Crowd2let is a crowdfunding platform for investment properties. Keith Ivison Operations Director at Crowd2let explains how investors can access these opportunities.
What is Crowd2let?
Crowd2Let is a Property Crowdfunding portal facilitates investment in residential property.
Can you describe crowd2let in numbers?
Started in 2014 Crowd2Let have Crowdfunded 30+ properties raising more than £2m
What are the main benefits for investors when investing in properties listed on Crowd2let?
The problem with property investment has always been the need to have multiples to make the figures work. Crowd2Let allows the ability to spread investment over multiple properties to reduce the risk of putting all ‘eggs in one basket’ so letting voids and expenses don’t impact the whole portfolio
On average, what is the ROI that investors have seen net of all the fees and expenses?
Up to now, no projects have run their course but the feedback and valuation looks to be tracking well, the average is 6% net of costs for rental yield plus projected capital growth.
What is the minimum investment possible in each property?
Each share is £500
What is the timeline of the exit strategy?
A Crowd2Let project has a 3, 4 or 5 year duration before the property is offered to sale.
Can investors cash out early, is there a secondary market?
Yes, the investor can sell their shares in the SPV (Special Purpose Vehicle) Company. We have a future strategy to set up an online market place but this is not available as yet. We have had investors enquire about buying shares but the reality is that we have had not one request to sell. We must be doing something right.
What are the main risks and how does Crowd2Let mitigate them?
As in all property investment, the price of property can go down as well as up. We mitigate the risks by choosing the right property for crowdfunding in a good area that will let well. This is the key to our success. We have had a 99.6% occupancy rate, our first tenant in our first crowdfunded property is still in that property.
What fees and expenses are deducted from the property rental before it is paid as a dividend to the investor?
First let me explain how this works:-
Each £500 investment buys 1 nominal share in the company formed worth £1. The remainder of the investment is treated as a “loan” to buy the property “package”. The monthly “rental” payments are therefore treated as loan repayments as over the “Investment Time Frame” the full initial “loan” will never be fully repaid, for example £1,000 invested, 6% “rental return” over 5 years equals £300. There is no gain by the investor over the “Investment Time Frame” therefore there is no tax to pay. The rental payments are therefore neither a dividend nor a cost to the company.
At the end of the “Investment Time Frame” the balance remaining of the initial “loan” to the company is repaid when the property is sold along with the uplift in value of the proportion of ownership net of corporation tax due to be paid by the company itself. This element is subject to personal Capital Gains Tax although the current allowance is £11,000 so depending on your level of investment in the particular property and your own tax situation there is most likely no tax to pay. For example, initial investment £1,000, loan repaid over 5 years £300, loan balance remaining £700. Property doubles in value so your initial investment is now worth £2,000, minus “remaining” investment of £700 = £1,300 gross Capital Gain.
The fees deducted from the collected rent are standard property management fees
What are the costs related to the management of the purchase and rental of the property?
All of the costs are laid out in a downloadable report in PDF format for each project. The package price is made up of lots of things but primarily 5% of the purchase price fee for Crowd2Let, solicitors fees, first-year insurance and lettings preparation.
How has the market reacted to Brexit, have you noticed any changes in the trends?
We have not seen any less interest in the portal since the Brexit referendum, however, we do think that it will be good for us and our local area.
Do you tend to select properties in specific geographical areas?
In order to give the best to our clients, we need to understand fully the marketplace in which we operate. All of our team have lived, do live and invest in property in the North East of England. We believe that there is no better place.
To learn more about crowd2let visit crowd2let.com
We thank Keith Ivison for the interview.