The fallout from Lendy’s reported woes has launched a flotilla of lazy journalism, poorly-informed opinion pieces and Chicken Licken style warnings to investors.

Meanwhile, experienced investors in property finance are merely rolling up their sleeves and getting on with business as usual. Risk is part of life. Understanding which risks, how much of each to take and the price you exact for it is how an investor makes money.

This much would seem obvious, but not, it seems, to the jittery herd of financial journalists commenting on this particular situation.

The spectrum of real estate lending is broad and varied.

At one end of the scale we find investment loans, which tend to have strong covenants on long leases and a robust income stream that services the debt.

At the other end – bridging loans, which are short term, with repayment coming through either a sale or refinancing following an event such as the granting of planning permission.

Generally regarded as the Bellwether of property lending, bridging lenders are usually the first into the market cycle and often the first to drop out. Lending tends to be at credit card rates, since until permission is granted, there are too many unknowns (including the financial cost of any Community Infrastructure Levy or S106 Agreement – the charges that local authorities make on new developments to help fund infrastructure, schools or transport improvements – vital to support new homes and businesses in the area).

In between is a vast and multifarious landscape, taking in low-risk borrowers with low risk deals to high risk borrowers with high risk deals. It also – crucially – includes well-run platforms operating in the higher risk space that give plenty of information, have high levels of due diligence and price the risk fairly so that investors can make informed decisions.

Somewhere in this Big Country is Lendy, ploughing along in its covered wagon, braving the arrows and potholes as it goes.

Now, I don’t intend to comment specifically on Lendy’s business, save to furnish enough background to give us some perspective on the case:

Lendy recently appealed to the regulator after one of its borrowers threatened to sue. They claimed Lendy failed to give notice on loans and arrange further funds. Concerns were also raised over the fact that £112m of its £180m loan book were at least one day late. As we understand it, this deal was not a bridge but an expensive development facility.

Now, to the uninitiated, this will set all sorts of hares running. But those who regularly walk the streets of the bridging world will know that what looks like a situation going wrong is probably expected and planned for. It’s a way of increasing returns – on what, in the US, is often described as “hard money”.

With developments, just because a project is taking longer than expected, it doesn’t necessarily mean the deal is deteriorating. Lots of factors determine the progress of construction – some beyond anyone’s control, like weather.

But financiers know this, and also that when deals go beyond the due date, the interest continues to accrue. Sensible lenders will also build delays, cost increases and falling values into their sensitivity analysis but still impose a fairly tight schedule on the borrower.

Whether the 12% return Lendy investors get is enough to cover their risk is a matter for them. The reality of the market suggests that if investors are getting 12%, then the borrower is paying somewhat more – and you should ask yourself what kind of borrower is happy to pay this much for their senior debt (CapitalStackers borrowers are charged substantially less). But I will say that this is an area where the astute investor should take very great care to ensure his own risk is adequately compensated for – and to be clear, the key risk is this:

Any investor taking part in a deal that is not fully funded at the outset is entirely dependent on new investors coming on board to pay the contractor, without which the project will fail to complete.

In our view, certainty of completion is a fundamental prerequisite of any property deal. It’s inconceivable that we would expose our own investors to the risk of a development that may never come to fruition.

We have no intention of letting our investors take the liquidity risk when a big, strong bank can take it for them.

This is the main reason why we choose to partner with banks as part of our strategic business model. We raise the funds necessary to plug the gap between what the bank will lend and the borrower’s equity. And we make sure that our investors’ funds are deployed after the equity. The banks commit to the finance up front, so we can be sure the funds are in place to finish the job.

Certainty. Right there. Locked in before an investor parts with a single penny.

And while it follows that this means our investors are not in the First Charge position, they’re certainly rewarded appropriately for their Second Charge position, with the added comfort that comes with the removal of doubt, and the fact that a bank sees the deal as worth investing in.

This is the main reason why CapitalStackers’ default rate remains at zero. We always run our financial analysis on the assumption that everything is built out before anticipating any sales revenue after a conservative sales period. That means we get to the end game without having to rely on new funding coming in. We believe that not to do this would be to take an insufficiently conservative view of the world.

Among the other reasons are:

1. As we’ve established, our investors are never invited to take part until all funding is in place to complete construction.

2. We don’t move until detailed planning consent is secured. We stick to “Oven-Ready” deals – otherwise the outcome is too opaque. Pointing P2P investors to deals before this point is somewhat irresponsible, unless the risks are made extremely clear, and/or the Loan-to-Value ratios are very low. But even if they were, we just wouldn’t do it anyway.

3. We secure regular information and updates from our borrowers and monitoring surveyors (which is then passed on to our investors). So at all times, the people who fund our projects are fully aware of what risk they’re taking, whether that risk is changing, and what they will earn for taking that risk. So they’re fully informed to take whatever decision they want to take. And if they’re involved in a deal and decide for whatever reason they don’t want to be, they can advertise it on CapitalStackers’ secondary market and seek to recoup their capital.

This should all be meat and drink to experienced investors, though. This is how the banks have always done things: information + risk = appetite + return.

Of course, there will always be bad deals and bad operators, despite the best efforts of the FCA – it’s a fact of life. But among the rest, it’s a question of assessing the risk, and deciding how much money would make you comfortable enough to take that risk.

In other words, there’s no such thing as a bad risk – just ones you’re happy to take, and the ones you’re not.

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.

There used to be a game show on TV called It’s a Knockout, where amongst lots of other silly games, contestants – wearing daft costumes that made walking difficult – used to carry buckets of water across a slippery surface whilst being bombarded with water cannons or sandbags, to try and fill a receptacle at the end of the course.

Obviously, they spilt a lot along the way and were occasionally wiped out altogether and had to start again. But there’s no doubt that if they were dogged enough and did it for long enough, eventually they would fill the receptacle.

This often seems to me to be a good analogy for the stock market.

The award-winning financial advice website, “This Is Money” ran an analysis last year confirming much the same. If you’d invested over any ten year period over the last two decades (except two dodgy phases in the dotcom boom and the financial crash), you were 95% likely to turn a profit. And assuming you reinvested your profits, the average return generated would have been 70%!

Sounds like investment Nirvana, doesn’t it?

But let’s examine those figures a little more closely.

And – for now – we’ll set aside those periods of heart-in-mouth panic as you watch your stock slide and gnaw your fingernails away as you decide whether or not to leave your investments where they are. That’s all part of stock investing, seasoned veterans will tell you. Take your lumps like you take your jumps.

If we accept that you’ve ridden the roller-coaster, pushed your ticker back down to its rightful position each time the market bounced it up into your throat, fought against all your instincts to reinvest hard-earned profit back into the maelstrom from whence you’ve just extracted it…what are you left with?

A 70% profit over 10 years! Sounds like a lot if you consider that if you’d started with £100,000, you’d now be sitting on £170,000.

But over 10 years? If we spread that out on an annual basis and apply a little simple compounding, it amounts to just 5.45% per year. Is that a fair recompense for all the cardiac distress?

So is there an alternative? Property?  Well, it’s more secure, but again, it ties up your capital for years.

So if you could make an annualised return of three times that amount without all the turmoil and without the long-term capital handcuffs, wouldn’t you consider it? Heck, wouldn’t you even do it for twice that average stock market return?

That’s why smart investors have started looking at loan-based crowdfunding of property. Lending to screened-and-approved developers looking for investment to get their projects off the ground. Usually, they’ll have agreed bank funding for around 60% of the building cost and they’ll have their own equity to sink into it too. But the capital gap in between is increasingly being filled by crowdfunders on the FCA-authorised CapitalStackers platform.

And it can be impressively lucrative. Recent investors in a CapitalStackers funded development in York made annualised returns of up to 22.5% in just eight months.

More typically, investors in two current CapitalStackers deals are set to make annualised returns of between 10% and 17%. Those figures look even more attractive when you know that all CapitalStackers investors are able to choose their own return, predicated on the level of capital risk they’re prepared to take (although the risk itself is not terribly off-putting, given that the investment is secured on the property, the developer’s equity/profit is there to cushion any drop in value – and the Loan-to-Value on these deals is within a sensible range of 55% to 72%).

So how might this kind of investment compare with the stock market?

Well, taking a mid-point CapitalStackers investment as an example: If you were to start with £100,000 – on an agreed return of 13.5% – after one year, your nest egg would be worth £113,500.

After two years, you’d have £128,822.

Impressively, you’d have overtaken your stock market earnings in just over four years, and after ten years you’d be sitting pretty on £354,780. Which makes those nerve-wracked stock market investors with their £170,000 look like dabbling amateurs.

As with shares, you don’t need a huge amount to get started. The minimum investment in a CapitalStackers scheme is just £5,000 – but many invest a lot more.

And considering you can access your capital by selling your investment on the secondary market, it’s no wonder more and more of the smart money is moving to loan-based property crowdfunding.

Find out more at www.capitalstackers.com or
by calling 
Steve Robson on 07774 718947
or Sylvia Bowden on 07464 806477
or Tony Goldrick on 07788 373126.

Please follow and like us:

Blog

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.

As the gurus at Motley Fool sound the death knell for Buy-To-Let, calling it an “expensive distraction” and point investors once more to the Stock Market, some more canny investors are sitting back and wondering if there is a third way.

After all, there are good reasons why we British have traditionally invested in property. And yet the FTSE also has very sound reasons to commend it.

But for those who want double digit returns but without the bumpy stock market ride, there is a way to achieve the benefits of both property investing and stock market investing in one, and reduce the drawbacks of both.

Secured on property, but more liquid than buying bricks and mortar – and less volatile than stocks and shares – it consistently brings higher returns than Buy-To-Let, without the overheads, management and conveyancing fees, refurbishment and maintenance costs and stamp duty.

Motley Fool suggests that in every respect other than the ability to borrow to invest, the Stock Market beats Buy-to-Let. And it surely does.

However, loan-based property crowdfunding has many of the advantages listed too. Investing in property developments through CapitalStackers, for instance, can bring you highly attractive risk weighted returns in the time it takes to build a row of houses. Investors in the Foss Place development in York made annualised returns of between 8.5% and 22.5% in just eight months – all within a sensible Loan to Value range of 58% – 75%. 

Like stocks and shares, you don’t have to have saved or borrowed huge sums to get started – you can participate in a building development scheme from just £5000.

And whilst your loan investment is as solid as the houses being built, it’s also more liquid. You can invest in a CapitalStackers scheme almost as quickly as you can buy shares (with the assurance that the due diligence has already been done for you) and if you want to free up your cash, you can sell part or all of your investment on their secondary market.

Although investing in Buy-To-Let is verboten for pension schemes, if you have a SSAS (or access to one) CapitalStackers gives you a route to invest in the same asset class by lending on residential property developments and take your gains free of tax.

But there’s one important advantage that investing through CapitalStackers has over the Stock Market, and it’s this: when you buy shares, you bear all the risk. If they drop in value, your capital gets burnt. There’s no firewall, no cushion, no contingency.

However, with CapitalStackers, even the highest risk layer is cushioned by the developer’s own equity and profit, and you get to choose yourself the level of risk you want to take and the corresponding rate of return.

All of which points to a very healthy alternative to both BTL and the markets. As Warren Buffet once said, “If you can’t invest in the stock market for ten years, don’t invest in it for ten minutes”, and of course, it’s difficult to make any money out of rental properties in the short term. But CapitalStackers can bring you attractive, typically double digit, returns in as little as 6-24 months. In short, as long as it takes the developer to finish a building.

Now, isn’t that worth considering?

Please follow and like us:

Blog

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.

CapitalStackers has completed the drawdown of £1.36 million funding for a prestigious development of eight homes, in the pretty Cheshire village of Malpas. Work is expected to start on site later this month and two properties are already under offer at the asking price.

The P2P property lending specialist also successfully negotiated £1.58 million of senior funding from a major high street bank, on behalf of the developer Orchard House. The gross development value of the scheme is £5.1 million.

CapitalStackers’ investors now look forward to returns of between 10.7% and 15.6% per annum over the next 22 months with lending at Loan to Value ratios from 55% to 73%.

Steve Robson of CapitalStackers comments, “Investors were invited, at the back end of last year, to lend into three layers and choose their own level of risk and return. Many are repeat investors, some of whom benefited from returns of up to 22.5% last year on an office to residential conversion we financed in York, however some are new investors, keen to dip their toe into the P2P property lending market.

“They are attracted not only by the high level of returns available, but the transparency and ease of the deals. We now have 150 investors on the books and rising, plus an exciting development pipeline. There are opportunities still available in the Malpas deal through our secondary market.”

Patrick Lomax, Founder and Director of Orchard House comments, “I have been impressed with CapitalStackers detailed knowledge of the property industry and finance market. We dealt with an experienced and senior team who absolutely delivered to the brief and exceeded our expectations. They have access to a wide pool of potential investors and delivered within relatively tight timeframes. We spoke to a number of debt advisors but none came close to the same level of service and professionalism.”

The Orchard House development is only a short walk from the 18th century market town of Malpas, Cheshire – a friendly village community within commuting distance of Chester and Wrexham and close to the Ofsted outstanding Bishop Heber High School.

A number of listed buildings dotted around the immediate area (including the Grade 1 Church of Saint Oswald), lend the site a rare traditional charm. And since the developer has in-house design capability, each of the homes can be partially bespoke to the purchaser’s requirements, which has sparked early interest from buyers with plots already being reserved off-plan.

CapitalStackers investment opportunities appeal to a broad spectrum of investors, from conservatively positioned pension funds to those with a higher risk-and-reward appetite. The minimum investment is £5,000.

Please follow and like us:

Blog Deals 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.

If you were going to invest your life savings, your pension, your inheritance, you’d want to know it was relatively safe wouldn’t you?

Before you took the plunge, you would hope to weigh up the balance of risk versus return and make an educated and informed decision about where and with whom you invest? Do you play safe and potentially get a lower return or do you take a higher risk and reap the financial benefits faster?

This concept isn’t new of course – for centuries, people have taken perceived risks with their money. Some have struck gold, others have had their fingers burnt. And most have harvested returns somewhere in between!

In 2016, how do you make an informed choice and how important is transparency in this process?

We at CapitalStackers believe it is more important now than it has ever been. Investors are becoming more and more sophisticated and quite rightly, they demand transparency, whether investing £5,000 or £1 million.

Technology has also had a huge impact on the way people invest. Investors have direct and easy access to investor platforms and they should also have direct and easy access to any information necessary to weigh up risk and return. No matter how much you wish to invest, with whom or how experienced you are, transparency allows you to make a properly informed choice.

P2P lending and alternative finance companies are revolutionising the traditional banking and lending industries. According to the FCA, £2.7bn was invested on regulated crowdfunding platforms in 2015, up from £500m in 2013. But with change, often comes competition and uncertainty. Over the last few months there have been widespread calls for tougher regulation and control. Concerns predominantly focus on whether consumers understand the risk they are taking, especially those who are less experienced or knowledgeable.

There is also some confusion over the differences between the ‘pooled’ lending approach and direct peer-to-peer lending such as that arranged by CapitalStackers.  With pooled lending, investors are provided with only part of the picture such as headline risk parameters and no detailed financial information about any of the borrowers or the deals. The upside is that risk is often spread across the loan whole portfolio, but investors are entirely dependent on the platform’s management.

Direct lending such as that arranged by CapitalStackers means absolute transparency and decision making independent of the platform management. Investors choose both the deal and the loan amount – and they have access to detailed information on the specific risk and returns.

Recent press headlines airing concerns with the alternative investment sector, such as those made by Lord Turner, are only a generalisation and don’t reflect the diversity within the P2P market. There is a vast difference between investing in a tech start-up through an equity crowdfunding platform and secured lending against bricks and mortar, for example. At CapitalStackers, we only arrange loans to experienced developers, many of whom have already raised part of the funding requirement through a mainstream bank and gone through their independent due diligence process, as well as our own stringent checks. No investment is without risk, but those made through CapitalStackers are carefully analysed, managed and transparent.

We have always been open to scrutiny and detailed information is provided to our investors up front providing the same level of clarity on the deal as the bank and the developer have in assessing its viability. This transparency is the foundation upon which CapitalStackers is based and the reason why our investors continue to re-invest.

John Thornley, MD of Fairhurst Estates, has committed funds to a variety of property backed investments over many years in the commercial and residential property sectors. As well as investing directly he now also invests through CapitalStackers. As an expert in this sector he was pleasantly surprised by the amount of detailed financial information provided on the platform. “I literally had no further questions which is unusual. All the information I needed to make an informed decision was provided up front”

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.

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.

Steve Robson, Managing Director of CapitalStackers presented to a packed audience at the highly successful Great British Private Investor Summit in London yesterday, organised by Angel News. Some 250 high net worth and angel investors were in the audience listening to pitches from a range of crowdfunding and peer to peer lending platforms.

Following the event, Steve said:

“We are delighted with the response from investors to the business model and really encouraged by their level of interest in the platform.  The completion of two deals marks an important step for us and we now look forward to the formal launch to enable us to engage with the wider investment community.”

At a recent pre-launch event hosted by Hallidays LLP, CapitalStackers generated enough interest to complete its first two deals. The CapitalStackers business model seeks to engage with banks and allow investors to choose their preferred risk and return profile.  That, and the fact that all deals are secured by commercial and residential real estate, made the Stockport based firm stand out in this embryonic but fast growing and dynamic sector.

CapitalStackers and its website aim to be the destination of choice for investors looking to finance property investments and development schemes. These will be high net worth individuals or sophisticated investors with a minimum of £5,000 to invest and looking to achieve a better deal than through some of the more traditional investment routes.

It is supported financially and professionally by Hallidays LLP, a firm of accountants with an excellent reputation. This is not the first time these people have come together in the world of property finance and information technology. In 1999 they set up pi-FRAME Ltd, a small and specialised software house which sells real estate lending risk analysis software to banks and property lending boutiques.

At the recent pre-launch event, Steve Robson commented:

“Real estate lending has spent long enough in the doldrums. This initiative and others like it will go a long way to repairing the property finance market. Not only will real estate borrowers benefit from improved liquidity, so also will investors through achieving better returns. We are genuinely excited about the future.”

Please follow and like us:

Blog 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.