You may already be aware of the concept of crowdfunding as a method of raising capital for a business venture or project whereby small quantities of money are given over by a large number of people. The general idea is not a terribly new one, as it’s been in the mainstream since around 2012, however, for the property market, it’s a relatively recent development.
Property crowdfunding, as the term has been coined, is for all intents and purposes, the same as regular crowdfunding, with the only difference being that it’s used as a method of investing in property. Typically speaking, investment properties are advertised online within the pre-determined parameters of the described project with would-be property investors invited to come and invest.
One thing that does stand out when compared with traditional routes to investing in property is that the minimum amount to invest can be as low as £10.
A popular method
Whilst property crowdfunding hasn’t been around for that long, it hasn’t stopped it becoming very popular with those looking to invest for the future. The online property market has seen a raft of companies appear online offering the chance to become a landlord for a nominal contribution, albeit sharing the opportunity with countless other small investors.
The reason for it’s broad appeal is largely due to its simplicity, as it offers a chance to become involved in multi-property investment without having to go through the hassle of finding, managing or maintaining the properties, as is usually the way when stepping into the property market as an investor.
Are crowdfunding companies trustworthy?
As we just mentioned, property crowdfunding in the property market is still in its infancy, but that hasn’t prevented it from becoming one of the most highly-regulated industries around. Of course, when investing in property or indeed in any kind of investment, there is always going to be an element of risk, but as the UK’s Financial Conduct Authority (FCA) have a close eye on things, you can be pretty sure that any legitimate-looking company online is going to be a safe bet.
That’s not to say that you shouldn’t do your homework on them, as you most certainly should, but the landscape in this particular sector of the property market seems pretty legit and any property crowdfunding company offering an opportunity will have had to do their due diligence and adhere to the FCA’s strict code of conduct.
Flexibility of opportunity
One of the best aspects of property crowdfunding is the ability to diversify your investments without having to go through all the rigmarole of finding, buying and funding a property, as all of these processes are taken care of for you. That means that you avoid having to pay solicitors fees, stamp duty and all the other long list of associated costs and obligations.
It’s also an extremely flexible way to invest in property, as you can add to your investments whenever you like. For example, you could have £1,500 to invest across multiple crowdfunding properties or choose to place it all in one property - it’s entirely your call. Also, if, at a later date, you find that you have extra capital, you can simply repeat the process and invest more in the same hassle-free way.
How the Process Works
Entering the property market in this way is quite simple, as it’s been designed to be so. Would-be property investors get to invest directly in the company as a shareholder, which has been set up to offer small parts of the opportunity to multiple parties. As soon as the magic figure has been reached and the company obtains sufficient capital to purchase the specific property, it’s then completed and the property is bought.
What happens then is, as a shareholder, you get to enjoy your share of the rental income and any capital growth your property makes. The more you invest in the property - the bigger your share will be. One of its greatest benefits is that you don’t need to know much about property investment to do well at it and it’s almost entirely hands-off.Paragraph
Crowdfunding is an exciting sector of the property market and one that seems to be going from strength to strength. Being able to invest small sums of money in multiple properties of all types and sizes and over a period that suits you is something that offers the benefits of property investment with precious little in the way of drawbacks.
Our advice would be that as long as you do your due diligence and speak to a property investment professional before you make any big decisions, there’s no reason why you shouldn’t consider getting involved. The good news is that with property crowdfunding the decisions are very often on the small side.