Will President Trump Affect Property Investment?

Last week, the world looked on, gobsmacked, as Donald Trump became the 45th President of the United States. The economic policies Trump is expected to implement will have significant implications, not just for the US, but worldwide. Global markets are already meeting the news with some trepidation. So the chances are you’re probably also feeling a bit concerned about your investments. With that in mind, let’s take a look at how the election result, and the prospect of President Trump affect property investment.

Within hours of the result being announced, global stocks plummeted $3 trillion in value.

Throughout Europe, US Stock futures fell by around 4.5%. UK stocks have dropped between 4% and 5%. Within just 10 minutes of the result announcement, both Saudi Arabia and Dubai saw a stock market fall of 2.7%.

On 9th November, the FTSE fell by 2% in early trading, picking up a little during his victory speech. The Hang Seng index also fell, down 3.16%, and the Nikkei 225 index dropped 5.36%.

By contrast, it was expected that global stock prices would have risen by over 10% if Clinton had triumphed. The Trump effect appears to be quite the opposite.

That is one serious hit. Equity assets have been thrown into the unknown, with higher volatility hitting these assets hardest of all.

So How Will Trump Affect Property Investment for Me?

Well, the first step is to diversify your portfolio quickly. This will help you assuage the volatility of any assets that are set to feel the brunt of Trump’s foreign policy, and the market uncertainty it brings.

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Apart from gold, which is rising in value (up 4% to $1.316 an ounce), property remains a strong investment.

Property has a long track record as a ‘safe haven’ investment, a strong asset to hold in these troubled times. Whilst property in the US isn’t thriving right now, due to unreliability of returns, this bolsters things for the UK property market. Our strength and resilience in property, plus the renewed focus on the UK as the US flounders.

Even the new President is planning over £1bn worth of investment in the UK. Considering our status over the last few years, of significant discrepancies between demand (high) and supply (low), it’s a good call. This imbalance is placing upward pressure on property prices here, which is great news for investors’ capital gains, which promise to be both solid and strongly consistent.

OK, so I should invest in property now, but where?

London, whilst usually a good call has been experiencing a steady decline in prices at the top end of the market. However there may soon (some have suggested) be an increase in demand caused by Americans running screaming from their home country, hoping to relocate to the UK capital. Not sure about that but we’ll see.

But aside from London, there isn’t much of a change on the cards. The UK residential market isn’t really strongly affected by US foreign policy, nor equities, to much of an extent.

Nonetheless, Manchester remains the UK’s leading city for property investment yields, coming in at around the 8% mark. Manchester has one of the UK’s highest tenant populations. The demand for rental property here outpaces supply at a ratio of 4:1. And this is not likely to change due to Trump.

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Will President Trump Affect Property Investment By International Investors?

Chinese property investors have long been keen on the US cities of Los Angeles, New York and San Francisco. But the election result has injected a high element of risk into investment coming into the US, with the result that investor return is likely to be affected. As such, the UK property market appears an attractive, more stable, option.

What’s more, with the pound plummeting to a 31 year low following Brexit, opportunity here is knocking hard.

Despite Hong Kong’s Hang Seng index falling 749.14 points in late morning trade directly following the result, and risk of capital outflow from emerging markets, there is a bright side. The Federal Reserve is unlikely to hike up in December, and as such the economy and political environment is not likely to see a dramatic change.

As we’re all pretty much aware, Trump’s policies regarding the Middle East make for a poor relationship with the US. This will cause some real uncertainty for quite a while. Directly following the result, oil fell to under $46 a barrel, with the global benchmark diving nearly 4% to its lowest since August, though some of its losses were quickly recovered later on. Middle Eastern investors, therefore, should seek to diversify their portfolios, both with gold and – ta-da! – UK property.

Over in South Africa, the reduced likelihood of a December Fed hike is also good news. However, the rand lost 65c following Wednesday’s result, and an erratic, fluctuating rand is likely to come next.

Here in the UK, we know that if we trigger Article 50, equities are likely to be strongly affected. In fact, it’ll be a much more direct effect than the US election result. On the bright side, though, Trump advisors are expressing some early thumbs-up for trade deals with the UK. Well, they’ve said we won’t be ‘last in line’, so that’s hopeful. If these sentiments are followed through, this could give the UK economy a boost. The advice for UK investors is to keep focusing on those all-important property yields.

Our August 2016 Statistics: P2P Secured Loans

In addition to our equity-based crowdfunding investments, did you know we also offer peer-to-peer secured loans for real estate? We’ve been offering these since 2015, with much success.

Check out how these performed in our August 2016 statistics…

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Here’s the stats to show how these P2P secured loans are doing as of August 2016 (Gross):

  • Total Sum Loaned –£8,784,684
  • Total Returns Paid – £127,241
  • No of Loans – 22
  • No of Loans Repaid – 7
  • Average Loan Period – 10 months
  • Default Rate – 0%
  • Average Loan Size – £399,304
  • Average Loan to Value – 68%
  • Average Interest Rate Paid – 9.00%

You can learn more about our secured peer to peer loans by downloading our free guide here.

You can also read more about our new peer to peer loans, equity investments and Property Crowdfunding by simply registering on our website:

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The Latest P2P News – 16/9/16

P2P News – All The Latest Updates

 

Hi guys and welcome to another P2P news round-up, as usual we will be giving you a snapshot of the latest goings-on in the P2P world. Today we look at an array of news items from there is no evidence of P2P investors underestimating risk to focusing on what the P2P and marketplace lending industry needs to do to go mainstream. Missed our last P2P news round-up? If so, catch up here.

No evidence of P2P Investors Underestimating Risk

P2P Lending

Last month, former FCA chief executive, Tracey McDermott, voiced concerns about the rapid growth of the P2P marketplace that could potentially leave some investors unaware of the risks.

However, the P2PFA’s (Peer-to-Peer Finance Association) director Robert Pettigrew, stressed that this was not the case.

Mr. Pettigrew recently mentioned that although approaches varied depending on the company, the P2PFA was dedicated to ensure investors were aware of all the risks involved.

In addition, he stated : “Different platforms have adopted a variety of approaches to ensure a high level of consumer understanding, but with continued grow and expansion in the sector, the focus on making sure that all investors have an awareness and understanding of the risks of peer-to-peer finance products will continue to be a major priority for P2PFA platforms.” (Bridging & Commercial, September 2016)

Platforms such as LendingCrowd and LandBay recommend that investors should require financial advice if they are unsure about the investing process.

Stock Market VS Peer-to-Peer Lending Investments – Who Wins?

stock market p2p

To buy stock, or not to buy stock that is the question! With recent markets in a volatile state you might want to look for an alternative.

Anyone who is an active stock market investor knows that it takes time to do your research (and a bit of guess work) to figure out where the market(s) are heading.

However, if you’re looking for something that’s less time consuming and slightly more effective – P2P might be for you. There are many platforms out there that are free to pick through the loans that are listed by prospective borrowers and read their stories and explanations of why they need a loan for and what they’ll do with it.

You should review the prospectus of your chosen P2P lending platform before investing as well as spreading the risk of your investment.

With any investment there is always risk involved, however, many view P2P is an alternative, especially with the current volatility of the markets. Anyone looking to diversify their investment and move away from traditional investment options might want to go down the P2P route.

Interested in P2P? If so, why not take a look at our P2P page where you can view investments and order a free information pack.

Brexit Vote Scares Investors Away From Traditional Asset Classes

Brexit P2P

New research suggests that the UK’s Brexit vote is putting investors off traditional asset classes.

Research revealed that 13 per cent of active investors said they have steered clear of currency markets since the EU vote back in late June, in addition, 10 per cent have avoided government bonds and nine per cent have u-turned from investing in equities.

Leicestershire based P2P lender ThinCats told City A.M. that 30 per cent of investors – from a survey of 2,000, including 500 defined as active investors have been put off traditional asset classes.

However, the research showed that assets such as gold has become more attractive, 14 per cent of investors stated that they have turned to the commodity as an alternative. Moreover, 7 per cent, said they view P2P as more attractive after the Brexit vote.

What P2P and Marketplace lending Industry Needs To Do To Go Mainstream

imgp2p

A lack of transparency is one of the key obstacles for p2p and marketplace lending platforms experiencing considerable growth in scale, according to ThinCats’ John Mould, who believes there are several other hurdles the industry needs to overcome to fit into the mainstream investment universe. (Altfi, September 2016)

It’s fair to say that 2016 has been a challenging year for the industry which has seen high profile scandals as well as seeing slow growth.

ThinCats’ CEO told Altfi that he believes the broader industry should deal with several issues centring on greater transparency in returns, what investors are exposed to and securitisation. Mr. Mould says that many platforms are really asset management firms in disguise and should therefore be regulated as such.

Areas where Mould stresses investors and borrowers need greater transparency is in provision funds, collective pools of cash liquidity that act as a type of insurance for investors.

In the Altfi article he also questions the lack of clarity that is linked to retail and institutional investors. He stresses that the issue is that we are not quite sure how they are both treated fairly. We know in a fund that they all come at the same unit price, he mentions, but he questions on who makes the decision process on the loans?

He again questions the lack of clarity in the last paragraph of the article : “If you’re the regulator you’re saying half of them look like fund managers, half of them look like banks but worse and half of them have these provision funds that we don’t know how they work and half of them just seem to be securitising debt. How does that work?”.

 

 

What Are Your Thoughts?

Which of our chosen P2P stories has interested you the most? We would love to hear from you, feel free to leave us a comment on our Facebook and Google Plus pages. If you prefer to tweet us, tweet @TheHouseCrowd.

In the meantime if you want to know more about Property Crowdfunding do register for our Information Pack which will tell you all about it. 

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The Alternative Finance Marketplace: How is Real Estate Shaping Up?

We’ve been eagerly poring through NESTA’s 2015 UK Alternative Finance Industry Report, ‘Pushing Boundaries’, since it was published in February this year. The report offers a fascinating, in-depth look at all areas of the alternative finance industry, including – crucially – the Real Estate Alternative Finance (crowdfunding and Real Estate P2P lending) market.

If you like data, you’ll love it. But if you’d prefer something a bit more readable, you’ll be pleased to hear that we’ve put together our own guide to the state of the alternative finance industry, keeping the emphasis squarely on Real Estate Alternative Finance, of course.

Things have changed since NESTA published its report, ‘The Rise of Future Finance’ in 2013. At that time, the alternative finance industry was worth £939m.  In 2015, NESTA reported its value at £3.2bn. The market is on course to surpass the £5bn mark in 2016.

Real Estate Alternative Finance - QUOTE 1

It’s not just financially that the alternative finance sector has grown. It has evolved taxonomically, too.

In the 2013 report, NESTA identified a range of distinct funding models operating in the sector. Two years later, 28% of alternative finance platforms surveyed reported that they were operating a ‘mixed’ or ‘other’ business model, which does not fit into the existing taxonomy.

Real Estate Alternative Finance: Crowdfunding and P2P Lending Tops the Tables

The 2013 report has no mention whatsoever of the terms ‘real estate’ or ‘housing’. And yet, by 2015, NESTA’s report segments data on Real Estate Alternative Finance into its own category, such is the proportion of the industry it covers.

In 2015, Real Estate and Housing was the most popular sector for the alternative finance market.

  1. Real Estate and Housing
  2. Technology
  3. Manufacturing and Engineering
  4. Food and Drink
  5. Retail and Wholesale
  6. Leisure and Hospitality
  7. Community and Social Enterprise
  8. Finance
  9. Construction
  10. Education and Research

Combined debt and equity-based funding for Real Estate Alternative Finance amounted to nearly £700m in 2015, with P2P business lending in Real Estate (for mortgages and property development) taking the lion’s share: £609m – 41% of the total volume of P2P business loans in 2015.

The market volume of equity-based crowdfunding is much more modest, coming in at £87m for 2015, still a very significant sum.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 2

P2P Business Lending in Real Estate

In 2015, P2P real estate lending financed over 600 commercial and residential developments, mostly by small to medium sized property developers.

Of that hearty £609m funding sum for 2015, Real Estate P2P lending saw increased growth throughout the year:

Q1 → £120.78m

Q2 → £146.81m

Q3 → £152.96m

Q4 → £188.12m

Perhaps some of this extraordinary success has something to do with institutional funding in the P2P Real Estate lending sector? Institutional funding was around 25% in 2015, and up to 75% on some platforms.

P2P business lending for Real Estate comprises a range of financing models and products. There are the short term bridging finance loans, which run for a 12 to 18 month period. Them, there are the longer term (3-5 years) commercial and residential mortgages, and construction/development debt finance.

In 2015, the average size of P2P loans for Real Estate came in at £522,333, slightly under 2014’s £662,425 average. The figure for 2015 was more in line with the average UK house price than the previous year. This may be due to the growing use of P2P lending in funding residential and commercial mortgages, rather than the larger developments focused on in 2014.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 3

Just a quick clarification point here: regulatory constraints mean you cannot use P2P Real Estate lending for your own residential mortgage.

It’s also not a done deal to apply for a loan for a Real Estate development: in 2015, 27.5% of loan applications in P2P Real Estate lending were accepted.

The average number of lenders required to fund a typical P2P Real Estate loan? 490.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 4

Equity-Based Crowdfunding for Real Estate

This model enables investors to acquire ownership of a property asset, via the purchase of shares, either of a single property, or a number of properties as part of a portfolio.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 5

In 2015, equity-based crowdfunding for Real Estate raised a total of £87m, for 174 development projects. This is how the annual quarters looked:

Q1 → £13.09m

Q2 → £23.16m

Q3 → £35.70m

Q4 → £14.63m

Equity-based crowdfunding for Real Estate had a great year in 2015. The record for fastest funding for a development project was set: £843,100 was raised in just 10 minutes and 43 seconds, from a total of 319 investors!

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 6

Unlike P2P Real Estate lending, with equity-based crowdfunding, there is scarcely any institutional involvement. Of the 10,626 funders participating in Real Estate crowdfunding, NESTA found that only 3% were categorised as institutional investors by the platform. This contrasts with the 77% of sophisticated or high net worth investors in the model.

Yes, equity based crowdfunded property investment is much more grass roots in many ways than the P2P Real Estate sector. The recent inclination to lower minimum investment thresholds in this area, with the aim of enticing more retail investors attests to this in a very clear way.

Whilst 27.5% of loan applications in P2P Real Estate lending were accepted in 2015, in equity-based crowdfunding for Real Estate, platform acceptance rate was much lower. Only 2.9% of deals made it onto the platform, on average.

However, deal success rate for those who did make it onto the platform was pretty high: 87%. There are also far fewer investors required for an equity deal – NESTA reports an average of 150 per deal. The average deal size for 2015 in the crowdfunding sector for property was fairly high, too: £820,042.

Real Estate Alternative Finance and Manchester

Of the 58 alternative finance platforms surveyed by NESTA for their report, 62% were – unsurprisingly – London-based. However, a significant 5.2% hailed from our home city of Manchester.

Manchester is also one of a number of regional and local authorities that have either partnered with online alternative finance platforms to fund local SMEs, or have used alternative finance methods to fund community projects.

NESTA’s data shows that the most active regions receiving funds from Real Estate crowdfunding were London (of course), the North East, and the North West. The North West was also found to be one of the top 3 regions actually providing funds.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 7

This isn’t terribly surprising given the growing trend for emphasising Real Estate crowdfunding within areas in need of regeneration. Manchester has, as we know, come a very long way. The economy of the North West has been transformed over the last few years, in no small part due to the heavy investment in regeneration projects, in the form of development funding from both the public and private sectors.

It is these regeneration areas that are being identified as some of the potentially best investment opportunities. Not only do they cost investors less than prime locations, but these areas are also the ones that will experience the highest growth over coming years.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 8

Real Estate Alternative Finance and The Government

Direct investment from the government has helped support the growth of both peer-to-peer and crowdfunding markets. In 2015, £60m was lent by the British Business Bank via P2P lending platforms, specifically for SMEs.

Tax incentives have also been applied, including the EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme). These schemes have been widely used, by a large proportion of investors using alternative funding platforms, and have been especially popular within the equity-based crowdfunding market.

The launch of the IFISA (Innovative Finance ISA) in April 2016 is also an exciting development in the alternative finance sector.

In particular, P2P business lending platforms for Real Estate expect the IFISA to generate a whopping 51.9% growth in transactional volume this year, whilst equity-based crowdfunding platforms for Real Estate predict 30.31% growth as a result of the IFISA.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 9

The figures for Real Estate Alternative Finance outmatch those elsewhere in the alternative finance market. P2P consumer lenders, for example, expect a 26% increase in total volume as a result of the IFISA. It’s clear that Real Estate lending stands to benefit the most.

In anticipation of the influx of retail investors expected by the onset of the IFISA, some P2P Real Estate lending platforms are even lowering their investment thresholds.

What is the IFISA?

At its most basic, the Innovative Finance ISA allows UK investors to lend money using P2P lending platforms to invest up to 100% of their £15,240 annual ISA allowance, and to receive any interest and capital gains tax-free. You can find out more here.

Institutional Investment in Real Estate Alternative Finance

Catching the scent of a good thing, institutional investors are also muscling in on the peer-to-peer real estate lending market, as they are across the alternative finance industry.

It is estimated, based on platform reporting, that in the UK in 2015, 1,031 institutional funders were at the bottom of financing loans and equity deals in alternative finance.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 10

45% of all alternative finance platforms reported institutional involvement in 2015. In 2014, this was 28%, and in 2013, just 11%.

For P2P business lending, in 2015 26% of total funding was attributable to institutional funding. In peer-to-peer Real Estate lending specifically, a total of 25% institutional funding was reported, with significant increase between the 3rd and 4th quarters of the year, in particular:

Q1 → 22%

Q2 → 22%

Q3 → 23%

Q4 → 31%

By contrast, however, in equity-based crowdfunding, 2015 saw just 8% of funding coming from institutions.

With institutional funding growing in the alternative finance market, as well as the influx of more high net worth investors, there is some discussion about whether the disruptive force of the alternative finance market is at risk of being stemmed.

Banking institutions have found themselves burdened with heavy regulatory compliance, cumbersome legacy systems and bureaucratic complexity. Since the debacle at the end of the last decade, the general populous has been hungry for new alternatives to the traditional financial system. Confidence has been lost, and – at the retail end of the investment spectrum at least – making one’s savings grow within the received systems has less potential for gains than what’s promised by alternative finance.

Alternative finance has become a key player in the development of a whole new generation of financial products. Along with a range of other FinTech solutions to saving, banking and investment, this revolutionary rumble has got the banks concerned.

It’s no wonder that, as such a disruptive movement grows, it finds itself on the precipice of being co-opted into the corporate world. But all the time that interest rates on savings accounts remain shockingly low, and first-time buyers view getting on the property ladder as likely as a winning Euromillions ticket, the prospect of a less suffocating alternative for growing money will continue to be thoroughly desirable.

And, focusing on Real Estate specifically, research conducted by Crowdstacker found that 44% of retail investors would like to increase their exposure to the UK property market, not only owning their own home, but also by investing through P2P lenders, like The House Crowd. Investor reluctance was found to centre around the time consuming nature and costs of property management, as well as affordability. The alternative finance model of crowdfunded property investment and P2P lending in Real Estate removes those factors from the equation.

2015 also saw the emergence of self-managed, platform-owned listed investment trusts, funds and vehicles: a sure sign that platforms are preparing to challenge the fund management space.

And as the alternative finance world continues to evolve, we are also seeing the emergence of a number of independent online aggregators, such as Informed Funding, FinPoint and ABF. These are rising up to provide additional channels and services for connecting business fundraisers to alternative finance platforms.

That being said, corporate interjection into the alternative finance space should not be considered a negative. It is this involvement that is allowing the industry to grow and evolve.

A number of P2P consumer lending platforms have struck high profile partnership deals with some big-name corporates.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 11 - THE HOUSE CROWD

Corporate partnerships have been witnessed between alternative finance platforms and large brands such as Virgin, Amazon, Uber and Sage. As NESTA puts it, these partnerships are “fusing the traditional corporate world with the disruptive models of alternative finance”.

It is these partnerships that will aid in increasing public awareness of the alternative finance sector, but not only this. Corporate partnerships will also attract high quality borrowers, reducing default rates on P2P loans, and also offers the potential for data gathering, which will enhance the industry’s credit scoring capabilities, and inform risk management.

The increasing involvement of high net worth investors, along with institutional funding and corporate partnerships is what is allowing alternative finance to push boundaries, blur definitions, and limit the dangers of orthodoxy: it is a catalyst for rapid evolution.

Conclusion

The extraordinary growth of the industry that we have witnessed over the last few years has begun to level out.

In 2015, the UK’s alternative finance industry facilitated investments, loans and donations totalling £3.2bn. In 2014, this figure was £1.74bn – a YoY growth rate of 83.91%, which is not to be sniffed at. But when you compare this to the 161% growth between 2013 and 2014, it looks positively small.

REAL ESTATE ALTERNATIVE FINANCE REPORT - QUOTE 12 - THE HOUSE CROWD

In 2014, 24 new alternative finance platforms began trading. This was down to 14 in 2015. Fewer new entrants are joining the market, whilst existing platforms continue to increase their total volumes at a steady rate.

Up until now, the industry appears to have been actively pushing its boundaries, both in its evolution, and in its rate of growth. Whilst the figures continue to be staggeringly impressive – with the market on course for a £5bn year in 2016 – plateauing figures are a good sign that the industry is maturing.

Alternative finance is coming of age with intelligence and dignity. It is listening to influential voices from big corporates, accepting helping hands where they are offered, and maintaining its grass roots persona. Most of all, however, it’s making money, not just for a few, but for a large body of investors all along the wealth spectrum. In Real Estate, it’s helping to regenerate run-down neighbourhoods, keeping a stagnant housing market moving, improving living standards across the board.

REAL ESTATE ALTERNATIVE FINANCE REPORT - QUOTE 13 - THE HOUSE CROWD

In short, alternative finance may have been a disruptive teenager, but it’s growing up to be a real force for good in the middle of a blighted financial landscape. The future of finance is looking promising.

 

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All About MangoPay: What You Need to Know About Our New Secure Payment System

You may have noticed, along with the launch of our shiny new website, that we have integrated a new payment system named MangoPay. So what is this new, fruity-flavoured payment system? We’ve been getting a few enquiries since the system launch, so I thought it would be a good idea to give you some background.

What is MangoPay?

MangoPay is a well-respected, pan-European company, which was set up directly by The Leetchi Group in 2012. At that time, Leetchi was a crowdfunding platform, and developed MangoPay to meet the payment service needs of their own platform. So successful was their development, that they turned this internal system into a standalone product: MangoPay. Leetchi now provides financial service solutions across Europe.

MangoPay currently has over 1000 business platform customers, and is available in 22 countries across Europe, offering multiple currencies, as well as domestic and international payment methods. It was acquired by the leading French banking group, Crédit Mutueal Arkéa, last year, and have also recently partnered with London-based GoCardless. It’s also partnered with large banks, including Barclays, Commerzbank and Sabadell.

What does MangoPay do?

MangoPay itself is a secure payment flow system that allows both bank transfers and debit card transactions to be tracked automatically within the system. Deposited investment sums are held in escrow until the property has become fully-funded, at which point your balance is moved to the relevant SPV account and sent to our legal team in order to complete the property acquisition.

Where you earn rental income, interest, and so on from your investments, credit is paid into your personal MangoPay account, directly on The House Crowd platform, in your e-wallet. From there, you can automatically collect your money by withdrawal, and also add to it at any time.

What about security?

All client funds are segregated and administered by MangoPay within The House Crowd’s system and Mangopay itself is regulated separately by the EC (European Commission). As such, the FCA compliance within which we work at The House Crowd, combined with the regulations under which MangoPay is regulated, equates to a double dose of regulatory rigour!

In the event that the target sum for a property is not raised, all deposited sums are returned directly to the investor.

In terms of fraud prevention, MangoPay has a few set rules:

Firstly, no more than 10 transactions are permitted to be performed with the same card within a 24 hour period. After this number, no further transactions will be accepted.

Secondly, MangoPay refuses payments from blacklisted countries. These blacklisted countries are ones which are considered to have insufficient measures in place to combat both money laundering and the financing of terrorism.

Thirdly, MangoPay refuses all transactions that do not benefit from liability shift (applies only to payments in Euros). Transactions must pass MangoPay’s 3D Secure Authentication procedure.

FCA Compliance

MangoPay do have a reciprocal relationship with the FCA, with every financial regulator within the EEA, and have passported their licence. All data is held in a secure data centre called EBRC in Luxembourg, in accordance with very stringent data protection laws. Funds are acquired in the UK, via Barclays and each day said funds are settled in a segregated client account, held in trust at ING Luxembourg, which means the funds are 100% guaranteed, unlike the FSCS which only guarantees £75k.

There are no more risks holding the data at a Luxembourg based data centre than a UK data centre.

We have taken a lot of time to decide on the right payment system for The House Crowd. We were adamant that the system we used was fully secured, both in terms of financial data, and personal information. So, if you had any concerns about the new MangoPay system, please rest assured that we have ensured it’s as watertight as it gets.

As always, if you have any questions at all, please don’t hesitate to get in touch. We are always here to answer your queries, and to help in any way we can.

Happy investing!

Why The UK Rental Market Is Surging

A recent report has revealed that property in the UK is swinging more towards the rental market. As many commentators have mentioned, there has been a significant reduction in home ownership in the past number of years and many expect that this trend will continue.

The summer slowdown has seen properties with four bedrooms or more are struggling to sell, and as a result have remained on the market for an average of 74 days, according to data from RightMove.

Property analysts are speculating whether the property market will gain strength again during the Autumn and also get a clearer picture of the market and hopefully shake off that post-referendum hangover.

The Bank of England’s recent interest rate cut should give buyers some confidence with cheap-to-borrow money.

Although a lot of uncertainty still looms following June’s Brexit vote, the question remains:

Why is the UK is switching to a property rental market?

Firstly, this is linked to the surge of investors who were rushing to complete buy-to-let deals before stamp duty was hiked by 3% in April.

The demand for rented properties in the UK has increased by 10% due to Brexit uncertainties. Recently, the Royal Institution of Chartered Surveyors (RICs) reported the number of properties on the market was at a record low.

Another factor that should be taken into consideration is employment mobility. For example, if we look at millennials and their lifestyles, they are known for being constantly on the move, and renting a space is more practical to them than saving for a deposit.

In addition, they are very sociable. Figures from Statista highlight the importance of socialising to millennials. Their research shows that 51% stated that socialising was where their remaining disposable income was most likely to be spent. Therefore, the likes of build to rent properties are appealing as they provide communal areas for their residents, hoping that they will stay in their rented accommodation for some time. They are one demographic in particular that are currently reshaping the UK housing market.

From millennials, now turning our attention to investors. Long term investors are willing to pay just that little bit more compared with the likes of first time buyers who are looking at settling into their first home.

These are the type of investors who may have a number of buy to let properties in their portfolio and realise that as their financial liabilities reduce they will actually be able to increase rental income (providing they have done their homework properly and invested in areas that pay out suitable yields).

Whether the recent increase in buy to let related taxes, which were set by the former chancellor, will have an impact in the short to medium term still remains to be seen. If rental yields bring in enough money to cover all liabilities, and leave a wee bit extra in their bank accounts, the question is would BTL investors really pull out of this market?

If you are a BTL investor and HAVE done your homework, you’ll know that the north is the place to be. If you haven’t, we recommend Manchester. The Northern Powerhouse city has an average rental yield of 6.2%.

Investors can benefit from significant demand from the city famous for its two Premier League clubs and music scene, as well its big student population. Average property prices in Manchester stand at £135,000.

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As we’ve previously mentioned, there are numerous factors as to why the UK property market trend has now switched from home ownership to rental.

The Brexit vote has caused some concern and confusion for now, and until the Brexit mist clears we will see fewer people committing to long-term property purchases. The likes of millennials are also changing the housing model and with lucrative investments across both sides of The Pennines, the rental market switch in the UK looks very buoyant indeed.

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What is Loan To Value (LTV)?

At The House Crowd, we get a lot of questions from investors about the term ‘LTV’. We have included a handy definition in our glossary of investment terms which looks like this:

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.

(* Lien – the right to keep possession of property belonging to another person until a debt owed by that person is discharged)

Still confused? Well, let’s try and clear things up…

Basically, LTV, or Loan-to-Value is a statement about how much borrowing you have compared to the value of your property. So if your property is worth £100,000 and you have a £75,000 loan secured against the property – that loan is at 75% LTV.

The lender knows that if you default on the loan as long as the property is sold for more than 75% of its valuation (at the time the loan was made) then he will not lose any money.

Let’s try and simplify that with a handy diagram:

LOAN TO VALUE

At The House Crowd our secured loans have a maximum value of 75% LTV and are secured by a legal charge against the property. All these charges are registered directly with the Land Registry, ensuring that any further deals or sales of the property include the charge owners correctly within the process.

If they are secured by a second charge then the LTV is based on the total borrowing including the first charge against the property value.

For example: if a property is valued at £600,000 and a bank has a first charge on that property that requires a sum of £200,000 to clear, if we then loan a further £200,000 this would take the total borrowing to £400,000 and therefore result in a combined LTV of 66.7%.

If the borrower defaults on the loan, but not on the 1st charge, then we would repossess and sell the property. The 1st charge holder would be paid first, and then we would take any capital amount owed to us and any interest.  

This is what would happen:

LOAN TO VALUE

What Can I Do To Buffer My Property Investment Against Market Fluctuations?

Our loans are usually for less than 12 months. We believe limiting our loans to 75% LTV provides a reasonable level of security should the value of the property fall during that short period, whilst allowing us to pay our investors a very healthy return. If you are more risk averse then you may choose to invest in loans with a lower LTV (but are likely to receive a lower rate of return as borrowers will expect to pay a lower interest rate.)

Investing in this way allows you to make great returns from property investment without you ever having to lay a finger on the property yourself!

I’ve Still Got Questions – Help!

If you’ve still got questions, then don’t hesitate to drop us a line. We have the chat option on our website, or you can give us a bell or an email. We’re always happy to help!

 

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7 Top Tips for Investing in P2P Lending

Peer to peer lending is a fairly new kid on the block, but one that’s making its presence clearly known. The idea behind peer to peer lending is that individuals provide unsecured loans to those looking for finance, a move that has tempting advantages (ROI-wise) on traditional bank or building society savings accounts. The P2P industry is growing at a rapid rate, driven by the awkward difficulties of obtaining loans from banks these days, as well as the general loss of faith in the established banking industry since the 2008 crash.

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Whilst, of course, not without risk, peer to peer lending has some real advantages to offer. With peer to peer secured loans through The House Crowd, short term investments with a fixed return give investors the confidence of knowing what to expect. That’s not to say, however, that you can just rush into P2P lending willy-nilly. You do need to know what you’re doing in order to make the right kind of investments for your needs.

That’s why we’ve put together these handy tips, to help you on your way to getting started with peer to peer investments in a smart and informed way!

  1. Diversify

Any financial advisor you speak to will tell you how important it is to have a fully diverse portfolio of investments. The same goes for peer-to-peer lending.

We recommend spreading your risk by ensuring you don’t lend out any more than 1% of your portfolio to one single business. With peer-to-peer lending, you should further diversify by spreading investments across multiple platforms.

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This is good advice when it comes to maximising return, and giving you the perspective to ascertain which loans are generating the best yields. Furthermore, if one platform you’re using suddenly experiences issues, or – worse still – vanishes altogether, then by having spread your risk across multiple peer to peer lending platforms, you’ll be in a far less vulnerable position.

The more you diversify, the less likely you’ll be to lose money on your investment.

  1. Research

Knowledge is power, and when it concerns your financial investments, it’s no less than crucial. There’s also no excuse for not being well-informed, especially when there is so much information out there on the web.

Read the reviews on each platform you consider before getting involved. Examine the track records of various platforms, get advice from other investors, keep notes, and compare and contrast before you dive in. It’s important to remember that not all lending platforms are the same, and each have their own practices, and procedures for screening borrowers, as well as handling late payments and defaults.

Here are some handy questions you might like to ask yourself:

  • What percentage of loans on this platform fall into default?
  • How are borrowers screened and evaluated?
  • What average returns have investors produced in the past?
  • What is the process for handling late payments?

The better informed you are, the more confident you’ll feel, and the more equipped you’ll be to make the right decisions for your money.

  1. Re-Invest

Don’t simply allow your returns to sit idle within the platform. This is a good way to lose out on potential income and lower your return on investment: uninvested cash earns no interest. Take advantage of the compounding yields to be gained by continual reinvestment of returns into new loans.

  1. Keep Involved

The peer-to-peer lending market is growing and evolving all the time. As such, it’s key to stay up to date with developments within the industry. Acquaint yourself with new platforms as they emerge, changes to legislation and about the loans themselves.

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Remember that peer to peer lending is not a passive exercise. You need to put the time in, in order to get anything out.

Some of the loans you’ve already made could be downgraded or even default, and you need to be fully aware whenever something like this happens. Keep abreast of new loan offers as they come up. Again, knowledge is power… a fact we cannot emphasise enough.

  1. Take it Slow

If you’re just starting out with P2P lending, don’t rush in. Do all that reading and research, but remember that the best way to learn is to actually begin. Start with smaller amounts, tentatively monitoring how these small investments perform. This will act as a kind of practice run, and give you the chance to understand the lending platform you’re using.

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As with anything in life, taking on too much too soon is likely to leave you feeling overwhelmed, and leave you prone to making mistakes, which could be costly.

  1. Know Your Risk Tolerance

We all have one. So, what’s yours?

Higher risk tends to equate to higher reward, but if you’re not comfortable with that level of risk, take a step back to a risk profile that fits your tolerance better. It’s important to carefully consider how much risk you’re prepared to take, and only invest accordingly.

  1. Be Prepared

A strong emergency fund is absolutely vital in order to cover your own personal expenses. Your investment funds should be comprised only of any money you have that is surplus to your daily needs and your emergency fund. Remember that you will not be able to withdraw money from your P2P platform on a whim.

These are just some of the most important factors to consider before you get cracking with P2P investment. You should, as we’ve said above, keep up to date and well-informed on the industry, and monitor your investments closely. It may feel a bit ‘hands-off’, but investments of this kind are certainly not a passive income source. The more you put in, attention-wise, the more you stand to get out.

You can always find out more about investing with The House Crowd by checking out all our guides and articles right here on our website. And if you’ve still got questions, our team is on hand to help!

Happy investing!

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Beating Your Cash Investment With Property Crowdfunding

Following the financial crisis of 2008, cash savers have been hit hard. Interest rates are at their lowest for 300 years, with no sign of any improvement for years to come. For those reliant on cash savings for a monthly income, things are looking particularly bleak.

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In the short term, a deposit account may be a safe haven for your money, but over time, cash saving will almost certainly leave you with a loss, as inflation swallows up the value of the money you’re trying to save.

So what’s the investment answer?

Assuming you have a juicy £100,000 to invest, you do have other options. Divide that sum between what you’ll need short term, whilst locking the rest into medium term investments. Both strategies will go towards providing you with a monthly income.

Global Equity Income funds provide twice the return of cash, and corporate bond funds will generate about 50% more monthly income than cash savings. However, these come with a level of risk due to fluctuations on the stock market. The alternative? Well, crowdfunded property investment, of course!

Whilst there is always risk on investing money anywhere, we remove many of the uncertainties associated with property investment, and offer consistent, predictable returns via simple, transparent investments suitable for all levels of investor.

What’s more, at The House Crowd, we offer rates of return, both equity and P2P, that are extremely attractive. Our crowdfunded property investments typically offer 9.5% gross yields fixed for five years, or 10% or more per annum on our development properties.

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Along with offering more potential for profit, and a preferable alternative to seeing your savings fester sadly in a stagnant savings account, our model is inarguably a much more interesting and engaging way to manage your investments. The House Crowd is unique in offering both equity and peer to peer secured lending and a range of investment types and terms. This allows you to diversify whilst holding your portfolio on one, easy to manage, trackable platform.

It’s always a sensible move to get advice from an independent financial advisor before investing. A professional will be able to review your needs to ensure the portfolio you choose is of the best quality to offer you the best returns. However, whichever way you swing it, we’re confident that our crowdfunded property investment strategy is the way forward to seeing your money grow!