A leading lettings expert has spoken out against the growing trend for investing in residential property via crowdfunding schemes. Instead he urges would-be investors to stick to the traditional sources of funding and become proper landlords.
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What is Crowdfunding? Crowdfunding is a relatively new phenomenon. It allows small investors to club together with their peers to purchase a buy to let property. Investment schemes are advertised online via crowdfunding platforms.
“Crowdfunding takes the combined power of peer-to-peer financing, mixes it up with buy to let and is supposed to allow anyone with modest means access to the housing market and the joys of being a landlord, without ever needing to worry about finding tenants, voids or fixing a boiler that’s just conked out,” says letting expert, David Lawrenson.
This innovative approach to property investment can be very attractive to people without the capital to invest in property via a landlord mortgage. However, it is not without its risks.
Little Control for Investors Collective funding means investors have no control over how the property is managed, the costs, or even the tenants. Investors may see the value of their share in the property fall and until a vote is cast, they won’t be able to do anything. Many crowdfunding investment schemes also charge an up front fee, plus a percentage of the profit share; there will also be charges for maintenance of the property.
Lawrenson concludes that although crowdfunding buy to let properties appears to be deceptively easy, it is a risky strategy and investors are much better off becoming a hands-on landlord instead.