crowdfunding

March 10, 2020

The House Crowd: My Review of this Property Crowdfunding Platform

Nick Investing crowdfunding, property 2 Comments

Regular readers will know that 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 risk when you have equity-based investments.

The House Crowd was actually the first property crowdfunding company I invested with, starting in 2014. So I thought I would say a few words today about my experiences with the company and the investment opportunities they offer.

History

When I started investing with The House Crowd, they were offering mainly shares in specific properties. Investors pooled their money to buy a property and received a share of the rental income (distributed annually) with their money back – and hopefully a good profit – when the property concerned was sold. Typically a five-year timescale was specified, with investors then able to vote on whether to sell and take their profits or continue for another year (or more).

I still have shares in seven House Crowd properties. There haven’t been any disasters, though in certain cases rental income has been lower than forecast. This was typically due to voids (tenants leaving and not being replaced). There were also a few cases of tenants failing to pay their rent and absconding. And there was one ‘tenant from hell’, who apparently threatened other tenants with a knife so they all left, caused serious damage to the property, and left owing six months’ rent. Reading about this made me glad I invest via property crowdfunding platforms (and REITs) and am not a landlord myself.

One drawback of this type of investment is that it is quite illiquid. If you want your money back before a property is sold, The House Crowd will try to sell your share to another investor. There is no guarantee a buyer will be found, however, and even if one is you will only get the price you paid for your share. There is currently no formal secondary market, as on some other platforms such as Property Partner.

On the plus side, this sort of investment has its attractions from a tax perspective. Rental distributions are paid as dividends. There is currently a £2,000 annual tax-free dividend allowance which many people don’t otherwise use. And even if your dividend income exceeds £2,000, as a basic rate taxpayer you will only pay 7.5% tax on the balance above this. Gains when selling are – of course – treated as capital gains, and again there is a generous annual tax-free CGT allowance (£12,000 in 2019/20).

New Types of Investment

In recent years, recognizing that some investors were being deterred by the lack of liquidity, The House Crowd have introduced other types of investment. One of these is secured loans. Here money is lent to developers (or THC’s sister company, House Crowd Developments) for short- to medium-term projects, typically between 6 and 18 months.

Obviously you don’t get rental income with these, but you get your money back with interest once the loan is paid off. Interest rates vary, but are typically in the region of 7 to 12% per year. The rate paid generally depends on the LTV (loan to value). The higher the LTV (the loan amount compared with the property value), the riskier the loan, and the higher the interest rate on offer as a result. Some example projects open for investment at the time of writing can be seen in the cover image at the top of this post.

I have invested in loans with The House Crowd as well. The majority have gone well. For example, I invested £5,000 in a development loan for a Welsh property called Croesyceiliog Farm. I got this back with £461.99 interest ten months later.

Other loan investments haven’t gone as smoothly. For example, in 2016 I invested £1,000 in a loan for a property called Caverswall Castle. This was meant to be 12-month loan, but the borrower defaulted and legal action is now being taken to sell the property and repay investors. I still expect to get my money back eventually, but legal proceedings move at a glacial pace. How much interest I will get after all costs are covered I don’t know. At this stage, if I just get my £1,000 back, I will be more than happy.

Secured loans have various attractions for investors, and many property crowdfunding platforms as well as The House Crowd are now offering more opportunities of this nature. They have the advantage of shorter timescales than direct investment and decent rates of return (assuming the borrower doesn’t default). One drawback is that the interest paid when the loan is redeemed is treated as income, so you will have to pay tax on it at your highest marginal rate.

Auto-Invest and IFISA

In recent years The House Crowd have introduced an Auto-Invest product which you can (optionally) hold as an Innovative Finance ISA (IFISA).

As you may know, IFISAs offer the opportunity to invest in P2P lending and get tax-free returns. 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 House Crowd 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. Note that you can also only invest in one ISA of each type per financial year.

The House Crowd Auto-Invest product allows you to invest in one of three investment portfolios: Cautious, Balanced or Bold. Each of these comprises a basket of bridging and development loans, providing automatic diversification. The Cautious product has a target return of 5%, the Balanced 6%, and the Bold 7%. Note that these are target rates and they are not guaranteed. I have copied a summary table about the three products from the House Crowd website below .

As you can see, the more ‘adventurous’ the product, the higher the average LTV and the higher the maximum LTV. As mentioned earlier, the higher the LTV (other things being equal) the riskier the loan, and the higher the interest rate on offer as a result.

There is a minimum investment of £1,000 and a minimum 12-month term. After that you can withdraw by giving 30 days’ notice. Your money is protected by a legal charge secured against the borrower’s land/property, which can be possessed and sold in the event of the borrower not repaying.

It is possible to transfer another ISA to the House Crowd IFISA free of charge if it is over £5,000 (there is a £50 transfer fee for ISAs valued from £1,000 to £4,999).

Pros and Cons

As usual, here is my list of pros and cons for The House Crowd.

Pros

1. Well-established property crowdfunding platform with a good track record.

2. Customer service is fast, friendly and helpful.

3. Choice of investment types.

4. Tax-free IFISA option available.

5. Competitive rates of interest.

6. Attractive, user-friendly website.

7. Detailed information provided about loans and investments.

Cons

1. Limited liquidity with no formal secondary market.

2. Rental income (where applicable) only distributed annually.

2. Minimum £1,000 investment.

3. Some loans are currently in default.

4. Can’t open an IFISA if you have already put money in another IFISA this year.

Conclusion

For the most part I have been happy with my experiences with The House Crowd to date. Although (as mentioned above) there have been ups and downs, overall I have still made a good net return from my investments with them.

I like the new Auto-Invest/IFISA option, which is automatically diversified across a range of loans (thus reducing volatility and risk). The minimum 12 month term and withdrawal on 30 days’ notice thereafter is attractive as well. It is, however, important to be aware that the target rates of return quoted are not guaranteed.

You should also bear in mind that investments with The House Crowd do 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. 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 has been sold. But obviously, this may take a while.

The lack of liquidity with property investments generally – and the absence of a formal secondary market with The House Crowd – means you should only invest money you are unlikely to need at short notice. This should be regarded as a medium- to long-term investment, therefore.

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

A further consideration is that with world stock markets in chaos at the moment due to the coronavirus outbreak, now is probably not an ideal time for the average individual to be investing in stocks and shares. P2P lending of the type offered by The House Crowd represents an alternative investment approach that may be less susceptible to the wild ups and downs (mostly downs) on stocks and shares right now..

Welcome Offer

Unfortunately at present there is no welcome offer (or referral scheme) for new investors with The House Crowd. If a welcome offer is launched in future, I will of course post full details here.

If you plan to open an account with The House Crowd after reading this review, I’d still be grateful if you could let me know by sending a message via my contact form or leaving a comment on this post. This may help me persuade THC to set up a referral scheme and/or welcome offer in future 🙂

And of course, if you have any comments or questions about this review, as always, please do leave them below.

Note: This is a fully revised and updated version of my original 2017 review.

Disclosure: I am not a professional financial adviser and nothing in this post should be construed as personal financial advice. 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. All investments carry a risk of loss. Finally, in the interests of full disclosure, I should reveal that as well as being an investor with The House Crowd, I also own shares in the company.

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

February 16, 2020

Bricklane: My Review of This Property Investment Platform

Nick Investing property, crowdfunding, pensions 23 Comments

Please be aware that this is a historical post. Bricklane is now closed to new investors and is winding down. Please see the comments below for the latest updates about it.

Today I am looking at another property investment platform, Bricklane.

Unlike Kuflink and Ratesetter, both of which I have discussed previously on this blog, Bricklane is not a platform for peer-to-peer loans. Neither does it arrange crowdfunded investments in specific properties like Crowdlords and Property Partner.

Bricklane is structured as a Real Estate Investment Trust, or REIT for short. For those who don’t know, REITs are property funds that use investors’ money to buy (and manage) property and provide returns in the form of rental income plus capital appreciation.

In order to qualify as a REIT in the UK, companies have to meet certain requirements. The most important are as follows:

At least 75% of their profits must come from property rental.
At least 75% of the company’s assets must be involved in the property rental business.
They must pay out 90% of their rental income to investors.

In exchange for operating within these rules – and to encourage investment in UK real estate – REITs are not required to pay corporation or capital gains tax on their property investments. That helps make REITs profitable for the companies running them, and is how they are able to generate attractive returns for investors.

Normally rental income from REITs is treated as taxable income and taxed at your highest marginal rate. However, if you invest through an ISA or SIPP (Self Invested Personal Pension) no tax is due. You therefore get the best of both worlds – your money isn’t subject to taxation while invested in the REIT, and when it comes back to you in the form of income distributions and profits on sales of shares, you don’t have to pay tax on these either.

Types of Investment

You can invest in Bricklane as a stocks and shares ISA or a SIPP, or failing that in a standard investment account, where you will be liable for tax.

To maximize the benefits from investing in a REIT, I highly recommend going down the SIPP or ISA route, if you haven’t already used up this year’s allowance. As a reminder, everyone has a £20,000 annual ISA allowance (for 2019/20) and you are also only allowed to invest in one cash ISA, one stocks and shares ISA and one Innovative Finance ISA (IFISA) in any one tax year. I invested in a stocks and shares ISA with Bricklane myself.

Bricklane has two property portfolios you can invest in. These are Regional Capitals, which includes properties in Birmingham, Manchester and Leeds. and London, with a portfolio of properties in the capital. The Regional Capitals portfolio has generated a return of 19.3% since it was launched in September 2016 and the London portfolio 8.9% since its launch in July 2017 (figures from the Bricklane website).

As a Bricklane investor, you can choose to invest in either or both portfolios, in any proportion you choose. I opted to put all my money into Regional Capitals, as I believe this is where the biggest growth potential lies. In addition, rental income in this portfolio is higher, and I am also concerned about the possible impact of Brexit on London. You might see this differently, of course!

Bricklane Pros and Cons

Based on my experiences so far – and some online research – here is my list of pros and cons for the Bricklane property investment platform.

Pros

1. Fast, easy sign-up.

2. Well-designed, intuitive website.

3. Low minimum investment of £100.

4. Bricklane take care of all the work involved in buying and managing properties. You just choose which portfolio/s to invest in.

5. REIT structure offers significant tax advantages.

6. Tax-free ISA and SIPP options are available.

7. Possibility to access your money at any time (though this does depend on another investor being willing to buy your shares).

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

9. Charges are reasonable, comprising an initial 2% fee (though see my comment below on how you may be able to offset this) and 0.85% annual management fee.

10. Potential to profit through both capital appreciation and rental income.

11. Rental income is paid into your account every three months. You can either withdraw it or reinvest it to compound your returns.

12. Up to £1,500 cashback is available for new investors of £5,000 or more via my referral link (see below).

Cons

1. No detailed information provided about the properties your money is invested in.

2. Can’t invest in an ISA if you have already put money into another stocks and shares ISA this year.

3. 20% tax deduction from rental income at source if you don’t invest via a SIPP or ISA (and additional liability if you are a higher rate taxpayer).

4. Minimum £10,000 investment for a SIPP.

5. Returns over the last few months have been disappointing (see below)

6. No absolute guarantee you will be able to sell your shares when the time comes.

My Experiences

I put £5,000 into a Bricklane Stocks and Shares ISA in October 2018. As mentioned above, I chose to invest in the Regional Capitals rather than the London portfolio. The graph below – taken from my member’s page – shows the earnings generated since I opened my account.

As you will see, initially my investment performed pretty well. In the first nine months I made about £150, which equates to an annual interest rate of 4% (tax-free). That’s not spectacular, but it still beats most bank and building society accounts by a considerable margin. It is similar to the top rate currently on offer with P2P platform RateSetter in their Max account, although in their case you have to pay a fee equivalent to 90 days’ interest if you wish to withdraw. There is no withdrawal fee with Bricklane.

Since July/August 2019, however, returns have diminished considerably. My earnings between August 2019 and February 2020 were only just over £7, which is clearly a very low percentage rate. Of course, a large part of this is down to the depressed state of the property market caused by uncertainty over Brexit. I am hoping that now this is definitely happening – for better or for worse – my investment will get back on an upward trajectory again. Although recent results have been disappointing, at least the overall value of my portfolio hasn’t gone down (which has happened with some of my other property-related investments).

One other thing I should mention is that in October 2019 I withdrew £1,000 from my account to help fund a new central heating boiler after the old one packed in. This has therefore also reduced my returns a little. Although even if I still had the full £5,000 invested, earnings over the last few months would still have been nothing to write home about.

I should add that the withdrawal in question proved straightforward, although it wasn’t instant. I received the money in my bank account about a fortnight after putting in my request.

Conclusion

Clearly the performance of my Bricklane portfolio since last August has been disappointing, though overall I am still better off than I would have been if I had kept my money in a bank or building society.

I am hoping that things will start to improve in the property markets now that the Brexit issue has been resolved. There are some signs of this, although it remains to be seen whether the recovery in property prices will be sustained. For the time being, then, I am sticking with what I have in Bricklane, though I am not planning to top up my investment with them currently.

More generally, my experiences with Bricklane have been good. The sign-up process was fast and simple, and my £125 referral bonus (see below) was credited to my account instantly, completely offsetting (with a bit to spare) the initial 2% charge.

I also like the fact that any investment with Bricklane is automatically diversified across a range of properties, thus reducing volatility and risk. By contrast, with many P2P loan and property crowdfunding platforms, you invest in one loan or property at a time.

It’s also reassuring that you can ask to withdraw your money at any time – this can be an issue with property crowdfunding platforms in particular. As mentioned earlier, this does depend on someone else being willing to buy your shares, but Bricklane say that to date there hasn’t been a problem for anyone wanting to sell. As I said above, I had no issues when I wanted to release £1,000 from my own investment with them.

It is important to note that this is an investment rather than a savings account, and it does not therefore 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 (FSCS).

Clearly, no-one should put all their spare cash into Bricklane (or any other investment platform). Nonetheless, in my view it is worth considering as part of a diversified portfolio. Not only are the rates of return (other than the last few months) higher than those offered by most banks and building societies, they are less affected than shares by ups and downs in the stock market. Property investments aren’t a way of hedging your equity-based investments directly, but they do help spread the risk.

In addition, the tax treatment of REITs make them a highly tax-efficient investment, especially if you can invest in the form of a SIPP or an ISA.

Welcome Offer

As an existing Bricklane investor, I can offer a special cashback deal for anyone signing up and investing on the platform via my link. If you click through this special invitation link, sign up and invest a minimum of £5,000, you will receive £125 in cashback (and I will get £100). With a £5,000 investment this bonus will cover your initial 2% charge and still leave you £25 in profit 🙂

If you invest more, you will get even more cashback, as follows:

Over £10,000 – £250

Over £20,000 – £500

Over £50,000 – £800

Over £100,000 – £1,500

Not only that, once you are an investor with Bricklane, even if you only start with £100, you will be able to offer the same cashback bonus to your friends and relatives and earn commission yourself as well. There is no limit to the number of people you can introduce through this scheme.

Obviously, this is a generous promotional offer by Bricklane 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.

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

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. 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.

Note: This is a fully revised and updated version of my original Bricklane review from October 2018

UPDATE 15 March 2020: Having said that my earnings from my Bricklane ISA over the last 6-8 months were disappointing, since the start of February they have shot up by over 100% (see below).

This doesn’t exactly cancel out the recent falls in my equity-based investments due to the coronavirus, but it does demonstrate the value of having a well-diversified portfolio. And I am obviously feeling more positive about Bricklane as an investment platform now 🙂

One other thing to note is that until the end of April 2020 Bricklane are waiving all investment fees for both new and existing investors. Visit the Bricklane website for more information.

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

RateSetter Invest £10 Get £20 Free Offer

January 25, 2020

Get a Free £20 From RateSetter When You Invest £10!

Nick Saving Money, Investing reviews, crowdfunding, events 0 Comments

PLEASE NOTE: This welcome offer has now changed. Details of the new ‘Invest £1,000, Get £100’ free welcome offer can be found in my fully updated RateSetter review.

I’ve mentioned P2P lending platform RateSetter before on Pounds and Sense – in my RateSetter review and also my recent post about changes in their account structure..

As I said then, Rate Setter is one of my favorite lower-risk P2P lending sites. It lets you save via a tax-efficient IFISA and/or an ordinary (taxable) Everyday account. Although their rates aren’t the highest (currently 3% to 4%) I like the fact that risk is spread across all loans on the platform, with a provision fund to cover any defaults.

In my previous articles I mentioned their welcome offer of a £100 bonus for anyone investing £1000 for a year or longer. This offer is now closed, though if you took advantage and are waiting for the £100 bonus to be credited twelve months on, that will (of course) still be honoured.

What RateSetter do have now is an enticing (and much lower cost) Invest £10, Get an Extra £20 offer.

New Welcome Offer

Currently if you are new to RateSetter you can get £20 added to your account for free just by signing up and depositing £10. 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;
register after 23rd January 2020; and
deposit a minimum of £10 through the RateSetter ISA or Everyday account within 56 calendar days of registering.

Your bonus will be credited to your Everyday Account and invested in RateSetter’s Access (instant access) product at the going rate (currently 3%) within 30 working days of qualifying. From here you can transfer it to your ISA account if you like or simply withdraw it.

My Thoughts

This is a great offer from RateSetter if you are wary about P2P investing and want to dip a toe without risking any significant money. It is also good if you only have very small amounts available to invest, or you just like the idea of getting your hands on a free twenty pounds! It will also give you a chance to see how the RateSetter P2P platform works for yourself.

Although the bonus is ‘only’ £20 as opposed to the £100 on offer before, you only have to invest £10 to get it rather than £1,000. In addition, your bonus will be credited within 30 working days of qualifying for it, rather than having to wait a full year as before.

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.

Disclosure: This post includes my referral link. If you click through and make an investment for this offer, I will receive a bonus for introducing you. This has no effect on the terms or benefits you will receive. Please be aware also that I am not a qualified financial adviser and nothing in this post should be construed as individual financial advice. You should do your own ‘due diligence’ before making any investment, and take professional advice if at all unsure how best to proceed. All investments carry a risk of loss.

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

December 19, 2019

My Best Investments of 2019

Nick Investing events, property, crowdfunding, retirement 5 Comments

One question I get asked fairly frequently as a money blogger is what I think are the best current investment opportunities.

I have to be very careful when responding to this sort of question (and always tell people this). For one thing, I am not a qualified financial adviser, so it would be against the law for me to offer personalized investment advice. And even if I were, I still wouldn’t be allowed to give one-to-one advice without first doing an in-depth fact-find on the person in question.

Of course, this is exactly as it should be. For one thing, everyone’s circumstances are different, and what represents a good investment for me might not be the same for you. It depends on a wide range of factors, including your income and expenditure, your family responsibilities, how much you want to invest, the timescale (and purpose) you are investing for, your age and health, and so forth.

Another important consideration is your attitude to risk. Other things being equal, higher returns come with higher risks. If you’re comfortable with this and willing to accept it in exchange for the chance of better returns, that is of course your decision. On the other hand, if riskier investments would cause you sleepless nights, you are probably better off seeking a safer – if possibly less exciting – home for your money.

In addition, anything I say here is inevitably based on my own experience, and there is no guarantee yours will be the same as mine. I might, for example, have great success with one platform and suffer losses on another. But there is no way of knowing whether your experiences if you invest will be the same as mine. This applies especially if you have to choose specific investments on the platform (as with many P2P/property crowdfunding platforms) rather than putting your money into a pooled fund of some kind.

And, of course – as the financial services ads always say in the small print – past results are no guarantee of future performance…

I don’t want to come across as too negative. I am, after all, a money blogger and investor myself. So what I can – and will – do is talk about my own investing experiences and share information about what has worked well for me this year. It’s then up to you to decide if you want to investigate these opportunities any further. If so, you will need to do your own ‘due diligence’ before deciding how to proceed, perhaps taking professional advice from a qualified financial adviser as well (which I strongly recommend if you are new to investing or at all uncertain).

Although I count myself as a reasonably experienced investor, I do still have an independent financial adviser (Mike from Integrity Wealth Solutions). He oversees about half my investments, while the other half I look after myself. He also advises me on my financial situation more generally and answers any questions I can’t answer satisfactorily myself. i will talk more about this in another post. But I wanted to mention it here to show that I am not at all opposed to using a financial adviser and in general recommend it, particularly when starting out in investing.

My Best Investments of 2019

Below I have listed some of my investments that have performed best this year and/or caused me the least stress and hassle! I have included a few lines about each one, and links to any blog posts I have written about them for further info.

(1) Nutmeg

Nutmeg is a robo-advisory platform. I have used it for my Stocks and Shares ISA investments over the last three years. My investment pot has grown steadily, albeit with a few ups and downs, as is to be expected with equity-based investments. At the time of writing my Nutmeg pot has grown by about 40% since i started investing in April 2016, which is certainly a lot better than I could have achieved with a bank savings account. Of course, you shouldn’t normally invest in any equity-based product with anything less than a five-year timescale.

Nutmeg use exchange-traded funds (ETFs) as their investment vehicle. These are discussed in more detail in my in-depth Nutmeg review, which also includes details of what I invested with them and when. Note that my investment has grown by a further £1,100 since that article was published.

(2) Ratesetter

Ratesetter is a P2P lending platform. They don’t pay the highest rates, currently ranging from 3% for instant access to 4% for their Max account (where you pay a release fee of 90 days’ interest if you wish to withdraw). Though better than most bank savings accounts, those rates are clearly nothing spectacular.

One thing I particularly like about Ratesetter, though, is that they have a provision fund that effectively covers investors against defaults. That means you don’t have to worry about diversifying your investments across a range of loans, as is the case with some other P2P lending platforms. Of course, if the whole platform were to collapse the provision fund wouldn’t necessarily save you, but Ratesetter has been going for ten years now and appears professionally and competently run. It has delivered the promised returns to me with no stress or hassle, and I am happy to recommend it based on my experience.

In addition, if you check out my Ratesetter review you can discover how to get a free £20 bonus if you invest a mere £10 with them.

(3) Buy2Let Cars

I took a long time before deciding whether to invest with Buy2Let Cars, as it is quite an unusual investment. Basically what you are doing is putting up the money to buy a car for someone in a responsible job who can’t afford to buy one outright themselves. You then receive monthly repayments over a three-year period, and a final repayment of capital plus interest at the end of the loan. The minimum investment is £7,000, so this is obviously not going to work for everyone. Personally I bought one new car at a price of £14,000 in March 2018. Since then I have been receiving £250 per month in repayments, with a final payment of £8,429 due in month 37. That will give me a total net profit of £3,429 based on an annual interest rate of 10% (the rates on offer can vary but once you have signed an agreement the rate is fixed for the duration of the contract).

There are – of course – various safeguards and protections in place, fully discussed in my Buy2Let Cars review. Buy2Let Cars say that to date they have a 100% repayment record to investors, which appears to be confirmed by their Trust Pilot reviews. This investment has been working very well for me, with payments turning up in my bank account every month like clockwork. I am currently semi-retired, so it is providing a useful extra monthly income for me, with a large lump sum due in 2021, just a few months before I qualify for the state pension 🙂 If you think it might work for you, I recommend checking out my Buy2Let Cars review and speaking to my contact there, Brett Cheeseman, who helpfully answered all the questions I had at the time I invested.

(4) Kuflink

Kuflink offer the opportunity 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 don’t pay the highest rates in this field – their loans are typically at an interest rate of around 7% – but in my view they offer a fair balance between risks and rewards. One thing I like about them is that interest is paid into your account monthly on all loans. I only have a relatively small amount invested, but so far everything has been going well with just the occasional short delay in repayment of capital.

Kuflink currently have a generous welcome offer, with cashback of up to £4,000 for new investors. Take a look at my Kuflink review for more information about this.

(5) Crowdlords

Crowdlords is a property crowdfunding platform. I have been investing with them almost since their launch and have made a good overall profit. Crowdlords pay competitive interest rates (over 20% in some cases) and offer a choice of equity and debt investments. Equity investments are higher risk than debt ones, but offer the potential for bigger returns if all goes well.

My only reservation about Crowdlords is that I currently have two overdue investments with them. In both cases, though, I have received full and reasonable explanations for the delays, and have been told that the money should be in my account within the next few months. Obviously, if that doesn’t happen, I will let Pounds and Sense readers know.

Crowdlords doesn’t have a welcome offer as such, but they do have a Refer a Friend scheme. If you sign up quoting my code, I will share the commission I receive 50:50 with you. Please see my Crowdlords review for more information about this.

So those are the investments that have given me the best returns and/or least stress during 2019. I do have others as well, including Primestox, ZOPA, Bricklane, The Lending Crowd, The House Crowd and Property Partner. Most of these have still made some money but none has really set the world alight.

Only Primestox actually lost me money. This is (or was) a premium food investment platform. They started promisingly and I made good returns on my early investments, but then they were hit by a series of delays and defaults. This happened with three projects I invested in. In the case of two I have received partial repayments with more promised, but in the third I have probably lost my £500. Primestox are no longer advertising investment opportunities, and I assume are re-evaluating their business model.

Property Partner is an interesting case. I have made modest returns on my portfolio this year, partly due to the fact that the property market in general has been in a slump. That said, there haven’t been any issues with delays or defaults, and dividends have been credited to my account every month as promised. It will be interesting to see what happens in 2020 as properties come up to their five-year anniversary and investors have the opportunity to exit at the current market price. As I noted in this recent blog post, this has the potential to create opportunities for both buyers and sellers.

I haven’t included certain other investments in this article. These include my Bestinvest SIPP, which is now in drawdown and holding up well in value. Neither have I included money invested via my financial adviser. This is mostly in funds from Prudential, which again are doing pretty well.

Lastly, I haven’t included the money I ‘invested’ in Football Index. My portfolio has more than doubled in value over 18 months, so in some ways it is my most successful investment of 2019! I am sure luck has played a significant part in this. Nonetheless, if you want to know more about Football Index – and read how you can get a risk-free £50 when signing up – you might like to check out this recent blog post.

I hope you have enjoyed reading this article, which has run on a bit longer than I expected. I hope also it may have given you a few ideas to investigate further if you are in the fortunate position of having money to invest.

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

Disclaimer: As stated above, I am not a professional financial adviser, and nothing in this article should be construed as personal financial advice. 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. All investment carries a risk of loss.

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

October 15, 2019

Ratesetter Rings the Changes

Nick Saving Money, Investing reviews, crowdfunding 2 Comments

Updated 30th March 2020

I have mentioned P2P lending platform Ratesetter a few times on Pounds and Sense – most notably in my Ratesetter review.

Ratesetter is one of my favorite lower-risk P2P lending sites. It lets you save via a tax-efficient IFISA and/or an ordinary (taxable) Everyday account.

Although their rates aren’t the highest – currently 3% to 4% – I like the fact that risk is spread across all loans on the platform, with a provision fund to cover any defaults. This means that if someone you have lent money to via the platform defaults, it shouldn’t affect your returns. It also means that – unlike some other P2P lending platforms – there is no need to diversify your lending across the platform in order to control risk.

The Changes

Originally you could invest in Ratesetter in a choice of three different products: Rolling Market, One Year and Five Year.

The Rolling Market was the closest to an ordinary savings account, letting you withdraw some or all of your money any time without penalty. With the 1-year and 5-year products you could still request withdrawals before the full term of the loan, but in those cases a percentage charge was applied. This was 0.3% with the 1-year product and 1.5% with the 5-year product.

Under the new system, loans are spread across all three types of product. What was called the Rolling Market is now an Access account. As before, you can withdraw money from this at any time without penalty. There is just a ‘fair usage’ clause, which prevents investors from lending new money for 14 days after a withdrawal.

Instead of the 1-year and 5-year products, there are now the Plus and the Max. The Plus product pays more interest, but if you want to withdraw you have to pay a ‘release fee’ of 30 days’ worth of interest based on Going Rate at the time of release. And with the Max product, which pays more still, you are charged a release fee comprising 90 days of interest, again based on Going Rate at the time of release.

The Going Rate is the current interest rate for loans in the three product categories. Previously this was set by the market, based on supply and demand. That meant it could fluctuate, sometimes considerably, from day to day and even hour to hour. The interest rate you received could therefore vary a lot.according to when you invested (and when any returns were reinvested).

Under the new system, interest rates are set by Ratesetter themselves. This makes Ratesetter feel more like an ordinary savings provider. Currently the Going Rates are as follows:

Access: 3.0%

Plus: 3.5%

Max 4.0%

If you are already a Ratesetter investor, you may therefore want to reassess the type of product in which your money is held.

If – like me and many others – you put your money into a Rolling Market (now Access) product, you may want to think about transferring some to a Plus or Max account to take advantage of the higher interest rates. There is no greater risk in these accounts, and the only downside is that you will lose 30 or 90 days’ interest if you withdraw early. Doing this is likely to deliver better overall returns, so long as you remain in for at least six months in the case of a Plus account and a year in the case of a Max account. (These are only very approximate figures, as the interest rates paid can change.)

If you want to do this, you can’t (unfortunately) transfer money directly from one type of product to another. Rather – and I have confirmed this with Ratesetter – you will need to start by withdrawing your money from the product it is in currently (e.g. Access) so it goes into your holding account. You can then invest from your holding account into the new product (e.g. Max) that you want. Bear in mind though the 14-day rule mentioned above.

My Thoughts

Overall, I like these changes to Ratesetter. The new Going Rates are admittedly a little lower than the previous market rates. However, I think the greater stability and certainty over the interest rate you will be getting more than make up for this. I also like the new, simpler terms for withdrawing money from your account. I will continue to invest in Ratesetter and regard it as one of the safer (if less exciting) components of my portfolio.

As I’ve noted before on Pounds and Sense, 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 (FSCS). Nonetheless, the rates on offer at Ratesetter are significantly better than those from most banks and building societies. And the existence of a substantial across-the-board provision fund with a strong record of protecting investors from losses clearly offers reassurance.

It’s also reassuring that with all three products you can access your money if needed at any time, even though in the case of Plus and Max you will be charged a release fee for this. Obviously, you shouldn’t therefore put money into the Plus or Max products if you think there is any likelihood you will need it back within a month or two.

Clearly, no-one should put all their spare cash into Ratesetter (or any other P2P lending platform). Nonetheless, it is certainly 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 definitely help spread the risk.

If you would like more information about Ratesetter, please see my original Ratesetter review (which I will be fully updating soon).

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;
register after 27th March 2020; and
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.

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 between 13 and 14 percent for the first year (depending on whether you opt to invest your money in the Access, Plus or Max product). 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.

Obviously if you need your £1,000 at any time, you can withdraw it (normally within 24 hours). This will though mean you don’t receive the £100 welcome bonus at the end of the first year.

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

Disclosure: As stated above, this post includes my referral link. If you click through and make an investment, I will receive a bonus for introducing you. This has no effect on the terms or benefits you will receive. Please be aware also that I am not a qualified financial adviser and nothing in this post should be construed as individual financial advice. You should do your own ‘due diligence’ before making any investment, and take professional advice if at all unsure how best to proceed.

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

November 10, 2018

Property Partner: My Review of This Property Crowdfunding Platform

Nick Investing property, crowdfunding 0 Comments

Today I am spotlighting Property Partner, a property crowdfunding platform I have been investing with since 2015.

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 risk when you have equity-based investments.

Property Partner

Launched in January 2015, Property Partner has swiftly become the UK’s largest property crowdfunding website. They have over 11,500 investors, who between them have invested over £122.7 million in properties across the UK. Non-UK investors are welcome to join Property Partner too, so long as the legal system in their country permits it. Unfortunately US residents cannot invest via Property Partner at this time.

Property Partner offer shares in a wide range of properties. They include commercial buildings and residential ones, including PBSA (purpose built student accommodation). The properties tend to be on the larger side, so you won’t generally find single flats or terraced houses here. Neither do they sell shares in development or bridging loans, as offered by several other property crowdfunding platforms. This is what you might call ‘traditional’ property crowdfunding, where a property is bought on behalf of investors, who then receive a share of the rental income and any capital gains when the property (or their share in it) is sold. Here is a sample listing from their website…

One big attraction of Property Partner is that they have an active secondary market. That means investors can offer part or all of their portfolio for sale at any time. Obviously, to sell your shares in a property you will need a buyer, but Property Partner say that so long as they are priced reasonably (i.e. at or below the current official price) shares normally sell within 72 hours. By contrast, other property crowdfunding platforms such as The House Crowd and CrowdLords do not run formal secondary markets, though they say they will always help would-be sellers find a buyer if required.

Another attraction of Property Partner is that dividends are paid monthly, unlike other platforms which typically pay quarterly, biannually or annually. Money from dividends builds up in your account, and you can either withdraw it or reinvest it in other properties. When you add that you can get started on Property Partner for as little as £250, it is not all that surprising to me that they have enjoyed such success.

For legal reasons explained on the website, you can’t currently invest on Property Partner through a tax-efficient ISA or a SIPP. That means rental income will be liable for tax at your highest marginal rate, and any profits on selling will be subject to Capital Gains Tax (though there is quite a generous annual CGT allowance).

On the positive side, for anyone investing £5000 or more, you can opt for one of three managed plans: income focused, growth focused, or balanced. Your investments in them will be managed on your behalf to ensure good diversification of assets. Property Partner say that the net annual return (capital growth plus rental income) of the dividend plan should be at least 6.5%, the balanced plan at least 7.5% and the growth plan at least 8.5%.

My Experience

I have been investing with Property Partner for three years now, and have shares in a total of 17 properties. My largest single holding is around £2,550 (St David’s Lodge in Hastings, pictured above) and the smallest is £27.90.

I have aimed to build a diversified portfolio within Property Partner. I hold shares in both residential and commercial properties, in London and across the English regions (Property Partner doesn’t have properties in Scotland or Northern Ireland, and they have just one in Wales). To diversify further, I also recently bought a share in some purpose-built student accommodation in Leicester. Although as Leicester is my old university city, sentimental reasons may also have played a part in this decision!

During all the time I have been with Property Partner there have been no defaults or delays, and dividends have arrived in my account every month like clockwork. I understand that is true of all the properties on their books.

All properties on Property Partner are purchased for an initial five years. After the five years are up, all investors will get the opportunity to sell their share (or part of it) at a market valuation made by an independent chartered surveyor. As the platform hasn’t yet been going for 5 years, that hasn’t happened yet. Alternatively, as mentioned above, you can put your share up for sale at any time on the secondary market.

Pros and Cons

Based on my experiences, here is my list of pros and cons for Property Partner.

Pros

1. Fast, easy sign-up.

2. Well-designed, intuitive website.

3. Low minimum investment of just £250.

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

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

6. Guaranteed opportunity to sell at a fair market price after five years.

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

8. Charges are reasonable, with an initial 2% fee. There is no charge for selling shares.

9. Potential to profit through both capital appreciation and rental income.

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

11. Up to £750 cashback is available for new investors of £2,000 or more via my referral link (see below).

12. Managed investment plans are available for investors of £5,000 or more.

Cons

1. No tax-free ISA or SIPP option available.

2. Rates of return are competitive but not the highest.

3. No development or bridging loans.

4. Some properties are purchased with gearing (loan finance). This makes them riskier if the value of the property should fall.

Conclusion

Overall, I have been impressed by my experiences with Property Partner. There have never been any delays or defaults, which can’t be said of every crowdfunding platform I have invested with. Property Partner state that the returns generated across all their properties since 2015 average 7.3% a year, taking into account both rental income and capital appreciation. That obviously beats bank and building society accounts by a considerable margin.

As ever, it is important to note that investments with Property Partner do 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. All investments are secured against bricks and mortar, however, so even in a worst case scenario it is highly unlikely you would lose all your money.

The lack of liquidity with property investments generally means they should be regarded as medium- to long-term investments, and you should only invest money you are unlikely to need at short notice. The active secondary market on Property Partner does though mean that you should be able to recover your capital quickly if you need it, though there is no guarantee what price you will get.

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

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, even if you only start with £250, 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.

Obviously, this is a generous promotional offer by Property Partner 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.

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

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

July 24, 2018

How to Invest Tax-free in Peer-to-Peer Lending with IFISAs

Nick Saving Money, Investing crowdfunding, sponsored post 4 Comments

Peer-to-peer (P2P) lending involves lending money to people and businesses via a P2P platform (generally web-based) and being paid back with interest by the borrower.

P2P lending has become increasingly popular among savers looking for better interest rates than those offered by banks and building societies. Until quite recently, however, you couldn’t invest in them tax-free.

All that changed in April 2016, though, with the launch of the Innovative Finance ISA, or IFISA for short. IFISAs allow anyone to invest tax-free in P2P lending via authorized platforms.

You can put any amount into an IFISA up to your annual ISA allowance. In the current 2018/19 tax year this is £20,000, which can be divided however you choose between a cash ISA, a stocks and shares ISA and an IFISA. So, for example, you could invest £10,000 in a cash ISA, £6,000 in a stocks and shares ISA and £4,000 in an IFISA.

Note that under current rules you are only allowed to invest new money in one of each type of ISA in a tax year. It is though generally possible to transfer money from one type of ISA to another without it affecting your annual entitlement (although there may be platform fees to pay).

After a slow start when only a very few were available, in 2018 the number and range of IFISAs has grown significantly. As of July 2018 over 40 UK IFISA providers are operating, ranging from well-established P2P lenders such as Zopa to new, upcoming platforms such as The Just ISA (see below). Interest rates paid vary considerably, from around 4% to 15%. Obviously, the higher rates reflect the higher levels of risk involved.

Although all IFISAs involve P2P lending, a number of different types are available. Those currently on offer include lending for all the following purposes:

property development
business loans
personal loans
green energy projects
bonds and debentures
entertainment industry loans
infrastructure projects

An unusual IFISA which certainly lives up to the “Innovative” description is The Just ISA. This is described as a litigation ISA. Lenders’ money is used to help individuals fund the cost of taking businesses, institutions and individuals to court, typically for reasons of professional negligence.

The Just ISA offers five-year bonds paying a gross interest rate of 8% per year (in practice this headline rate will be reduced somewhat due to fees and charges). All cases are underwritten and fully insured, and they say they have a success rate of 90%. There is a minimum investment of £2,000.

What Are The Risks?

All UK IFISA providers have to be authorized by the Financial Conduct Authority (FCA) and HMRC. This doesn’t in itself protect lenders (or savers if you prefer) against the failure of a platform, however. While savers with UK banks and building societies are covered by the government’s Financial Services Compensation Scheme (FSCS), which guarantees to reimburse up to £85,000 of losses, this does not apply to IFISA platforms.

All IFISA providers do offer various safeguards to lenders, though. These vary, but include provision funds to cover potential losses, insurance policies, and so forth. In many cases, also, loans are made against the security of property or other assets, which in the worst case could be sold to pay off any debts.

Even so, IFISA lenders don’t enjoy the same level of protection in the UK as bank savers. This is, of course, a major reason why the returns on offer are significantly higher. It’s therefore important to be aware of the risks and ensure you are comfortable with them before investing this way. It’s also important to lend across a range of platforms and loans, and not make the mistake of putting all your savings eggs in one P2P lending basket.

Summing Up

If you are looking for a home for some of your savings that can offer better interest rates than banks and building societies and won’t incur any tax charges, IFISAs are definitely worth considering.

As well as the higher interest rates, they can add diversity to your investments, helping you ride out financial peaks and troughs. Just be aware of the risks involved in P2P lending, and ensure you invest in IFISAs only as part of a balanced portfolio.

Disclosure: this is a sponsored post on behalf of The Just ISA. All investments carry a degree of risk. Be sure to do your own “due diligence” before investing, and speak to a qualified professional financial adviser if in any doubt before proceeding.

If you have any comments or questions about this post, as always, feel free to post them below.

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

May 11, 2018

Guest Post: Property Versus Pensions – Which Is Best?

Nick Investing crowdfunding, sponsored post, pensions 4 Comments

Ever worry that your pension isn’t large enough to sustain the kind of retirement you’re looking forward to?

On average, British pensioners receive just 29% of their in-work earnings.

This small sum would leave many of us struggling to pay the bills, let alone being able to afford those long-awaited family holidays or treats. Latest figures from the Organisation for Economic Co-operation and Development show that 18.5% of those aged 76+ in Britain are living in poverty.

Those dependent on state funds are the worst affected and, with pensions failing to provide a sufficient income, many retirees rely on property as an alternative source of income.

Buy-to-let property is a big commitment, both in terms of the capital you need to get started and the long-term nature of the investment. Many of us look forward to relaxing during retirement, and there really is no guarantee of ‘a quiet life’ when you invest in rental properties. If you were planning to invest all your savings in property, it’s essential to consider how your finances would hold up should the property become vacant or need substantial repairs.

If house prices fall or stagnate, you could be left responsible for a property portfolio that contributes only a minimal amount towards your retirement income. Even if the housing market continues to boom, your personal circumstances may change and, as property is an illiquid asset, it can be tricky to turn your investments into cash at short notice.

So, if you’re in search of a way to supplement your pension and bring your retirement dreams a little closer to reality, you’ll be pleased to know that buy-to-let isn’t the only way to invest in bricks and mortar…

Kuflink’s innovative peer-to-peer platform offers investors many of the same advantages as buy-to-let, including monthly interest payments and property-backed opportunities, without the hassle of maintenance or deposit costs!

Register today to view Kuflink’s portfolio of exclusive short-term property loans offering up to 7.2% interest pa gross*, and invest from just £100.

*Capital is at risk. Rate correct as of April 2018. You should seek independent financial advice.

Thank you to my friends at Kuflink for an interesting post. I would just like to add that I am an investor with Kuflink myself and so far have been pleased and impressed with the service received.

As an existing Kuflink investor, I can also offer a special cashback incentive for anyone signing up and investing on the platform via my link. If you click through this special invitation link and invest a minimum of £1000, you will receive cashback as follows:

Investment amount	Cashback due
£1,000 – £5,000	2.50%
£5,000.01 – £25,000	3.00%
£25,000.01 – £50,000	3.50%
£50,000.01 – £99,999.99	3.75%
£100,000	4.00%*

*Cashback capped at £4,000

And yes, you really can earn up to £4,000 in cashback. If you invest £100,000 or more, then in addition to the £4,000 cashback, you would receive interest of around 6% to 7%. That means over a year your total returns on your £100,000 investment would be at least £10,000 (and more if you reinvest the monthly interest repayments on Select-Invest loans). Food for thought if you have that sort of money, though admittedly not many of us are lucky enough to do so!

Note that once you make your first investment of at least £100, you will have 14 days to maximise your cashback by making further investments. The 14-calendar day window starts from the moment you make your first investment. There is no limit to how much money you can invest in this window, and the cumulative total of your investments made within this 14-day period will be the total amount eligible for cashback.

The cashback amount will be transferred six months after your first live investment is made (assuming you haven’t sold up via the secondary market in that time). If Kuflink withdraw this offer after you have invested and before your cashback has been paid, you will still receive the cashback reward. The cashback will be paid into your Kuflink wallet, and from there you can either withdraw it to your bank account or invest it in another Kuflink loan or product.

As your referrer via this link or the link above, I will receive a referrer’s fee (variable) if you invest £1000 or more. Note also that once you have invested you will be able to offer the same cashback deal to your friends and colleagues, and get a referrer’s fee yourself as well. There is no limit to the number of people you can introduce through this scheme.

Obviously, this is a generous promotional offer by Kuflink 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 comments or questions about this post, please do leave them below.

Disclosure: This is a sponsored post by Kuflink, for which I am receiving a fee. As stated above, I am also an investor with Kuflink myself.

Update:: I have now added an independent review of Kuflink based on my experiences of investing with them. Click here to read it.

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

May 25, 2017

PrimeStox – An Unusual Way to Make Money Investing in Food

Nick Investing crowdfunding, food 4 Comments

If you’re looking for a more remunerative (and interesting) home for some of your savings than a low-paying bank account, you might like to check out what PrimeStox has to offer.

PrimeStox is basically a crowdfunding platform for high-quality food producers and sellers. These businesses are seeking short-term funding (typically for four months) to make products and get them to market. Once the products are sold, investors get their money back with interest. This is generally around 8% for four months, which works out as an annual rate of around 24%. If you immediately reinvest your money in another project, the annual interest rate will be more than this, due to the effects of compounding.

The opportunity may be best explained by an example, so here’s one product I invested in recently. Scarlett and Mustard is a range of premium salsas, dressings, and so on produced by a husband and wife team in East Soham. They say all the ingredients they use are 100% natural and sourced locally.

Last month they were looking for a total investment of £6,000 to fund 6,000 jars of their tomato salsa range (pictured below). I decided to invest a modest £50, which made me the beneficial owner of 50 jars. All being well, I shall receive £54 (my original investment plus 8% interest) by the end of September 2017.

You might ask what will happen if they don’t sell the salsa. The answer is that all investments are secured by the products concerned, so in the worst case scenario I will receive 50 jars of tomato salsa, which would keep me going for a very long time! Or I could sell them or give them away to friends, of course.

In practice, though, that is an unlikely scenario. So far all investments on PrimeStox have been repaid with interest on or before the date specified. If there is a problem, all investors vote on how best to resolve it, e.g. by selling the goods to a third party for a smaller margin. It is therefore highly unlikely that you would ever lose all your money.

Primestox Pros and Cons

Obviously, investing in PrimeStox is not as safe as putting your money in the bank. In addition, the money will be tied up during the investment period with no easy way of accessing it (although this.is generally no more than a few months). You shouldn’t therefore invest money you may need urgently in the near future.

On the other hand, there are a lot of things I like about it…

Rates of return are highly competitive, even compared with other crowdfunding and P2P investment opportunities.
The minimum investment is very low – typically £20. You can therefore test the water without risking any significant funds.
If you are prepared to spend a bit more – say £100 or over – in many cases you will receive a higher interest rate.
Unlike some other crowdfunding platforms where demand from investors greatly exceeds supply, with PrimeStox there are generally a few days to decide whether you want to invest and how much (though I have noticed that opportunities are filling up faster and faster).
You are supporting small businesses in the UK and abroad who are dedicated to producing high-quality foodstuffs.
And, as mentioned earlier, as an investor you hold title in the product until it is sold. PrimeStox will even send your share to you free of charge if you want.

As for why producers are offering these sort of returns, it is basically to aid their cashflow by covering the cost of raw materials, production, storage, transportation, and so on. But also, they hope that investors will act as ‘brand ambassadors’ for them, helping to promote the product, and maybe even buying some themselves.

In that spirit, here are links to the three products I have invested in on the platform so far, with the amounts I purchased included.

Scarlett & Mustard – Tomato Salsa – £50

Strong Roots Sweet Potato – £100

Bread Tree – Rainbow Pasta (pictured below) – £56

There is absolutely no obligation to promote any of the products you invest in, but obviously as an investor you have a financial interest in ensuring they are successful. Investors are also sometimes offered rewards, discounts and other incentives by the producers in question.

Clearly nobody should invest more than a small portion of their savings in PrimeStox, but the potential returns on offer are compelling, and investing this way is certainly more fun than stocks and shares!

If you have any comments or questions about PrimeStox, as always, please feel free to post them below.

Disclaimer: I am an investor with PrimeStox but have no other relationship with the company and am not an affiliate for them. Neither am I advising anyone to invest in PrimeStox. Investment decisions are personal to every individual and if in any doubt you should seek advice from a qualified financial adviser. This post is provided for information purposes only and should not be construed as financial advice..

Save

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

The Alternative Guide to Property Investment - Review

April 25, 2017

Review: The Alternative Guide to Property Investment by Frazer Fearnhead

Nick Investing property, crowdfunding 3 Comments

Today I’m reviewing a guide to property crowdfunding that has just been published by Frazer Fearnhead. The full title is The Alternative Guide to Property Investment: How to Build Your Property Portfolio via the New Property Crowdfunding Platforms.

The book is available in both hard copy and Kindle e-book form. I bought the e-book version, partly because (I admit it) I’m a cheapskate, but also because I wanted to get my hands on it as quickly as possible.

For those who may not know, Frazer is the founder and managing director of The House Crowd, one of the UK’s leading property crowdfunding platforms. In his book, he explains what property crowdfunding is and the pros and cons compared with other forms of investment. The book is organized in twenty-three main chapters (most of them quite short), as follows:

Why Invest in Property at All?
How Much Diversification is Sensible?
Why Property Investment is the Best Vehicle to Supplement Your Pension
Establishing Your Own Investment Criteria
Capital Growth vs Cash Flow
Residential vs Commercial
How to Beat the Averages and Give Yourself the Best Chance of Making a Successful Property Investment
The UK Property Market – 2017 and Beyond
Passive Property Investment
A Brief History of the Alternative Finance Industry
All About Equity Crowdfunding
How Does Property Crowdfunding Compare with Traditional Property Investment?
All About Peer-to-Peer Secured Lending
Commonly Asked Questions About Property Crowdfunding
Comparison: Equity Crowdfunding vs Peer-to-Peer
What Returns Can You Expect?
Taxation
How to Decide Whether Crowdfunding is Right for You
Key Factors to Consider When Choosing a Property Crowdfunding Platform
Using Your Pension to Invest via Crowdfunding
Crowdfunding Your Own Property Deals
FCA Regulated Companies
In Conclusion

My Review

The Alternative Guide to Property Investment is well written and neatly presented, with illustrations where relevant. It covers most things someone new to property crowdfunding would want to know. As I have been investing this way for several years (using The House Crowd and other platforms such as Property Partner and Crowdlords) quite a lot of the information was familiar to me already. Nonetheless, it is valuable to get Frazer’s perspective as one of the pioneers of property crowdfunding, and there is plenty of food for thought even for seasoned property investors.

Clearly, as the MD of The House Crowd, Frazer has a vested interest in promoting the attractions of property crowdfunding. Nonetheless, he gives a balanced view of the pros and cons and is not afraid to state that it does carry a degree of risk. I agree though with his view that people should not automatically rule it out because of this. While property crowdfunding is not as safe as putting your money in a bank savings account, the potential returns are much higher. And a variety of safeguards exist, including the fact that most property crowdfunding (except for the most speculative development projects) is secured by bricks and mortar. But of course, you should only invest in property crowdfunding as part of a balanced portfolio.

Another aspect of this book I liked is that it explains the range of investment opportunities now available in property crowdfunding. These include equity crowdfunding – the original and most familiar form of property crowdfunding – where investors purchase shares in a property and receive a proportion of the rent paid as well as capital appreciation when the property is sold. But the book also covers secured lending – an increasingly popular option – where investors provide cash to property owners and get the capital and interest back at the end of the loan period (typically 6 to 12 months). And finally, the book discusses property development projects, which offer greater potential profits but also involve bigger risks.

Another important topic covered in the book is taxation, and specifically how property crowdfunding can be used to make the most of your tax-free allowances. The latter include savings interest, dividends, and capital gains. This is a feature of property crowdfunding that can be highly advantageous for investors.

If you are new to property crowdfunding, The Alternative Guide to Property Investment will provide a concise and easily digestible introduction to this field, from someone who really does know this business inside and out. The asking price is modest, and all profits from sales are going to the charity Lifeshare who work with the homeless and vulnerable in Manchester (where Frazer was born).

If you have any comments about The Alternative Guide to Property Investment (or property crowdfunding more generally) please feel free to post them below and I will do my best to answer them. You might also enjoy reading my earlier post How to Profit from Property Crowdfunding, which sets out the basics of how property crowdfunding works.

Disclosure: I have a range of investments with The House Crowd and other property crowdfunding platforms, including development loans, secured lending and equity crowdfunding. I am also a shareholder in The House Crowd. I firmly believe that property crowdfunding can be a worthwhile addition to any investor’s portfolio, and have put my own money where my mouth is!

Save

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

1 2 3 4