This week we gave our investors a serious cause to celebrate when our residential development in York was completed two months ahead of schedule. Which means the shrewdness of all sixteen P2P investors paid off as they got their investment back within just 8 months and received returns of up to 22.5% per annum.

Foss Place

All the apartments at Foss Place, Foss Island Road in York had already been pre-sold during construction by developer Norstar Limited and the majority of investors, who lent between £5,000 and £1.73 million to the project, have re-invested into another CapitalStackers funded scheme, a residential conversion in the centre of Harrogate.

CapitalStackers’ offering is becoming increasingly popular with astute P2P investors –  the entire funding for Foss Place was completed in just 14 days from CapitalStackers’ engagement to the full loan being drawn down. The company now has in excess of 100 investors on its books and rising – and it’s easy to see why.

The idea is to plug the funding gap between typical bank debt and the developer’s equity – and it’s a win-win deal. Developers get access to the funding that dried up since the banks retrenched and it’s a great way for a wide range of investors to get involved with bigger commercial building projects, from housing to offices – schemes that would otherwise be out of the smaller investor’s reach (except through REITs or unit trusts, which would not allow them the same control over their investment).

CapitalStackers not only gives investors the choice of the development project they help fund but also lets them choose the risk level and associated return. Total financial transparency is maintained and typical returns are between 5% and 20% per annum paid out on completion of the project – usually around 12-24 months later. The minimum lend is just £5,000, and all loans are fully secured on the property being funded, with the extra benefit of high quality due diligence.

The Foss Place project is just another great example of the idea in action. CapitalStackers raised £2.25m loan monies to help Norstar Limited purchase and convert a disused office building into 6 studio and 18 one-bed apartments, with a predicted gross development value of £3.2 million and peak loan to value ratio of 76% including interest. On completion, the development sold out for £3.4m equating to an improved loan-to-value ratio of 71%.  The apartments were priced between £99,000 and £120,000.

Steve Robson of CapitalStackers comments, “We’re delighted to give our investors annualised returns of between 8.5% and 22.5% in just eight months, two months ahead of schedule. We arranged three layers of finance to Norstar: Layer 1 being £1.75m of senior debt; Layer 2 provided £350,000; and Layer 3 a further £150,000, at returns of 8.5%, 15% and 22.5% per annum respectively”.

So for any investors looking for a more appealing investment opportunity, CapitalStackers has surely come of age. There are a number of exciting projects in the pipeline with similar attractive risk and reward profiles. The minimum investment is £5,000 and there’s no upper limit. So why not register now and give your funds a boost over the next 12-24 months?

Press enquiries: Cath Cookson, 07799 713941 or Simon Sinclair 07769 684843.

Find out more at www.capitalstackers.com or by calling Steve Robson on 07774 718947.

Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme.

Please follow and like us:

Blog Deals Investor News News Press Releases

CapitalStackers is authorised and regulated by the FCA. Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

 

Try our useful free Excel tool to calculate how much you might make from investing in property.

Is Buy-To-Let the ideal investment for you? Is it as good as it used to be?

For the past few years, the BTL sector has been booming, propelled by an annual 5.6% rise in property values, with yields at 5% to 6% and base rates at a record low of 0.5%. It’s been good business for banks, too, with the market now accounting for 15% of all UK mortgages.

But fuelled by concerns that the resultant property boom might spiral and flip over into a bust cycle, the Chancellor and the Bank of England have headed off prospective landlords in a pincer movement that sees stamp duty on investment properties increase by 3% and new stress tests for BTL mortgages that raise the bar significantly for borrowing landlords.

In addition, the recent reduction in Capital Gains Tax pointedly excluded landlords – meaning that they’ll now pay 8% more tax than other investors on any increase in the value of their assets.

 

Landlords say “It won’t affect us”.

Still, it has to be said that most BTL investors remain unmoved by this perceived persecution. A recent YouGov poll of 1,000 landlords (commissioned by Aldermore Bank) suggested that more than half expected it to have no effect on them whatsoever.

And of course, for the majority, it won’t. 87% profess no intention of buying any more properties, and among those who are actively building a property portfolio (assuming they’re sensibly viewing them as long-term investments), even the pain of the extra stamp duty will be assuaged when spread over a decade or two.

Nevertheless, while 70% expected the number of tenants to rise over the next 5 years, a third felt the value of the BTL market would fall in the next 12 months.

 

So how much can you realistically expect to make?

All of which suggests that, while BTL will remain a valued part of the investment portfolio for years to come, newcomers to the market should take a very prudent long term view of their own prospects.

To this end, we felt it might be helpful to create this useful free Excel BTL Calculator to help you project what a BTL investment could earn you in a variety of circumstances. It allows you to project best and worst case scenarios, play with the variables and paint yourself a very clear picture of how things will likely pan out.

 

A simple example

Let’s say you have £100,000 to invest into a modest flat costing you perhaps £275,000, and generating a gross yield of, say, 6%.  Immediately you will be out of pocket by almost £15,700 having shelled out for stamp duty, legal fees and mortgage costs.

After mortgage interest (let’s assume you secure a mortgage at 2.99%) and other costs (don’t forget to budget for void periods), your net income would be £4,598 – giving you a net yield of 4.6%, all of which is clawing back your upfront costs over the first three and a half years.  Taking into account selling costs and assuming no capital growth, you would lose money if you sold before four and a half years were up.

Of course, this is only an example. Feel free to put in your own numbers and test different scenarios.

For instance, you could extrapolate scenarios like the property lying vacant for a couple of months, increasing or reducing the capital growth rate – or you could see how it would look if you decided to bypass an agent and do a lot of the management work yourself, if you have the time.  You might also like to see what impact the Bank of England’s new stress tests might have.  The example shows that a hike in rates to 5.5% would only leave you slightly underwater but any other additional costs, such as a longer void, would require you to put your hand deeper into your pocket.

The calculator allows you to plot out all these eventualities and draw your own conclusions – so play around with it and see how BTL works for you.

 

What are the alternatives?

If you decide BTL isn’t right for you at the moment, but you still want the comfort of property backed investment, it’s worth considering Peer to Peer property lending.

Since the banks tightened up, property developers typically find themselves with a piece of land, perhaps 20% equity of their own and a promise from a bank to lend 50-60% of their project cost.

In between those two figures, there’s a golden gap that needs filling – and it’s being increasingly filled by peer-to-peer investors.

www.capitalstackers.com, for instance, works with banks and developers to fill this funding gap, giving investors the option to choose different developments – from office blocks to housing developments – and different risk and reward profiles.

Instead of sinking your £100,000 into a single property and taking on the headache of managing it yourself (or at least managing the agent), you could spread your cash across several different ones.  You can even lend against residential property through your pension fund and get the returns tax free.

 

How much could you make from P2P property lending?

The returns you get can vary from 5% for a let investment property to figures in the high teens if you lend on a development and where you have an appetite for a higher return against a higher risk (up to around 75% of the property value).

If this seems a strikingly large return for an investment, consider the experience of CapitalStackers investors who are currently lending against a residential development in York.  Those with the lowest risk (less than 60% of the property value) are earning 8.5% which compares favourably with the example in the BTL Calculator irrespective of the differing risk profiles.  Investors taking the most risk, sitting at 76% of value, are earning in excess of 20%. Since the developers have already sunk cash equity into the project which will make a profit, the investors benefit from a fairly deep cushion against possible downturns. Their returns take into account the fact that the property securing their lending is a development which at the time they committed had yet to be built out and sold (which, at the time of writing, it is and has).  The developers take care of the whole process and will be making quite a tidy sum from it themselves, so they’re more than happy to reward those plugging the gap that the banks used to fill.

Okay, so you might forego any capital uplift from owning the property outright but you are also well shielded from capital depreciation by the borrower’s equity and profit margin.  Essentially, it’s possible to make better returns for a lower and better spread of risk with someone else looking after your interests.  What’s more, you don’t have to tie up your cash for so long and nor do you need to take on a mortgage.

 

Please follow and like us:

Blog Investor News

CapitalStackers is authorised and regulated by the FCA. Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.

There are a raft of tax provisions that are going to make individuals who lend money pay less tax, including:

From 6th April 2015 a £5,000 zero % band for basic rate taxpayers.

From 6th April 2016   £1,000 interest tax free for basic rate taxpayers (£500 for higher rate tax payers).

It is anticipated Peer to Peer lending will be allowed to be held in ISAs in the Government’s second 2015 budget next week.

Therefore, there is potential for an extra £6,000 per annum tax free income per individual.

Philip Eagle, Tax Director, Hallidays Limited

Please follow and like us:

Blog Investor News News

CapitalStackers is authorised and regulated by the FCA. Investment through CapitalStackers involves lending to property developers and investors. Your capital is at risk. Investments through this and other peer to peer lending platforms are not covered by the Financial Services Compensation Scheme. Unless otherwise stated, returns quoted are annualised and gross of tax.