A new online property investment platform offering returns of up to 20 percent has been launched by one of London’s leading high-end residential companies.
Propio’s straight-forward platform offers would-be investors a range of debt and equity opportunities all linked to development. Its low £1,000 entry point will appeal to investors who, until recently, would have been unable to directly invest in property.
But the firm’s founders hope to attract everyone from high net worth investors to pensioners and tech-savvy millennials. While Generation Y may be priced out of the property ladder, the low £1,000 investment threshold could make property development a worthwhile venture for someone comfortable with the risk who wants returns up to ten times higher than a typical cash ISA.
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 in-depth information about the opportunities, 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. As Propio focuses on developments that have already obtained planning permission, delays are less likely and returns are more predictable.
Taking an equity stake in a project – the highest risk option – could potentially earn a return of up to 15-20 percent per year. 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.
With the ongoing crisis on the high street worsening, commercial property funds – which are heavily exposed to shopping centres – are likely to be hit. For example, M&G’s Property Portfolio Sterling A returned 6.3 percent during 2017, but lost 7.6 percent the year before according to Morningstar.
Propio 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. The company believes investors deserve better transparency around property investment – which is often seen as very opaque. The company plans to be more open – and far more competitive – than rivals who often deduct a multitude of fees for transactions and management, beavering away at investors’ real returns.
Its directors also put their money where their mouth is and to-date have invested their own cash into every single opportunity listed on its site.
Parul Scampion, co-founder at Propio, said:
“Our ambition is to democratise property investment, demystifying the development process so that retail investors of all backgrounds can access the sorts of returns previously only available to the financial elite. Of course, development is more risky than keeping cash under the bed, but with returns up to 20 percent, there is potential to tap into far greater returns than many other platforms offer.
“Our fintech platform opens up exciting new avenues of funding for 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 reign in lending. With the bombshell of tax hikes buy-to-let investors now face, we’re hoping to offer far better returns with a greater level of transparency on the fees charged. We are also planning on launching an ISA product in the autumn which makes it even more tax efficient as there would be no tax to pay whatsoever on any returns. Best of all the earnings can be recycled and reinvested.”
Propio secures exclusive property investment opportunities, which meet its strict investment criteria, through its extensive network of investment and property contacts. The company uses the latest industry research to seek out attractive property opportunities throughout the UK. As part of this, Propio:
· Completes a rigorous 52 point assessment of both the investment and the company providing the opportunity
· Negotiates robust legal agreements with its chosen developers to protect the interests of Propio investors
· Launches the opportunity and raises funding from its investor community through its secure online platform. Once an investment is fully funded, the capital is transferred to the provider
· Keeps investors updated on key developments and milestones and updates their dashboards and wallets as and when returns are paid
· Manages the repayment of capital and profits to all parties and closes down the SPV at the end of the investment period