Peer-to-peer lending platform CrowdProperty has launched with a target of £20 million funds to be raised from private individuals in its first financial year.
CrowdProperty is designed to facilitate loans between private individuals and property professionals. The team of five co-founders who together own and run the business have over 70 years’ property market experience and include Simon Zutshi (pictured), founder of the Property Investors Network with over 23,000 private property investor members.
Lenders will be private individuals with £500 or more seeking to achieve higher returns (5-11% gross) on their money than most traditional savings accounts. Meanwhile, ‘borrowers’ or property professionals will be those that wish to borrow money from the crowd of lenders to finance a new property project or re-finance an existing one. This includes development projects, project refinancing and buy-to-let investment refinancing.
Following the main retail launch, the second phase of the distribution strategy will focus on financial intermediaries. Details are yet to be finalised but CrowdProperty intends to pay commission to advisers and brokers whose clients become ‘lenders’. Finally, whilst Treasury consultation is still ongoing, the company is also researching the viability of including CrowdProperty finance within ISAs and investment funds as a longer term project.
CrowdProperty take a one-off 3-5% arrangement fee from property professionals (borrowers) and pass the full amount of the gross interest (5-11%p.a.) payable on the loan to the crowd of private individuals (lenders). Borrowers can apply for up to 100% finance on new developments at 9-11% p.a. or up to 80% loan to value for refinancing projects at 5-6% p.a, depending on a set of proprietary criteria.
The firm secures all loans with a first legal charge against the property asset lent against, in much the same way as a bank or building society would.
Zutshi said: “Our inspiration for CrowdProperty came from a very simple understanding of the current problems facing many people in a climate of exceptionally low interest rates and increasingly tight lending restrictions from traditional high street lenders.
“Many property professionals in the UK were not getting the money they needed to make profitable property developments happen and most everyday people were not getting as much interest as they would like from their savings. The answer was simple: give people a better return on their money by allowing them to directly lend it to property professionals looking for funding.”
Zutshi added: “The big difference of course with CrowdProperty compared to other players in the market is that we are true property market specialists and experts with unrivalled networks of contacts and the ability to find the most exciting and potentially profitable developments which others might easily miss. We want to ensure projects deliver, to maintain trust and certainty with our lenders and ensure our results and reputation will ultimately lead to us becoming the number one property peer to peer lending platform in the UK.”