Raising Money For Your Own Projects via Crowdfunding
Lastly in this series of guest crowdfunding blogs, what about the other side of the coin… what if you as a property developer or landlord want to raise money via crowdfunding.
Many developers may not want to or may not be able to get finance from banks and whilst most successful developers have private investors willing to back their projects, that money is usually quite limited and will inevitably run out after a while. Crowdfunding potentially gives developers access to huge amounts of cash.
If you are such aa developer then clearly the factors you will need to consider are cost of finance, speed of raising money and flexibility of the lender/ investor.
The good crowdfunding platforms will want to see that you have a proven track record and will undertake appropriate due diligence on your opportunity before allowing it to be promoted.
Each crowdfunding sites operates in slightly different ways and accepts different sorts of deals. Lend Invest or Crowdproperty for example will make secured loans against property, CrowdLords offer landlords and developers the ability to raise money on a shared equity basis. And The House Crowd offers both shared equity deals and secured loans.
Secured loans offered on crowdfunding platforms tend to be short term and you are likely to be paying a significantly higher rate than a typical buy to let mortgage but less than standard bridging loan rates.
There is no guarantee that you will be able to raise the money and it will obviously depend on how attractive the deal is for investors. If you are prepared to share the profits though it can reduce the risks as you will not be obligated to make mortgage payments every month.
It works particularly well for short term develop and sell projects as it means you simply share the profits out when the property is sold. Longer term B 2 L Joint Ventures will involve a considerable amount of administration to keep investors updated and pay out dividends on a regular basis.
But if you can offer attractive deals and are prepared to share the wealth, you will have an endless source of JV finance and never need to apply for a mortgage again.
Written by Frazer Fearnhead, The House Crowd
Frazer started his career as a lawyer in the music industry. He has been investing in property since 1994 and working with other investors since 2003, helping them invest in over £60,000,000 worth of investment property along the way. He is the founding director of The House Crowd – www.thehousecrowd.com – the world’s first property crowdfunding platform.
