P2P and Crowdfunding Platforms Offering Affordable Alternatives to Buying Property
Without a doubt buy-to-let is now very lucrative as a result of strong growth of house prices, low saving returns and rising need for rental houses and properties. However, for new investors into the sector, the entry is not cheap since mortgage lenders have to deposit 25 percent at first while the upkeep and maintenance of rental properties is usually very demanding and expensive.
While this might not be a very optimistic outlook for new investors, there’s a wholly new way to invest. As the investors’ numbers grow, most are now turning to crowdfunding and peer-to-peer platforms, which enable them to make indirect investment in rental property. The approach helps avoid the bother of property management and need for mortgages while allowing you to invest in a couple of properties at the same time towards spreading your financial risk.
In fact, the investment range comes with a lot of options that are baffling at times while some risks to your finances are also there.
What’s being offered?
Right from the start, you have to decide if you are going for a stake in a buy-to-let or lend your funds to landlords. P2P (Peer-to-Peer) platforms allow you to lend your finances to investors so that they can purchase properties in
turn receiving frequent interest as per your capital. However, remember you will not have any share in the house meaning any rise in house prices will not be of benefit to you. Nonetheless, the cost related to letting properties is taken off your shoulders such as tenant issues and maintenance.
Crowdfunding on the other hand offers shares in properties or a single property. In the process you end up with constant dividends out of the rental income as you also benefit with any increase in house prices. Any fall in house
prices could also erode your capital while investors also have to deal with void periods, maintenance and management costs.
Both approaches put capital at risk and make selling an investment a little hard in case you need your funds early. But, you will find platforms with secondary exchanges already functioning where selling the investment can be done although it does depend on demand, otherwise you might have to cheaply sell your investment.
Regulations are definitely increasing, but remember Financial Services Compensation Scheme has not started protecting these investments.
With this investment you can expect a return of between 3 percent and 12 percent. Peer-to-Peer platforms are offering a lot of certainty, since investors get a specified interest rate already set. Crowdfunding provides estimated rental yield and capital returns projected reflecting the estimate growth of house prices.
Rather than buy one buy-to-let property and taking weeks or months to carry out a research on the best place to buy, find out the kind of properties with the highest yields and thinking about the areas that could enjoy high growth in property prices and end up with all your eggs in a single basket, crowdfunding and peer-to-peer offers a better opportunity and even access to the property market in central London, which you might not be able to on your own. All the research is also done for you and you do not have to manage anything or deal with tenants, especially with crowdfunding platforms.
Peer-to-peer platforms offering this investment opportunity include Landbay and LendInvest while crowdfunding platforms include Property Partner, among others.