It is possible to make a passive income from the property. The traditional way is DIY BTL, (do it yourself buy to let. Buying a property and then renting it out.
Crowdfunded Bridge loans, property development, BTL and BTS (buy to sell or to flip) are all sources of passive income. Most investors will have a hard time sourcing such deals, negotiating and following through with them. Several crowdfunding platforms have opened up these opportunities for property investors, however, not everything is peachy and rosy!
The crux is the LTV and the location of the property. The LTV is the loan to value, meaning how much money is being borrowed compared to the value of the property. Since the property market is not very liquid this valuation is arbitrary; there is no guarantee that it will be valid if the time comes to sell the property. The second part is the location of the property; the location determined the value in both residential and commercial terms, if the property is in a desirable area then there will be buyers at your doorsteps otherwise the selling process might take months or years.
EstateGuru – Estonia
Estateguru is an Estonia property investment platform, it has lent more than 92 million Euros across 603 Loans. 3.3% of the loan book is in default, and 6.5% of loans have l;ate payments. Most loans yield around 11%. Minimum investment of 50 Euros per project, meaning it is easy to diversify. There is a basic auto investor tool. The advances settings of the auto investor are unlocked when investing a minimum of 250 Euro in each loan.
Estate guru has a reputation of being more conservative and of having higher deal flow than other property platforms. The EstateGuru stats are a good place to start your own research.
Housers – Spain, Italy, Portugal
Housers is a real estate investing portal, it offers investments in:
- Participative Loan
- Buy-to-Let Opportunities
- Buy-to-Sell Opportunities
- Development Loan Opportunities
Each of the listed investments has a risk scoring level: A, B, C, D, E, F, G.
These are primarily located in Spain; there are also loans available in Italy and Portugal. The platform allows for diversification throughout various asset categories and locations. The minimum amount to invest per opportunity is € 50. Each share of the properties can be traded on a secondary market.
The advantage of using Housers is that most of these deals would be inaccessible to the retail investor. The investor is shielded from the complexity of setting up, executing and maintaining the properties. In return, housers earns fees to coordinate these property deals.
There are risks to investing with Housers, starting from the risks of the platform itself to the risks related to each investment. Real estate investment depends on someone else willing to buy the property in the future at a higher price; if this does not materialize, profits will be hard to make.
CrowdEstate – Estonia
CrowdEstate is platform based in Estonia focused on investing in crowdfunded property and corporate loans. You can start investing with as little as 100 Euros and in 100 Euro increments thereafter. It has exited over 40 deals successfully. It has around four new investment opportunities every month.
An auto invest feature allows investors to set their filters; this will allow them to invest without having to invest in each loan manually. A secondary market allows investors to sell their loans before they are paid off, most loans are sold higher than the original purchase price.
CrowdEstate has 25,000 registered investors; this means that loans are usually filled up quickly. Crowd Estate statistics page can give insights whether this investment is compatible with your financial situation.
Property Partner – UK
Property partner is a UK based property investment platform, the whole design of the site is very slick. Its focus is on the buy to let model; investors buy a share of a property and rent is paid out monthly. The deals focus on properties which encompass multiple apartments or larger commercial premises. Shares in each SPV can be sold or bought on the secondary market. There are various formulas to how one can invest, whether manually or automatically.
Investing in the UK property market at this time has the additional risk of Brexit. Learn more about the Brexit and the prime UK property market and Weakness in the UK property market. This applies to all the investment platforms based in the UK.
Property Moose – UK
Property Moose was a property investment platform which focused on the Buy to let Model; they allowed investors to select properties to invest and then investors collected the rent as passive income from each one the property where managed under a separate SPV. Property moose had to change the business model and essentially become a REIT. According to them the costs of maintaining each SPV made the whole system not profitable. The properties have since been grouped under a new LLC: Uk Diversified property. As of the time of writing it is still not clear if the original valuations have held, i.e. to what extent have investors lost money.
The House Crowd – UK
House Crowd is a property crowdfunding based in the UK; the investments are denominated in Sterling. Several of their initial Equity Property Crowdfunding investments are returning less than 2% profit for investors per annum. They have expanded their investment opportunities to
- Equity Property Crowdfunding
- Peer to Peer Lending
- Property Development investing.
The minimum Investment is of 1,000 Sterling, 5,000 Sterling are needed to use the auto invest tool. Investments are visible online however there is no online wallet system for cash and support need to be contacted to check the cash balance.
FundingSecure – UK
Funding secure is a p2p lending platform which features some property loans. It is also facing some customer complaints according to to the website Trust pilot. There is no auto invest feature, investing in the good loans on this platform requires surgical timing when these loans are launched.
Lendy – UK
https://lendy.co.uk is a p2p lending platform which requires property as a guarantee from the borrowers. It has seen better days, many investors are complaining on Trust Pilot are the forums the massive number of defaults for the loans invested. Not to be confused with https://lenndy.com/
Property, peer 2 peer lending and dividend stocks are an important part of a passive income portfolio. There are various ways to make passive income from the property even without capital such as lease and then rent through AirBnB.
Crowdfunded projects are an alternative to DIY property investing, however since regulation is still emerging and the accounts of the management companies are not public the companies of crowdfunded property projects have an informational advantage over the investor. This means that to some extent the investor needs to be extra careful when investing on these platforms. Achieving Financial independence, is an important goal any major setbacks to your portfolio mean that the FIRE date is moved forward, diversification, research and managing risk are important areas for the investor to focus on.
Learn more: This p2p investment risk reduction guide might is also applicable to crowdfunding sites About the risks of Crowdfunding and the warnings by the UK FCA and the investor bulletin on crowdfunding from the USA SEC