Property Partner Review – Invest in Property via Crowdfunding. 2


Property Partner is one of a number of recently launched property crowd funding platforms. Here, I give a review of the website and analyse what the Property Partner platform has to offer.

What Is Property Partner?

Property Partner is an online crowd funding website that allows everyday people like you and I to invest in property. In the simplest of terms, Property Partner gathers money from a range of people and invests these funds in actual physical property.

Property Partner allows people with as little as £50 o invest in the property market. The houses are bought outright using funds collected form ‘the crowd’ (investors). Each investor is then considered an owner of the property and gets a share in any rents received by the house being let and any capital gains received when the property is sold. Investors are also able to sell their stake in properties at any time.

Think about it this way, just like how you can buy ‘parts’ of a business on the stock market, Property Partner allows you to buy parts of a property.

How It works:

Property Partner provides two methods of how you can own a share in an investment (or buy to let) property. The two methods are:

  1. Buy into the property when the it is first advertised (New Listing).
  2. Buy someone else’s share of a property in the secondary market.

These are both explained below.

 

Buying into a property when it is first advertised (New Listing)

Property Partner advertises a number of properties on its website, typically a new property every two weeks (but the number is creasing). For each property, there is a set amount to raise which includes the acquisition cost and any transactional costs (surveyors, stamp duty e.t.c).
The properties are well researched and the forecasted financials like estimated rental yields and capital growth for the 5 years the property is held for are given.This will allow you to calculate your return on investment.

Property Partner advertises a number of house for you to choose from.

Property Partner advertises a number of house for you to choose from.

Once you find a property you are interested in, all you have to do is click the ‘invest’ button on the screen. The more you invest in a particular property, the bigger proportion of the property you own.
The money you invest for your property does not go straight to Property Partners bank account but instead goes into a client monies ‘ring-fenced’ account in accordance with the FCA rules. Thus, if Property Partner was to go bankrupt, your money would be safe and secure and would be paid back to you. Your money going to this ring fenced account as opposed to property partners account is an added security feature and this gives me peace of mind!

Just like you, hundreds, if not thousands of people view the website to see if they are interested in investing in any properties advertised. The beauty of crowd funding is that the whole of the property will be bought by people like me and you thus bypassing any need for debt or banks. (No worrying about rising interest rates!)

Once the property is fully funded, Property Partner will take care of the rest. They will buy the property on your behalf (and consequently issue you a share certificate), look for suitable tenants, collect rents and consequently take care of the sale of the house if investors choose to sell it.

For someone like me who does not have a great understanding of property management, this is great. Once I invest money, all I have to do is sit back and watch dividends flow in every year. This is my kind of deal!

All properties advertised have a minimum 5 year term before they are sold. So after 5 years, a vote will take place involving every shareholder. If there is a ‘yes’ outcome the property will be sold. You will receive your initial investment and a proportional share of the profits if the house is sold at a profit.
If the house is not sold, there will be a vote every subsequent year.
If you want to sell your stake before this minimum 5 year period, THC have stated that they will help you do so.

 

Buying into a property on the secondary market.

Were you not able to buy a share in the property you liked during the initial a funding stage (as above)? Then no worries, Property Partner allows you to purchase a stake in someone else’s share of the property in the secondary market. Likewise, if you bought a share in the property when first advertised and you don’t want to hold the share till the property is sold in 5 years time, you can sell your share on the secondary market.

The selling investor chooses the price in which they offer their shares for sale. But Property Partner does provide information to help both potential buyers and sellers to perform diligence, and determine whether they wish to buy or sell at a given price. That is, they give the value of the property at the time investors want to buy and sell shares with each other, thus enabling both sides of the transaction to reach a fair deal.

Share valuations for properties are updated regularly.

Share valuations for properties are updated regularly.

Property Partner strives to provide an updated estimate of the valuation of each property on a monthly basis. The updated valuation is based on indexing the purchase price paid against the House Price Index for the appropriate borough or region that is published, each month, by the Land Registry. A RICS desktop valuation is carried out on a quarterly basis and a comprehensive Chartered Surveyor’s physical inspection and valuation is completed every five years.

Share Certificate For A House Purchase And Dividends?

As can be seen above, Property Partner will issue you a share certificate and will pay you dividends every year.

This is because each property is treated as its own company, known as a Single Purpose Vehicle (SPV). Thus each and every property has different ownership (shareholders) as each property will have different investors. So if you invest in a property (using the joint-venture model), you will receive a share certificate for that property (company) and will receive dividends (rent) every year.

The advantage of using a Single Purpose Vehicle is that if Property Partner goes bankrupt for any reason, you do not lose your investment as your investment is in the actual physical house and completely separate from the website or other properties (single purpose vehicles) Property Partner has bought.

 

What Types of properties are available through the Property Partner?

There has been a wide range of properties advertised on website, ranging from one bedroom apartments to family sized houses.

The key for Propeorty Partner is that the financials for the property need to be correct as they look to maximise investors returns. They concentrate on properties with good rental yields and capital growth prospects.

Property is very London Centric but occasionally advertises properties in other regions of the South East.

The Fee.

Property Partner charges investors two basic fees:

  • 2% on any funds invested with the platform – So this 2% fee applies whether you are buying into a new listing (buying into a property when first advertised) or when reselling your investment on the secondary market.
  • 15% of gross rent (12.5% + VAT) This is 15% per annum of the gross rent figure so this will only be charged once the property starts producing rental income. This 15% aims to cover advertising for new tenants and managing managing the property but excludes certain costs such as maintenance (consistent with industry practice).

Property Partner has stated that in certain situations, may charge a lower the 15% fee. An example of when this might be the case is in the instance where the property is rented by long term tenants under an Assured Periodic Tenancy.

Why Pay Someone To Look After A Property Investment For You?

Just like with buying and selling shares in companies, you can do it yourself (at a lower cost) or let a fund manager do it for you for higher returns.This is no different. Hopefully time will tell if the team at Property Partner will be able to pick up good solid cheap investments that offer high returns in the long run.

 

Who is Property Partner Good for?

1) People who are interested in property investing but lack the required funds.
2) Investors looking to diversify their assets to include property.
3) Investors looking to split their investments over a number of properties – This erases the worry of no rent during certain months in which the property is untenanted as by investing in multiple properties, cash will still be flowing in from other properties you’ve invested in. You are diversifying the risk away.
4) Investors counting on  short term gains in property – If you speculate the a certain house will increase in value in the short term, you can purchase shares in a property and then sell them on the secondary market when the price goes up thus realizing profits. In this situation, this is better than buying a house yourself and then quickly selling it off again once prices rise as it will be much harder to find a buyer for the whole house and you will have to pay substantial legal costs.

Who Is Property Partner Not Good For?

1) People already running their own buy-to-let portfolios and running every aspect of the property management themselves – These types of people will not benefit from joining THC unless they are looking to diversify (see point 3 above).
2) People who think the property market is overvalued – As most of the properties available on Property Partner are based in London, people who already think their is a London property bubble are wise not to invest in property at this time.
3) People investing for cash flow or rental yields – the rental yields available on the properties advertised are rather low averaging about 3%. But in this current low interest rate environment, a 3% yield may be considered good by some.

Who Are The Competitors?

  • Other Crowd funding platforms – Currently in the UK, there are 4 other crowd funding property platforms. These are Propertymoose , The House Crowd , Property Crowd and Crowd2let .
  • Property market funds – These are funds or investments trusts (REITS) that can be bought from online platforms such as Hargreaves Lansdown. I personally don’t like these as I have no control over what is being invested in. These types of funds also have lots of hidden fees.

 

Why Invest With Property Partner As Opposed To Other Crowd Funding Websites.

Here are some reasons why I believe Property Partner offers better value than the other crowd funding websites currently available:

  1. Property Partner offers a good secondary market to buy or sell shares in existing properties after that have already been funded. Other crowd funding websites don’t offer this clear and transparent service.
  2. Property Partner provides good detailed financial information on each property advertised. The financials are thorough and given in a good clear format.

 

Property Partner looks like a good way for you to get exposure to the property sector for your investment portfolio. As the platform grows in size, I suspect it will only get better as more diverse properties will be offered.

*With any financial product, always be cautious and do your research. As a rule of thumb, never invest more than 10% of your net wealth in any crowd funding scheme as although the returns look very good, it is not protected by the Financial Service Compensation Scheme (FSCS) unlike money in a bank where up to £80,000 is protected by government.

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