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As featured in P2P Finance News 01/05/2018...
Mike Bristow, co-founder and newly appointed chief executive of the specialist property peer-to-peer lender CrowdProperty, looks at why all types of private investors are queuing up to lend to the residential property projects on CrowdProperty’s online platform
Of course our eight per cent annual return and 100 per cent payback record are incredibly attractive to an investor in a low interest rate environment but we have focused very hard on what else is important to both existing and new peer-to-peer lenders.
We hold firm to the original ethos of P2P by giving retail lenders the autonomy to choose which of the wide range of quality property projects on our platform they want to invest in, free of charge. That means we ensure that they have all the facts they need to make these significant decisions and focus or diversify their investments. As part of that, we run webinars prior to project launches allowing lenders to ask questions directly to the borrower. Many investors greatly value that human connection and coming together as part of a successful team.
We also appreciate that many people have a one-to-two-year outlook for much of their investment funds. This aligns very well with our six-to-18-month project terms. And we also provide lenders with a range of ways to invest – through their SIPP or SSAS pension, for instance, and they can receive interest tax-free if they invest through CrowdProperty’s Innovative Finance ISA, which has proved incredibly popular.
Investing in property is attractive because it can be secured against a physical asset that is very, very unlikely to ever go to zero, unlike investing in a business, the value of which is based on future cashflow, which is much more vulnerable.
As with all P2P lending, capital is at risk, but our lenders tell us that they keep coming back to us for three big reasons: the expertise of our board in only selecting quality projects; the level of security we offer and the recoverability of our lenders’ funds.
Firstly, our background is property investment and development. Compared to many P2P businesses that have no hands-on experience of what they are financing, our founding team shares almost 100 years’ property experience. This provides us with a critical edge; we understand the intricacies of projects and developers, which enables us to complete stronger, quicker and more relevant due diligence. We are also, importantly, a totally independent marketplace.
Secondly, we hold the first legal charge on all properties we finance against, which means that we can, just like a mortgage company, take charge of the property if the borrower defaults.
Finally, in the unlikely event that a default occurs, we would again leverage our property expertise to manage the project to completion or find the best alternative options to recover our lenders’ capital and interest. We don’t blindly repossess and fire-sell which other finance companies might do. Fundamentally we build a relationship with our borrowers to spot potential problems before they have an impact. That is the best safeguard for our lenders – we know what we are doing through both application assessment and project duration.
Funding millions of pounds of property projects in minutes is a testament to the trusted brand we’ve built. We’re immensely excited about the future of CrowdProperty as we’re delivering meaningful differences to both borrowers and lenders alike. We will shortly be supporting a material proportion of the country’s well-publicised housing need, whilst also realising better, secured returns for our lenders money. Together we build.