House Crowd Review: in this article we will take a closer look into one of the best crowdfunding companies in the UK and how it works.
In The House Crowd review, we look at a peer-to-peer lending and property crowd investing platform that has facilitated over £101m property backed investment. Read on to find out if it is suitable for you.
The House Crowd: Investment Introduction
Most people prefer to invest in property. If you do not own a home, you probably want to get one and when you do, you will want to own another as an investment. This is because many people prefer investments that are more tangible than stocks and shares. One popular investment is the buy-to-let investment. This is different from owning a home, as a landlord, you are running a business with legal responsibilities.
Today, buy-to-let investment is much tougher than it used to be because of the new rules in the property system and the removal of the tax allowances that are only reducing property owners’ rental income. Moreover, like most investments, it is risky and very hard to get into. Very few people are rich enough to get enough funding for a well-diversified portfolio. This means most, if not all of your money will be put into one asset, if it sinks, so does your capital.
This is where property crowdfunding comes in. Merging peer to peer financing with buy-to-let investment, it offers you an opportunity to access the housing market.
The House Crowd Overview
The House Crowd is one of the first UK property crowdfunding platforms. It was set up in December 2011 and began operations in March 2012. Its founder and current CEO, Frazer Fearnhead, was a contestant in the 13th season of Dragon’s Den where he was seeking £1m for 5% equity in House Crowd, he failed to secure the investment. Today, the platform has invested more than $101m in 398 properties and paid out £38.74m to its 25,275 investors.
The House Crowd also offers secured peer-to-peer lending where you can invest in property-backed bridging and property development loans.
Opening an account on The House Crowd
The first step to investing with THC is creating an account. The registration process consists of three steps. The first one requires you to provide a working email, your legal name, phone number and set your account’s password.
In the second step, you will provide your date of birth, nationality, occupation, type of account you are opening and your address. The third and final step is uploading your identification document which must have matching information with what you provide in the previous steps.
If you do not have the ID ready, you can choose to skip and add it later. The document verification will take up to 24 hours. The registration process is pretty easy and straightforward and takes less than three minutes to complete.
How to invest in The House Crowd
After completing the registration process, you will be able to access the site even if you have not uploaded identification documents yet. However, to invest, must verify your identity. To view the available and already funded investments, click the ‘invest’ button from the top menu and choose the investments you want to view from the drop-down menu.
If you wish to view more information about the property or loan, click ‘more info’ to view a summary and additional details of the loan. The minimum investment is £1000 and top-ups are in multiples of £1000 anytime. The investment starts earning interest 14 days after your funds reflect in the account.
Types of Investments available at The House Crowd
The platform gives you access to several different types of investments including:
Secured peer to peer lending
The House Crowd offers investors an opportunity to diversify their portfolios by providing property backed peer to peer loans. The platform has facilitated over 120 p2p loans worth over £48 million.
Property development lending
Investors on the platform have access to peer-to-peer development deals that offer up to 10% per annum. The loans are secured by a first legal charge against the land/property, this means the investors hold the right to be paid first if the property is sold.
Due to regulations that restrict banks from lending more than 60% of the Gross Development Value of any given property development, developers are often left with a gap in their funding. The House Crowd then offers the loan to fill the gap giving investors a chance to earn high interests.
This offers the opportunity to invest in peer-to-peer lending without actively managing the portfolio. The investments offer a 7% interest rate per year and up to 8.2% over 5 years if you decide to reinvest the interest earned.
Innovative Finance ISA
This offers investors an opportunity to invest up to £20,000 and earn 7% per year tax-free. This investment type has a 3-years minimum invest term.
Small Self-Administered Scheme (SSAS) pension
The platform offers SSAS holders, usually directors or senior employees of limited companies an opportunity to invest in their products tax efficiently. You can only use SSAS to invest in P2P bridging loans, P2P property development loans and Auto Invest.
30 Day Access Product
This is a product for investors who want greater liquidity. The investor can get the money back within 30 days after providing notice. However, this is only possible if there is further sufficient funding received. The annual interest rate is 4% and the minimum investment is £5000.
How much can you earn on The House Crowd
Your returns on the platform depend on the investment type you choose. Different products hold different interests. The 30-Day Access has 4% p.a., Auto Invest 7% p.a. and the 3-year IFISA offers 7% p.a. tax-free. The average returns for the peer to peer lending were 9.2% p.a. for the period from 2015-2018. Property development loans typically have 10% p.a. interest rates.
The House Crowd charges the borrower than the lender, the fees for equity investments are usually around 5% of the money raised. The platform does not deduct taxes on your returns. You must also consider other charges such as bank transfer fees.
Who can invest in The House Crowd?
The platform is open for individuals over the age of 18 and institutional investors. The platform also allows investors in the EU, Switzerland, Canada, Australia, New Zealand, South Africa, United Arab Emirates, and Hong Kong among others. For legal reasons, they cannot accept investments from the United States of America residents.
The House Crowd Pros
- Competitive rates of interest
- Multiple investment types
- Easy to use Auto Invest functionality
- Tax-free IF ISA
The House Crowd Cons
- Minimum £1000 investment.
- Limited liquidity as there is no formal secondary market
The House Crowd Verdict
The House Crowd is a great option for investors looking to invest in properties without having to manage them or those that lack the high capital to do it alone. All investments are property backed and easy to diversify your portfolio thereby minimizing the risk involved.
It is important to remember that as with any investment, your capital is at risk.
Other Crowd Investing Resources
For those looking for other similar peer to peer platforms to invest, you may want to read some of our other reviews. There are many peer to peer lending and investing platforms currently available, and you can diversify your interest income by using several of them simultaneously.
You can consider some other peer to peer companies checking our Mintos Review and our Property Partner Review. Check our post on the best peer 2 peer lending platforms in Europe, and the best real estate crowdfunding platforms in Europe.
Are you already investing in The House Crowd or in any other peer to peer lending platform? Leave your thoughts and questions about this The House Crowd review below.