In the UK, we love our property. Many individuals here understand property better than any other asset class. It is no surprise that the buy-to-let boom which has taken place over the past couple of decades has minted many millionaires. And it will continue to mint many more. The only problem with todays would be property investors is that it is too hard to save for a deposit and even if you do, you will normally be financially outmuscled by someone with an existing buy-to-let portfolio.
Thankfully for small investors like myself property crowdfunding exists. Property crowd funding allows individuals with little capital and minimal knowledge of the property sector to collectively join forces to leverage resources. This method of property ownership has proved popular as seen by the numbers of deals done on existing platforms like PropertyMoose, The House Crowd and Property Partner. There is now one more website to add to that list, Brickowner.
What Is Brickowner?
Brickowner is a property crowd funding platform that lets everyday investors access institutional grade property investments with as little as £100. Brickowner is an aggregator, which by combining a number of investors investing smaller amounts, is able to pool a large enough amount to invest with an institutional asset manager.
Putting it simply, Brickowner gathers money from a wide range of investors and uses these funds to buy actual physical property.
It goes one step further than the other crowd funding websites by selecting established UK property asset managers to work with. More on this below.
How does it work?
Brickowner advertises a number of properties on its website. As the company is new, the amount of properties advertised has been limited – but I understand the numbers will be increasing. For each property, there is a set amount to raise which includes the acquisition cost and any other associated costs (surveyors, stamp duty e.t.c).
Research is carried out on each property advertised and the forecasted financials like estimated rental yields and projected returns for the 2-3 years it typically holds the property for are given.This allows you to easily weight up different properties against each other.
Once you find a property you want to become an owner in you can complete the whole process online. The website is user friendly and the investment process is really easy.
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, Brickowner will take care of the rest. They buy shares in the investment through a property/asset manager and take care of any investment maintenance i.e. investment review/property management/legal work. Bricowner will also take care of exiting the investment if investors choose to sell it after the minimum period.
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!
The great aspect about Brickowner is that you are able to sell your stake in a property before the investment period has finished. You can choose the price at which you want to sell your investment and see if they are any buyers. Obviously there is no guarantee that a buyer will be willing to pay the price that the seller is requesting.
What if Brickowner goes bust?
I don’t know about you but I like to know what would happen to my money in case a company offering investments goes bankrupt; especially if that company is new.
The advantage of using a Single Purpose Vehicle for each property purchase is that if Brickowner goes bankrupt for whatever reason, you do not lose your investment as your investment is in the actual physical property and completely separate from the website or other properties (single purpose vehicles) Brickowner has bought.
Furthermore, there is also protection if Brickowner were to go bust after raising money but before getting the chance to buy a property. This is because the money you invest for your property does not go straight to Brickowner’s bank account but instead goes into a solicitors ‘ring-fenced’ account. Thus, if Brickowner was to go bankrupt, your money would be safe and secure and would be paid back to you. Your money going to a solicitor rather than directly to Brickowner is an added safety feature and this gives me peace of mind!
What Types of properties are available through the Brickowner?
Brickowner is looking to differentiate itself from various other property crowd fund platforms by offering individuals the chance to invest in institutional grade property investments
There platform works with specialist managers to find properties. In order to find attractive properties, there is a focus on good potential income and capital growth prospects.
What Fee Does Brickowner charge?
Brickowner has stated that it aims to be clear and transparent when it comes to the fees it charges. In essence, two fees are charged:
- 3% Fundraising Fee – This is a one off fee at the point of investment, and is there to cover the use of the Brickowner technology. This fee applies to those buying newly listed properties and also those that buy shares on the secondary market.
- 1% annual management fee – Fee is paid monthly from the SPV
On the face of it, it looks like Brickowner charges a lower fee as compared to other property crowd funding platforms.
Why Pay Someone To Look After A Property Investment For You?
Just like with buying and selling shares, 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 Brickowner will be able to pick up good solid cheap investments that offer high returns for investors.
What Return Do You Get On Your Investment?
This is the most important questions when it comes to investing. You want to know how hard your money is working for you.
Of the properties I have browsed so far, the average return appears to be about 10% per year. It is important to note that each property has different financials and thus it is important to do your research and see what property investment is best for you
Who is Brickowner for?
- Small investors interested in property but lack funds to buy property themselves.
- Investors looking to diversify their assets to include property.
- 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.
Who Is Brickowner Not Good For?
- People looking to live of rental yields (dividends) by holding properties for the long term – This is because the holding period is 2-3 years and thus it is not the best for long-term investors.
- 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 property crowdfunding platforms unless they are looking to diversify.
Who Are The Competitors?
Property market funds – These are funds or investments trusts (Real Estate Investment Trusts) 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. Also, they are too London-centric and I believe prices are too high there right now. These types of funds also have lots of hidden fees.
How is Brickowner different to the competitors?
- Property Partner – Only invest in residential properties (BTL)
- Property Moose – Mainly residential around Liverpool, they are targeting small retail investors (from £10 with average investments of around £100.)
- The House Crowd – Minimum investment of £1000
Why invest in Brickonwer as opposed to other property crowd funding platforms?
Brickowners platform will be attractive to retail investors due to the following reasons:
- By leveraging off property and easy to understand investment principles we can explain our investments in a simple manner without “turning off investors”.
- Investors are keen to see returns that not only beat inflation but that are greater than 5%.
- There is a novel factor involved in giving retail investors a diverse property based portfolio outside of the BTL market.
- More complex investments in other p2p markets are unable to leverage off the UKs propensity to invest in property ownership and therefore investors seem warier to invest. Loans/Equity and Bonds etc.
- Brickowner are investing in the initial investments to keep costs low for customers in return for gaining an understanding in how retail investors would like to invest.
All in all, Brickowner looks like a decent platform to diversify your holdings and get on the property ladder.