Capital Growth v Cash Flow

Capital Growth v Cash Flow

This is an excerpt from Chapter 5, ‘Capital Growth versus Cash Flow’ of Frazer’s upcoming book, The Alternative Guide To Property Investment. You can register your interest in pre-ordering the book by clicking on the button at the bottom of this post.

Capital growth is a very powerful concept. As Albert Einstein once said, compound capital growth is the eighth wonder of the world.

What compound growth means is that if an asset worth £100,000 increases in value by 10% a year it will only take eight years for that asset to be worth more than double its original value. In ten years it will be worth around £259,000. And that’s without leverage.

Imagine that you’re back in 1996. You have £16,000 to invest, but you’re not sure what to do with it. Your stockbroker tells you one thing, your financial adviser tells you another, and your bank manager – of course – reckons you should stick it in the bank for a rainy day.

Instead, you decide to use that £16,000 as a deposit on an £80,000 buy-to-let property in London (that was the average house price in London just 20 years ago).

Two decades on, the average London property is worth over £488,000.

That means, provided you covered your mortgage payments and costs with rental income, your £16,000 has turned into £408,000 profit. Now there may well have been various incidental costs to take into account but, I think it’s fair to say, you would still have done many times better than if you had put that money into a pension or kept it in the bank.

It’s not possible to make the benefits of property investment any clearer than that.

It is, in my opinion, far and away the best investment you can make. Imagine that property only did half as well as this over the next ten years. It would still be likely to produce several times the returns of any other asset class.

Because of the power of compound growth, many people think property is all about capital growth, and that aspect is certainly what helps make it an attractive investment. And the fact that you can leverage purchases and obtain, for example, an 80% LTV mortgage multiplies the rate at which your capital can grow at astonishing rates.

Nonetheless, many people have come unstuck by leveraging highly and speculating on capital growth. They have then found themselves in an unsustainable position having to subsidise mortgage payments as the rental income has not been sufficient to cover their financial outgoings on the property.

You may be able to support one property at £200 a month whilst you wait for it to increase in value, but how many more of those could you afford?

However, if all your properties at least ‘wash their face’ and produce a small profit from rental income, you can support as many of them as you can buy – and benefit from the capital growth in all of them.


To read more about why to invest in property, you can click below to register your interest in the book. Fill in your details, and once the book is released, we will send you more information.

I'm Interested!

April – Monthly Property Development Update

April 2017

Here is a round-up of our latest developments and how they are progressing, with pictures available on the links below the descriptions.

HCD10 – Bollin Heights

Work is progressing on schedule and the show apartment is now complete and looks great.

We have applied for planning permission for phase 2, and expect a positive decision on 8th May as it is not contentious.

Sales proceeds are now £300,000 over what was anticipated.

Click here to see latest photos

HCD5 – Bank Chambers

Work is now well underway and proceeding apace. The conservation officer has signed off on all works for the top two floors. Discussions regarding the extra apartments on the ground floor are ongoing.

Click here to see latest photos

HCD4 – Gratrix Park

This development is progressing well with no issues. Sales are strong with 12 units reserved, and we have increased prices slightly.

Click here to see latest photos

HCD3 – The Woodlands

Work has now started after all the council’s issues have been resolved. We are working to get the show home and on-site sales office built ASAP to aid sales. Although the start of works has been significantly delayed, the contractors should be able to make up most of the time lost and will do so once enough confirmed sales have been made.

Click here to see latest photos

HCD2 – 10 Congleton Road, Alderley Edge

Work is proceeding apace with no problems. We will be raising money for the final stage next month (May 2017).

Click here to see latest photos

HCD1 – Regent St

Unfortunately, the expected bulk sale fell through. We have changed agents and improved marketing and have decided to drop the price in the hopes of attracting interest. There are no confirmed sales on the remaining 5 as yet, although there are various interested parties.

HCP156 – 103 Station Road, Marple

The cellar and all other remedial works have now been completed and the property will be going back on the market ASAP.  The cellar is now a habitable space.

Click here to see latest photos

HCD7 – Brundred Farm

Following the rejection of our planning application despite the planners recommending it, our purchase option has been extended for 8 months. The planning appeal is being prepared and will be submitted imminently.

Don’t forget, if you need any help with the investment process, you can call our client account team on 0161 667 4264. 

 

Register Now for more Info

View our Property Investments

 

Establishing Your Own Investment Criteria

Establishing Your Own Investment Criteria

This is an excerpt from Chapter 4, ‘Establishing Your Own Investment Criteria’, of Frazer’s upcoming book, The Alternative Guide To Property Investment. You can register your interest in pre-ordering the book by clicking on the button at the bottom of this post.

We held a dinner for our top-20 investors recently and I think it’s fair to say that just about everybody had different reasons for investing and slightly different criteria for choosing what to invest in.

Before investing any money, you need to consider what you want to achieve. Do you want to sit back and let your investment grow in value (e.g. stamps or wine or a pension fund, if you still think that’s a good idea) or do you want to generate an income (e.g. shares or property)?

Or perhaps a mix of the two?

Do you solely want to provide for your retirement and reinvest any income generated or do you need to earn an immediate income from your investments?

Are you prepared to risk all your capital on the same sort of investment or do you want to make some ultra-safe investments and speculate with a certain portion of your money on riskier but potentially more lucrative investments?

These are just a few of the questions you should ask yourself as the answers will help formulate your own investment criteria. If you have decided that you want to invest some of your capital into property, then the two most significant decisions you need to make are whether you want the emphasis to be on capital growth or cash flow and whether you want to make commercial or residential property investments.


To read more about establishing your own investment criteria, you can click below to register your interest in the book. Fill in your details, and once the book is released, we will send you more information.

I'm Interested!

The House Crowd Reviews Show How Great We Really Are!

The House Crowd Reviews Show How Great We Really Are!

We already know that we’re the best property crowdfunding platform in the business. And so does the industry, if our recent Crowdfunding Platform of the Year award from Property Wire is anything to go by (it is). But what do our investors think? Well, The House Crowd reviews on TrustPilot from our investors are pretty positive as well!

We boast an ‘Excellent’ rating on TrustPilot, with 9.2 stars out of 10 overall from investors who’ve reviewed us. Scrolling down the page, we were thrilled to see five out of five from all reviewers, which gave us a real sense of pride. Among the top reviews featured, we are described as ‘absolutely amazing’, ‘helpful’, ‘one of the best online investment programs I have come across’, and ‘professional, courteous and slightly irreverent’. That sounds like us, alright!

Our Top The House Crowd Reviews

Just to save you clicking and scrolling around, we’ve saved some of the best snippets from our favourite The House Crowd reviews on TrustPilot for you to take a look at.


“I have invested for several years now (with a large amount of £££’s) and am VERY happy with the returns. Relatives who I have encouraged to join are also extremely happy.” – Marios Michael


“I have been using the house crowd now for over two years and have found no issues at all in my dealings with them. All contact has been professional, courteous and slightly irreverent, which I find to my taste in an otherwise dry area.” – Trevor


“We’ve been using THC for several years now, over a number of differing project types. Generally speaking THC provide an excellent service with good returns and thus far have fulfilled all of our expectations.” – Ron Stolle


“I really like the total transparency of the House Crowd operation. You have access to all the information about every project. The variety of projects on offer is quite amazing too. Returns may seem high at first glance but when you look at the careful research that has gone into each project, it is clear these returns are achievable.” – Phil Rigby


“THC offer the ability to spread investment risk and their management team do all the hard work whilst gaining significant improvements on the average returns from direct investment.

“THC are a friendly, well-managed company providing a first class service people interested in property investment. Crowdfunding is not just the future, it is now!” – Kevin Jarvis


“The House Crowd is an easy way of getting property exposure with a strong return profile for an all equity investment. Diversification is easier than direct BTL since you have other crowd members contributing too.” – James

We could go on (and on!) sharing these great The House Crowd reviews with you, but we think you get the picture. We’ve always known we offer outstanding service and investment options, but to have this fed back in such positive ways by our investors reminds us what a good job we are doing. As we continue to grow and offer more investment products, we’ll be sure to continue putting our investors first, and keeping up the volume of positive investment experiences for everyone who invests with us.

 

Why Property Is the Best Vehicle to Supplement Your Pension

Why Property Is the Best Vehicle to Supplement Your Pension

This is an excerpt from Chapter 3, ‘Why Property Is the Best Vehicle to Supplement Your Pension’ of Frazer’s upcoming book, The Alternative Guide To Property Investment. You can register your interest in pre-ordering the book by clicking on the button at the bottom of this post.

Research from Saga Investment Services (amongst various others that reached the same conclusions) has found that the UK’s over-50s population needs to double the number of pension contributions they are making, if they are to stand any chance of a decent income through their retirement.

The research found that the majority of those over-50s surveyed believed they’d need an average annual income of £15,200 to get them through their retirement (personally I cannot imagine trying to subsist on such an amount in my old age – especially given inflationary factors).

The people surveyed estimated that they could generate this from a pension pot of £143,830 on average. Their estimated figures fall shockingly short of reality.

A pension pot of this size would actually generate just £7,940 guaranteed income a year (for a healthy 65-year-old) for life. That’s nearly a 50% shortfall. Basically, they need double the size of their pension just to make ends meet.

To have a comfortable life, which respondents identified as being defined by holidays, dining out, socialising, and hobbies, it was calculated that they’d need at least £21,630 (clearly they are less profligate than me). That would require a pension pot of nearly £400,000 – double the respondents’ estimate of £194,000 (which would generate just £10,170 guaranteed income a year).

On their estimated required sum, their pension fund would be exhausted within 12 years.

Poor returns, excessive fees and inconsistent annuity rates: a pension sure ain’t what it used to be. It’s no surprise, then, that people are starting to look for alternative ways of generating money for their retirement. Research suggests that property investment is turning out to be twice as popular as any other form of investment with the over-50s.

The younger generation, too, is turning down traditional pension plans, focusing instead on property investments (and now crowdfunding as a means to access the asset class). As mentioned previously, the number of people choosing – or being forced – to rent, due to the difficulty of getting into the property market, or simply because it’s more convenient in many ways, is rising rapidly.

A pension also has the disadvantages of limited (and badly publicised) choice of annuity provider and the fact the money is inaccessible.

When it comes to cashing in, holders are often disappointed to find that they are unable to access their lump sum when they wish to without severe financial penalties. And despite recent changes, one can only access 25% of one’s pension pot without incurring punitive taxation.

Not only that, as far as I know, the benefits of a pension end when the holder dies. That means you could have saved £400,000 in your pension, purchased an annuity with that, at age 65, and receive £21,000 a year thereafter. But if you were to pass away within a few years your spouse and heirs would receive nothing. The pension company keeps everything.

Clearly, this is not the case if you buy a property, which can be inherited; though the Treasury will, no doubt, steal as much of it as they can. Did I say ‘steal’ – how outrageous, that I should accuse our esteemed government of ‘stealing’ money that has already had tax paid on it at least once before – in the form of income tax, stamp duty, tax on savings interest, dividend tax, etc.

I do apologise. Clearly, it’s perfectly fair for them to take whatever they feel like.

Whilst it is important to start saving for retirement as early in life as possible, the younger generations are waiting later and later before considering their retirement planning. This may be in part due to high living costs and stagnating real earnings amongst the young … or, perhaps, their preference for electronic gadgets, dining out, designer clothes and foreign holidays over prudent saving … Just saying!


To read more about supplementing your pension with property, you can click below to register your interest in the book. Fill in your details, and once the book is released, we will send you more information.

I'm Interested!

 

Performance Statistics: March 2017

Performance Statistics: March 2017

The figures are now in for our performance statistics from last month. You will see below our summary figures from the dividend, interest and capital payments made in March 2017. You can also see our total cumulative returns from 2013, which you may also find helpful to know.

March 2017

  • Projects paid out against = 20
  • Total value of dividends and interest paid = £217,583.03
  • Total value of capital repaid = £2,015,907.39 (1 x development capital, 1 x bridging loan)
  • Total number of investors paid = 694

Total for 2017 So Far

  • Projects paid out against = 64
  • Total value of dividends and interest paid = £374,095.83
  • Total value of capital repaid = £2,881,907.39
  • Total number of investors paid = 1,714

Cumulative (from January 2013)

  • Project paid out against = 498
  • Total value of dividends and interest paid = £1,509,720.83
  • Total value of capital repaid = £7,887,627.39
  • Total number of investors paid = 10,212

To find out more about investing with The House Crowd, you can register with us by clicking on the purple button below. Alternatively, take a look at our current property investment opportunities by clicking the blue button! Either way, we’re always here to answer your questions in any way we can.

Register Now for more Info

View our Property Investments

 

March Peer To Peer & Development Performance Stats

March 2017 Summary P2P & Development Stats

March 2017 summary and monthly statistics can be seen below.

Bridging Loans 31/03/2017
  Net
Total Amount Lent £14,971,670
Total Returns Paid £458,801
No of Loans 41
No of Loans Repaid 18
Average Loan Period 10
Investor Capital Lost 0%
Average Loan Size £364,658
Average Loan to Value 70%
Average Interest Rate Paid 8.94%

 

Development Loans 31/03/2017
  Net
Total Amount Lent £11,010,571
Total Returns Paid £146,212
No of Loans 16
No of Loans Repaid 5
Average Loan Period 10
Investor Capital Lost 0%
Average Loan Size £688,161
Average Loan to Value N/A
Average Interest Rate Paid 11.69%

You can find all our latest investments by clicking here.


View our Property Investments

How Much Diversification Is Sensible?

How Much Diversification Is Sensible?

This is an excerpt from Chapter Two, ‘How Much Diversification Is Sensible?’ of Frazer’s upcoming book, ‘The Alternative Guide To Property Investment‘. You can register your interest in pre-ordering the book by clicking on the button at the bottom of this post.

In the previous chapter, I mentioned that I go against traditional wisdom as I am not particularly convinced about diversification across different asset classes as one cannot possibly be knowledgeable about all of them and therefore must seek to rely on third-party advisers. If you have no time or inclination to look after your own money this is probably sage advice.

I accept that for most people there are good reasons to do so but, for me, I would point to the fact that one of the wealthiest people I have ever met invests all his money in property. But not just in any property, and not just in one particular area, but in one particular street (in central London). He won’t even consider buying properties on adjoining streets. As far as he is concerned, they are outside his area of expertise. Clearly, specialisation can have its advantages.

Therefore, I am not giving advice, just telling you what I personally think. The consensus of opinion about diversification may be generally sensible for most people but may not be right for everyone, especially for those who are experts in their field. That’s a matter for you to decide.

What I do think is sensible for most people is to diversify and spread your risk (within reason) so all your eggs are not in one basket.

And one reason I believe property crowdfunding is such a beneficial concept is that it allows you to spread whatever available capital you have over a number of different properties so, if a disaster befalls one, you don’t have all your money tied up in it and you still have others to fall back on.

Within the asset class ‘property’ itself, you could, if you wish, diversify your portfolio in a number of different ways. It could include traditional buy-to-let properties, new-build apartments, commercial investments, HMOs (houses in multiple occupation) and ‘fixer-uppers’.

Secured lending and development finance are other options that fall within the property investment umbrella, as you lend out sums to property developers and business owners who own property they can use as security.

Diversification also means a selection of risk profiles. Of course, you should take into account your personal circumstances and lifestyle requirements, as well as your own attitude to risk. Typically, higher risk investments come with the prospect of higher rewards, whilst a safer investment may yield lesser gains.

Buy-to-let has been the most popular option for property investment. Private renting has almost doubled in the period from 2003 to 2015, and in Manchester, it has almost quadrupled, from 6% to 20%.

This means, in theory, that the buy-to-let sector should offer great potential for investment over the coming years. However, as we shall learn later, the traditional way of purchasing single buy-to-let properties may no longer be the best way to capitalise upon this growing market. In fact, it may not be feasible at all for most individuals anymore.

The commercial property market, too, can be a good option.

Investing in commercial real estate can mean:

  • positive leverage (potentially increasing ROI (return on investment);
  • tax benefits (proper structuring can offer an array of benefits tied to interest, depreciation and so on);
  • more control (personal ownership equals control);
  • a hedge against inflation (such property tends to benefit long term from inflation);
  • cash flow and current income (rental income from stable commercial real estate means a potentially steady and predictable income stream);
  • historically strong returns (average annual return: 9.5% sustained over a 20-year period).

You can find out more about commercial property and how it compares with residential property investment later in this book.


To read more about diversification, you can click below to register your interest in the book. Fill in your details, and once the book is released, we will send you more information.

I'm Interested!

 

The House Crowd Wins Property Wire Awards 2017 Crowdfunding Platform of the Year

The House Crowd Wins Property Wire Awards 2017 Crowdfunding Platform of the Year

Following last week’s news that we had been nominated for the Crowdfunding Platform of the Year in the first annual Property Wire Awards 2017, we are delighted to announce that we won!

Our Property Wire Awards 2017 Win!

As the first property crowdfunding platform in the world, offering diverse property investment products and increasing accessibility to the property investment space, the Global Property News service selected The House Crowd as the leading company in the property crowdfunding space.

We were presented with the award at the ceremony on Old Street, London, on Friday night, alongside many other industry leaders. We met a really interesting mix of people from the industry at large – some we knew already, and some new faces. It was a fantastic opportunity for us to find ourselves amongst such similarly forward-thinking property pioneers.

The awards were extremely competitive within each of the categories, which ranged from Best Buy to Let Mortgage Provider to Best Trade Association and many more in between. There was a real dominance of London-based companies up for nomination, so it was a real joy for us to promote the potential of the Northern Powerhouse.

Recognition For Our Work

This announcement comes just as we reach our fifth anniversary, and we are proud to be recognised as trailblazers in property crowdfunding at this point.

The award is also a great opportunity for us to share The House Crowd’s story to becoming the first in an industry now worth £700 million a year in the UK alone.

We have worked hard to provide an alternative means of investment for those who are increasingly finding themselves pushed out of the property market by legislative changes.

Over the last five years, we have evolved from buying £50,000 terraced houses to offering the large range of investment products we do now, from peer to peer-secured lending to property crowdfunding itself.

We are also introducing a specialist bridging finance service, along with the planned launch of HC Finance and HC Investments websites.

Frazer Fearnhead, our founder and CEO, said:

“We’re proud of what we’ve achieved over the past five years, and Property Wire recognising us as the best is testament to the team’s hard work.

“Despite having to fight through reams of red tape to make it happen, property crowdfunding is already worth £700 million a year in the UK with numerous other platforms having followed in our footsteps.”

Our Investment Director, David Roberts, has also added:

“We are a follower of Property Wire as a great source of property news. It is a pleasure to be recognised by these industry leaders for the work we are doing in the property crowdfunding space”.

Why Invest in Property At All?

Why Invest in Property At All?

This is an excerpt from Chapter One, ‘Why Invest In Property At All?’ of Frazer’s upcoming book, The Alternative Guide To Property Investment. You can register your interest in pre-ordering the book by clicking on the button at the bottom of this post.

Fact: almost everybody wants to be able to retire at some point and enjoy the later years of their lives in comfort.

If you think the state pension will allow you to do that, then, sorry, you are living in La La Land. The government will not look after you in your later years. It simply can’t afford to.

The maximum state pension in 2016/17 is £119.30 per week. Can you live comfortably on that? In fact, can you live on that at all?

It is imperative that you do something to supplement that. Your main choices are:

  • savings accounts
  • a private pension
  • shares
  • property

I will dealing with each of these briefly.

Savings Accounts

We are always being told that keeping your money in a bank account is safe and it’s guaranteed – at least up to £75,000. That is provided the government doesn’t also go bankrupt, which is not as ridiculous as it might sound; it would have happened here in the 1970s had the IMF not stepped in, and just take a look at Greece and Italy and Portugal and Spain … oh yes, and France, to see how vulnerable many governments are right now. I do not believe saving your money in a bank account is in any way a sensible manner to provide for your retirement.

The only thing that is guaranteed is that the value of that money is being eroded year on year by inflation, and given the current rates of interest payable the net value is actually decreasing. Even if you had a million pounds saved by the time you retired at, say, 2% interest, that would only provide you with £20,000 a year income – and that’s before tax.

Pensions

So, let’s look at private pensions…

The days of the final salary pension are long gone, and few, if any, private pensions have delivered what clients expected while some, it’s fair to say, have been outright disasters. The returns, whilst clearly considerably better than a savings account, are still negligible and the only people, in my opinion, who seem to really profit are the institutions that provide them.

We’ve seen pension fund after pension fund collapse, leaving thousands with substantial losses, executives ripping off their firms and employees for millions, and major holes appearing in the entire ‘safety-net’ structure. Robert Maxwell and the Mirror Group and British Home Stores are just two of a number of pension funds that spring to mind.

Please read Chapter 3 if you need convincing that the pension most people have is nowhere near enough to generate an annuity that will finance a comfortable retirement.

So whilst you definitely do need a vehicle to provide for your retirement, it definitely does not need to be an institutional or company pension.

Investing in Shares

Clearly, fortunes can be made in the stock market – if you know what you are doing. If you don’t, then picking the best tracker fund you can find would seem the most sensible option. I would not advocate against investing in the stock market but in my opinion, it is considerably more volatile than property and there are many more factors beyond your control that make it harder to invest in successfully.

Property

Of all the investment options available, I believe property is the one people most easily understand and, therefore, are most likely to be successful with.

I mean, let’s face it, even Goldman Sachs didn’t really understand what they were peddling in the noughties. The more complicated something is, the more likely it is that investors don’t really know what they are doing or what the risks are. They don’t even know what it is they don’t know, so how can they possibly evaluate the risks?


To read more about why to invest in property, you can click below to register your interest in the book. Fill in your details, and once the book is released, we will send you more information.

I'm Interested!