Performance Statistics: January 2017

Performance Statistics: January 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 January 2017. You can also see our total cumulative returns from 2013, which you may also find helpful to know.

January 2017

  • Projects paid out against = 22
  • Total value of dividends and interest paid = £82,695.41
  • Total value of capital repaid = £373,000 (1 x development capital)
  • Total number of investors paid = 542

Total for 2017 So Far

  • Projects paid out against = 22
  • Total value of dividends and interest paid = £82,695.41
  • Total value of capital repaid = £373,000 (1 x development capital)
  • Total number of investors paid = 542

Cumulative (from January 2013)

  • Project paid out against = 456
  • Total value of dividends and interest paid = £1,218,320.41
  • Total value of capital repaid = £5,378,720.00
  • Total number of investors paid = 9,040

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.

 

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Peer To Peer and Development Performance Stats

December 2016 Summary P2P & Development Stats

December 2016 Summary Monthly Statistics can be seen below.

Bridging Loans   31/12/2016
  Gross Net
Total Amount Lent £10,773,024 £9,624,670
Total Returns Paid £292,637 £292,637
No of Loans 28
No of Loans Repaid 14
Average Loan Period 10
Investors Capital Lost £0
Average Loan Size £384,751 £343,738
Average Loan to Value 70%
Average Interest Rate Paid 9.00%
Average Interest Rate Offered 9.08%

 

Development Loans   31/12/2016
  Gross Net
Total Amount Lent £8,865,861 £8,019,571
Total Returns Paid £46,862 £46,862
No of Loans 12
No of Loans Repaid 2
Average Loan Period 9
Investors Capital Lost £0
Average Loan Size £738,822 £668,298
Average Loan to Value N/A
Average Interest Rate Paid 14.00%
Average Interest Rate Offered 11.92%

You can find all our latest investments by clicking here.

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Manchester Property Market Growth at 12 Year High

Manchester Property Market Growth at 12 Year High

Latest figures released by the Hometrack Index show Manchester property market growth to have hit a 12 year high in 2016. This gives the city the second highest rate of price growth in the UK, next to Bristol.

A rise of 8.9% year-on-year for Manchester was reported, with experts predicting that the city will overtake Bristol for pole position by the end of the first quarter of 2017. The figures for Manchester exceed the average year-on-year increase across the UK, which came in at 7.7%.

Strong market fundamentals, particularly a significant supply/demand imbalance in Manchester, keep pressure on prices high. Despite the same supply/demand imbalance in the capital however, London dropped to seventh place for price growth in 2016.

Strong Market Fundamentals Keep Manchester Property Market Growth Thriving

Manchester’s vibrant rental market is also thriving, with demand continuing to grow. This, of course, makes it a dream opportunity for buy-to-let investors. Indeed, the city was recently named the UK’s buy-to-let hotspot by HSBC. This is all despite the massive challenges faced by buy-to-let investors following the government’s attacks on landlords.

The growing popularity of property crowdfunding is helping prospective buy-to-let investors push back against these attacks, providing a welcome haven for those keen to benefit from a steady stream of secured rental income.

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Rental growth here is 13 times that of London, driven by the growing population of young renters, flocking to the city for studying and career opportunities. Manchester boasts 60% more 25-29 year olds than the UK average, placing it within the country’s fastest growing demand for short term lets.

Massive Investment In Manchester Fuelling Property Market Growth

Success is also compounded by the government’s whopping £7 billion investment in Manchester. Determination to develop a world-class infrastructure in the city will attract further billions of worldwide investment over the coming years, which is already evident as overseas investors hone in on the investment opportunities offered here.  

Over 100,000 students across Manchester’s four main higher education institutions give it the highest student population in Europe.

70,000 of these are not in student halls of residences, meaning they are renting privately within the city. This makes it prime territory for PBSA (Purpose Built Student Accommodation) investment.

Across the board, from the UK-leading purchase market, to the thriving private rental and student markets, right through to commercial investments, Manchester is winning. As growth in the city’s property market continues at an unprecedented pace, with huge investment fuelling projected growth for years to come, we remain confident in the continued promise that our city offers investors.

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Our 2016 Summary

Our 2016 Summary

December saw another successful month for The House Crowd, which rounded the year off nicely for us and allowed us to start 2017 on the right foot. It was a very busy month, with 4 bridging loans being repaid, 1 property sold and seed capital repaid for one of our development projects. We paid out over £2.2 million in capital returned to 693 investors. You’ll find the stats, for December, as well as for our 2016 summary, below:

December 2016

Projects paid out against – 24

Total Value of dividends and interest paid – £195,747.96

Total Value of Capital Repaid – £2,057,295

Total paid out to investors for December – £2,253,042

Total number of investors paid – 693

2016 Final

Project paid out against – 240

Total value of dividends and interest paid – £794,126.60

Total Value of Capital Repaid – £4,554,720

Total number of investors paid – 5,506

Cumulative

Project paid out against – 434

Total value of dividends and interest paid – £1,135,625.00

Total Value of Capital Repaid – £5,005,720.00

Total number of investors paid – 8,498

We’re excited to see where 2017 takes us, and hope that you will join us for the ride. With many upcoming developments and exciting projects to invest in, we’re sure that 2017 is going to be a year to remember.

You can find all our latest investments by clicking here

 

Apache Capital Partners Fund 466 Private Rental Sector Homes in Manchester

Apache Capital Partners Fund 466 Private Rental Sector Homes in Manchester

Property investment management firm, Apache Capital Partners, has teamed with Moda Living to secure senior debt financing of £85m, secured on the Angel Gardens development in Manchester city centre. The development will create 466 private rental sector homes in Manchester.

Deutsche Pfandbriefbank has agreed to a four-year term funding contract for the construction period of the development, which will convert to an investment loan for the rest of the term. The development is set to cost a total of £153m. Completion of the project is set for 2020.

The premium private rental sector apartments will stand 34 storeys tall, making it one of the tallest residential towers built outside London since the 2008 crash. Covering 520,000 sq ft, the Angel Gardens development forms part of the NOMA redevelopment project, regenerating a 20-acre site opposite Manchester’s Victoria station.

Angel Gardens and Beyond…

Angel Gardens, however, is not the only private rental sector delivered by the joint venture between Apache and Moda Living. It will be the first of many private rental sector developments created by the venture. In the pipeline is a total of 5,000 new private rental sector homes across eight cities across the UK, including London and the south east.

Johnny Caddick, managing director at Moda Living, believes the project will “set new expectations for rental housing in Manchester and throughout the UK”.

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Private Rental Sector Homes in Manchester: On Trend

Investing in property in Manchester is becoming a real trend for high profile investors. And the private rental sector is hot property, considering the vast increase in those seeking rental accommodation. It is mainly the young professionals, who are flocking to the city for its huge career opportunities, that make up the bulk of renters in the city. Angel Gardens will be ideally placed for the many employed in the NOMA area, as well as those commuting into Manchester Victoria.

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An Introduction to Investing Through Property Crowdfunding

An Introduction to Investing Through Property Crowdfunding

Traditionally, only those with access to large amounts of capital have been able to invest in the lucrative world of property. Managing a portfolio is normally time-consuming, business, which becomes increasingly more burdensome as the investor’s portfolio becomes larger.

However, in the last few years, a new method of property investment has emerged which has effectively democratised the entire investment process, allowing more people than ever to benefit from the financial gains that property investment can offer.

Property crowdfunding started to take off in 2012, and is now worth billions of dollars a year worldwide. The value of the industry currently doubles every two months, and is set to be worth $250bn by 2020.

The growth of the property crowdfunding industry has been catalysed, in part, by the relaxation of regulations over the last few years. The Government has identified the industry as being hugely beneficial to the economy, and has also begun investing in crowdfunding itself. Institutional investment is also coming into play at an increasing rate, and high net worth investors, attracted by the simplicity of the process, and the returns available, are also investing through property crowdfunding.

But why is investing in property crowdfunding proving so popular?

Offering the chance to build a diverse portfolio without all the legwork involved in traditional property investment models, and with the opportunity for significant gains, it’s no surprise that investing in property crowdfunding has grown exponentially in the last few years.

What’s more, as interest rates on savings continue to crawl along the seabed, and returns from both rental and sales continue to rise, more and more people are waking up to crowdfunding as a simple way to grow their money.

How Does It Work?

Property crowdfunding encompasses both equity investments and debt based investment (also known as peer to peer secured lending).

The concept itself is relatively simple.

Equity investments involve a group of people pooling their cash to buy a property as shareholders through a ‘Special Purpose Vehicle’ (SPV). The SPV is a limited company, set up solely for the purchase of that property. The SPV handles all the work, fees and maintenance of the property, whilst the shareholders receive their proportion of the rental yields, and/or share of capital gains when the property is sold.

People can invest even very small sums in buying shares in the property. On some platforms, this is as low as £50, but the typical minimum is between £500 and £1000. One of the advantages of property crowdfunding is that you can spread your available capital over a number of different properties across the crowdfunding platform, to mitigate risk.

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Getting started is a very quick and easy process. You simply register on your chosen website – it is an FCA requirement that only registered and accredited investors may participate, and, once registered, you simply select the properties you wish to invest in.

Debt based investments again involve pooling resources, in this instance, to make micro loans through the platform to a third party borrower. The loan as a whole is secured against the borrower’s property and the platform appoints an agent to act on behalf of lenders and take any necessary enforcement action. These types of investment are usually short term (up to 12 months, and pay a fixed rate of interest with no capital growth).

Where Did It Start?

The House Crowd is the longest-established property crowdfunding platform. It began trading in 2012 and offers both debt and equity investments. Since then, other companies have followed in their footsteps, such as Property Moose in 2013, and Property Partner and Crowdlords in 2014. The industry continues to expand, with several new platforms emerging each year.

Is It Regulated?

Property crowdfunding firms are all regulated by the Financial Conduct Authority (FCA), which ensures that platforms are managed properly, and that risks are made completely clear to investors. As with any investment, there is risk to capital – but it’s worth comparing this risk against other investment classes, and seeing how property crowdfunding stacks up.

Before investing through property crowdfunding platforms, it is very important to do your research. Every regulated platform should have the FCA authorisation number clearly visible on their website. If you can’t find these details, you should steer clear as they are not operating legally.

Is It The Right Choice For Me?

As with any investment, you need to take into account your personal circumstances to establish whether it is the right one for you.

You can find out more about establishing whether property crowdfunding is the right investment for you here.

Ask yourself what you wish to achieve. Investors with a lot of professional experience and access to bank funding, may find the model less appealing than novices.

If, on the other hand, you don’t have a deposit available, or aren’t able to get a mortgage, then investing through property crowdfunding could be an ideal way for you to access this asset class. And, given the government’s recent attacks on landlords, which has severely undermined the profitability and viability of buy-to-let investing for individual investors, it may well be that crowdfunding remains the only sensible option available for most.

Risk

The same principles that apply to other forms of property investment also apply to crowdfunding. You should be aware that capital growth profits are speculative, and investing in properties that produce a healthy cash flow is the more sensible approach.

One of the major risks associated with cash flow positive properties is that of damage or non-payment of rent. As such, you should always factor this in as an eventuality that may affect your yields. As mentioned above, however, if you have a well-diversified portfolio, with your capital spread over several properties, any losses due to one bad tenant will be more bearable than if you had all your eggs in one basket.

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At the end of the day, it all comes down to your risk tolerance. You do lose a large amount of leverage by investing through property crowdfunding, and you will only benefit proportionately from the property’s capital growth but, at the same time, having no borrowing means significantly less risk as there are no mortgage payments and no danger of the property being repossessed (as shareholders own it outright).

If making crowdfunded debt-based investment, (aka peer to peer lending) you need to know what would happen if the borrower defaults and does not repay the loan. You should ask questions about how your investment would be protected, what happens in the event of a default – how easy is it to take control of the secured property? – and how much equity is available to enable you to recover your money should the worst happen. Unless there is sufficient equity in the property, you could risk losing some or all of your money.

If you opt for debt-based investments, your investment will be secured by a legal charge. A critical matter to consider is at what LTV the loan is made. If, for example, a loan is made at ‘75% LTV’, it means that you will be at risk of losing some of your capital if the borrower defaults, the property has to be seized, and is sold for less than 75% of its current valuation.

Debt investments are generally considered to be lower risk than equity investments, as lenders are always paid out before shareholders, however, you do not get the potential upside of capital growth.

What About If I Want Out of My Investment?

If you need a liquid asset, then property is not the best choice.

Investing through property crowdfunding facilitates liquidity to some degree as it may be easier to sell shares in a property than the whole property. However, there is never any guarantee that you will be able to find a buyer, and, if you cannot do so, you will have to wait until the property is sold.

Some platforms will help you to find a buyer after the expiry of a minimum term, but you should check the small print before you invest. If you’re looking for a short term investment, P2P secured lending may be the better option.

To Conclude

We hope that this has offered you some valuable insight into getting started investing through property crowdfunding. Of course, you should know everything about the ins and outs of any investment before you part with your money, and we are fully committed to helping you know all you need to.

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If you have any questions, you can always get in touch with us and we will be very happy to fill you in.

Traditional Property Investment versus Property Crowdfunding

Traditional Property Investment Versus Property Crowdfunding

Property crowdfunding and traditional property investment have some significant differences. The main difference is to be found in the nature of managing the investment.

Whilst those who favour traditional property investment value the sense of control associated with full ownership of a property, there are significant costs and time commitments involved in maintaining their investment, Property crowdfunding on the other hand is to a very large extent a passive investment with thord parties managing everything on your behalf. So if you do not have the time, nor the resources, to keep up with the demands of building a property portfolio it can be a very attractive option.

There are also additional financial implications to consider, and we will go into these in this article.

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Responsibility

Property crowdfunding eliminates many of the responsibilities involved with traditional property investment. An investor wishing to create a properly diversified portfolio of properties will invest large sums on a smaller range of properties, and will be responsible for everything from biological disruptions (by infestation of plant or animal life), to managing tenants and weathering void periods on a rental property. With a crowdfunded property investment, none of these aspects apply, as they are taken care of by a third party.

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Furthermore, the due diligence, prequalification and vetting of an investment property are all handled by the SPV (Special Purpose Vehicle), the company behind the purchased property.

If, on the other hand, you have the skills and experience necessary to avoid mistakes and handle the investment on your own, then traditional property investment will probably be a lucrative way to grow your money. That being said, you will need substantially more money in the first place in order to make your first investment purchase.

Fees and Costs

There’s also the matter of fees. A traditional property investor will have to contend with solicitors’ fees, mortgage broker fees, loan arrangement fees, and surveyor charges, for example. With property crowdfunding, these fees are included within the overall cost required to sell the property, as listed on the crowdfunding platform’s website.

It’s also worth learning from the mistakes many property investors made ahead of the 2008 property crash. Many found that their mortgage lenders had allowed them to leverage at a rate that exceeded their affordability. The banks then revalued people’s assets, leading to a swathe of repossessions, subsequent catastrophic loss, and bankruptcies.

Checking the small print and getting legal advice when investing with the traditional property investment model is wise. Then again, none of this applies to property crowdfunding.

This is, of course, a worst-case scenario for traditional property investors. It is, nonetheless, one that still bears some weight. If mortgage rates rise, those who have invested with a mortgage may find themselves out of pocket. Buy-to-let investors should take the obvious step of making sure that their monthly rental income covers, at the very least, their mortgage repayments by at least 130% and should factor in potential mortgage rate rises.

Find out more about our current property investment options.

Buy-to-let landlords have also been hit by changes in Government legislation that have removed the ability for these landlords to deduct interest from profits from their tax liability, which can prove a further obstacle to ensuring the profitability of their investment. Again, there are no such risks with property crowdfunding, which usually buys properties for cash with no or minimal borrowing.

Challenges and Rewards

Whilst there are challenges involved with investing in property in the traditional manner, there are also a great many rewards. First of all, rather than earning a percentage of returns based on your initial investment sum (as with crowdfunding), once all outgoings (such as loans and legal fees, for example) have been taken into account, an outright property investor could earn a potentially much higher return.

There is, however, a downside to this. Where a traditional investor leverages a lot of cash, the risks to the investment are increased dramatically. Should the investment value fall, they could stand to lose a very significant amount. Whilst risk is, of course, not negated with property crowdfunding, no mortgage is necessary.

Selling Your Investment

Another benefit of traditional property investment is the control over when to sell the investment. If you are able to sell at a profit, and as quickly as you require, then the power is in your hands. Property crowdfunding, on the other hand, usually requires a majority vote from all shareholders if you wish to sell before the end of the investment term.

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To Conclude

Property investment, whether traditional or crowdfunded, has long been a profitable investment choice. Whilst both forms of investment carry risk, there are significant pros and cons on both sides, which potential investors need to factor into their investment decision.

Weighing up which type of property investment is right for your particular needs is key to ensuring that you are confident in where to place your money. At the end of the day, however, whichever path to property investment you choose, there is potential for great returns.

Property Crowdfunding: Is It The Right Investment For Me?

Property Crowdfunding: Is It The Right Investment For Me?

Property crowdfunding is becoming an ever-more popular way for people to invest in property, often with significantly less money than investing the traditional way. However, before you jump in, it’s a good idea to assess whether this is the right investment choice for you and your circumstances.

You can view our current property investment options here.

What Do You Want To Achieve?

The first question to ask yourself when considering property crowdfunding is what you wish to achieve from your investment.

If you are looking for an investment that requires less ongoing attention than owning a property for either development or rental, or you personally have more faith in the property market than the stock market, then it could be right for you. Nonetheless, plenty of investors in property welcome the sense of control that owning a property outright brings.

Though there is more additional financial outlay involved in the purchase and maintenance of a property owned this way, some people would rather be involved in all aspects of their investment than leave it to another party.

You can find out more by registering here.

What Experience in Property Investment Do You Have?

This follows on to the second question you need to ask. How experienced are you as a property investor?

If you’ve been a full-time, outright property investor for some time, and have access to the bank funding required to own and develop a property yourself, then property crowdfunding may be less appealing.

For those who know how the market works, and perhaps already have all the necessary contacts they need for the properties they invest in, benefitting from more of the profits (after paying off loans), as opposed to their share percentage, may be a more attractive investment option.

If none of this applies to you, then you could be the sort of person who would benefit from property crowdfunding, depending your circumstances.

What Are Your Circumstances?

For novice or less experienced investors, or those who have less access to bank funding, then property crowdfunding can offer an opportunity to invest in property that is unavailable through other means. For those who are interested in the prospect of weathering the risks of property investment, rather than earning scarcely any interest on their savings accounts, again, property crowdfunding may offer an alternative path.

Whenever you consider an investment, whichever form this may take, you need to ensure that you are covered in the event that the investment takes a turn for the worst. You should only ever invest what you can afford, so make sure your calculations are correct, and you won’t cause yourself financial harm if, for any reason, the value of your investment falls.

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To Conclude

As a final note, if you decide to invest in property crowdfunding, there is further investigation to be undertaken. You will need to choose the right crowdfunding platform. It is very important to do your research, and to only settle on the platform that meets all your needs and requirements. Make sure they are regulated by the FCA, that they have a good reputation, and that their customer service and complaints procedures meet your standards.

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Entrusting your money with any investment vehicle is a decision that should never be made lightly. Ensuring that you are confident with all aspects of the investment is crucial, including the issue of risk. Property crowdfunding is no different to most other investment types, in that there is always a risk of loss. Knowing everything you can, and choosing the right investment for you, is the key to investing happily, smartly, and – hopefully – profitably.

 

Continued Increase in UK Property Demand Great News for Investors

Continued Increase in UK Property Demand Great News for Investors

In unsurprising news, RICS has announced that UK housing demand continues to increase. November’s figures show an increase in buyer enquiries by 3% over the previous month (up to 13% in November from 10% in October).

This demonstrates a third consecutive month of increases in the number of prospective buyers on the UK housing market.

“Although there are some signs that the numbers may begin to edge upwards in the new year,” says RICS Chief Economist, Simon Robinsohn. “The combination of macro uncertainty, the on-going supply shortfall, with stock levels around historic lows, and the myriad of tax changes impacting on buyers suggest that any pick-up in activity will be relatively modest. This is significant not just for the housing market itself but also for the wider economy given how much of consumer spending is tied in with home purchases.”

There are no signs that the current UK housing shortage is likely to ease off any time soon. New sales instructions rose from minus 3% to zero in the same period. Seller numbers, therefore, are slightly higher, but not enough to meet the continually strong demand.

Where there is a discrepancy between the sales market and buyer market like this, it implies that more people are either moving direct from rental accommodation, or are first time buyers. The buy-to-let market, however, is still strong, despite stamp duty hikes and tax changes implemented at the start of the 2016-17 tax year.

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UK Property Demand Rises Pleases Investors

All of this, of course, is great news for property investors. With such high demand for housing, and the value of properties still on the rise (albeit less so than in earlier months of the year), the chances of significant gains, in buy-to-let, new development or ‘flips’, are looking good.

Most of the UK is continuing to see an increase in prices, particularly in the North West, where the market is booming. Week after week, we are seeing fresh reports of the continuing rise in popularity of properties in the Manchester area.

This is, in part, due to heavy investment in development of the city’s infrastructure, and an influx of businesses relocating to the area.  These new businesses, bringing fresh jobs to the North West, are further increasing demand, particularly in the rental sector, as young professionals continue to find promising careers in the region.

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Glossary of Property Investment Terms

There are a lot of terms unique to the investment world that will be new to those just embarking on building a property portfolio. That’s why we thought it would be very useful for you to have a thorough Glossary of Property Investment Terms to help you to thoroughly understand some of the finer points of investing. We hope you find it useful!

Glossary of Property Investment Terms | The House Crowd

A Shares 

A class of shares which have specific rights attached to them, as set out in a company’s articles of association.

Angel Investors

Investors who provide investment and other support to early-stage businesses. Traditionally angels are wealthy individuals who have a significant amount of entrepreneurial, industry or investment experience.

Angel Network (or Angel Syndicate)

A group of angel investors that pool together money and other resources to invest in, and provide support to, early-stage businesses.

Annualised Return

Average return each year over the minimum term, based on the total of rental income and estimated capital growth.

Find out more about Annualised Returns here.

Articles of Association

A company document that sets out its management and administrative structure.

The articles dictate the internal affairs of the company such as director and shareholder rights, the issue and transfer of shares, and the organisation of meetings.

Asset Class

A class of economic property that has similar characteristics. Listed shares, government bonds and real estate are all asset classes.

Glossary of Property Investment Terms | The House Crowd

B Shares

A class of shares which have specific rights attached to them, as set out in the company’s articles of association.

Below Market Value (BMV)

Properties are sometimes sold at below the market value, meaning they are offered at lower prices than comparable properties.

Beneficial Shareholder / Owner

An investor who owns the economic value and other shareholder benefits attached to shares, such as dividends and tax reliefs, but the registered title to their shares is held with another person or entity often for administrative convenience.

Bridging Finance

Bridging loans are a short-term funding option. They are used to ‘bridge’ a gap between a debt coming due – primarily for property transactions – and the main line of credit becoming available. Alternatively, they can act as a short-term loan in pressing circumstances.

Glossary of Property Investment Terms | The House Crowd

Capital Employed  

The sum of shareholders’ equity and debt liabilities; can be simplified as Total Assets – Current Liabilities.

Capital Growth

The increase in value of an asset or investment over time, measured on the basis of the current value of the asset or investment, in relation to the amount originally invested in it.

Convertible Equity

An equity investment where money is invested in a company in exchange for shares to be issued at a later date. The share issue is generally triggered by the company raising finance from other investors. In return for investing early, the convertible equity investors receive a discount on the price of the shares issued to the other investors.

Convertible Note

A debt investment where money is invested in a company with the expectation that the debt will “convert” into shares issued at a later date. The share issue is generally triggered by the company raising finance from other investors. Before the conversion, the investor is paid interest.

Crowdfunding

The funding of projects or ventures by raising money from a large number of people, usually online. The three main types of crowdfunding are equity, debt and rewards/donations.

Glossary of Property Investment Terms | The House Crowd

Damp Proof Course (DPC)

A barrier through the structure by capillary action such as through a phenomenon known as rising damp.

Debt

Money owed by one person/company to another. The borrower has to repay the money at a later date and generally also has to pay interest.

Dilution

A reduction in the ownership percentage of a share in a company caused by the issue of new shares.

Diversification

An investment strategy that involves mixing the amount, values and kinds of investments within a portfolio to spread risk and minimise losses.

Dividend

A dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.

Dividend Distribution

The distribution of a portion of a company’s profits to investors.

Drag-Along Right

A contractual obligation that allows majority shareholders to force minority shareholders to join in the sale of a company on the same terms, valuation and conditions of the majority shareholders.

Glossary of Property Investment Terms | The House Crowd

Enterprise Investment Scheme (EIS)

A UK tax scheme offering income tax and capital gains tax reliefs to qualifying private investors who invest in eligible businesses.

Equity

Shares or other securities that represent an ownership interest in a company.

Equity Crowdfunding

A type of crowdfunding that enables multiple investors to a buy shares, or other equity interests, in a company, usually through an online process.

Exit

An event when investors may be able to cash in and sell their shares, such as an initial public offering (IPO) or trade sale.

Glossary of Property Investment Terms | The House Crowd

FENSA Certificate

Documentary evidence that the installation work has been self-certified to comply with the Building Regulations

Financial Conduct Authority (FCA)

The financial services regulatory body in the UK, formerly called the Financial Services Authority (FSA).

Fully Diluted

All the shares of a company in issue, plus all shares which are the subject of options or other contractual rights to be issued in the future (regardless of whether the right has vested).

Fund  

An investment opportunity that seeks to raise money to be invested across multiple businesses. Fund campaigns are commonly used to invest in businesses participating in accelerator programmes and competition winners.

Glossary of Property Investment Terms | The House Crowd

Gas Safety Certificate

By law, landlords must have all gas appliances serviced regularly, normally once a year, by a Gas Safe registered engineer.

Gross Development Value (GDV)

The estimated value that a property, or new development, would fetch on the open market if it were to be sold in the current economic climate.

Gross Rate of Return

The total rate of return on an investment before deduction of any fees or expenses. The gross rate of return is quoted over a specific period of time, such as a month, quarter or year. It is often quoted as the rate of return on an investment in marketing materials.

Growth-Stage

The stage that a business is at when it has passed its ‘seed’ or initial stage and has established proof of concept and looking to grow.

Gross Yield

The yield on an investment before the deduction of taxes and expenses (such as management fees and maintenance costs). Gross yield is expressed in percentage terms. It is calculated as the annual return on an investment prior to taxes and expenses divided by the current price of the investment.

Glossary of Property Investment Terms | The House Crowd

High Net Worth Investor (HNWI)

A classification used by the financial services industry to denote an individual, or a family, with high net worth. If you earn more than £100,000 a year or have net assets of more than £250,000, you may qualify as a High Net Worth Investor.

HMO (House in Multiple Occupation)

A house occupied by more than two qualifying persons, being persons who are not all members of the same family. A “qualifying person” is a person whose only or principal place of residence is the HMO.

Glossary of Property Investment Terms | The House Crowd

Initial Public Offering (IPO)

The first time that a company’s shares are available for public purchase by means of a listing on a stock exchange. This process is also known as ’going public’ or ‘floating’.

Glossary of Property Investment Terms | The House Crowd

Know Your Client (KYC)

The regulatory process that financial services firms and certain other businesses must perform to verify the identity of their customers to help prevent against money laundering and other financial crimes.

Glossary of Property Investment Terms | The House Crowd

Loan to Value (LTV)

A term commonly used by banks and building societies to represent the ratio of the first mortgage lien as a percentage of the total appraised value of real property. For instance, if someone borrows £130,000 to purchase a house worth £150,000, the LTV ratio is £130,000 to £150,000 or £130,000/£150,000, or 87%. The remaining 13% represent the lender’s ‘haircut’, adding up to 100% and being covered from the borrower’s equity. The higher the LTV ratio then the riskier the loan is for a lender.

More on Loan to Value here

Local Housing Authority (LHA)

The main provider of social housing (or housing authorities) for people who cannot afford to buy their own homes. Local authority housing is allocated according to eligibility and need. Rents are based on the household’s ability to pay.

Glossary of Property Investment Terms | The House Crowd

Net Profit

The actual profit after deducting expenses, such as management fees, letting fees, maintenance costs which are were not included in the calculation of gross profit, have been paid.

Net Yield

Net yield is everything after expenses. It takes into account all fees and expenses associated with owning a property. It is a far more accurate way of calculating actual yield. It is also much harder to calculate as most costs are variable.

Nominee

A person or firm that holds assets, such as shares on behalf of another, enabling the nominee to handle complicated administrative matters.

Glossary of Property Investment Terms | The House Crowd

Open Market Value (OMV)

The realistic price that could be achieved for a property if marketed for sale.

Option

A right granted which gives the receiver an option, but not an obligation, to buy (or sell) shares in a company, or other securities, at an agreed price within a certain time frame.

Ordinary Shares  

Shares which represent normal equity ownership in a company. Ordinary shares generally entitle the owner to vote at shareholder meetings, receive dividends, and receive distributions on the winding up of a company, but do not carry preferential treatment.

Glossary of Property Investment Terms | The House Crowd

Pre-Emption (Also called Anti-Dilution)

A contractual provision which requires the company to offer its shareholders the chance to purchase additional shares to maintain their percentage of equity in advance of further shares being issued.

Portfolio

A group of financial assets such as shares, property or bonds, held by one person or entity.

Portable Appliance Testing (PAT)

The name of a process by which electrical appliances are routinely checked for safety.

Post-Investment

The period of time after an investment has been made in a company.

Preference Shares

A class of shares which have specific preferential rights attached to them, as set out in the company’s articles of association. Typically the preference will be a dividend paid in priority to other shareholders, or priority to distributions on the winding up of the company.

Professional Investor

A classification used by the financial services industry to denote an individual or family.

Property Yield  

A calculation to give an indication of annual returns based on the rental income against how much the property cost: Property Yield (%) = Rental Income/(Property purchase price + Refurbishment Budget).

Glossary of Property Investment Terms | The House Crowd

Registered Social Landlord (RSL)

Registered providers that own and manage social housing.

Return on Capital Employed (ROCE)

The return on capital employed is, considered by some, a better measurement than return on equity, because ROCE shows how well a company is using both its equity and debt to generate a return.

RICS Surveyor

Building surveyors, like all surveyors, inspect property or land. RICS (Royal Institute of Chartered Surveyors) is a professional body for chartered surveyors, which includes chartered building surveyors. RICS sets standards and guidance for surveyors and provides training and professional development opportunities for surveyors to comply with changing standards and legislation.

Risk

The potential for losing something of value. With equity investment the main risk to the investor is losing the money invested.

Glossary of Property Investment Terms | The House Crowd

Secondary Market

A market where investors purchase shares from other investors rather than from the company that has issued the shares directly.

Shareholder Agreement

An agreement between a company’s shareholders detailing certain rights and obligations of the shareholders.

Shares

An ownership interest in a company which entitles the shareholder to certain rights, for example a share of profits or dividend payments from the company. Shares are also referred to as “stock”.

Sharia Compliant

Investments that comply with Islamic law and principles, eg. ethical investments with no borrowing where investors share in the profits and losses.

Solicitors Regulatory Authority (SRA)

The regulatory body for solicitors in England and Wales.

Sophisticated Investor

A type of investor who is deemed to have sufficient investing experience and knowledge to weigh the risks and merits of an investment opportunity. This category is for people who have invested in shares in more than one unlisted company (including via The House Crowd) in the last two years or have been a member of a business angel syndicate or network for at least six months including The House Crowd’s Investor group.

Special Purpose Vehicle (SPV)

A Company set up for a particular purpose. In the case of The House Crowd, SPV’s are set up for the purpose of purchasing/owning a property on behalf of the investors.

Subscription Agreement  

An agreement between a company and investors purchasing shares in the company. It sets out the terms of the share purchase and details certain rights and obligations of the company and the investors as shareholders.

Glossary of Property Investment Terms | The House Crowd

Tag-Along Rights

A contractual obligation which gives minority shareholders the right, but not the obligation, to join a transaction where shares are sold by majority shareholders, on the same terms, valuation and conditions of the majority shareholders.

Term Sheet  

A non-binding agreement addressing the basic terms and conditions under which an investment will be made in a business. A term sheet often serves as a template to develop more detailed legal investment documentation.

Glossary of Property Investment Terms | The House Crowd

Unencumbered

An asset or property that is free and clear of any encumbrances such as creditor claims or liens. An unencumbered asset is much easier to sell or transfer than one with an encumbrance. Examples of typical unencumbered assets are a house without any mortgage or other lien on it, a car where the automobile loan has been paid off or stocks purchased in a cash account, rather than a margin account.

Glossary of Property Investment Terms | The House Crowd

Valuation

The monetary worth of a business or property as determined by considering both qualitative and quantitative factors.


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