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The Crowdfunded Stock Exchange For The Property Market

Thanks to the Internet it is now possible to invest in the property market with tiny sums of money, but does it work? We take a look at buy-to-let crowdfunding.

by Jonathan Stephens

Invest In Property For £50? Introducing Buy-To-Let Crowdfunding

As we all know from the seemingly endless news reports regarding the state of the UK property market over recent years, things are booming. This is great news if you’ve already placed your feet firmly upon the property ladder, but what about those who are yet to get one foot off of the ground?

Many young first-time buyers are struggling to take advantage of the current upswing in property prices, and for those in later life who dream of owning a buy-to-let property to pay for their retirement things are similarly bleak. However, it would seem that the old adage of ‘where there’s a problem, there’s a business’ has come true again.

Join The Crowd

Aside from the normal process of either buying property for somewhere to live or as a buy-to-let investment, there is now a third option – crowdfunded buy-to-let. Thanks to the wonder of the Internet, crowdfunding has exploded, and the trend looks set to continue.

What Is Crowdfunding?

Crowdfunding is the practice of obtaining funding for a project from a large number of people, all of whom invest relatively small amounts into said project. The power of the Internet means that millions of people can be made potential investors and some astonishing figures have been obtained via crowdfunding in the past.

How Does This Translate To Buy-To-Let?

A crowdfunded buy-to-let scheme, such as Property Moose, works on exactly the same principle, small sums from large amounts of people. Some companies operating buy-to-let crowdfunding projects will allow investors to put in as little as £50 to start off their property portfolios. They then manage the property for all of their investors and pay a regular dividend to them too.

Many of the new buy-to-let crowdfunding companies offer the prospect of capital gains as part of the deal as well, so at the end of the agreed rental period the property will be sold and the profits distributed across the investors after the company takes its fee.

The beauty of the idea for younger people looking to get onto the housing ladder is that their savings will grow in line with the market itself, which means that, theoretically, their investment should eventually return a deposit big enough for them to invest in their own home.

The Downside

Unfortunately, as with so many Internet based companies, the whole crowdfunding scene is somewhat faceless. Many investors, be they large or small, would rather work with a more personal property investment company, who will proactively seek out the most suitable investments for each client. Being able to build a relationship with your investment company is vital and the vast majority of the new crowdfunding companies dealing in property fall down in this regard.

The other, possibly more obvious, downside is the fact that owning shares in a property can never compare with owning your own. When you are the sole owner you have the control to do with that property as you wish. By entering into a crowdfunding agreement you are at the mercy of the group, and that may not always work out to be in your best interest.

While buy-to-let crowdfunding may appear to be a great idea on the surface, it simply cannot compete with the individual service offered by a top rate investment firm.


*This post was published according to the "Contributed Article Terms and Conditions"

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