Today I'm looking at another crowdfunding site, Crowdlords.
Crowdlords is a two-sided crowdfunding paltform. Instead of purchasing property, they serve as intermediaries between landlords/developers and investors. It is very different from a one-sided network like Property Partner, which buys and manages assets themselves.
Crowdlords started 2014. I personally invested £1,000 in the very first property listed on the site, a Teesside two-bedroom terrace refurbishment. After then, I've even invested with them in some other ventures. So I thought I'd say a few things today about my platform impressions and their investment opportunities.
Once I began investing with Crowdlords, they offered shares in small properties, usually terraced residential houses.
In the early days, Crowdlords partnered with private landlords to build their properties. Investors received this cash, usually earning a mix of rental income and benefit plus capital gain when the property was sold or (quite often) remortgaged. Projects had a fixed timeline, typically 12 months to three years.
When Crowdlords have evolved, so have project size and scale. As well as individual private owners, they now collaborate increasingly on larger ventures with property developers. Below I copied a screen grab from the Crowdlords website of three opportunities available for investment. They seek to raise over £600,000 for these three developments alone – much more than the £49,000 raised for the first time I've invested in Crowdlords!
All my smaller crowdlords investments are repaid now. I'm pleased to say there were no defaults, although some took longer than originally stated. I've learned that delays are comparable to the property development course.
I currently have two bigger Crowdlords investments. One (with interest due soon) was for a Newark flat. The other was to build seven eco-apartments in Oxford – a worthwhile initiative that has endured numerous setbacks, but will hopefully be paying out soon again. I'm still waiting for feedback on both projects, and will update this review when I do.
Crowdlords at the Moment
Crowdlords recently introduced an Innovative Finance ISA (IFISA). As you may know, IFISAs offer opportunities to invest in P2P loans and get tax-free returns.
Everyone has a generous annual £20,000 ISA allowance (for the current tax year 2019/20). This can be divided between three types of ISA. And if you open an IFISA for Crowdlords, you will still have cash and stocks and share ISAs with other providers as long as you don't spend over £20,000 in total.
Any qualifying Crowdlords platform investment can be purchased in an IFISA. It's also possible to transfer another ISA to a Crowdlords IFISA for no cost.
As mentioned above, certain opportunities on the Crowdlords platform have become much larger. Also, Crowdlords now usually offer a variety of investment choices for various risky appetites. For instance, you can be able to select a debt- or equity-based investment or a combination of both. Debt assets pay lower but have fixed rates, with preferential redemption rights in a worst-case scenario. In comparison, equity investments provide the opportunity to receive higher returns if the project is more profitable than expected. But for problems, equity investors would be repaid after debt investors.
Benefits and Drawbacks
Here's my list of pros and cons for Crowdlords.
1. Established crowdfunding platform with good track record.
6. Customer service is fast, polite, helpful.
3. Scope of investment options (including projects).
4. Profit potential through capital appreciation and rental income.
3. Crowdlords carry out all the work involving buying and managing properties (in association with landlords/developers). You just choose what to invest in.
6. Tax-free IFISA available.
7. Competitive interest rates (sometimes over 20% p.a.).
8. Comprehensive details on every incentive.
9. Investor referral scheme.
10. Could spend as little as £250 in ventures.
1. No structured secondary market.
6. Not a user-friendly website.
3. Some projects were delayed in completion.
4. Many ventures require gearing, i.e. loan funding, in addition to investors' capital. When all goes well, this raises future gains, but can endanger those investments when problems occur.
Overall, to date, I've been pleased with my Crowdlords experiences. While (as described above) there were some delays, there were no defaults, and with them I made a good net return from my investments.
I especially like the option of equity and debt investments in the latest ventures and the availability of IFISA.
It is important to remember that investments with Crowdlords are not protected by the Financial Services Compensation Scheme at the same degree of security as bank and building society savings. Nevertheless, on-offer return rates are far higher than those from other banks and building societies. All investments are protected against bricks and mortar, and if a creditor defaults, you will still get your money back until the property is sold (but obviously it may take a while).
In general, the lack of liquidity with property investments – and the absence of a structured secondary market with Crowdlords – means you can only spend capital you are unlikely to need shortly. Therefore, this should be called a medium- to long-term investment.
Clearly, nobody can put all their spare money in Crowdlords (or any other investment platform). It's definitely worth considering as part of a diversified portfolio. Not only are return rates far higher than those provided by banks and building societies, they are largely unaffected by stock-market ups and downs. Property investments aren't a mean of hedging your equity-based assets, but they do help spread the risk.
As of writing this review, Crowdlords don't have an all-round welcome deal for new investors.
However, they have a referral scheme whereby you can introduce them to family, friends and colleagues and get a bonus if they invest via the platform. Tariffs are as follows:
- 1% Investment bonus, up to £10,000
- 1,5% Investment commission, between £10,001 and £20,000
- 2% Investment commission, over £20,000
Naturally, once you're a Crowdlords investor, you'll also get a referral code and will be able to earn commission yourself. There's no limit on how many people this scheme can add.
CrowdLords main features and highlights
- Real Estate Investments
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