Welcome to my CrowdProperty Review. CrowdProperty is the only peer-to-peer (P2P) lending platform that I have written about because it is the only one I have used (and I only discuss products that I have directly used myself.) No individual or organisation has offered me any incentive to write this review and, thus, it is an accurate, honest and non-biased description of my experiences. I wanted to review CrowdProperty because it offers interest that is around 16x bigger than the average savings account available at the moment (although capital is at risk).
A Quick Overview
What Does CrowdProperty Do?
To begin this CrowdProperty review, let’s ask the question: what does CrowdProperty do, exactly?
CrowdProperty provides crowdfunded property project loans to developers.
The Process (In a Nutshell)
The developer will approach CrowdProperty to raise funds for their building project. CrowdProperty assesses the project details and performs the necessary due diligence before adding the project details to their crowdfunding platform.
Here, investors can pledge to fund part of the capital investment in return for an interest rate of approximately 8%.
How CrowdProperty fits into my own financial plan
I opened my CrowdProperty account at the beginning of June 2020 because I was looking for a higher risk and reward investment option for my portfolio (this is mostly from memory as I didn’t intend to write a CrowdProperty review at the time – in fact I don’t think I’d even set up this website).
I try to maintain a balance in my portfolio of 50% cash and 50% investments – you can read about how I do this here.
My cash reserves at this time were a few grand higher than my investments, so I was looking for a suitable place to invest.
I did have an existing stocks and shares ISA that I could have increased my stake in but I wanted to diversify a little and give P2P lending a try.
What is peer-to-peer lending?
Peer-to-peer (P2P) lending essentially involves loaning cash to individuals or businesses with the expectation of your capital being returned after an agreed period of time along with an agreed amount of interest.
A simplified example of P2P lending
So, for example, I loan you £100 for 1 year at a 10% interest rate. After the year is up, you give me my £100 back plus £10 (10%) in interest.
You get to borrow a quick £100 when you need it and I get a free tenner on top of my hundred quid back at the end of the year for helping you out.
Pretty simple. However, what if you are unable to afford to repay at the end of the term? I’ve lost my original £100 plus the tenner you said you’d give me for lending you the cash. Bastard!
Unlike a bank account – which is regulated by the Financial Services Compensation Scheme (FSCS) and pays back any losses up to a certain amount if a bank goes bust – options are much more limited with P2P lending.
Any capital invested is at risk of being lost forever (i.e. you might not get your money back). The flip-side is that this increased risk means that interest rates for P2P lending are typically higher.
The Financial Conduct Authority (FCA) regulates peer-to-peer lending and CrowdProperty are authorisedand regulated by them. They have recently ruled that new P2P investors cannot invest more than 10% of their assets in this asset class.
All About the CrowdProperty P2P Lending Platform
I looked at several peer-to-peer lending providers and Crowd Property stood out because they seemed to do a lot of scrutiny before lending and consequently have not had any development loan default since they began.
They provide various lending opportunities to developers including new development loans, refurbishment loans, bridging loans and auction finance.
They claim to be experts in property development and have safeguards in place to minimise potential losses as much as possible.
Ways that CrowdProperty Mitigate Their Loans Against Risk
- First legal charge on all properties – ‘first charge’ security means if a developer defaults on their payments, CrowdProperty can take ownership of the property and project.
- All projects are analysed rigorously by in-house property professionals and only the best projects by experienced developers are approved.
- Independent valuation performed by the Royal Institute of Chartered Surveyors (RICS) prior to approval.
- Regulated by Financial Conduct Authority (FCA) – contingency plan in place if CrowdProperty ceases to trade and investor capital is ring-fenced so that it cannot be used for CrowdProperty creditors.
- All projects must meet certain financial criteria including loan-to-value (LTV) and loan-to-cost percentages. LTV is always less than 70%.
All of these factors helped to reassure me that although I knew my capital was at risk, these risks would be mitigated against in a sensible way.
Interest Rate and Liquidity
I was also attracted by the 7-8% interest rates on offer however, I was aware that any cash I tied up in a CrowdProperty property project would become illiquid – I would not be able to withdraw it and there is (currently) no secondary market with which to sell the development loans.
In addition, CrowdProperty would help to diversify my portfolio by giving me exposure to the UK property market without the need for a large amount of capital or the stresses of property management.
Who Can Invest With CrowdProperty?
You must be over 18, have a UK bank account, have an address in the EU and be able to provide proof of your identity.
The Founders of CrowdProperty
CrowdProperty was founded in 2014 by Simon Zutshi, Mike Bristow and Andrew Hall. In over six years of operations and almost £200M of property funded, they have never had a loan default. They are a member of the Peer to Peer Finance Association.
CrowdProperty’s IFISA Option
Perhaps the most tax-efficient way to invest through CrowdProperty is through an Innovative Finance Individual Savings Account (IFISA) because tax does not have to be declared or paid on income or capital gains.
An IFISA is an ISA designed specifically for peer-to-peer lending, similar to how a stocks and shares ISA is primarily designed for tax-free stock market trading.
Can I have an ISA and an IFISA?
As previously mentioned, I had already opened a stocks and shares ISA for this financial year, so I mistakenly assumed that I would not be able to open an IFISA.
Fortunately, after a bit of research, I discovered that it was possible to open both an IFISA and a stocks and shares ISA in the same tax year.
As well as a cash ISA and a LISA if I wanted to. I just needed to ensure that I didn’t exceed the tax-free limit of £20,000 per year across all products.
Other ways to Invest in A crowdProperty Portfolio
As well as the option to invest with CrowdProperty using an IFISA lending account (as I have), there are also options to invest pension capital using a SIPP (Self-Invested Personal Pension) or an SSAS (Small Self-Administered Scheme).
It is worth noting that some pension providers do not allow P2P investments, so this is something that you should get independent advice about.
And for those that are unable to take advantage of the tax breaks that these schemes offer, there is also an option to open a standard account.
With the standard option, interest earnings must be declared to HMRC.
CrowdProperty Setup, Usage and AutoInvest Feature
I began my CrowdProperty investment by opening an IFISA lending account and transferring in the minimum investment of £500 to get familiar with the system.
I must admit, the interface is not very intuitive and I struggled to find out how to deposit cash.
Rather than the button I was expecting to press to make a payment, there was a small section that provided some bank details.
I then had to log on to my bank account and perform a manual transfer of funds to my account.
Available projects to invest in
I then began to look at projects that were available for investment.
Projects have information about the interest rates, loan length and the amount of capital they wish to raise, along with a picture/video of the property and information about the project including the type of finance (e.g. bridging loans, refurbs etc.).
Return rates are usually 8%, although I have seen some as low as 7.6% and a minimum investment of £500 capital is required to start investing.
To be honest, I’m not a property professional and I don’t know an awful lot about property investment (which is one of the reasons that I’m using CrowdProperty’s expertise) so I wasn’t really sure which projects I should pledge to.
In addition, you have to make the pledges quickly when they go live because they get funded very quickly.
Autoinvest to the rescue
I could see that this manual investment was going to be a pain, so I looked into the autoinvest feature.
With auto-invest, you are guaranteed a slice of each investment and your funds will be well-diversified across many different projects.
And you don’t have to do anything – just let the system do the job for you.
Although it won’t suit everybody, this hands-off approach is perfect for me.
How To Find CrowdProperty’s ‘Hidden’ Auto Invest Feature
Again, the website wasn’t particularly intuitive and it took me a while to work out how to do this.
For those that are having difficulty finding the Autoinvest settings, you first have to go to your IFISA or click the ‘TOP-UP‘ link:
Then click this little blighter right at the top – it says ‘AutoInvest Settings‘ and is only a couple of shades of grey darker than the background colour:
My own CrowdProperty Property loans
I currently have a smidge over £3,000 in my CrowdProperty account, which has been distributed to developer loans.
It has started paying back already and I have been very happy with the results so far.
As you can see, Auto Invest has automatically diversified my funds across several real estate projects.
Different amounts have been invested into different projects (between £50 and £217).
I’m not sure how they calculate this, however I guess they allocate a portion of every loan to ‘autoinvestors‘ and it is split evenly between us all.
Also, note that parts of some loans have already been paid back – I also turned on the AutoReinvest feature so that my interest payments are automatically reinvested in new loans.
How Much Have I Invested With CrowdProperty and What Have My Returns Been?
Overall, I have invested £3,101 with CrowdProperty.
The lowest interest rates projects are 7.5% and the highest are 8%. The terms are within a range of 8 to 18 months.
In the 5 months since I opened my account, the value has increased by about £20 but this is only from loans that have been repaid early.
This may seem like a poor yield, however, the loans are usually only paid back at the end of the term (capital and interest payback) and all the terms are longer than 5 months.
Therefore, I will not realise any profits until the loans end.
Most of the terms are around 12 months in length, so I will update this CrowdProperty review in the summer of 2021 once a large portion of the loans have been repaid (and reinvested).
Upcoming CrowdProperty Projects
At the present time, CrowdProperty are writing loans at a rate of about two per week.
The screenshot below shows the projects they have lined up for the beginning of December 2020.
CrowdProperty provides an option for individuals with excess cash to loan it to property developers at higher returns than can be obtained with usual savings products.
There is Risk But CrowdProperty Do a Good Job of Mitigating Against It
There is the risk of losing the capital, so should only be used for money that will not cause hardship if potentially lost.
Despite this risk, I find that the due diligence CrowdProperty perform before offering a developer loan to be very thorough, along with the first charge they hold (‘first charge’ security essentially gives them the same rights as a mortgage lender).
The maximum 70% LTV ratio also provides a buffer for if the developer runs into problems.
This is evidenced by the fact that they have never had any loans default in their 6 years of operation and have good loan book performance.
In fact, one of their primary selling points is their 100% capital and interest payback track record, so they are unlikely to want to lose that.
This gives me reassurance that my investment is safer with CrowdProperty than other lending platforms I have looked at.
Cash IS Tied Up For The Duration of The Loan
Once pledged, cash is tied up until the full term is reached and there is no secondary market with which to trade securities.
The CrowdProperty Website Could Be Better
During the course of my CrowdPropertyreview, I found the website to be a bit confusing and non-intuitive.
The learning curve was a little steep but once I got my bearings and had set up Auto Invest (and Auto Reinvest), I just let it run on autopilot.
I’ve not needed to contact customer service, so I cannot comment on this.
|Good points||Not-so-good points|
|High interest rates (~8%)||Capital at risk|
|100% payback record||No secondary market|
|Rigorous due diligence/1st legal charge||Online system is a bit clunky|
Further CrowdProperty Updates
Since writing this CrowdProperty Review, I’ve had a couple of loans paid back in full, so would like to share the current value of my portfolio as I approach six months since opening my CrowdProperty account.
The £84 I have available in cash should be auto reinvested by the CrowdProperty platform in the very near future.
In six months, I’ve earned a little under £87 from my initial investment of £3101.
This is equivalent to around a 5.6% rate of interest, which is far higher than I could get for any cash savings in the current climate.
It is also worth noting that most of the loans are currently partway through their terms, so I will not realise the true gains until the loans are complete.
That’s All, Folks
Thank you for reading my CrowdProperty review.
I plan to update this page again in early 2021 to report on how my CrowdProperty investments are doing, so be sure to check back from time to time.
You may also find my monthly personal finance reports of interest.
They discuss my current financial position as I work towards my goal of early retirement as well as where I am investing my money and why.