A two-sided, residential property crowdfunding platform bringing together Investors and Landlords
- Location London, United Kingdom
Product(s) and/or service(s)
An opportunity that utilises the power of crowdfunding to enable more people to invest in and make a return from Buy-to-let and other UK residential property investments.
CrowdLords is a technology platform that directly connects Landlords or Developers with people who wish to invest in property either for income, growth or for both.
Landlords and Developers identify the properties they wish to fund and present an investment case to investors. Each property is held in a Special Purpose Vehicle (SPV) with the shareholdings in each SPV split between the Landlord and the Investors. There are different classes of shares to accommodate the different investment structures.
Investors select from a range of properties and investment types. In return they are paid a share of ongoing rental income and a proportionate share of sale proceeds when the property is sold. Investors can invest as much as they wish in as many properties, with a minimum investment per property of £1,000.
Our goal is to make property investment more accessible to more people in a controlled and regulated way.
Over the longer term, we believe that UK property offers the potential for very good returns and security. But for many of us it remains out of reach – either through a lack of knowledge, time or confidence, or simply through a lack of funds.
We created CrowdLords to address this issue by connecting those with a shortage of finance, with others who lack time and expertise. We believe we do this by providing the information, tools and legal structures needed to enable informed decisions about individual investments along with the ability to spread risk across a number of properties.
The platform has been built to incorporate and automate the processes and requirements of the new FCA regulations for crowdfunded investments.
Focusing initially on the Buy-to-let market to establish a footprint we will then expand our market segments and products to offer a wider range of growth or income investments including equity, debt and combinations of the two.
For Landlords and Developers:
– it provides access to funding currently difficult to source from the banks, including funds for any refurbishment work.
– it allows them to choose the appropriate balance of income and capital growth.
– it provides the legal structure for co-investment with family and friends.
– it provides support and advice and will later include access to a range of portfolio management tools.
– it creates an opportunity to generate income and/or capital growth according to priorities.
– their investments are fully secured against UK property assets.
– it provides choice in terms of property types, locations and investment terms.
– it enables a diversified investment of fairly modest sums.
– it will later provide access to a range of investment management tools.
– it will eventually include a secondary market to enable people to sell their shares early if they wish to bring improved liquidity.
Substantial accomplishments to date
The business has been in development for nearly 18 months. During that period we were selected to be part of the Pi Labs co-working space which gave us access to great contacts and other PropTech start ups. Personal investments made by the Directors along with our first SEIS round of Seedrs funding enabled us to launch in preview mode to pre-registered users in February 2015.
Other key highlights include:
– Platform now live to the public and being marketed to Sophisticated Investors and HNWs.
– Initial marketing (website and social presence) to generate pre-registrations.
– c.2000 pre-registered and 500 fully approved investors.
– All legal frameworks in place and FCA approval expected within 2 months.
– The first property has been funded and we have a strong pipeline of very interesting investments from around the country.
– We have appointed a specialist Financial PR agency and a full marketing programme is ready to go.
Unlike other property crowdfunding businesses, CrowdLords is not responsible for sourcing or managing investment properties – the Landlords are responsible for this, which we feel makes our proposition more transparent and the business ultimately more scalable. We believe it provides a greater diversity of investments and more agility in the accommodation of new products and investment structures as the business matures.
Revenue comes from four primary sources:
1. A property listing fee of £500 for each property.
2. A success fee of 5% of funds raised for each property.
3. A handling fee of 1% of all income paid out to shareholders.
4. An exit fee of 10% of the capital gain for each property when the property is sold.
CrowdLords is a “lean” business – the platform and infrastructure is designed to automate the process of connecting Investors with Landlords in a very efficient and regulated manner. As a result we believe that the business can generate strong profit margins once a market presence has been established.
Use of proceeds
Having proven that the concept works and that we are able to efficiently recruit both Investors and LandLords / Developers, we will use the proceeds of this EIS investment round for:
– Growing the team to enhance our Legal and Property expertise.
– Developing the platform to improve the experience and automate processes.
– Building our presence in the market and dramatically increasing our Investor base.
– Developing new products to improve the diversity, choice and returns for investors.
– Introducing new propositions including a Secondary Market and a P2P debt option.
– Enhancing working capital.
We have two main audiences.
1. Landlords and Developers:
To open up residential property investment to a wider audience requires a steady supply of a wide variety of investments. These will come from the following audiences:
They can use the platform to release capital from their existing portfolio or fund expansion.
Will use the platform to fund small developments or to convert units for sale into units to let – securing sales and increasing the profit generated from the developments.
CrowdLords enables a wide range of people to become Landlords. Early interest has come from.
– Young aspirers: They have some savings but not sufficient for a deposit. They have the option of being one of their own tenants and it’s also easy for them to be supported by the “bank of mum and dad”.
– 2nd career mothers: Opportunity to generate income in a way that fits their other commitments. They may well have social circles in similar situations who may wish to join them.
– Parents of students: Rather than renting student accommodation, parents can be the Landlords providing lower cost accommodation, generating profit to either support study or for graduation.
With the Landlord being able to reside in the property we see it as an opportunity for us to be an alternative to schemes such as ‘Help to Buy’.
2. Investors (UK and European in the future):
The nature of our proposition means that it is for groups that the FCA classifies as Sophisticated Investors or HNW’s. We see them coming from the following groups:
– Sophisticated Investors and Family Offices: Those who are experienced in managing their own investments. Possibly with some experience of crowdfunding or P2P lending.
– Pensioners: Looking for flexible ways to earn income/capital from property, following the change in annuity legislation.
– Expats: Who wish to invest in UK property but struggle to secure mortgages due to their residential status.
Characteristics of target market
We believe that a number of factors make this the right time for CrowdLords:
1. Significant and increasing demand for private rental stock: This bodes well for Landlords and potential returns for investors.
2. Forecast steady increase in property values: Conservatively expect a UK average 4.65+% increase pa in property prices over the next 5 years.
3. Forecast growth in rental yields: Rents are estimated to rise by 2% on average this year. Rising prices also mean that it is increasingly difficult to raise deposits required to buy houses – leading to increased rental demand.
4. Poor investment returns from banks: Rates expected to remain relatively low for some time.
5. Acceptance of P2P lending: The P2P market is rapidly evolving as a significant and credible source of finance. FCA regulations are enhancing this credibility.
6. The new tax allowance for interest from P2P loans and changes to Pension rules is likely to increase alternative savings and investments.
The CrowdLords brand has been developed to be personable and professional and this translates across all customer touch points – including the platform and the support function. Given the target audience, the brand is designed to feel mutually beneficial, efficient, supportive and trusted.
The marketing communications are focused on acquiring and supporting Investors and generating the right level of properties to invest in.
We are now entering phases 2 and 3 of our original plan for Investors:
Phase 2. Launch: (Apr – Sept)
Maximise presence in blogs, press and where Investors go for advice/information (will be online and at events). We are launching a PR campaign supported by digital marketing focused on optimising the conversion of visitors into approved users of the platform.
Phase 3. Post-Launch: (October onwards)
Focused on advocacy and reputation building, using word of mouth and PR with significant investment into search engine optimisation, content marketing and online advertising.
To create a supply of the right number and type of investments we will develop a range of channels including:
– existing Landlords looking for alternative finance.
– new Landlords – possibly from our Investor base.
– small regional property developers.
– property investment management companies.
– estate agents.
In many respects the growth in the number of P2P and crowdfunding platforms creates a positive environment for this significant commercial opportunity.
Our primary competitors are:
We are not really competing with banks, CrowdLords is more an alternative form of investment or an alternative source of finance for Landlords and Developers.
2. “Generalist” P2P and crowdfunding platforms:
There are a number of platforms competing for investors. CrowdLords has learnt from the best of these in terms of presentation of opportunities, PR and marketing. In addition, CrowdLords is differentiated in that it is focused on a niche that has benefits over P2P and equity crowdfunding for businesses.
3. “Property” focused crowdfunding platforms:
The two most notable of which are:
The House Crowd: A successful regional operation which has funded £10m of their own properties so far. But, from our understanding, their growth relies on their internal resources to source and manage properties and therefore, as it is a one-sided platform, it is limited in its ability to scale. Nevertheless, they have proven that an SPV type structure is practical, attractive and acceptable to investors.
Property Partner: A recent entrant with a very well executed platform and a sophisticated proposition. We understand they recently raised an additional £5m Venture investment which is likely to raise the profile of equity crowd investments in residential property. They are however a one-sided business with the limitations highlighted above.
CrowdLords is viewed as differentiated in that we will:
– deliver a greater diversity and choice for Investors that allows them to select the level of risk/return they are comfortable with.
– enable Landlords / Developers to influence their own financial terms bringing further variety and choice to Investors.
– be able to develop new products more quickly as the platform is our business, not the management or development of properties.
Advisory Group Member