An online property investment platform, claiming to offer returns of up to 20 per cent, has been launched.
Would-be investors can access a range of debt and equity opportunities all linked to development through the platform called Propio.
There is a £1,000 entry point for investments, which Parul Scampion, co-founder at Propio, said should appeal to investors who, until recently, would have been unable to invest in property in this way.
Users log into the platform and allocate money either to specific projects or to a selection of pooled bonds which invest in multiple opportunities.
Investors select which property they want to invest in, either as a loan to fund construction or taking a share in the company that holds the property.
An investor gets their cash back when the development loan is repaid, which according to the company is typically after 12-18 months or, if they’ve taken an equity position, when the property is sold on.
The website includes information about the opportunities, complete with independent valuation information and an explanation of the project’s timeline.
Ms Scampion: “Our ambition is to democratise property investment, demystifying the development process so that retail investors of all backgrounds can access the sorts of returns previously only available to the financial elite.
“Of course, development is more risky than keeping cash under the bed, but with returns up to 20 per cent, there is potential to tap into far greater returns than many other platforms offer.”
Investors get their cash back when loans are repaid, or developments are sold, with the duration depending on the type of project and on whether investors have taken a debt or equity stake.
Propio focuses on developments that have already obtained planning permission to avoid delays.
Taking an equity stake in a project – the highest risk option – could potentially earn a return of up to 15 to 20 per cent each year, according to Mr Scampion.
However, she said equity holders are always the last to be repaid, which is why returns are highest.
Debt investments – where money is lent to developers but secured against the asset – typically return around 8 per cent, she added.
According to Ms Scampion this type of return is substantially greater than those offered by traditional property funds – which typically seek an income yield around 4 per cent with the rest made up by capital growth.
To-date, the platform’s directors have invested their own cash into every single opportunity listed on the site.
The company maintains that loans are asset-backed and at a typical loan-to-value of 60 percent, the value of the property would have to fall by 41 percent before investors lose.
But Samuel Blanning, adviser at Star House Financial Services, sounded a note of caution about the arrangement.
“Loans to property development companies have been available via peer to peer platforms for years and this is just another entry into a crowded market.
“Young and inexperienced investors should be cautious of chasing high returns of up to 20 per cent.
“Any investment offering [returns] of 20 per cent clearly carries an extremely high risk of total loss and should only be considered as a very small percentage of a diversified portfolio.
“The best way to get on the housing ladder is to calculate how much you need for a deposit, put a realistic amount of your income towards that goal, and, assuming you are taking a long-term view, invest your deposit fund in diversified investments with potential to keep pace with house price growth.
“Losing money on very high risk loans to property developers will only make getting on the housing ladder even more difficult.”
aamina.zafar@ft.com