Elevate is the newest market place platform to enter the real estate space - and it brings a twist or two. AltFi caught up with Paul Toon - CEO - to discuss what Elevate was bringing to the market and how the market might develop over the coming years.
There are three primary methods of interacting with the platform: Invest, Get Funding For A Property or Earn Commission.
Invest, as Paul Toon explained, offers a similar service to other platforms - where investors are matched to investments of suitable risk profiles. Investments are taken in three categories:
Mr. Toon highlighted the importance of promoting liquidity in the secondary market. He said that Elevate will currently only accept properties with a minimum net yield of 4% and, for this reason, Elevate is initially looking at regions outside the South-East, where the property bubble is far less pronounced. Mr Toon claims that Elevate is unique among other platforms in offering both equity and mortgage funding of properties, enabling investors to obtain higher returns on their equity, reproducing the methods used by professional buy-to-let investors.
Elevate promotes investment in affordable housing. Mr. Toon said that one or two properties should be coming live on the site in the next few weeks and offer both the chance for investors to make annualised returns of 5 to 10%, which are particularly attractive for a social investment opportunity, enabling investors to align their financial goals with their personal values.
Elevate’s other business areas - Funding For Property and Earn Commission – are truly innovative.
Paul explained that this section is perfect for someone looking for help in purchasing a property. Investors can invest with either equity or debt - assuming the IRR is high enough and costs are low enough for Elevate to list the campaign. Furthermore, Elevate will ensure that contractors used for refurbishment are all of a high enough standard and support the sourcing of tenants. Mr. Toon emphasised that the platform did not just match up buyers and sellers, but supported the process from first meeting onwards. The platform is additionally useful for higher rate tax-payers: under current government plans, the tax benefits available to direct investors in buy-to-let properties are being reduced significantly over the next 5 years. However, by investing through companies using a third party platform such as Elevate, the tax treatment is unaffected, and will actually improve during the same period for many investors due to the phasing in of lower corporation tax rates.
The third and final option offers customers the opportunity to earn commission by bringing properties onto the site. Mr. Toon suggested that the system could be useful for neighbourhood regeneration, as those who wanted to see property being improved - but didn't have the ability or desire to take it on themselves - could help list the property on the site and, if the project is funded, earn 0.5-1% commission. Furthermore, by using the platform, estate agents can gain access to far more individual, amateur property investors - a group of investors who would ordinarily not have either the time or funds to purchase an entire buy-to-let property on their own, but which Elevate can quickly and efficiently group into buying syndicates and do everything on their behalf. Of course, supposing that it was a rental company that listed the property, they would then be given priority on the rental contract - meaning they earn commission for the listing and can then earn through the rental contract.
Elevate is offering innovative services, and certainly disrupting the real estate market. Some consumers, not understanding the alternative finance market, associate it with controversial payday lenders. The problem may be a particular issue for Elevate, as they share a name with a Sunny Finance associate. AltFi asked Mr. Toon how he sees the industry improving its reputation. He emphasised the importance of the advertising and marketing budgets of the larger platforms. Whilst platforms - such as his own - did have a marketing presence, it has nowhere near the reach of the larger platforms, as displayed by Zopa’s recent TV advert. He continued with the importance of balanced and informed media coverage promoting the sizeable benefits of the industry.
The importance of getting this image right is invaluable to the UK economy, as Mr Toon estimates that the residential real estate market, worth £5.8 trillion in 2014 according to Savills Reseach, is larger than the market capitalisation of all of companies listed on the London Stock Exchange (£2.3 trillion) and all lending to consumers and businesses in the UK combined (£1.4 trillion and £0.4 trillion). Therefore, the benefits that can be felt by making the market more accessible, liquid and efficient are huge, Mr. Toon argued.
Having just funded their first three projects - Elevate is one of the up and coming platforms in the UK space and certainly carries a fresh perspective. Perhaps a cause for Elevate’s concern should be the number of incumbent firms operating in the space: AltFi Investor – which offers a comprehensive list of UK P2P investment options – lists 6 property based lending options available. For Elevate to succeed, they will need to establish themselves amongst the dominant players. The need to educate the public is typically present with new products, if Mr. Toon's team can get that right then Elevate may have a truly exciting future ahead.