The rapid technological advances of the last decade and the emergence of the shared economy have democratised a range of services including shopping, job hunting, renting rooms and taxis, putting power firmly in the hands of the consumer.
By Parul Scampion, co-founder, Propio
Investing has also become easier – buying and tracking shares on our tablets or mobile devices is now commonplace – so, at a time when the demand for empowerment by consumers is at an all-time high, why not change the way we invest in property?
That is what Propio – launched this week by the founders of residential group Fruition Properties and Pivot, an established property finance house– aims to achieve. Propio is a new easy-to-use online property investment platform offering returns of up to 20 percent, which allows would-be investors to access a range of debt and equity opportunities all linked to residential property development.
Power to the people
Banks and other large institutions still suffer from a hangover of distrust following the 2008 financial crisis and numerous other scandals. By taking the power away from the institutions and giving it back to individuals, Propio is democratising the way people invest in property.
By setting a low £1,000 entry point, we believe Propio will appeal to everyone from high net worth investors to pensioners and tech-savvy millennials, who, until recently, would have been unable to directly invest in property. The platform also allows people to diversify across multiple asset classes and locations, helping to spread and reduce risk, while hopefully delivering increased returns.
One of Propio’s early projects, 23 Upper Richmond Road, reached its £622,000 funding goal and will return money to the 77 investors this autumn
While Generation Y may be priced out of the property ladder, the low investment threshold makes property development a worthwhile venture for someone comfortable with the risk who wants returns of up to ten times higher than a typical cash ISA. Ultimately, our ambition is to demystify the development process so that retail investors of all backgrounds can access the sorts of returns normally reserved for housebuilders.
Propio also opens up crucial new avenues of funding for small and medium-sized developers keen to share equity with others or whose schemes may not be big enough to excite the major banks who have been told to rein in lending.
So, how does the platform work? Users log into the platform and allocate money either to specific projects or to a selection of pooled bonds which invest in multiple opportunities. The website includes all critical data about every opportunity, complete with independent valuation information and an explanation of the project’s timeline.
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. Taking an equity stake in a project – the highest risk option – could potentially earn a return of up to 15-20 percent. However, 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 percent. This type of return is also substantially higher than those offered by traditional property funds - which typically seek an income yield around 4 percent with the rest made up by capital growth.
Time for transparency
At a time when there is still a general distrust of big corporations we also believe that investors deserve better transparency around real estate investment – which is often seen as very opaque. We are more open – and far more competitive – than our rivals who often deduct a multitude of fees for transactions and management, eating away at investors’ real returns.
Our platform has been road-tested over the past year by an expert team of developers responsible for more than half a billion pounds worth of property. Our founders have a strong background in property development, urban planning, property finance, financial services, technology and financial regulation.
We also put our money where our mouth is, investing our own cash into every single opportunity on the site and co-invest a minimum of 2.5% of the value of each deal, capped at £25,000. Of course, development is more risky than putting cash in the bank, but with returns up to 20 percent, now is the time for everyone - not just the few - to tap into the attractive returns on offer.