This is part 2 of a series of posts about crowdfunding with The House Crowd. Read Part 1 here where I detail the types of investment opportunities available. In the next post I will share my experiences of signing up and the range of investment projects on the platform
One of the most interesting recent innovations I’ve come across is The House Crowd, which combines the power of crowdfunding with something dear to many British investor’s hearts: property.
UK Investors have long found comfort and investment returns through owning bricks and mortar. But in the past, investing in property involved being a lot more hands-on than investing in companies shares. Property requires up-keep and repairs, and investors need their properties to be occupied by tenants to keep cash-flow positive. Investing in property also used to involve much bigger sums of money to be invested.
Enter The House Crowd. Using the power of crowdfunding, even small-time investors with only a few hundred pounds now have an opportunity to invest in property and enjoy the returns it can provide, without needing a huge deposit or without having to be hands-on finding tenants and keeping the property well maintained.
So, how do you get started?
Property investment is not for everyone, and you should ensure you have paid off your debts and have an emergency fund in place before you begin with any investing.
The first stage is registering with The House Crowd. Once you have put in your details you can then see investment information. It is done this way to conform with the Financial Conduct Authority regulations about investments. Once you’ve submitted your username and other details, you will then be taken through a short quiz to prove you understand what you are investing in. It’s not exactly rocket-science but you need to prove to The House Crowd that you understand how the investments are structured.
If you intend to invest in a specific buy to let property the structure used to accomplish this means you are actually investing in shares in a Special Purpose Vehicle (a limited company called an SPV) that will own the property outright free of any mortgage, unless stated otherwise. The other investments options are funding development opportunities and secured loans which allow you to get your capital back at the end of a pre-determined period of time, along with interest. You do not own any actual property directly and as with all investments there is an element of risk. The key thing an investor should understand is how much risk and whether the predicted return on the investment is worth the risk.
When I signed up to The House Crowd, I was able to go through the questionnaire in only about 15 minutes during a lunch break. This included time I spent reading through the material on the website describing the investment process (the Secured Loan Guide, and Equity Investment Guide are both recommended reading). By creating an account and going through the questionnaire I was not signing up to a specific investment and I was under no obligation to purchase anything.
Another piece of recommended reading is the Risk Warning. As with all investments there is an element of risk and you should not invest money you might need access to in the short term. You should also not be investing if you have consumer debt as you can almost always make a better return by paying off debt than you can with an investment.
Having gone through the required reading and questionnaire I was now logged in and it was time to go shopping for investments!
Since I began this journey with The House Crowd, I’ve found two friends of mine have also used the service. First I recommend you read my friend Maria’s post about The House Crowd on The Money Principle. The second is my friend David. Read his story here.
Next week, in Part 3 I will share how to go about picking the investment for you, and which property development project I’m currently invested in.
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