An opportunity that utilises the power of crowdfunding to enable more people to invest in and make a return from the UK Buy-to-Let market.
CrowdLords is a technology platform that aims to directly connect Landlords with equity investors. It aims to bring together people who wish to invest in Buy-to-Let with others who wish to build and manage a Buy-to-Let portfolio.
Landlords who are fully vetted, would identify the properties and be required to invest a minimum amount themselves - the balance is sourced from Investors. Each property would be held in a Special Purpose Vehicle (SPV) with the shareholdings in each SPV split between the Landlord and the Investors.
Investors would be able to select from a range of properties and investments. Investors would gain returns from ongoing underlying rental income and a proportionate share of sale proceeds when the property is sold. Investors could invest fairly modest sums with a minimum investment of £1,000.
The goal is to open up Buy-to-Let to more people in a controlled, regulated manner.
Over the longer term, we believe that UK property offers the potential for very good returns and security. But for many individuals it remains out of reach - through a lack of knowledge, expertise or finance. We believe CrowdLords solves this issue and enables individuals to make informed decisions and partake in the sector for relatively modest financial outlay.
The platform will incorporate and automate the processes and requirements of the new FCA regulations for crowdfunded investments.
CrowdLords is a true, two sided crowdfunding platform - it will aim to create a community of like-minded people who share common goals and aspirations. People who will support each other beyond finance with knowledge, experience and local property market intelligence.
- it will provide access to Buy-to-Let finance
- allow the ability to choose the appropriate balance of income and capital growth
- it will offer the ability for investment with family and friends
- it will provide support, advice and access to portfolio management tools
- it will create an opportunity to generate income and/or capital growth according to priorities
- investments will be fully secured against UK property assets
- it will provide choice in terms of property types, locations and investment terms
- it will enable a diversified investment of fairly modest sums
- it will provide access to investment management tools
Substantial accomplishments to date
The business has been in development for nearly 12 months. Personal investments made by the Directors have contributed to funding the following:
- development of the concept and the brand
- planning and development of the technology platform (ongoing)
- professional advice and fees (legal/FCA/Finance)
- initial marketing (website and social presence) to generate pre-registrations
- significant external legal advice taken (and ongoing) around structuring of investments and processes including standardising all legal documentation required for both Landlords and Investors
- pre-approval for EIS/SEIS has been applied for
- ongoing mentoring from external advisors to ensure platform is "fit-for-purpose" before formal launch
- 5 year business plan and financial forecasts fully prepared and agreed
Unlike other property crowdfunding businesses, CrowdLords is not responsible for sourcing or managing investment properties - the Landlords are responsible for this, which we feel makes both our proposition more transparent and also the business more scalable once market traction is achieved.
Revenue is expected to be generated from three primary sources:
1. A property listing fee of £250 for each property
2. A success fee of 5% of funds raised for each property
3. An exit fee of 10% of the capital gain for each property when the property is sold
CrowdLords is a "lean" business - the platform and infrastructure is designed to automate the process of connecting Investors with Landlords in a very efficient and regulated manner. As a result we believe that the business can scale and generate very strong profit margins once commercial traction and market awareness are established.
Financial assumptions around the numbers of properties listed, invested and exited are conservative.
Use of proceeds
We plan to use the proceeds of this investment round for:
- Completing the development and further enhancement of the technology platform
- Achieving FCA authorisation and completing standardised legal contracts and processes (including money handling)
- Implementing phase 1 of the marketing plan
- Recruitment of sales and marketing, support and IT/Web development employees
- Enhancing working capital
CrowdLords plans to target two main audiences.
Whilst the goal is to open up Buy-to-Let to a wider audience, becoming a Landlord is likely to appeal most to a range of sub-segments including:
- Experienced Landlords: CrowdLords will provide them with an opportunity to set the income and capital returns that they offer. They will also be able to use the platform to raise capital from their existing portfolio to fund expansion
- Young Aspirers: They have some savings but not sufficient for a house purchase deposit. We believe CrowdLords will provide a good solution. They will most likely manage properties on a part-time basis. It's also easy for them to be supported by family and friends
- 2nd career mothers: Opportunity to generate income in a way that fits their other commitments. They may well have social circles in similar situations who might also wish to join in
- Tradesmen: Self-employed tradesmen with the skills and contacts to improve, refurbish and manage properties. Again, lower capital requirements make the platform very attractive for them
- Estate Agents: Who have the knowledge and expertise to source properties and partake in the investment opportunity
Anyone with savings looking to improve returns we believe will be attracted to our proposition, including:
- Friends & Family: CrowdLords will actively encourage Landlords to source their own investors
- Sophisticated Investors: Those who are savvy at managing their risk/return investment requirements and have familiarity with other crowdfunding or P2P vehicles
- Experienced BTL investors
- Expats: Who wish to invest in UK property but struggle to secure UK mortgages due to their residential status
- Pensioners: Looking for flexible ways to earn income/capital from property following the change in annuity legislation
Characteristics of target market
We believe that a number of factors make this the right time for this proposition:
1. Significant and increasing demand for private rental stock. This bodes well for landlords and potential returns for investors
2. Forecast steady increase in property values: Conservatively expect a UK average 4.65+% increase pa in property prices over the next 5 years.
3. Forecast growth in rental yields: Rents are estimated to rise by 2% on average this year. Rising prices also mean that it is increasingly difficult to raise deposits required to buy houses - leading to increased rental demand
4. Poor investment returns from banks: Rates expected to remain relatively low for some time
5. Acceptance of P2P lending: The P2P market is rapidly evolving as a significant and credible source of finance. FCA regulations are enhancing this credibility
6. ISA/Annuity Changes: P2P will soon be ISA eligible. Pensioners will soon be able to invest funds in property rather than annuities
The CrowdLords brand has been developed to be personable and professional. This needs to translate across all customer touch points -mainly the platform and the support function. Given the target audience the brand is designed to feel mutually beneficial, efficient, supportive and trusted.
The marketing plan will be focused on acquiring and supporting both Landlords and Investors. Awareness and demand will be created using online marketing, social media and targeted PR. There are three marketing phases planned:
Generating adequate "noise" and mass for the business to start functioning. Requires a number of properties and a number of pre-registered investors. Properties will be generated via networking and targeted attendance/presentations at relevant industry events and shows. Pre-registered investors will be generated via social media and online marketing.
Maximise presence in blogs, press and where Landlords and Investors go for advice/information (will be online and shows).We plan a PR campaign supported by digital marketing with the focus being to optimise the conversion of visitors into registered users of the platform.
Focused on advocacy and reputation building using word of mouth and PR with significant investment into search engine optimisation, content marketing and online advertising.
In many respects the growth in the number of P2P and crowdfunding platforms creates a positive environment for this significant commercial opportunity.
Competitors could be:
Not really a competitor, CrowdLords is more an alternative source of LandLord finance.
2. "Generalist" crowdfunding platforms:
There are a number of platforms competing for investors. This highlights the opportunity. CrowdLords has learnt from the best of these in terms of presentation of opportunities, PR and marketing. In addition, CrowdLords is differentiated in that it is focused on a niche - the Buy-to-Let sector
3. "Property" focused crowdfunding platforms:
The House Crowd: A successful regional operation which has funded c. 75 properties so far. But, from our understanding, their growth relies on The House Crowd's internal resources to source and manage properties and therefore, as it is a one-sided platform, it is limited in its ability to scale. Nevertheless, they have proven that an SPV type structure is practical and feasible.
Crowdahouse: This uses a fund to invest so is not strictly a true crowdfunding proposition. Again it is one-sided so does not offer investors a choice of properties.
PropertyMoose: A recent entrant and open to anyone with £500+ to invest.
Crowdlords is viewed as differentiated in that it would:
- offer a true "two-sided" platform
- aim to deliver a greater diversity and choice for Investors and allows them to select the level of risk/return they are comfortable with
- enable Landlords to influence their own financial rewards
- create an opportunity to benefit from a community of like-minded individuals who share common goals and aspirations