Article 3 in a series of 40 articles on P2P, Property and CrowdProperty
In article 2, we explained why CrowdProperty exists. Here we take a look at what it offers lenders, and in article 4, next, we lift the lid on our borrower proposition.
Property lending with solid foundations
In this brave not-so-new world of financial technology, it’s easy to get carried away with its novelty aspects and forget what’s really important – good old-fashioned market knowledge.
If you wander round financial technology (fintech) events, where the great and the good of the sector get together, you are often struck by one thing in particular – the tech bit is very impressive, but in many cases, those running it are focused on the ‘tech’, less so the ‘fin’ bit.
CrowdProperty takes a very different approach. Our founders have been in the property development business since before the time that Netflix was mailing DVDs to its customers, and when Amazon was just a very big river with piranha in it. One advantage of that is that they have been through numerous property cycles – seen the booms, suffered the busts and learned the lessons. There is no substitute for that.
Our business starts and ends with a deep understanding of the financing of bricks and mortar. We know SME property development – both as developers and investors. And we don’t just use the rear-view mirror but constantly research the market to make sure that we are up to speed on trends, opportunities and, most importantly, risks.
Key attributes
What, concretely, does this mean?
First, we are very choosey: our current application run-rate amounts to about £1.7bn a year and we expect to bring just 5-10% of this to the platform for funding. To date, we have assessed a total of £1.4bn of projects and lent around £50m. Some projects naturally fall away and don’t happen, but the rest are rejected, either because we do not think the financials are strong enough, or that the team running the project do not have the necessary experience to give us the assurance we need.
All our lending is secured against the assets of the borrower by means of a first legal charge, exactly like the security a mortgage company has over someone’s mortgaged home. With moderate loan to value measures, if the borrower defaults, we can repossess those assets in order to repay our lenders’ capital and interest. And we’ve proven that we can do that with full recovery.
Only projects with planning permission already in place receive finance. CrowdProperty does not lend on speculative developments. While we admire a buccaneering approach to life as much as anyone else – after all, Hollywood will never buy the screen rights to ‘Derek Brown: Chartered Accountant’ – we do not think that’s where our lenders’ money should be going.
We monitor the progress of the projects we lend to throughout their duration, and until the loan is repaid. That means we are aware of any potential problems, work through them with the borrower, and resolve them before they become an actual problem for our lenders. That requires hard-won expertise – there is no substitute.
Borrowers come to us because we offer unparalleled service from our experts in property development [CrowdProperty and Borrower]: they get ease, speed and certainty from us. They value that highly and our reputation for delivering on what is important for property professionals is spreading. This means we see not only a lot of projects but most importantly a lot of high quality ones. We are the preferred lender not the backup lender, which coupled with the efficiency of matching your capital with productive uses of your capital [The Edge of The Crowd & Better Solutions for Borrowers and Lenders], allows us to pass on consistently good rates of return to our lenders, earned from high-quality property professionals and projects.
In order to be meaningful, this needs to translate into cold, hard cash. And it does. Over the past six years that we have been trading, we have a 100% capital and interest payback track record, paying back over £14m to date. We have grown more steadily than many because we are so particular. We have only ever tightened our criteria and work relentlessly hard to get better and better at what we do every single day, learning from a large sample of projects, many years of operating, the very best data and analytics and deep, deep expertise.
Property investment is just that – an investment. In other words, like any other, it carries risk. But CrowdProperty is built on a solid foundation of market knowledge that is drawn on at every step of the lending process to predict, mitigate and manage that risk on behalf of our lenders.
Find out more at www.crowdproperty.com
Read more about how investing works and investment options at www.crowdproperty.com/lenders
View our statistics page: www.crowdproperty.com/statistics
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