24th September 2019
Property is tangible, understandable, personal and is perceived to have a great track record as an investment, precisely because most people have at some point in their life owned or rented a property.
Most of us know someone who has amassed significant wealth simply through owning a property and selling at the right time, whether by luck or by design. Deep down, many of us would like to try our hand at it, but sometimes it can feel like ‘how the other half lives’, especially when it comes to buy-to-let property.
Investing in property is becoming more accessible
Like air travel and holidays abroad, buy-to-let is now being opened up and democratised through crowdfunding platforms. As these platforms move into the mainstream, the traditional barriers to investing in property are gradually falling away. After all, you pay for your phone bill and rent once a month; in fact, you can buy just about anything and pay in instalments; so, why not bring property into the 21st century and follow suit? Crowdfunding property, if done in the right way, is quick, simple and – most importantly – accessible to far more people than traditional methods of buy-to-let investment.
Some of the traditional barriers to investing in property
To make residential property accessible, however deep your pockets or whatever your stage of life, these platforms have overcome several of the traditional barriers to entry:
- Property is too expensive
- It can be an inefficient investment
- Owning and managing property is expensive and time consuming
- The process can be complicated and lacks transparency
- Investment must comply with HMRC tax legislation
Crowdfunding addresses many of these issues
To make residential property investment more accessible, property crowdfunding platforms have broken down many of these barriers and built something innovative in their place. Now, a mechanism has been created that pools smaller investments together and takes on the administrative role of purchasing and maintaining a property. Each crowdfunding platform approaches this in a different way. In general, this is how it works:
- Platforms select a property that they believe will attract investors
- This property is then offered on the platform
- Interested investors can pledge as much or as little as they like
- Once sufficient funds have been raised to cover the property purchase, fees and taxes, the funds are transferred to a Ltd company that buys the property in return for contracts that grant rights to the property and rent
- The Ltd company then – you guessed it – uses the funds to purchase the property
- Any rent paid by tenants is then split up proportionally and given to investors
- The process of rent collection, tenant search and property maintenance are taken care of entirely by the platform
- At the end of a predetermined period, the whole property is sold and the net proceeds are then returned to funders proportionally
With these things taken care of by the platform, the investor can spend their time choosing a portfolio of properties that they think will make a good overall investment. There’s no paperwork, no middlemen and no high fees, so you can become a property investor who has a diverse portfolio without breaking a sweat.
How Assetz Exchange works
Assetz Exchange is relatively new to the scene, which has allowed us to see what does and doesn’t work. Thanks to our watch and wait approach, we’ve been able to differentiate ourselves from other platforms and do things in a way that we think is a little better.
Most property crowdfunding platforms raise funds by issuing Share Capital in a Ltd company that is set up for the purpose of purchasing the property. In other words, the funders become shareholders of the business that owns the property. Thereafter rental income is passed back to investors as a dividend and the increase or decrease in the house price is reflected in a higher or lower share price.
By contrast, Assetz Exchange provide this arrangement through the use of loans. So instead of issuing shares in the Ltd company, users lend money to the Ltd company. The proceeds of these loans are used to purchase the property and the rental income is returned as interest. The change in the value of the property is reflected in the price of the loan notes. Whilst Assetz Exchange’s contracts may appear a little more complicated, it means investors are eligible for Innovative Finance ISAs (IFISAs) and Self Invested Pension Plans (SIPPs), thereby enabling investors to invest in residential property tax free.
There are also important differences in the exit route between Assetz Exchange and our competitors. Some platforms do not have a secondary market, so investors are locked in for a set time period. Others control the exit price. By contrast, Assetz Exchange provides an aftermarket for all the properties as soon as they are purchased, thereby providing an immediate exit route.
Likewise, there are large variations in the minimum investment amount. We have kept ours very low at £1.
Assetz Exchange – the gateway to property investment
Crowdfunding property investment is an affordable way to invest in property. It’s also a relatively simple process.
There’s no paperwork, no middlemen and no high prices. The properties are researched, sourced and right there for the taking. With property crowdfunding, if you have five minutes of time and £15 in the bank, you can become a successful buy-to-let property investor.
The traditional property investment market has become stagnant, but this new method is fresh, progressive, and ready to evolve with investors. So, if you’re interested in residential property, look no further than crowdfunding property investment.
By using Assetz Exchange users can:
- Build a customised and diversified residential property portfolio in minutes not months
- Invest from as little as £1
- Receive monthly income
- Invest in residential property through their ISA
- Sell whenever they want – commission free
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