Below is an interview with Frazer Fearnhead, who is the founder and MD of The House Crowd, which claims to be the world’s first company combining crowdfunding and property investment. His website is www.thehousecrowd.com.
For the benefit of our readers, could you define in a couple of sentences, what The House Crowd is?
We are a crowd funding platform that pools together people who want to invest small amounts in residential property and benefit from the high returns we can offer. It’s a completely passive investment with none of the hassles usually associated with investing in property yourself. In short, it’s a smarter way to invest in property.
And with similar brevity, how it works?
People invest in shares in a Company set up solely to purchase specific properties. We group them together to fund the purchase and any refurbishment costs. The property is then rented and dividends are paid from the profits made. The property is valued annually and investors vote once a year on whether to put the property on the market to be sold or continue renting it.
Where did the idea come from?
It was born out of my personal frustration and dislike of the banks and a recognition that there was a huge appetite for property investment but that many people did not have large amounts of capital for the requisite deposits or a sufficiently high credit score to get a mortgage.
What level of investment can be made, and what level of returns can be expected?
£1,000 is the minimum investment. Typical rental yields are 10% -11% a year plus any capital appreciation when the property is sold.
And have returns so far matched advertised rates?
Yes. In respect of every property under our buy to let model, everyone has received the returns as promised. Two properties we bought to sell – a model we quickly abandoned (as the market was not right for it) – did not achieve as high a return as we expected but still produced significantly better than the returns offered by banks or ISAs
What safeguards are there in place for investors?
Bricks and mortar. Although they invest through a company structure, underlying that is the security of an actual physical property unencumbered by any debt. Each property is ring-fenced so if something goes wrong with the head company itself or any SPV the others are not affected.
Is there a typical investor, or are they too broad to define?
Across the board everyone from train drivers to investment bankers and a liberal sprinkling of retirees. Our youngest investor is just 19 our eldest is 94.
Many of our readers are American, is this a vehicle they can easily invest in?
Yes we are now able to accept investors from most countries in the world and have investors from many places including Australia, Spain, Germany, Netherlands, South Africa, The United Arab Emirates and the USA . It’s all done on line via our website and is very simple. They just need to send their ID to our solicitors as part of the Anti Money Laundering regulation and transfer the funds electronically to the solicitor’s client account.
How long have you been running, and how would you evaluate progress to date?
Almost 2 years. We have raised £3.53M in that time bought 51 properties and growth from year 1 to year 2 was 154% (to date). Many of our clients now invest automatically in every project as a sort of savings plan and 42% of our business comes from referrals from existing clients. So I am very happy with the progress we have made. We have proved the concept works and is extremely popular and it snow time to shift up a gear and grow the company up from the solid foundation we have built.
What’s next for the House Crowd?
We are in the process of getting full FCA authorization which will help establish our credibility with more skeptical people. But the main hurdle is to get our message across to a much wider audience. To do so we are investing heavily in marketing over the next few years.