The United Kingdom is one of the most economically advanced and stable countries in Europe, with a strong legal system and one of the most important capital cities in the world. This and many other factors make it an ideal location for real estate investment.
Between 1997 and 2016, UK property prices have grown by 11.65% per year on average. This is compared to the FTSE All Share index which has delivered 3.03% p.a. on average over the last 20 years to the end of 2016.
I believe that property should form a part of everyone’s investment portfolio, which is why I have made it an important part of my investment strategy over the past few years. By investing in a variety of properties instead of one, you can diversify your portfolio, reduce your level of risk and increase your returns over time.
The best UK real estate platforms are Property Partner and Property Moose. No other competitor comes close to these two platforms. I’ve invested in both and they are very professional.
Property Partner
Property Partner offers us investors the opportunity to invest in properties directly or else into development loan bonds (recently introduced). A company is created for each property purchased, and investors buy shares in that company.
Most of the properties are geared. Property Partner only lists properties at 50-60% loan-to-value (LTV) of the purchase price. They buy multiple units at a discount compared to purchasing the units individually –adding further downside protection. Reducing risk further, they only gear multiple unit properties as these have a more stable rental income stream to service the mortgage.
You can manually choose which investment opportunities you want to pursue, or else select one of the three investment plans and have the platform auto invest for you.
- Income plan (6.5%+)
- Balanced plan (7.5%+)
- Growth plan (8.5%+)
The investment plans are ideal for those who have an amount less than €50,000 to invest, because at those levels it doesn’t make sense to spend a lot of time researching each opportunity and making manual investments.
The fees relate to services that Property Partner provides:
- Sourcing and performing due diligence on investment grade property deals, often with significant discounts, by an in-house team of property professionals and analysts.
- Ensuring that properties are let, managed and maintained to a high standard, and distributing monthly or quarterly dividends to investors.
- Delivering an end-to-end managed investment, including sourcing and arranging mortgages, corporate structuring through SPVs, financial statement preparation, corporate tax compliance, and adhering to regulatory requirements.
- Providing a technology platform that facilitates online investment management and reporting, on an FCA-regulated trading exchange allowing investors to trade their investments 24 hours a day, 365 days a year.
Investors pay:
- A one-off 2% transaction fee on invested funds.
- A sourcing fee of up to 2% + VAT of the purchase price; this is disclosed in the ‘Financials’ section of each property.
There is no charge to sell your shares
Transaction fees are rounded up to the nearest pence and the minimum fee per transaction shall be £0.01. For all Resale Market investments, there is an additional 0.5% Stamp Duty Reserve Tax payable when buying shares.
Proplend
This platform offers loans to UK commercial property owners. As investors we can earn 5-12% per annum, and the good thing is that the loans are granted as first charge security. Many other platforms grant second charge security, meaning that other creditors would be paid before us investors should the project run into any trouble. I would advise to stay away from such platforms as the risk is much higher in that case.
You can use Proplend’s auto invest system or else manually choose which projects to invest in.
In 2019, the average return on capital across all the loans on Proplend was 7.95%, which is really excellent considered that the loans are backed by a first charge security. Some other P2P platforms don’t offer much higher returns, and the loans are not even backed by any collateral, such as in the case of Bondora, where returns hover in the 7-9% region.
Sourced Capital
Sourced Capital is the largest property investment platform in the UK. On their website, they have a lot of useful materials to guide newbie investors into the world of real estate investment.
With regards to being the biggest investment platform, this is centred around the Sourced group not just the peer to peer lending platform.
The P2P arm of the Sourced business is relativity new as the majority of their projects where originally done offline. It was only when they saw an increased demand for a platform and smaller investment transactions such as £1,000-£10,000 that they decided to develop the online platform.
Sourced currently has 50 Sourced offline franchisees, which is the largest franchise for property investment in the UK. They also have a development arm which operates our largest GDV projects done by Sourced ourselves, namely their flagship £144mn development in Manchester – Regent Plaza.
All this means that this is no newbie platform that has appeared out of the blue. They’ve been operating for many years and the online platform is their latest product.
You can earn up to 12% per annum and they have several live projects you can currently invest in.
The way it works is that you can choose a property that you like and invest in a loan to the developer of that property. There are no fees for investors.
If you’re a UK resident, you can also invest in a Sourced Innovative Finance ISA and with some SIPP and SASS pensions you can invest them into projects on the Sourced platform – making your money work better for you.
There is no secondary market at the moment, however, I expect it will be an addition in the future. The average loan term is 6-18 months, which is not too long a period to have your money tied up in an investment.
Property Moose
Property Moose allows investors to invest in properties directly through an SPV (like Property Partner) or else invest in loan notes. SPV stands for special purpose vehicle which is essentially a UK limited company. The income you receive is also paid in the form of dividends.
Joining Property Moose is completely free of charge. They charge a fee on any funds raised (5%) which covers costs in raising the fund, investigating the properties, carrying out due diligence, organizing the initial renovation and management, developing software, marketing the property and expert customer service.
So that investing in property with Property Moose is as hassle-free as possible, the day-to-day management of the asset, and the tenant is outsourced to trusted partners. The cost of this is 10% (+VAT) of the monthly rental income. It is deducted from the rent before it is distributed to investors at the end of the quarter.
Property Moose receives a profit fee (15%) on sale that ensures they are incentivized to only offer strong investment opportunities – they only make money when investors do. This is taken from the gross capital growth before they distribute the rest to us investors. For example: if a £100,000 house increases in value by 10% and there is an exit of the property at £110,000, there is £10,000 growth/profit. The Property Moose fee is 15% of this growth, or £1,500. The remaining 85% (or £8,500) would be distributed to investors in proportion to their stake along with the £100,000.
Gross profit refers to the total amount of money made as the result of an activity. It represents the full return before the deduction of any costs or fees.
Net profit refers to the amount left over after any fees and deductions have been made from the gross figure. It is impossible to make any further deductions from a net figure – it represents the amount that is ultimately left over after obligations are fulfilled. The deductions are all known costs, such as the 5% Property Moose fee, legal costs and insurance.
They display all of the projected returns as net of all fees so you have a clear understanding of the potential returns on offer. There are no hidden costs and a breakdown of the financials is attached to each listed property.
For loan notes, Property Moose does not charge any fees to investors. Returns on loan notes are payable on the redemption of the loan. Therefore if I invest £1,000 in a loan with 8% interest for a term of 12 months, at the end of those twelve months I should receive the £1,000 principal plus £80 in interest.
The total projected returns figure is calculated by aggregating the projected net property sale price and the projected net rental income. The property value projections are based on market comparables, and Savills’s 5 Year Forecast.
At the end of the investment term, investors will vote upon the exit strategy. If the property is sold on the open market, or if it is sold to the crowd, proceeds from the sale are paid to investors exiting this investment.
Invest with Property Moose and get £10 credit
Have you invested in UK property through one of these platforms? What is your experience? If you have any questions about my experience with Property Moose or Property Partner let me know in the comments section.
Very interesting, thanks for the detailed analysis.
Are these Real Estate Crowdfunding Platforms regulated by the FCA / how do they get their agreement?
Yes, the good ones are. Check out my review of Property Partner, which is currently my favorite platform, for more details.
Are there any active crowd funding for property in Frankfurt, Germany?
Yes, I would check my post about investing in German real estate.
Very interesting. However I am uncertain if Reits or this P2P method described above is best. Read this: https://moneyweek.com/494910/property-crowdfunding-should-you-become-a-virtual-landlord/
I certainly would be interested in P2P if there was a way to own fully an apartment after buying to let for a number of years.
With Privalore in Spain, what you can do is invest together with others in a crowdfunding campaign, then actually buy it if you like the outcome of the project. You will most probably be able to negotiate a better price than those trying to buy it on the open market, and you’d have the benefit of having also been part of the original investment and hence paying part of the apartment at a lower price.