friendly website

3. All loans secured against property

4. Low LTV ratios for added security

5. Manual and auto-invest options

6. In-depth info provided on the website about loans, so you can see exactly how your money will be used (and by whom)

7. No investor losses to date

8. Marketplace (secondary market) for buying and selling loan parts

9. No charges to investors lending on the primary market and only a 0.6% fee if you resell a loan part on the secondary market

10. Rates of return of up to 12% are at the upper end for P2P lending

11. Can invest via a SIPP or SSAS (private pension scheme)

Cons

1. Minimum investment of £1,000

2. Limited supply of new loans to invest in

3. No tax-free IFISA option

Final Thoughts

With a minimum investment of £1,000 (per project), BLEND obviously won’t be suitable for everyone. But if you have that sort of money available, the promised returns of up to 12 percent are undoubtedly enticing.

I like the fact that BLEND are very selective in the projects they back, even if that does mean the flow of new opportunities is limited. It’s also good that they perform in-depth ‘due diligence’ on every loan and publish full details about this on the website, including independent valuations. This means investors know exactly what the potential risks and rewards of a project are.

The absence of any charges to investors (apart from on the secondary market) is another big plus. And the presence of a secondary market offers the opportunity to exit loans early if your circumstances change (though, as noted above, you aren’t guaranteed to find a buyer).

BLEND is probably at the riskier end of the P2P property spectrum, but in my opinion the returns on offer fairly reflect this. Risks are also mitigated by generally low LTV ratios and the detailed research mentioned above. The fact that no loan has so far gone into default or even into arrears is impressive, though there is of course no guarantee this couldn’t happen in future. It does offer some reassurance though.

Finally, BLEND has an average Trustpilot rating of 4.6 (‘Excellent’), with 95% of people awarding them a maximum five stars rating. This is among the highest ratings I have seen for an investment platform on Trustpilot.

As always, if you have any questions or comments about this post or P2P property investment more generally, please do leave them below.

Disclaimer: I am not a qualified financial adviser and nothing in the article above should be construed as personal financial advice. You should always do your own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

Please note also that this post includes affiliate links. If you click through and perform a qualifying transaction, I may receive a commission for introducing you. This will not affect in any way the terms you are offered or the product/service you receive.

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November 2, 2021

My Investments Update – November 2021

Nick Investing events, property, crowdfunding 4 Comments

As regular readers will know, I recently started posting monthly updates about my investments. These (partly) replace the ‘Coronavirus Crisis Updates’ I was posting from March 2020. You can read my October 2021 Investments Update here if you like

I’ll begin as usual with my Nutmeg Stocks and Shares ISA, as I know many of you like to hear what is happening with this.

As the screenshot below shows, my main portfolio is currently valued at £21,940. Last month it stood at £21,046, so that is a rise of £894. That means it has recovered from the £675 drop last month and is now £250 higher in value than it was two months ago.

I know some PAS readers were worried about the falls in their Nutmeg portfolios (and equities generally) in September 2021, so I hope this will provide some reassurance. As I said last time, stock market investments in general should be regarded as medium- to long-term. In the short term some ups and downs are entirely to be expected.

Apart from my main portfolio, I also have a second, smaller pot using Nutmeg’s Smart Alpha option. This pot also rose in value in October. It is now worth £2,756 compared with £2,633 last month. That’s a rise of £123, which again covers the fall last month with a bit to spare. Here is a six-month screen capture showing performance to the end of October 2021.

You can read my full Nutmeg review here (including a special offer at the end for PAS readers). If you are still looking for a home for your 2021/22 ISA allowance, based on my experience they are certainly worth considering. If you haven’t yet seen it, check out also my recent blog post in which I looked at the performance of Nutmeg fully managed portfolios at every risk level from 1 to 10 (my main port is level 9). I was actually pretty amazed by the difference the risk level you choose makes. If you are investing for the long term (and you almost certainly should be) opting for a hyper-cautious low-risk strategy may not be the smartest thing to do.

As regular readers will know, this year I am using Assetz Exchange for my IFISA. This is a P2P property investment platform that focuses on lower-risk properties (e.g. sheltered housing on long leases). I have invested a total of just under £1,000 in AE so far (I began with £100 in February 2021 and topped up twice).

Since I opened my account, my portfolio has generated £24.80 in revenue from rental and £59.97 in capital growth, for a total return of £84.77. I won’t bother publishing a statement on this occasion as it’s not massively different from last month. The bottom line is that I (still) have investments in 21 different projects with them and all are performing as expected, generating income and in most cases showing a profit on capital. So I am very happy with how this investment has been going.

To control risk with all my property crowdfunding investments nowadays, I invest relatively modest amounts in individual projects. This is a particular attraction of AE as far as i am concerned. You can actually invest from as little as 80p per property if you really want to proceed cautiously.

As mentioned, my investment on Assetz Exchange is in the form of an IFISA so there won’t be any tax to pay on profits, dividends or capital gains. I’ve been impressed by my experiences with Assetz Exchange and the returns generated so far, and intend to continue investing with them. You can read my full review of Assetz Exchange here if you like. You can also sign up for an account on Assetz Exchange directly via this link [affiliate].

Another property platform I have some investments with is Kuflink [referral link]. They appear to be doing well, with new projects launching almost every day. I currently have just over £2,000 invested with them, quite a large proportion of which comes from reinvested profits. To date I have never lost any money with Kuflink, though some loan terms have been extended once or twice. On the plus side, where this happens additional interest is paid for the period in question.

My loans with Kuflink pay annual interest rates of 6 to 7.5 percent. As mentioned above, these days I invest no more than around £100 per loan (and often less). That is not because of any issues with Kuflink but more to do with losses of larger amounts on other P2P property platforms (such as this one). My days of putting four-figure sums into any single property investment are behind me now!

Nowadays I mainly opt to reinvest the monthly repayments I receive from Kuflink, which has the effect of boosting the percentage rate of return on the projects in question

You can read my full Kuflink review here. They offer a variety of investment options, including a tax-free IFISA paying up to 7% interest per year with built-in automatic diversification. Alternatively you can now build your own IFISA, with most loans on the platform being IFISA-eligible.

I’d also particularly draw your attention to their revised and more generous cashback offer for new investors. They are now paying cashback on new investments from as little as £500 (it used to be £1,000). And if you are looking to invest larger amounts, you can earn up to a maximum of £4,000 in cashback. That is one of the best cashback offers I have seen anywhere (though admittedly you will need to invest £100,000 or more to receive that!).

Kuflink has some similarities with Assetz Exchange (see above). However, it’s important to note that with Kuflink you are investing in loans secured by property, whereas with Assetz Exchange your money is going into actual bricks and mortar. Kuflink loans typically pay around 7% annual interest. With Assetz Exchange projected yields from rental are generally a bit lower at around 5%, but you do of course have the potential for capital appreciation as well. There is also an argument that investments on AE are more secure as properties are typically rented out to organizations such as housing associations which are publicly funded. But I should emphasize that over the years I have been investing with Kuflink I have never lost any money with them and I understand nobody else has either. That is of course no guarantee it couldn’t happen in the future, but personally I find it quite reassuring.

On the subject of property investments, I also have a modest amount in the property crowdfunding platform Property Partner. At one time I was a big fan of this platform, but I lost a bit of enthusiasm when they introduced a raft of extra fees and charges.

Nonetheless, I do still have investments in around a dozen properties with PP, valued from about £30 to £2000 (in one case). The five-year-anniversary process restarted a while ago after being suspended due to Covid. For those who don’t know, after five years investors in a property are given the opportunity to exit at the current market value, as long as there are enough other investors on the platform willing to buy their shares at this price. If not, the property concerned is sold on the open market.

About half of ‘my’ properties have now gone through this process. I voted to sell on each occasion, as I am looking to reduce the total I have invested in property (as I feel too much of my portfolio is still in this form). In some cases all went to plan and I received payment for my shares, which I then withdrew. In other cases, however, not enough investors wanted to buy the shares that investors such as me wanted to sell. Consequently these properties are now being sold, which may of course take many months. Unfortunately the property in which I had £2,000 invested is one of those. To add to the joy, dividends are suspended on all properties that are being sold, so all I can do now is wait for the sales to go through.

On the plus side, Property Partner was taken over a while ago by the US digital home-ownership company Better. One of the first decisions taken by the new owners was to scrap the unpopular £1 monthly account fee and reduce the AUM (Assets Under Management) fee from 1.2% p.a. to 1.0% p.a. They are also offering fee rebates for their most active traders. All of this means that Property Partner may be worth another look now, especially as there’s a steady flow of opportunities to invest in properties going through the five-year process. That means you can buy shares in these properties at a fair market price without having to pay the usual fees associated with new listings.

Anyway, if you’d like to know more, here is a link to the Property Partner website [affiliate]. Note that if you sign up with Property Partner via my link and invest with them, I will split the commission I receive with you, meaning you could get up to £750 cash back.

You can also read my original review of Property Partner here, although this is obviously somewhat out of date now.

Moving on, I have another article on the always-excellent Mouthy Money website. This is all about the difference between saving and investing and why, in my view, you should do both.

In addition, last weekend the Express newspaper published an article about me and my blog, in which I shared some top tips for saving money on food shopping. Do check it out!

That’s all for now, so please stay safe and warm, and look out for your friends and neighbours as well as we head into the cold winter months. I’ll be back again with another investments update at the start of December.

As always, if you have any comments or questions about this post, please do leave them below.

Disclosure: I am not a qualified financial adviser and nothing in this post should be construed as personal financial advice. You should always do your own ‘due diligence’ before investing and take professional financial advice if in any doubt before proceeding. All investing carries a risk of loss.

If you enjoyed this post, please link to it on your own blog or social media:

May 4, 2021

My Coronavirus Crisis Experience: May 2021 Update

Nick Investing, Everything Else events, reviews, property, crowdfunding 5 Comments

Another month has passed, so it’s time for another of my Coronavirus Crisis Updates. Regular readers will know I’ve been posting these updates since the first lockdown started in March 2020 (you can read my April 2021 update here if you like).

As ever, I will begin by discussing financial matters and then life more generally over the last few weeks.

Financial

I’ll begin as usual with my Nutmeg stocks and shares ISA, as I know many of you like to hear what is happening with this.

As the screenshot below shows, the value of my main portfolio rose fairly steadily in the first half of April, after which it remained around the same level (apart from a brief dip around the 20th). It is currently valued at £20,430. Last month it stood at £20,078, so overall it has gone up by £352. I am happy enough with that.

Apart from my main portfolio, five months ago I put £1,000 into a second pot to try out Nutmeg’s new Smart Alpha option. This has done pretty well, so in April I added another £1,000 from some money returned to me by RateSetter (as discussed in last month’s update). This pot is now worth £2,067. Here is a screen capture showing performance in April.

I updated my full Nutmeg review in April and you can read the new version here (including a special offer at the end for PAS readers). If you are looking for a home for your new 2021/22 ISA allowance, based on my experience they are certainly worth a look.

I also added £400 (from RateSetter again) to my initial test investment of £100 with Assetz Exchange. As you may recall, Assetz Exchange is a P2P property investment platform that focuses on lower-risk properties (e.g. sheltered housing on long leases). I put £100 into this in mid-February and (as mentioned) another £400 in April. Since then my portfolio has generated £3.05 in revenue received from rental (equivalent to an annual interest rate of about 10% on my original £100 investment). Here’s my current statement in case you’re interested:

As you can see, even though I have only invested £500, I already have a well-diversified portfolio. This is a particular attraction of Assetz Exchange in my view. You can actually invest from as little as 80p per property if you really want to proceed cautiously!

You may also notice that some of the properties in my portfolio have gone up in value and some have gone down. This makes it a bit harder to judge overall performance compared with an equity-based investment like Nutmeg. The property values quoted by Assetz Exchange represent the best price you can sell at currently on the exchange, which is where all investments on AE are bought and sold. But they are only really relevant if you want to buy or sell that day. By contrast, Property Partner (a somewhat similar P2P property investment platform) quote a value for each property based on an independent surveyor’s valuation every 6-12 months. That means the values displayed on Property Partner are more stable, but of course they are only theoretical as there is no guarantee that this valuation would be achieved if the property was put on the market.

As I noted before, my investment on Assetz Exchange is in the form of an IFISA (Innovative Finance ISA), so there won’t be any tax to pay on profits, dividends or capital gains. I’ve been impressed by my experiences with Assetz Exchange and the returns generated so far, and therefore intend to continue investing with them. You can read my full review of Assetz Exchange here if you like. You can also sign up for an account on Assetz Exchange directly via this link [affiliate].

In case you’re not aware, everyone has a generous £20,000 tax-free ISA allowance in the current tax year (2021/22). However, for some reason the government only allows you to invest in one of each type of ISA in any particular.tax year. So you can only put new money into one stocks and shares ISA per year, but you can invest in a cash ISA and/or IFISA as well if you wish – just as long as you don’t exceed the £20,000 total limit. In the 2021/22 tax year I am therefore investing in a Nutmeg stocks and shares ISA and an Assetz Exchange IFISA. This gives me additional diversification compared with investing in just one type of ISA.

Moving on, I heard last month that I will not be eligible for any more SEISS income support payments for the self-employed. Along with many other self-employed people, my income took a hit when the pandemic struck and this money from the government came in very useful (though I do thankfully have a personal pension and other investments as well). However, I have become a victim of the rule that says to receive SEISS your average self-employed income must represent at least half of your total income.

For the first three rounds of SEISS that was indeed the case. However, the latest round of payments incorporates another set of tax returns (2019/20) when calculating average income. Because my income was lower in these accounts (partly due to the pandemic) my four-year average is now less than what I draw from my personal pension. So at a stroke I am no longer eligible for any more support. It’s not the end of the world, but I do find it bizarre that a scheme intended to support self-employed people whose livelihoods have been affected by the pandemic can cut off completely when your average income drops. Commiserations to any PAS readers who may have found themselves in a similar situation 🙁

Personal

In April, as I’m sure you know, some of the government’s lockdown restrictions finally began to be lifted.

I was glad to be able to go for a swim for the first time since Christmas, and have been doing so twice a week since it became possible again. I am a member of the David Lloyd Club in Lichfield which has two pools, one inside and one out. Although I’ve heard that you have to book slots at some swimming pools, that has never been the case at DL Lichfield, and in fact in many ways it feels reassuringly normal. Of course, you have to wear a mask as you enter the building, but thankfully not in the changing rooms or the pool 😀

I have just been told that if the pools get very busy, DL staff ask people to wait in the changing rooms until others have left. I haven’t witnessed this myself and don’t think it happens very often, but am happy to place this info on record.

What I do find bizarre is the rules about buying and consuming refreshments. The club room (aka coffee shop) at DL Lichfield is open for the purchase of drinks and light meals, but you can’t consume them within the building. You are, however, allowed to sit at a table in the club room (no need for a mask) to read and relax or just stare at the four walls. But heaven help you if you try to eat or drink anything.

I was told by a staff member that it was okay to take a drink to the outdoor pool as long as I was going for a swim, but not if I simply wanted to lie on a sunbed. Even though I am fast becoming a connoisseur of strange lockdown rules, this one seems barmy to me and I’d love to know how DL Lichfield plan to enforce it (“Unless you get in that pool in the next five minutes, I’m taking your coffee away.”). I’d like to support the DL club room/coffee shop, but the incomprehensible rules have defeated me. So I’m now taking a flask of tea and a biscuit with me and having that on the poolside or in the changing room after my swim. So far no Covid police have come for me.

I have also been pleased (and relieved) to have my hair cut again, six months after this was last done. Thankfully I didn’t have to queue up, as my hairdresser comes to me and cuts my hair in my conservatory. We have both had Covid jabs and agreed to dispense with masks and just kept the door and window open (thankfully it was quite a warm day). Again, it all felt reassuringly normal.

I haven’t so far taken advantage of the reopening of pub gardens, largely because it has been so cold (and wet) most days. It’s good to see at least some of my local pubs open again, but a shame they still aren’t allowed to open inside as well as out. Last year we had Eat Out to Help Out at a time when there were more Covid cases and deaths then there are now (just one death yesterday, I read). I am looking forward to May 17th when pubs and restaurants can reopen inside as well, but believe this has been delayed too long personally.

I am probably one of the few people who didn’t watch the Line of Duty finale. Indeed, I haven’t watched any of the series, as it didn’t really appeal to me. For one thing it sounded downbeat and depressing, and life has been grim enough recently. But also, it appeared a bit too complicated for my liking. Especially as i grow older, I find following series with large casts and labyrinthine plots increasingly challenging. I can remember laughing (affectionately) at my dad when he expressed confusion at the plot of some TV detective show, but I am obviously going down the same route myself now 😮

I have watched a couple of shows I enjoyed this month, though, so thought I’d share details in case anyone fancies giving them a try.

The first is an Amazon Prime Video series called Upload. This is a dystopian science fiction tale, set in a not-too-distant future when a method has been found for transferring people’s minds at the point of death (or before) to a virtual afterlife. This service is provided by a number of large corporations. They employ minimum-wage ‘angels’ in large warehouse-like offices to monitor these worlds and support the clients who live in them (at least, until their money runs out). It is quite a dark concept, but full of laugh-out-loud moments and some great characters. There is also a mystery in it, and a romance between a female ‘angel’ and one of her (deceased) male clients. It’s well worth a watch if you like something a bit different (and have Amazon Prime Video, of course).

I am also enjoying a US fantasy series called The Librarians (see below). I originally caught a couple of episodes on an obscure Freeview channel and decided I’d like to watch the whole (four) series from the beginning. Doing that proved a bit more challenging than I anticipated, but eventually I managed to track down a DVD box set on eBay.

The Librarians is a tongue-in-cheek fantasy series with a certain retro feel to it. It reminds me a bit of the old Avengers TV show in its heyday (with Diana Rigg as Emma Peel).

The Librarians are a group of misfits who are recruited to work at the mysterious Library, a place where magical artefacts of all kinds are stored. Early in the first series magic is released into the world again, having been suppressed for many centuries. In each episode the Librarians investigate some mysterious incident and try to stop evil individuals deploying magic for nefarious ends, generally using their intelligence rather than violence.

Again, it’s hard to explain in a few words, but you soon get the hang of things. And the characters, while perhaps excessively goofy at times, are all endearing in different ways. The Librarians is really old-fashioned family entertainment (with little if any swearing) and none the worse for that. If you can get hold of it – I’m not sure whether it’s on any streaming services – it offers an enjoyable (and at times hilarious) drop of escapism, something I guess many of us need at the moment.

As always, I hope you are staying safe and sane during these challenging times. If you have any comments or questions, please do post them below.

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Brickowner Property Investment Platform Review

April 17, 2021

Spotlight: Brickowner Property Investment Platform

Nick Investing reviews, property, crowdfunding 8 Comments

I have written about property crowdfunding on various occasions on Pounds and Sense. It’s a way for ordinary individuals to invest in bricks and mortar without requiring huge amounts of capital.

Why Property Crowdfunding?

Property investors get a double benefit – rent from tenants for as long as they own the property, and – in most cases – a profit if and when they sell.

Of course, property doesn’t come cheap. And even if you can stretch to buying a modest house or flat for investment purposes, you are taking the risk of putting all your eggs in one basket. As a result, many people of more modest means have concluded that property investment is not for them.

Property crowdfunding has changed all that, however. A number of platforms now exist that allow ordinary individuals the chance to buy a share (or fraction) in an investment property. Investors then receive a proportion of the rental income generated and also get a share of any profit when the property is sold (or refinanced).

A further attraction of property crowdfunding is that the platform (and its agents) take care of managing the property and tenants on your behalf. Unlike direct property ownership, property crowdfunding (or crowdlending if you prefer) is a genuine hands-free investment.

Brickowner Review

Brickowner is one of a number of property crowdfunding platforms that also includes Property Partner, Assetz Exchange and CrowdProperty. They allow investors to buy a share of individual property investments.

Brickowner focuses on institutional investments. They buy shares in large, high-return property investment deals that were traditionally only offered to institutions or high-net-worth individuals. They then offer smaller shares in these (a minimum of £500) to members wanting to invest in them.

How It Works

Before you can access the Brickowner platform, you will need to register on the site and confirm that you are allowed by law to invest in this type of product. This is a requirement imposed by the Financial Conduct Authority (FCA), which regulates this type of investment. In practical terms it means you will have to confirm that you meet one of the following descriptions:

High Net Worth Individual – This includes individuals who have an annual income of £100,000 or more or net assets of £250,000 or more and have made a declaration acknowledging the consequences of making investments based on financial promotions that have not been approved by an FCA-authorised firm.

Self-certified Sophisticated Investor – This includes individuals who have prior relevant investment experience and have made a declaration acknowledging the consequences of making investments based on financial promotions that have not been approved by an FCA-authorised firm.

Representative of a High Net Worth Body – This includes companies and partnerships with at least £5 million net assets and trusts with assets of £10 million.

Investment Professional – Including corporate investors and SIPP or SSAS professional service providers.

You will also be required to answer some questions to confirm that you understand the nature of the investments that can be made on the platform.

Once you are registered (and not before) you will be able to browse from the range of currently available property investments, such as the example below:

If you see a current project you like, you can invest in it, from £500 up to the maximum available. You can (and probably should) build a diversified portfolio by investing in a number of different properties. You can add funds and increase the size of your portfolio any time you want.

Investments have a fixed term: anything from one to five years. During that time you may receive dividends from any rental income received. These are added to your account and available to withdraw or reinvest. You also receive a share of any profits along with return of your capital at the end of the investment period.

In common with other property crowdfunding platforms, the pandemic has caused delays – in some cases a year or longer – to some projects on Brickowner, As far as I am aware no projects have failed completely, though.

Secondary Market

Brickowner recently introduced a secondary market where investors who need to release funds before the end of an investment term can put their share up for sale to other members. Here is a screen capture showing part of the secondary market currently.

Brickowner Secondary Market

As you may notice, some of the projects on the secondary market have less than £500 available. I asked if this meant you could therefore invest less than £500 in these cases, but was told no. Here is the exact reply I received:

£500 is the minimum investment in both the primary and secondary market. The reason there are smaller amounts on the secondary market is that there is a taxi-rank system, whereby available shares are listed and allocated in order of listing to a queue of buyers. So if I wanted to invest, say, £520 in Tamlaght, and there were no other prospective Tamlaght share buyers ahead of me BUT there were only £120 worth of shares available, I would have to wait until £520 worth of shares were available before my transaction went through. Prospective Tamlaght buyers in the queue would have to wait until my order had been filled before they moved forward in the queue.

In effect, then, you would have to place a bid for at least £500 of the project in question, and would have to wait till additional sellers materialized before getting anything. That is probably not ideal, but I can understand that Brickowner want to avoid the situation where some investors end up with tiny holdings in certain projects.

Charges

Brickowner fees are outlined within the property term sheet for each specific investment. There is no charge for depositing money with Brickowner, and no charge at the end of the investment period when your money and (hopefully) profits are returned to you.

My Thoughts

Brickowner offers an interesting option for people who want to add property to their investment portfolio. As mentioned above, there is a good case for doing this both in terms of dividends and capital growth, and to diversify your overall portfolio.

The Brickowner website is attractive and professional looking. One thing I have noticed is that most of their investment opportunities fill up very quickly. That is good insofar as it indicates that Brickowner is succeeding in attracting investors who believe in the proposition being offered. On the other hand, it does mean that at any particular time there may not be many (or any) projects to invest in. You will therefore need to build your portfolio gradually.

As mentioned above, Brickowner has a minimum investment of £500. This is not as low as some platforms (e.g. Assetz Exchange will let you invest as little as 80p) so it may be less suited to investors on a limited budget. But on the positive side, they are transparent about the fees they charge, and it is good that no fees are imposed for depositing or withdrawing money. It’s also good that a secondary market now exists for investors who wish (or need) to exit early.

As you can see from the screen capture above, the projected returns on investments with Brickowner are at the higher end for property crowdfunding platforms. Of course, this generally means the risks are higher as well. In any event it is important to read the financial information on each project carefully, to ensure that the investment aligns with your own needs and goals. Bear in mind also that some projects offer income as well as the potential for capital appreciation, while others aim for capital growth only.

During the coronavirus pandemic and lockdown, property transactions slowed considerably and many commercial property values in particular fell. However, there is clear evidence that a recovery is now under way. My own view is that there are good opportunities at present for property investors, but obviously in this uncertain time there are never any guarantees. Every investor needs to assess the situation carefully in light of their personal circumstances and tolerance for risk and proceed accordingly.

Investor Protection

The returns on offer from Brickowner are significantly better than you would get from a bank savings account at present, but clearly they don’t carry the same level of protection. For example, you are not protected by the Financial Services Compensation Scheme, which will refund up to £85,000 if a bank with which you have an account goes bust.

On the other hand, your money is invested in bricks and mortar, so it’s unlikely you would lose it all. A further level of protection is that – in common with other property crowdfunding platforms – your money is invested via an SPV (Special Purposes Vehicle). This is effectively an independent company with responsibility for the project in question. If Brickowner were to go bust, funds in the SPV would be protected and returned to investors once the property was sold.

Even if Brickowner were to go under before your money was invested, your funds are paid into a separate, ring-fenced client account. If the platform went belly-up the day after you sent the money, your funds would simply be returned to you.

Overall, then, whilst investing in Brickowner is clearly not as safe as leaving your money in the bank, the measures set out above do provide a reasonable level of protection (and reassurance). As with any investment, however, the higher potential returns on offer come with a greater risk of loss. In my view (and I’m not a qualified financial adviser, just an individual who has put thousands of pounds of his own money into property crowdfunding) Brickowner offers a reasonable balance between risk and reward. But clearly, you should invest only as part of a balanced portfolio combined with other, more liquid types of investment. .

If you would like more information about Brickowner and to set up an account, just click through any of the links in this post.

Disclosure: The links in this post are affiliate links. If you click through and set up an account at Brickowner and make an investment with them, I may receive a fee for introducing you. This will not affect the terms or returns you are offered. Please note also that I am not a registered financial adviser and nothing in this post should be construed as personal financial advice. Before making any investment it is important to do your own due diligence, and seek advice from a qualified financial adviser if you are in any doubt how best to proceed. All investment carries a risk of loss.

If you have any comments or questions about Brickowner or property crowdfunding in general, as always, please do post them below.

Note: This is a fully revised and updated repost of my original article about Brickowner.

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March 22, 2021

Assetz Exchange: My Review of This P2P Property Investment Platform

Nick Making Money, Saving Money, Investing reviews, property, crowdfunding 14 Comments

Today I’m looking at P2P property investment platform Assetz Exchange (launched in January 2019)..

As I have noted before on Pounds and Sense, I am something of an enthusiast for property investment (and specifically property crowdfunding). Among other things, I like the fact that you can make money from both rental income and capital growth. And investing in property can be a good way of spreading the risk when you have equity-based investments.

Of course, investing in property directly is costly and carries all the risk inherent in putting all your eggs in one basket. A major attraction of P2P property crowdfunding investment is that you can get started with much less money and build a diversified portfolio to help mitigate the risks.

In addition, if you invest this way you don’t have to deal with the day-to-day hassles of being a landlord, from finding tenants to repairing broken boilers. This is taken care of by the platform itself and/or their management company. You just have to sit back and – all being well – wait for the rental income and (hopefully) capital gains to materialize.

That said, there have been a few reversals in the P2P property sector over the last few months (see this recent post, for example). So I am now more concerned than ever to ensure that any investments I make in this category control risk as effectively as possible.

What Is Assetz Exchange?

As mentioned above, Assetz Exchange is a licensed P2P property investment platform. It is owned by well-known P2P lending platform Assetz Capital, but run quite separately from them. If you already have an account with Assetz Capital, you will have to register separately with Assetz Exchange.

Assetz Exchange aims to offer net yields to investors of between 5.2 and 7.2% per year. These are generally paid by institutional tenants through multi-year leases. All properties are unleveraged, providing additional security (and stability) for investors.

Assetz Exchange has some similarities with Property Partner, but they differ in some important ways. For one thing, many of the properties are rented out to charities (e.g. NACRO) or housing associations. These organizations generally sign longer contracts than private individuals. They don’t have voids (periods when the property is untenanted and producing no income). Neither are there any maintenance costs, as the organizations take responsibility for this themselves. And finally, these organizations are directly funded by the government, giving them a secure income stream.

Another area of specialism is show homes. Working with a national housebuilder, Avant Homes, Assetz Exchange purchases fully furnished show homes from multiple sites around the country. These are then leased back to the developer for fixed periods of up to five years to be used to help sell other plots. This eliminates potential void periods and avoids any maintenance costs. At the end of the leases, investors will be able to vote on whether to lease the houses to tenants or sell them to home-buyers on the open market.

Assetz Exchange also offers investors the chance to get involved with a new generation of modular eco-homes. This is already a popular approach to house-building in Europe and the United States. Assetz Exchange fund the acquisition and conversion of land into serviced plots, allowing buyers to then order a house to be built on that plot to their own specification. These modular-built eco-homes are sustainable and low energy. They are also typically quick to complete and have a lower impact on the environment.

Assetz Exchange do also buy and let some standard properties as well, offering investors the chance to further diversify their portfolios.

Signing Up

Before you can invest through Assetz Exchange, you will of course have to sign up on the platform. This is pretty straightforward. You just visit the Assetz Exchange website, read the information there, and click on Register in the top-right-hand corner.

You will then be required to enter your contact details and confirm which of four categories of investor you fall into. The options are as follows:

High Net Worth Investor – This includes individuals who have an annual income of £100,000 or more or net assets of £250,000 or more.

Self-certified Sophisticated Investor – This includes individuals who have made more than one peer-to-peer investment in the last two years or who meet certain other criteria relating to investment experience. This is the category I selected myself.

Investment Professional – Including corporate investors and SIPP or SSAS professional service providers.

Everyday Investor – This category is for investors who don’t fit into any of the categories above. They can still invest via Assetz Exchange but must pledge not to invest more than 10 per cent of their portfolio in P2P loans.

You will also be required to answer some multiple-choice questions to confirm that you understand the nature of investments that can be made on the platform. I found some of these questions quite challenging, and was pleased to get them all right first time. I would therefore recommend reading the information on the Assetz Exchange website (including the Help pages) carefully before proceeding to register. If you do make any mistakes, however, feedback is provided, and you can take the test again until you achieve a 100% correct score.

Once you have done all this, you will be able to fund your account. This must be done by bank transfer, as Assetz Exchange do not allow debit card payments. You will then be able to browse the range of currently available property investments:

Investing

Once you are registered on the platform and signed in, click on Exchange in the menu at the top of the screen and all current projects will be displayed. Here are a couple that are showing at the time of writing…

Clicking on any of these will open a page devoted to the investment concerned. Here you can read all about it, view reports and site plans, and so on. One very important area is the Order Book (see example below).

All buying and selling on the platform is conducted via an exchange (otherwise known as the Order Book) which works similarly to the secondary market on Property Partner.

So if you want to buy shares in a particular project, you can do so by accepting the best price currently available on the exchange. In the example above, there are £4,895 of shares available at zero discount (i.e. the original offer price).

If you want to get your shares at a lower price than this, you can make a bid. In the example, an investor has put in a bid for £75 at a 1.04% discount and another investor (or maybe the same one) has put in a bid for £154 at a 2.08% discount.

Conversely, if you wish to sell some or all of your shares at any time, you can accept the best bid (or bids) on the Order Book currently, or place an offer and wait to see if this is matched.

It does take a little bit of getting your head around at first, but it’s actually a simple and straightforward process. One thing to note is that if there is nothing showing on the right-hand-side of the Order Book (under Offers) you won’t be able to buy shares in that project there and then – though you can of course place a bid if you wish and see if a seller wants to match it.

In any event, if you want to buy, just click on the green Buy button (either on the Exchange page or the details page) and complete the short online form. You will need to indicate how much you want to invest, whether this should be from your General or IFISA account (see below), and whether the amount should include the FCC or not (see What Are The Charges? below).

You will also need to indicate whether you want to buy at the current best price (selected by default) or you want to try for a better price (in which case your bid will be added to the left-hand column in the Order Book).

The IFISA Option

As mentioned above, if you wish you can invest with Assetz Exchange via an IFISA (Innovative Finance ISA). As discussed in this recent post, this type of ISA for P2P investing gives you the same tax advantages as a cash or stocks and shares ISA. You don’t have to pay any tax on the money you make, whether this takes the form of dividends, income or capital gains.

Everyone has a generous annual ISA allowance of £20,000 in the current 2020/21 tax year (and next year as well). This can be divided any way you like among the three types of ISA. So if you open an Assetz Exchange IFISA, you can still have cash and stocks and shares ISAs with other providers as well, so long as you don’t invest more than £20,000 in total. You can also only invest money in one of each type of ISA in any one financial year.

Choosing the IFISA option on Assetz Exchange is very easy. You can do it when first registering on the site or later. The only extra thing you have to do is enter your National Insurance number.

If you have maxed out your ISA allowance – or have already invested in another IFISA in the current tax year – you can still invest via your default ‘Regular’ account. You can invest any amount this way, but of course any profits you make will potentially be taxable.

What Are The Fees?

Assetz Exchange do not charge any monthly fees to investors (this is in contrast to Property Partner, who made the unpopular decision to impose an Assets Under Management charge and monthly fee, greatly impacting small investors on the platform especially). The company does have to make money somehow, of course, and they do this from three sources:

Arrangement fee

When a property is first purchased, Assetz Exchange charge an arrangement fee which is included in the Fixed Costs & Contingency (FCC). When parts of the property are sold on the Exchange, this fee is added to the purchase price of the buyer (see above) and so is recovered by the seller. The size of this fee is included in the loan conditions.

Monitoring fee

Assetz Exchange charge a percentage of the gross rent received for the property. The percentage is stated in the loan conditions of the property.

Property disposal fee

A fee of 2% of the gross sales proceeds is charged if investors vote to sell and the property is physically sold.

What Are The Safeguards?

Like most other property crowdfunding platforms, all investments in any project on Assetz Exchange are held in a Special Purpose Vehicle (SPV) for the project concerned. This gives investors in the project some protection if the main company were to go into administration.

A contingency balance is held within each SPV which acts in a similar manner to a provision fund, covering unexpected short-term cash-flow disruptions. It is topped up from receipts and no distributions are made to investors if it falls below a certain level.

SPVs also benefit from indemnity insurance which covers non-payments from tenants. This in theory also covers disruption to cash-flow, but it does not cover voids (periods where the property does not have a paying tenant). For reasons mentioned above, voids should not be an issue with most of the properties listed on the platform.

In common with most other P2P investment platforms, Assetz Exchange does not fall within the remit of the Financial Services Compensation Scheme (FSCS), which covers customers with UK financial services firms up to £85,000 if the institution in question were to go bust.

Pros and Cons

Here is my list of pros and cons for Assetz Exchange.

Pros

1. Fast, easy sign-up.

2. Well-designed, intuitive website.

3. Low minimum investment (as little as 80p per project!) – this makes building a diversified portfolio straightforward.

4. Assetz Exchange take care of all the work involved in buying and managing properties. You just choose which ones to invest in.

5. Option to access money any time by selling on the secondary market (though this does depend on another investor being willing to buy your shares at a price you find acceptable).

6. Relatively low-risk investment options (though of course there are no guarantees)

7. Customer support (in my experience anyway) is fast, friendly and helpful.

8. Charges are reasonable. There is no charge for selling investments.

9. Potential to make money through both capital appreciation and rental income.

10. Rental income is paid into your account every month. You can either withdraw or reinvest it.

11. No monthly fees and only transaction-based charges to pay.

12. Opportunity to invest in socially beneficial developments such as sheltered housing

13. Tax-free IFISA option to which any investment on the platform can be added

14. Investors can vote for their favoured exit option (e.g. selling up) when the time comes

Cons

1. Can’t invest using a debit card

2. No auto-invest option currently available

3. Not as many opportunities as some P2P platforms (although the number is increasing steadily)

Closing Thoughts

I was impressed enough with Assetz Exchange to invest a small amount (£100) of my own money initially and will report back on PAS about how my portfolio fares. Here is how it’s looking at the time of writing, roughly a month after I opened my account. As you can see, my initial investment has grown by £3.87 from a combination of income received and capital growth. For a month that’s not bad at all – if it carries on growing at that rate I’ll be delighted! – but of course it is much too soon to draw any firm conclusions from this.

I particularly like the fact that with the low minimum investment on Assetz Exchange, even if you’re starting very cautiously (as I am) it’s easy to build a diversified portfolio. I like the relative simplicity of investing on the website and the fact that you can exit an investment any time via the exchange (though that does depend on willing buyers being available at a price that is acceptable to you). It is also good that there are no charges associated with selling on the exchange.

You can, of course, withdraw uninvested funds from your Assetz Exchange account at any time.

Obviously there are risks in any form of investing and it is important to do your own ‘due diligence’ before proceeding. You should also bear in mind that this type of investment is not covered by the Financial Services Compensation Scheme, which covers savers with UK banks and other financial institutions up to £85,000. On the other hand, the potential returns are significantly better than the fractions of a percent typically on offer from savings institutions right now, while the risks appear to be at the lower end of the spectrum, with many of the properties on long-term leases with corporate/institutional tenants.

To be very clear, nobody should put all their spare cash into Assetz Exchange (or any other investment platform for that matter) but in my opinion there is definitely a case for including AE within a diversified portfolio.

As mentioned above, I shall be reporting back on how my Assetz Exchange investments perform on PAS in future. In the mean time, if you have any comments or questions about this post, or Assetz Exchange more generally, please do leave them below as usual.

Disclaimer: I am not a registered financial adviser and nothing in this post should be construed as personal financial advice. You should always perform your own ‘due diligence’ before making any investment and speak to a qualified professional adviser if in any doubt how best to proceed. All investments carry a risk of loss.

Please note also that this review uses my affiliate links. If you click through and make an investment or perform some other qualifying transaction, I may receive a commission for introducing you. This will not affect any charges you pay or the product/service you receive.

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February 8, 2021

Is This a Good Chance to Profit with Property Partner?

Nick Making Money reviews, property, crowdfunding 0 Comments

I have discussed Property Partner a few times on this blog, most notably in my Property Partner review.

In brief, Property Partner is a property crowdfunding platform. For the most part they specialize in ‘traditional’ property crowdfunding rather than loan or development finance.

Properties are bought and managed by Property Partner on investors’ behalf. Investors then receive a share of the rental income as dividends, and a share of any profits (plus return of their capital) when the property is sold.

Property Partner launched in January 2015. That date is significant, because after a property has been on the platform for five years, all investors get the chance to exit at a fair market price (determined by an independent surveyor). Due to the pandemic the five-year anniversary process was temporarily put on hold, but it is now proceeding again, albeit with delays as they work through the backlog.

How it operates is that in the run-up to the fifth anniversary of a property, all investors have the opportunity to say if they want to exit their investment at the valuation price or stay on for another five-year term (less than this if they subsequently exit via the resale market, of course).

All investors who have opted to leave will then have their shares pooled and put up for sale on Property Partner at the price stated. New investors are then able to buy these shares.

So long as all shares are sold, the original investors get their money (including any net profits) and the property continues under Property Partner’s management. If all shares don’t sell, however, Property Partner offer the property for sale on the open market. Investors then have to wait until the property is sold before getting their money back. As anyone who has been involved with buying or selling property will know, this is likely to take several months (quite possibly longer in the current circumstances).

The Opportunity

As Property Partner themselves have been pointing out, a number of properties that are coming up to their fifth anniversary are currently trading on the resale market at well below their latest valuation. Here is just one example:

This property in Tower Hill, London (not one I own shares in myself) is due to go through the fifth-anniversary process in April 2021 (or possibly a bit later due to the backlog). At the time of writing shares are available on the secondary market at a price of 91p, which is 28.28% below the latest valuation of £126.88. In theory, then, you could buy shares now and in the next few months sell up for a substantial short-term gain.

Of course, in practice it’s not as simple as that. Here are some reasons:

Nobody knows yet what the final five-year valuation will be. If it is lower than the current valuation (which is perfectly possible in the current economic climate) the net profit will be reduced, perhaps substantially.
There is no guarantee that the shares of all investors who wish to exit will actually sell on the platform. If they don’t, as mentioned, you could have a long wait before the property is sold on the open market. In addition, if this happens there is no guarantee that the property will sell at the valuation price. If it goes for less than this, your returns will be reduced accordingly.
There are platform fees to take into account. In particular, there is a 1% fee for buying on the secondary market and a further 0.5% stamp duty reserve tax charge. Thankfully there are no exit fees, though.
And finally, the number of shares available for any property on the secondary market is limited. Obviously the number you can buy depends on how many shares other investors want to sell at the price in question.

On the plus side, for the length of time you hold the shares you may receive monthly dividends at a rate between 1.5% and 6% per year (though dividend payments on some properties are currently suspended due to Covid). This will offset the fees mentioned above; but if you only intend to hold the shares for a few months it probably won’t cover them completely. Bear in mind that an Assets Under Management (AUM) fee is now deducted from dividends as well.

You can read more about the five-year exit mechanic on this page of the Property Partner website.

My Thoughts

As an investor with Property Partner since almost the beginning (the cover image shows a property in Torquay I own shares in – I plan to retire there one day 😀 ), I am awaiting the five-year exit for my investments with considerable interest.

My personal circumstances have changed since I started investing with the platform, so I intend to take the opportunity to offload at least some of ‘my’ properties. Indeed, I have already voted to sell my shares in the first property I ever invested in with Property Partner (20 Phillimore Close) and am waiting to see how this pans out. I will update this post in due course once I know.

Nonetheless, I am still considering investing short term on the resale market to take advantage of the opportunity the five-year anniversary presents. In particular, I have already topped up my investments in some of the properties I already hold but am planning to dispose of.

I will, though, be cautious until I have a better idea how the first few five-year anniversaries have passed, so I can see if all shares put up by investors sell on Property Partner, or if they have to sell the properties concerned on the open market. As mentioned earlier, the latter route will clearly take longer and there is no guarantee what price would be achieved.

Would I recommend someone who is currently an investor in Property Partner to look into this? Yes, certainly. Whatever your current circumstances, you need to be aware of what is going on with any properties you hold with Property Partner. And if you wish to sell, you should definitely consider taking advantage of the five-year exit mechanic. Equally, if you have money available to invest, you could check out the opportunities buying now on the resale market – though do bear in my mind my cautionary comments above.

If you haven’t joined Property Partner, and you like the idea of investing some of your portfolio in property, the platform is certainly worth a look. As older properties come back on the market for new investors, there will be no shortage of opportunities in the months ahead. And my understanding is that, as the original costs of acquisition have been amortised, there will be less costs to cover from investors, thus boosting the potential returns from the properties in question.

In addition, as these properties have a five-year history already, you will be able to check how they have been performing in terms of dividends generated and capital appreciation. This is no guarantee of how well or badly they will do in the future, of course.

Take a look at my Property Partner review for much more information about the platform and how it works. Also, if you do decide to invest in Property Partner, there is a welcome bonus offer. For convenience I have copied details below from my review.

Welcome Offer

As an existing Property Partner investor, I can offer a special bonus for anyone joining via my link. If you click through this special invitation link, sign up and invest a minimum of £2,000 within 60 days, you will receive an extra bonus as follows (and so will I):

£2,000 – £30
£10,000 – £150
£20,000 – £300
£50,000 – £750

Not only that, once you are an investor with Property Partner, you will be able to offer the same bonus to your friends and relatives and earn commission yourself. There is no limit to the number of people you can introduce through this scheme.

If you have any comments or questions about this post, as always, please do leave them below.

Note: This is a fully updated version of a post published in 2019.

Disclosure: this post includes referral links. If you click through and make an investment, I may receive a commission for introducing you. This has no effect on the terms or benefits you will receive. Please note also that I am not a professional financial adviser. You should do your own ‘due diligence’ before making any investment, and seek professional advice from a qualified financial adviser if in any doubt how best to proceed. Be aware that all investments carry a risk of loss.

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January 22, 2021

How I Lost £3,000 in a Day in Property Crowdfunding (And Lessons Learned From This)

Nick Investing property, crowdfunding 10 Comments

This isn’t an easy post to write, but I like to be honest with readers about my investing failures as well as successes. So here’s the sad story of one failed investment…

How It Happened

About a week before Christmas 2020 I got a cryptic email from the property crowdfunding platform Crowdlords directing me to their website for information about one of my investments. The email didn’t give anything away, but I had a premonition it wasn’t going to be good news.

Anyway, I followed the link to the Crowdlords site and logged in. The update concerned a property development I had invested £3,000 in back in 2016. Originally this was referred to as Seven Eco-Apartments (CL Number Four), but latterly it has been described simply as Kennington Road.

There was a long, involved explanation of what had been going on with the development. But the bottom line was that it had failed completely and investors were going to lose not just some but all of their money.

At first I wasn’t entirely sure I had read this correctly, so I emailed Crowdlords for confirmation. I received a quick reply from Richard Bush, co-founder of Crowdlords. Among other things, he said:

‘Kennington Road is one of two investments (from 72 we’ve completed to date) which have suffered from a very unusual combination of factors – delays, cost overruns, lost sales due to Covid and then further delays getting back to the market only to find the values have dropped. The perfect storm, almost.’

So there it was. At a stroke I had lost £3,000. As you may imagine, I felt pretty sick about this. I have subsequently heard from other people who lost much larger (five-figure) sums on the projects concerned (I’m not sure what the other project was). But that was no consolation, of course. About the only positive thing I can say is that I have had other Crowdlords investments which did deliver the promised returns. But even so, I am well down on my investments via the platform overall.

While it’s tempting to blame Crowdlords for the losses, I accept they are not directly responsible. Clearly they – along with many other businesses – have been the victims of unique and challenging circumstances in 2020. I do, though, think their communications with investors could have been a lot better, especially when it was becoming clear that problems were mounting. While they were quick enough to notify investors about successes – and new projects requiring investment – I couldn’t help feeling that failing projects were being swept quietly under the carpet. To be fair, Crowdlords aren’t the only investment platform I have noticed this with.

I do think it would be a nice gesture if Crowdlords were to offer modest ex-gratia compensation payments from their own profits to investors who have lost all their money. Even a book token would be nice. But realistically, I will be surprised if this happens now.

Lessons Learned

So what lessons have I learned from this experience? I’ll try to sum them up below.

Be a Sceptical Investor

Perhaps I’m stating the obvious here. But when I started investing in property crowdfunding it was pretty new and I found the concept intriguing and exciting. At that point, of course, there hadn’t been any failures to take the shine off. Plus I had recently come into some money through an inheritance and was looking for interesting and profitable ways to invest it.

Looking back now, I can see that I was a bit too ready to buy into the property crowdfunding idea, and put too much faith (and money) in it. I am not saying property crowdfunding can’t work (many of my investments did pay off). Nowadays, however, I am a lot more sceptical when assessing such projects and the claims made about them by their promoters.

It’s important to remember that property crowdfunding platforms are all in business to make a profit. To put it bluntly, they make their money by persuading potential investors to part with theirs.

There is nothing automatically wrong about that – all businesses do it – but it’s essential to examine any potential investment carefully and objectively before opening your wallet. That includes ensuring you understand exactly what the project entails and what the risks for investors are. Which brings me neatly to my second lesson…

Know What You are Getting Into

Property crowdfunding investment opportunities take many different forms.

In ‘traditional’ property crowdfunding a group of investors jointly purchase a property. They then receive rental income pro rata to their investment and a share of any profits when the property concerned is sold. With this type of investment, your money is effectively secured by bricks and mortar, so you are unlikely to lose your shirt. On the other hand, problems (from bad tenants to fire or flood) can arise leading to lower rental income than anticipated and/or delays in selling up. And obviously, if the value of the property doesn’t rise, you may not get all your capital back, let alone any profit on sale.

Development projects, which may launch with no more than a set of architect’s plans, are even riskier. If you invest in a development project (such as Kennington Road), while you may ultimately make a bigger profit, there is a real risk of the project failing completely for any number of reasons. In this case (as I discovered) you risk losing your entire investment sum.

Finally, there are platforms such as Kuflink that allow people to invest in loans secured against property (including bridging loans). If such loans are not repaid, the property can be sold to pay off the debt, so again you shouldn’t lose your entire investment. But even so, the legal processes involved can be time-consuming and expensive; and again you may end up losing some of your capital after all costs are paid off. And even if it doesn’t go that far, there are quite often delays in repaying loans (especially at the moment) meaning you don’t get your money back when you expect it.

So my second lesson is to be very clear what type of property crowdfunding you are investing in and what the risks are. And be especially cautious about investing in development projects, which are by nature more speculative and carry a greater risk of losing all your money.

Spread the Risk

This is of course an important principle in all investing but one that applies especially to property crowdfunding.

If you invest £3,000 in one project (as I did with Kennington Road) unless you’re Bill Gates that’s putting a lot of eggs in one basket. When I started in property crowdfunding I put as much as £5,000 into a single project. That is definitely not something I would do any more.

I am not investing as much in property crowdfunding as I did originally, but where I am still doing it I generally put no more than £100 into a single project. If I lose that money in a worst-case scenario, obviously that is not going to hit my finances nearly as hard. My approach nowadays is to have larger numbers of small investments spread across multiple platforms. This spreads the risk while still giving me control over what I invest in.

It’s interesting to note that most of the remaining property crowdfunding platforms (some have gone to the wall or are no longer serving private investors) also now offer some form of shared investment with automatic diversification. An example mentioned earlier is Kuflink, who offer an ‘Auto-Invest’ account paying up to 7% interest per year. Investments are automatically spread across a wide range of projects on the platform. If you want an easy way to diversify your property crowdfunding investments, this approach has some merit. Personally I prefer to build a diversified portfolio myself (which you can also do with Kuflink), but the automated approach is worth considering if you don’t have the time or inclination for that.

If you want to make use of your ISA allowance with Kuflink, you will need to open an Auto-Invest IFISA with them. You can’t create an ISA and choose your own investments, for reasons I’m not clear about.

Remember the Big Picture

Finally, it’s important always to remember that property crowdfunding is just one way of investing your money. It is also – as I have indicated – a relatively high-risk one.

So if you are going to include property crowdfunding investments in your overall portfolio, it should only comprise a fairly small part of it – I suggest no more than 10 percent. The rest of your money can then be spread across a variety of other investment types to provide good diversification. And as I have noted before, you should also have at least three months’ of income in easily accessible form in case of sudden, unexpected emergencies.

When I first started in property crowdfunding I made the mistake of putting about a third of my money into this type of investment. I am down to around 20% now, which is still (in my view) too much, but some money is tied up in long-term projects where an exit currently looks some way off. But at least hopefully there won’t be any more complete write-offs now.

Closing Thoughts

So that is the story of my failed £3,000 property crowdfunding investment and the lessons I have learned from it.

I am trying to be philosophical and remember that many of my other property crowdfunding investments have made money for me. Nonetheless, in retrospect I wish I had taken a more cautious approach initially. If I had simply put all the money into my Nutmeg stocks and shares ISA, for example, I don’t doubt that financially I would be better off overall.

Nonetheless, I do still believe in the property crowdfunding concept and am happy to have some money still in it. As I’ve said before in Pounds and Sense, property is relatively less affected by ups and downs in the economy than stocks and shares. Property investments don’t provide a method for hedging your equity investments directly, but they do offer an extra element of diversification and spreading of your financial risks. And alright, I will admit that a part of me does rather enjoy (for example) having a small amount invested in student accommodation in Leicester, my old university city 🙂

As always, if you have any comments or questions about this post, please do leave them below.

Disclaimer: Please be aware that I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. You should always do your own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

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April 19, 2020

Is This a Good Time to Invest in Property Crowdfunding?

Nick Making Money property, crowdfunding 0 Comments

Right now it’s difficult for savers and investors to know which way to turn. World stock markets have been in free fall, while bank and building society interest rates are at an all-time low.

Regular readers will know that I’m something of a fan of property crowdfunding and have invested through a number of such platforms (notably The House Crowd, Property Partner, Crowdlords and Kuflink). For anyone seeking half-way decent rates of return, I believe they represent an opportunity worth considering at least, especially in the current uncertain economic climate.

But before I come to that, a few words for those new to this field…

What Is Property Crowdfunding?

As the name says, in property crowdfunding a number of investors pool their money to invest in property and share in the returns pro rata to the size of their investment.

In the last ten years a number of property crowdfunding platforms have been launched to facilitate this. As well as publicizing such opportunities, these companies typically identify suitable properties, advertise and administer projects, and manage properties once they have been purchased. They also distribute payments due to investors from rent received and (eventually) from selling up. Unlike ordinary buy-to-lets, property crowdfunding projects are typically hands-off, passive investments.

There are various methods of property crowdfunding. The traditional method (if you can describe something that’s been around for under ten years as traditional) is equity crowdfunding. Here investors’ money is pooled to buy a house or larger property. Investors then (usually) receive rental income in proportion to the amount they invested plus a share of any capital gains when the property is sold.

The other main method is debt crowdfunding. Here investors lend money to a landlord or property developer so that they can complete a particular project. The money might be used for a bridging loan, or to make improvements to a property prior to selling or remortgaging it. In this type of crowdfunding, the investors never actually own the property. They play a role similar to a bank, lending money and (all being well) being repaid with interest once the project is concluded.

There are also development projects, where investors’ money is used to fund larger-scale property developments. This might involve building a new property (or properties) from scratch, or perhaps converting existing buildings to a new use. Either way, if all goes well, at the conclusion of the development the investors get their capital back along with interest. Development crowdfunding is riskier than equity crowdfunding, but the profits to be made can be bigger.

Property crowdfunding is a form of investment, and like all investments it carries risks. Clearly it’s not as safe as bank or building society savings (which are covered up to £85,000 by the Financial Services Compensation Scheme). All investments are though secured against bricks and mortar, so in the event of a borrower defaulting you should still get your money (or most of it) back once the property concerned has been sold.

The rates of return with property crowdfunding are significantly higher than those from banks and building societies, and they’re also relatively unaffected by fluctuations in the stock market. Property crowdfunding isn’t a way of hedging equity-based investments directly, but it does help spread the risk.

Property and the Coronavirus

These are undoubtedly challenging times for property investors, be they traditional buy-to-let landlords or property crowdfunders.

Even before the virus struck, property prices were at best steady or going down. And measures taken by the government in the last few years, including progressive cuts in mortgage interest tax relief and an additional 3% stamp duty on buy-to-let properties (dubbed ‘The Landlord Tax’) considerably reduced the attraction of buy-to-let for private landlords especially.

The coronavirus crisis has added a whole new layer of difficulty. In particular, measures taken by the government to mitigate the worst effects of the crisis have hit both tenants and property owners hard. Many tenants are obviously suffering financial hardship, and may therefore be having difficulty paying their rent (and other bills). Tenants are, though, currently protected from eviction, and landlords are required to provide rent holidays where appropriate. These measures are sensible and humane, but at a stroke they have reduced or cut entirely many landlords’ income streams, and there is no government scheme to assist them. Obviously I don’t expect many tears to be shed for landlords, but life has undoubtedly become a lot more challenging for them.

In addition, due to social distancing and the lockdown, only limited construction work is continuing. It’s also difficult (or impossible) for surveyors and valuers to do their jobs, or for potential buyers to visit and inspect homes and other properties. All of this means that to a great extent the UK property market has currently ground to a halt.

Despite that, it’s not all bad news. At some point – maybe quite soon – the lockdown restrictions will be eased. The government is (rightly) keen to get the economy moving again as soon as possible. And there are still plenty of people looking to move home, buy property, begin new development projects, and so on. Much as the depressed state of the stock market has presented opportunities for those willing to take a chance on buying now while prices are low, there is certainly a case that property will bounce back in the coming months and years too, rewarding those who invest in the sector now.

Property Crowdfunding Opportunities

Clearly property crowdfunding investors are not immune to the effects of the coronavirus crisis. Developments and sales have been delayed, and in some cases at least rental income has been reduced. It’s quite possible – likely even – that in the longer term the rate of defaults on loans will go up too.

Nonetheless, property crowdfunding investors are unlikely to be as badly affected as private landlords. For one thing, if they are sensibly diversified across a range of properties (and platforms) they won’t be as susceptible as someone with a single buy-to-let. And like all property investors, their money is secured by bricks and mortar, so they will get it back (or most of it) eventually – though in the current crisis, that might take some time. For most property crowdfunding investors at the moment, sitting tight is likely to be the best (or only) option.

As I said above, the crisis is also creating opportunities for those who believe that property will prove to be the resilient investment it has generally been in the past. Rather than prolong this post too much, I will focus my attentions on the four platforms I am currently invested in, and which I am therefore most familiar with.

Property Partner

Property Partner is an interesting case. They have just announced that they are suspending all dividend payments for the next three months (potentially longer). This is, of course, mainly money from rent received, which (for reasons stated above) is likely to take a hit in the coming months. Property Partner say they are taking this action to ensure that investors are protected in the longer term and all properties have sufficient cash reserves to cover any necessary expenditure.

As I said in this post a few months ago, many of the properties on Property Partner are coming up to their five-year anniversaries. This is a significant milestone, because after a property has been owned for five years, all investors have the chance to exit at a fair market price (determined by an independent surveyor). Property Partner have said they are suspending this process until June at the earliest.

You can still buy and sell properties on Property Partner’s secondary market, and on the face of it there are some good-value buying opportunities here, with properties listed at up to 25% off their current valuations (see screen capture below).

In theory, you could buy shares in these properties on the secondary market at a big discount, and sell them at their current valuation for a good profit when the five-year sale process is reinstated.

Unfortunately it’s not quite a straightforward as that, though. For one thing, the current valuations were made before the coronavirus crisis hit, so they may no longer be an accurate reflection of a property’s value. In addition, the five-year exit mechanism depends on other investors wanting to buy the shares at the valuation stated. Failing that, the property will be sold on the open market, but that could take a long time in the current economic climate. Neither is there any guarantee what price would be achieved.

My personal view is that I do believe property prices will bounce back but it may not be for quite a while. I am looking seriously at some of the buying opportunities on Property Partner’s secondary market where I think they represent good value in the medium- to long-term, but I am not rushing to invest at the moment.

Please check out my Property Partner review for more information about the platform.

Kuflink

Kuflink is another property crowdfunding platform I have a soft spot for. Although I don’t have huge amounts invested with them, so far all of my investments have paid out as promised, with just a short (one-month) delay in one case.

Kuflink is a property loans platform. So far anyway I have not heard of any defaults, although the longer the crisis continues, the greater the risk this may happen. Nonetheless, based on my experiences to date, I am continuing to invest (cautiously) with them. In particular, I like their new secondary market, where you can buy loan parts from other investors who want to sell up early (see screen capture below)

As you may imagine, this has been happening a lot recently, as many investors have wanted (or needed) to access their capital urgently. This has created short-term buying opportunities which I have been busily taking advantage of. These loan parts typically have only a few months to run, so you can expect to get your capital back quite quickly (and can then reinvest it). Only loans in good standing with monthly repayments up to date may be listed on the secondary market, so that offers some reassurance against default – though of course it is by no means a guarantee.

Secondary market aside, Kuflink also still has a steady stream of new investment opportunities coming to the table. Of all the property platforms, they appear to be the ones least affected by the current crisis. I am not exactly sure how they have achieved this, but obviously I hope they continue to do so!

If you haven’t invested in Kuflink before, it’s also worth mentioning that they have a generous welcome offer which is still operating. You can earn up to £4,000 in cashback with this. See my Kuflink review for full details.

The House Crowd

The House Crowd is actually the first property crowdfunding platform I invested with. My experience with them has generally been good, although as mentioned in my House Crowd review there have been some delays and defaults.

Although they started as a traditional crowdfunding platform, The House Crowd have increasingly moved towards development projects, and these have inevitably been hit by the current crisis. THC say that at present they are following a strategy of ‘prudently maintaining The House Crowd platform to ensure its continued and efficient operation as we see our way out of the other side of the lock down.’

That means there are fewer investment opportunities on THC at the moment. You can though if you wish still invest in their automatically diversified ‘Auto-Invest’ products, with target interest rates of 5% (Cautious) to 7% (Bold), or the new THC Fusion account, which offers even greater diversification with a target interest rate of 4% to 4.5%. More information about these can be read on the House Crowd website.

At the time of writing THC also have a couple of development projects open for investment, including their flagship project The Downs in Altrincham town centre, paying a target rate of 10% per year (see screen capture below).

Personally I am not investing any more money in The House Crowd at the moment, but I am keeping this under review. You can read my full review of The House Crowd here

Crowdlords

Finally, Crowdlords say they have experienced a significant reduction in investment levels since February, which they put down to uncertainty caused by the pandemic. They do still have a couple of lending opportunities listed (see capture below), but not much else. I guess like The House Crowd they are hunkering down and waiting for the current restrictions to be lifted and the property market to start moving again.

Again, I am not currently planning to invest any more in Crowdlords, but am keeping an eye on any opportunities that may crop up in the months ahead. You can read my full review of Crowdlords here.

Final Thoughts

I thought I’d close by sharing a couple of nuggets of information I found while researching this post.

First, the ratings agency Fitch has downgraded the rating of UK debt to AA-. However, Fitch estimated growth next year would bounce back to 3 percent if the UK can begin to unwind the measures to tackle the health crisis in the second half of the year. The UK’s Coronavirus Job Retention scheme – a three-month programme to support employees hit by the pandemic – will cost about 1.3 per cent of GDP, according to Fitch estimates.

Second, estate agents Knight Frank have predicted that many house sales will be lost this year and the UK’s property market will see little to no growth in 2020. However, a sharp recovery has been predicted for 2021. Liam Bailey, global head of research at Knight Frank, said, “We expect a revival in activity to continue, with volumes next year expected to be 18 per cent above the level seen in 2019.”

All of this (and other sources) suggests that while property markets are in the doldrums now and probably for most of 2020, there is every chance that by next year we will see a recovery. There are undoubtedly good opportunities on offer in property investment now if you agree with this evaluation and are able to be patient in the shorter term.

In any event, if you’re looking for better returns than the banks and lower volatility than the stock markets, then property generally – and property crowdfunding in particular – remains in my view well worth considering as part of a balanced investment portfolio.

As always, if you have any comments or questions about this post, please do leave them below.

Disclosure: I am not a regulated financial adviser and nothing in this post should be construed as individual financial advice. You should always do your own ‘due diligence’ before investing, and seek independent financial advice if in any doubt how best to proceed. All investment carries a risk of loss.

If you enjoyed this post, please link to it on your own blog or social media:

March 30, 2020

Ratesetter: My Review of This P2P Lending Platform

Nick Making Money, Investing crowdfunding 1 Comment

Updated 11th June 2020

Around two years ago I invested some money in the Ratesetter P2P lending platform, partly – I admit – to take advantage of their welcome offer (the current welcome offer is discussed below). So today I thought I would share my thoughts about it.

Ratesetter is a P2P platform that puts would-be lenders and borrowers together, obviously taking fees for doing so. It is one of the longest-running P2P lending platforms, having launched in 2010. They are one of the ‘Big Three’ P2P lending platforms, which also include Zopa and Funding Circle.

In this post I am looking at Ratesetter from a lender’s (or investor’s) point of view, but of course anyone can apply to borrow via Ratesetter too.

Types of Investment

Although investors lend money to borrowers via RateSetter, the actual lending is done behind the scenes. So from an investor’s point of view, RateSetter looks and works much like a bank or building society. Importantly, though, investors with RateSetter don’t benefit from the protection bank and building society savers receive by law in the UK via the Financial Services Compensation Scheme. More about this shortly.

There are three main investment products available on RateSetter. They are named Access, Plus and Max.

The Access product, as the name indicates, aims to offer quick access to your funds without any fee. The Plus and Max products pay more interest but you have to pay a ‘release fee’ of 30 or 90 days’ interest respectively if you wish to withdraw from them.

The terms and conditions for each account are summed up in the screen capture below.

Note that the interest rates on Ratesetter can vary, and the rates on offer when you read this may be different from those shown above.

The Access product is the closest equivalent to an ordinary savings account. You can ask to withdraw some or all of your money at any time without penalty. It’s important, however, to note that this is NOT the same as an instant saver account with a bank or building society. Withdrawing does depend on there being other investors willing to take over your lending on the platform. Ratesetter say that to date investors have received their withdrawn investments within 24 hours on average, which does offer some reassurance.

There is also a ‘fair usage’ clause, which prevents investors from lending new money for 14 days after a withdrawal.

With the Plus and Max products you can also request withdrawals at any time. As stated above, however, in these cases a release fee is applied.

Provision Fund

Ratesetter does, however, have a provision fund which provides a safety net in the event of a borrower defaulting. In the ten years since it was launched no investor has lost money from defaults on RateSetter, which is pretty impressive (although obviously it doesn’t guarantee it couldn’t happen in future). The provision fund is paid for by a ‘credit rate fee’ which is paid by all new borrowers.

It’s worth mentioning also that provision fund protection extends equally across all loans. There is therefore no particular need to diversify your investments on Ratesetter, although you should of course diversify across other platforms and investment types.

The IFISA Option

You can also invest in Ratesetter through an IFISA (Innovative Finance ISA). This type of ISA for P2P lending gives you the same tax advantages as a cash or stocks and shares ISA, i.e. you don’t have to pay any tax on the profits you make.

Everyone has a generous annual ISA allowance of £20,000 (in the current 2019/20 tax year). This can be divided any way you like among the three types of ISA. So if you open a Ratesetter IFISA, you can still have cash and stocks and shares ISAs with other providers as well, so long as you don’t invest more than £20,000 in total. You can also only invest money in one of each type of ISA in any one financial year.

If you have maxed out your ISA allowance – or have invested in another IFISA in the current tax year – you still have the option of opening an Everyday Account. You can invest any amount in this, but of course the profits you make will be taxable.

2020 Interest Rate Cut

Due to the coronavirus crisis and the current febrile economic environment, RateSetter announced on 4th May 2020 that there would be a temporary reduction in interest rates for the remainder of 2020. During this time, investors will receive only 50% of their interest, with the other 50% going to the Provision Fund, for the protection of all investors. At current rates. that means the actual interest rates paid during this time will be 1.5% for Access accounts, 1.75% for Plus accounts, and 2% for Max accounts.

I have also heard (and confirmed with Ratesetter) that currently repayment requests are taking three to six months to process. If that changes I will update the information here.

Ratesetter Pros and Cons

Based on my experiences so far – and the results of some online research – here is my list of pros and cons for the Ratesetter P2P lending platform.

Pros

1. Fast, easy sign-up.

2. Low (£10) minimum investment.

3. Choice of investment terms

4. Quick and simple investment process.

5. Tax-free IFISA option available.

6. Provision fund protects lenders against loss (no investor losses at all to date).

7. Ability to access your money at any time (though with a fee when exiting the Plus and Max products)..

8. Customer service (in my experience anyway) is fast and helpful.

9. NEW! A free £100 added to your account for new users who invest £1,000 and keep this invested for a year (see below).

Cons

1. Rates paid aren’t the highest in P2P lending.

2. Website isn’t always as intuitive to use as it should be.

3. Withdrawals are taking longer than usual to process due to increased demand following the coronavirus outbreak.

4. Temporary interest rate reduction by half to help boost the Provision Fund (see above)

Conclusion

Overall, my experiences with Ratesetter so far have been good. My initial deposit was matched within 24 hours and has been generating the promised returns ever since. I reinvested my bonus payment into the platform and this is earning interest as well.

As mentioned earlier, P2P lending does not enjoy the same level of protection as bank and building society savings, which are covered (up to £85,000) by the Financial Services Compensation Scheme. Nonetheless, the rates on offer at Ratesetter are significantly better than those from most banks and building societies. And the existence of a substantial provision fund with a strong record of protecting investors from losses clearly offers reassurance. Based on its past record and the protections in place, Ratesetter appears to be one of the safer P2P lending platforms.

It’s also reassuring that you can access your money any time – this can be an issue with property crowdfunding platforms in particular, as liquidity in these platforms can be limited. With the Plus and Max products you will be charged for exiting early, though, so invest in these only if you are pretty confident you won’t be needing the money within the next few months.

On the negative side, the current three to six month delay in withdrawals, and the halving of the rate paid to investors, is clearly disappointing. I understand that RateSetter are doing this to protect the business in the longer term, but it obviously it reduces the attraction of investing with them currently (though see Welcome Offer, below)

Clearly, no-one should put all their spare cash into Ratesetter (or any other P2P lending platform). Nonetheless, it is worth considering as part of a diversified portfolio. Not only are the rates of return higher than those offered by banks and building societies, they are relatively unaffected by ups and downs in the stock market. P2P lending isn’t a way of hedging your equity-based investments directly, but it does help spread the risk.

Welcome Offer

Currently if you are new to RateSetter you can get £100 added to your account for free just by signing up and depositing £1,000. Full terms of the offer are reproduced below, and you can also find them on the RateSetter website.

You can take advantage of this offer so long as you

have not previously registered with RateSetter
deposit a minimum of £1,000 through the RateSetter ISA or Everyday account and this is matched within 56 calendar days of opening an account
keep a minimum of £1,000 invested for 1 year

Your bonus will be credited to your Everyday Account and invested in Ratesetter’s Access product within 30 working days of qualifying. You can ask to withdraw your money at any time, but you must keep a minimum of £1,000 invested for 1 year to qualify for your £100 bonus.

My Thoughts: This is a great offer from RateSetter if you are new to the platform. If you invest £1,000 and keep it there for a year, then including the £100 welcome bonus you will get a total return of at least 12 percent for the first year, even allowing for the temporary 50% rate cut. As a matter of interest, this is the same welcome offer I took advantage of when I signed up with RateSetter two years ago, and my bonus £100 was credited without any issues (or prompting from me) twelve months later.

Clearly, this is a generous promotional offer by RateSetter and I assume it won’t be available forever. If you want to take advantage, therefore, don’t wait too long. I will remove this information if/when I hear the offer is no longer valid.

As always, if you have any questions or comments about this post, please do leave them below.

Note: This is a fully revised and updated relist of my original (2018) RateSetter review.

Disclosure: this post includes affiliate links. If you click through and make an investment at the website in question, I may receive a commission for introducing you. This has no effect on the terms or benefits you will receive.

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