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:

1. Why Invest in Property at All?
2. How Much Diversification is Sensible?
3. Why Property Investment is the Best Vehicle to Supplement Your Pension
4. Establishing Your Own Investment Criteria
5. Capital Growth vs Cash Flow
6. Residential vs Commercial
7. How to Beat the Averages and Give Yourself the Best Chance of Making a Successful Property Investment
8. The UK Property Market – 2017 and Beyond
9. Passive Property Investment
10. A Brief History of the Alternative Finance Industry
11. All About Equity Crowdfunding
12. How Does Property Crowdfunding Compare with Traditional Property Investment?
13. All About Peer-to-Peer Secured Lending
14. Commonly Asked Questions About Property Crowdfunding
15. Comparison: Equity Crowdfunding vs Peer-to-Peer
16. What Returns Can You Expect?
17. Taxation
18. How to Decide Whether Crowdfunding is Right for You
19. Key Factors to Consider When Choosing a Property Crowdfunding Platform
20. Using Your Pension to Invest via Crowdfunding
21. Crowdfunding Your Own Property Deals
22. FCA Regulated Companies
23. 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!

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How to Profit from Property Crowdfunding

Nick Investing property, crowdfunding 8 Comments

Updated November 2018: Crowdfunding and crowdlending are opportunities I particularly wanted to discuss on Pounds and Sense, so I thought I would kick off by looking at the investment possibilities offered by property crowdfunding.

As ever, I have to start with a disclaimer that I am not a qualified financial adviser. I am simply talking about this topic as an interested individual who has invested this way himself. You should do your own ‘due diligence’ before investing, and never risk money you cannot afford to lose in a worst-case scenario.

Why Property Crowdfunding?

Investing in bricks and mortar has long been a favourite strategy of the wealthy. Property owners get a double benefit: rent from tenants for as long as they own the property, and – in most cases – a profit if they choose to 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.

Crowdfunding is changing all that, however. A growing number of platforms now exist that allow ordinary folk the chance to buy a share in an investment property for as little as £50. Investors then receive a proportion of the rental income generated, and also get a share of the profit when and if the property is sold.

I now have investments via three different property crowdfunding platforms – a block of flats in Torquay in which I own a small share is pictured above – but in this post I want to focus on one platform in particular, the UK-based Property Partner. This was only launched in January 2015, and has swiftly become the UK’s largest property crowdfunding website. They have over 9,060 investors, who between them have invested over £44 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 are not able to invest this way at the moment.

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 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 £50, it is not all that surprising to me that they have enjoyed such success.

Understanding the Risks

With all property crowdfunding platforms, it is important to understand that there is an element of risk. Clearly, your returns may be affected if occupancy falls or there is a major issue affecting the property (e.g. a fire). Your money is not as safe as with a UK bank savings account (although of course the potential returns are much better).

It is therefore important not to put all your eggs in one basket. As mentioned, I have investments with three different property crowdfunding platforms, and within each platform I am invested in several different properties as well. I have only had one investment fail – a highly speculative development venture – and fortunately I only had the minimum amount invested in that.

On the positive side, I have made several thousand pounds profit from my property crowdfunding investments to date, and have been pleased with the net rate of return. With Property Partner alone I have around £5000 invested and made £500 profit in the last year or about a 10% return (allowing for both rental income and capital appreciation).

Clearly, I’m not saying that everyone should invest in Property Partner – that depends on your personal circumstances and investment goals, and you should always take professional advice if you have any doubts before investing. But if you are looking for a property crowdfunding platform to invest with, in my view they should definitely be at or near the top of your list.

Up to £750 Sign-up Bonus!

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.

I do hope you have found this post on property crowdfunding of interest. As I mentioned earlier, this subject (and crowdfunding/lending in general) is one I intend to return to on Pounds and Sense regularly in future.

• Of course, property crowdfunding is just one type of investment opportunity. If you’d like to learn more about investing in stocks and shares, check out this post on the excellent Financial Expert website.

Good luck, and if you have any comments or questions about property crowdfunding and/or Property Partner, please do post them below.