Britain loves property. It is a long enduring infatuation that shows no signs of slowing. And the internet age is offering up fresh opportunities for people to feed their property passions. Traditionally, property investment has been limited to investing in a buy-to-let property and becoming a landlord, with all the stresses and strains of managing tenants, paying the mortgage and managing the up-keep of your property portfolio.
The internet era has seen an explosion of disruptive business – start-ups challenging the status quo and bringing digital age thinking to traditional industries, or creating new industries all of their own. One such example is crowdfunding – it’s the practice of clubbing investors’ money together to get a project off the ground that will pay out returns to those original investors once it proves financially successful.
Have you ever wished you could play a part in the buy-to-let property market and generate stable returns from your savings, but felt it was too arduous a task to do so? Enter property crowdfunding, and businesses like my own – The House Crowd.
Property crowdfunding sees investments pooled together to purchase a property. The property is then renovated if necessary, and rented out to generate an income return. The property is managed and a regular dividend paid to investors. There’s also the prospect of capital growth as the value of the property rises.
The House Crowd is still only a fledgling business but since 2012 we have completely disrupted the property investment industry and successfully purchased over 100 properties via crowdfunding.
In a survey we undertook in April this year 67% of people said that they felt cut-off from property investment before they discovered property crowdfunding, either through a lack of capital to invest, fear of the effort involved or a lack of understanding as to how the market operates. Many of our investors have been surprised at how simple the process is and how easy our expert team can explain how the investment opportunity works.
But now they can join together with a crowd of likeminded people to invest in property and earn excellent returns far beyond those they could expect from a traditional financial institution.
Crowdfunding is certainly an emerging trend in the personal finance market which is on the cusp of entering the mainstream. And market forces are creating an environment which could see it grow in popularity at an even faster rate. April sees the introduction of ground-breaking pensions’ freedoms which will see retirees able to drawn down from their pensions schemes and invest their money how they see fit.
The retirees who take this option may seek to generate higher returns from their savings through alternative investments, such as crowdfunded property investment. While these options are often deemed riskier than traditional investment, they can prove lucrative. These freedoms will allow people to take control of their own financial destiny, in a much more pro-active manner than ever before. There needs to be responsible and personal guidance in place, and IFAs need to be clear on the broad spectrum of options available for those drawing down from their pensions.
Crowdfunding looks set to make a big impact on the UK property market. It is democratising the once elitist UK property market and allowing people to cut out the banks and larger institutions to generate more from their hard earned cash.
Frazer Fearnhead is founder and managing director of The House Crowd (www.thehousecrowd.com). Established in 2012, The House Crowd is the world’s first crowdfunded property investment vehicle. Investors can get their foot on the property ladder with just £1000, and earn hassle free returns whilst watching their portfolio grow.