Property crowdfunding platforms are all regulated by the FCA and operate under a strict code of conduct that stops them from making certain guarantees and offering advice on issues that don't fall under their purview. But despite a certain level of consumer protection, investing is still risky and care is required.
Property Expert Series: Ben Grove from Property Moose
- Part 1: What is Property Crowdfunding and is it a Good Way to Invest?
- Part 2: How Does Property Crowdfunding Work?
- Part 3: Secured Loans and Property Crowdfunding with Property Moose
- Part 4: How to Choose the Right Property Crowdfunding Platform for You
- Part 5: How are Investors Protected with Property Crowdfunding?
- Part 6: What is the Future of Property Crowdfunding
- Part 7: What are the Returns Like with Property Crowdfunding
- Part 8: Should I Invest in Property, Stocks or Shares?
- Part 9: What Problems could Crowdfunding Investors Face in the Future
- Part 10: What Due Diligence is Needed Before Investing in Property Crowdfunding
- Part 11: What Property Deals Work Best with Crowdfunding
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Amy: Can you tell us, Ben, how investors are protected if they want to participate in property crowdfunding? We've mentioned the FCA and different legislations and guidelines that you follow already. There must be some protection in place that looks after their risk.
Ben: There is actually quite a lot. It just depends on the company that you are dealing with and it depends on the deal that you're doing.
As I said, if you are doing a Secured Loan Note, for example, or there's no guarantee, it's certainly a lesser amount of time, stereotypically, and the returns are usually at a level where the risk is minimalised.
So, to have a 7% to 12% return is what I would refer to as medium risk whereas true property investment is a very high risk because anything can happen. The market could crash or you could buy the property and then find out that there are no footings or... There are many, many things that could happen which is why there's always a risk with investing, full stop.
As far as how we protect people, even from the very start when they sign up, we are saying, you cannot invest with us unless you prove who you say you are, that you, at least, allow us to understand, if you understand what investing is all about.
All of the guidelines and the forecasts we publish live the site so that people can do their own due diligence.
Obviously, we are part of a redress scheme. So, there are various things that we cannot allow ourselves to do. So, guaranteeing things or giving advice on things that were just not permitted to do because we don't practice that discipline.
So, we can't give financial advice, for example. Or we can't give tax advice. That's really for that person to go out and do it on their own terms so that they know that they are ultimately protected.
And then, on the flip side, there are also things, for example, like an underwritten rent guarantee where a developer may say, 'I will guarantee the rent for x-amount of years on this particular property'. So, you know you are going to get 5%, based on that developer's guarantee, for example.
So yes, I suppose there is a certain level of guarantee and protection but as I've said, ultimately, it's just being comfortable and making sure that you do your own due diligence to protect yourself.
Amy: Brilliant. Thank you.
Crowdfunding is the simplest and quickest way to invest in property. In just a few minutes you can be well on your way to building a diversified and balanced, property portfolio.
Unlike traditional forms of property investment, crowdfunding does not require huge sums of money to get involved and opens up the property market to everyone.
If you want to find out more then click the link below where you will find all the information you need to get started including the details of our favourite property crowdfunding platform.
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