How We Work

How We Work

 

 

 

Equity Crowdfunding

 

We operate an equity based model where the property is held within a Special Purpose Vehicle (SPV) - a limited company - and is funded mainly through equity though in some circumstances we do allow the inclusion of debt.

Your investment buys shares in that company and therefore you directly own a proportion of the property. The LandLord becomes a shareholder and Director of the company owning the property and we also appoint an Independent Director to look after your interests.

As opposed to Mortgage finance or Peer-to-Peer (P2P) lending where there are regular fixed interest or debt repayments, your income is variable. This is because it is based on your share of income.  However, unlike P2P lending, when the property is sold you get your initial investment back along with the opportunity to share in any success.

 

Income versus Growth 

 

People invest in property because it offers the potential of both income and capital growth. Usually, one is more important than the other depending on the motives for investing. Our model enables Investors looking for mainly income to support LandLords looking for capital growth and vice-versa. So that everyone has the opportunity to achieve their objectives.

We do this by allowing the LandLord to offer different proportions of income and growth. If they are driven by growth, for example, they may reduce the proportion of capital growth paid but increase the share of income. The proportions paid are shown in the Investment Details tabs on Browse Investments pages.

 

 

 

 

 

 

Your Share of Income

 

All rental income is paid directly into the SPV bank account. Your share is paid directly to your nominated bank account quarterly, as Dividends, after we have paid any due Corporation Tax. This whole process is managed by KPMG, our accountants under the supervision of the Independent Director.

The only costs subtracted from the income, prior to the calculation of your share, are those that are fixed and declared when you invest.

Typically these include:

SPV accounting costs
Ground rent or Service charges
Property Insurance
Debt interest payments if it is a leveraged investment

 

 

 

LandLord Returns

 

The LandLord, has a different class of share to you. This enables them to be rewarded for finding, negotiating, securing, letting, managing and maintaining the property.

How much they receive will vary by property and the terms offered but the principal is that their net returns are directly linked to how well they manage the property.

 


Different Types of Properties

 

One of our primary objectives is to offer choice and diversification. We achieve that by working with different types of LandLords and Developers, across the country with different types of property.

In the main you will find the following Buy-to-let properties on CrowdLords:

Existing Buy-to-let properties
Properties that are already tenanted can be listed either by the existing owner to release capital, or by a prospective owner.

Buy-to-let refurbishments
Properties being refurbished to increase the rental value or converted for use as an HMO

Buy-to-let developments
Properties being converted from residential use or separated into flats or studios and rented out by the Developer

New Build Buy-to-lets
Properties being purchased off-plan to be rented out on completion

 

We also include some Developments that are new builds, or renovations that will be sold on completion. As such there is no income and Investors are paid a share of any profits.

 
 

An explanation of the Investment Details

 

To help you make an informed choice, each property listing shows the Investment Details in a standard format. Our intention is not to judge the investment but to lay down the facts in a way that you can make your own judgement. The main sections are as follows:

 

Investment Strategy

This explains how the LandLord or Developer intends to generate a return from the Investment. Usually this will come from a combination of either:

Income return
Inherent or developed value
Growth in value

Capital Investment

This is a breakdown of the total fund showing allocations to professional fees, CrowdLords’ fee and the contingency fund. All investments include a contingency fund which if not used is paid back to investors at the end of term.

Development Overview

If there is significant refurbishment or development, this gives an explanation of how the works add value and how the budget is allocated.

 

Return Summary and Return Profile

Together these two sections explain how the Total Annual Returns are broken down between:

Built-in value – either as a result of buying below market value or adding value through refurbishment or development

Income – rental income return each year

Growth – as a result of market appreciation

 

Please note: The graph and the figures within the graph are for illustration purposes only

 

 

 

 

Average Annual Returns

The average annual returns take into account any refurbishment time or expected voids and shows

Gross annual returns - the percentage total annual yield
Operating costs - the percentage total; annual yield
Corporation Tax - the propertion expected to be paid as tax
LandLords share - the income available to the LandLord to include all management and maintenance costs
Distribution Yield - the percentage to Investors each year   

 

Please note: The graph and the figures within the graph are for illustration purposes only

Capital Returns

The Capital Returns section details how the projected capital returns for Investors are calculated using the Target sale price, assuming the contingency is returned, subtracting liquidation costs and CrowdLords’ fee and the payment of Tax to result in the Total Capital Returns. The proportion of Growth Paid is then shown to result in the Capital Returns for Investors.

 

Please note: The graph and the figures within the graph are for illustration purposes only

 

 

 

Risk Return Profile

We include a CrowdLords Risk Rating to illustrate where the investment lies on our Risk Return Profile.  Where risks are higher it is usual to expect a higher return and this is designed to aid quick comparisons only. It is our opinion only and should not be taken as a recommendation. You should judge the Risk for yourself using the information provided and your own investigations to form your own opinion.

We rate Risk across 5 parameters and grade them as being A, B, C, D or E – A being lower Risk. The five areas we grade are:

The Investment Period – the longer the period, the less the risk
Macro location and market – has the area performed well historically
Micro location – is the property in a good location for rental / sale
Level of Development – the degree of development and the cost / time risks
Track Record – the track record of the LandLord / Developer

We combine these into a weighted rating between A and E and show how the Risk / Return compares with what we would expect.

 

Please note: The graph and the figures within the graph are for illustration purposes only