Accounting firms may have wholesale clients who are typically seeking alternative investment opportunities for their available funds. As an example, wholesale clients with SMSFs need to regularly consider their investment strategy, including issues such as diversification, asset concentration, liquidity and investment risk.
Property has previously been an attractive asset class for some Australian investors but hasn’t typically offered liquidity and diversification. As of 31 December 2020, there was approximately $119.4 billion invested in Real Property in SMSFs.†
New alternative investments are becoming increasingly available. One of these alternatives is marketplace lending platforms such as CrowdProperty. CrowdProperty gives wholesale investors an opportunity to invest in smaller property developments through Project Loans and secured with a first mortgage.
Investors in the CrowdProperty marketplace lending platform can invest in more than one property development project from a minimum of $10,000, thereby not tying up all of their funds in a single real property investment. They can also invest in a variety of different projects.
Property is a national obsession for Australians. In fact, according to a 2019 survey by HSBC, Australia is the seventh most property obsessed nation in the world.
For wholesale clients, property investment has been a vehicle for some looking for long term gains in property markets.
But with the recent arrival in Australia of CrowdProperty, a new marketplace lending platform providing property project loans, there’s a new way for risk-informed wholesale investors to potentially make their available funds work harder than they could be (with historically low bank interest rates), and scratch the property itch without the long-term cash outlay and associated sunk costs of actual property investment.
Marketplace lending — the benefits
According to a 2016 Deloitte report titled A temporary phenomenon? Marketplace lending, the first marketplace lender started-up in the UK in 2005 (Zopa), followed by the next in the USA in 2006 (Prosper) and a third in China in 2007 (Paipaidai). These were typically peer-to-peer platforms that connected retail borrowers and investors directly. These lending options then evolved to investors investing in bundles of loans which were then provided to the borrower by the platform or loan manager. The sector came to be more accurately called ‘marketplace lending’.
Unlike banks, which take in deposits and lend to consumers and businesses, marketplace lenders do not take deposits or lend themselves. While there are variations on how the different platforms work, the key to what makes CrowdProperty different is its dedicated focus and expertise in property development and property project finance.
CrowdProperty UK co-founder and CEO Mike Bristow was quoted in the Financial Times making this crucial point: “Whereas certain companies just started with peer-to-peer and looked for an asset class to fund with it, we said ‘we’re brilliant at property, let’s apply that with a peer-to-peer funding model’”.
Two important questions we’re often asked by accounting firms interested in the CrowdProperty marketplace are:
- ‘Who does the project selection?’; and
- ‘What happens if it doesn’t go to plan?’
In answer, CrowdProperty has dedicated property specialists on staff with decades of experience and we only offer project loans to SME property projects and professional developers. What’s more, all property project loans are secured with first mortgage, meaning our loans are last in and first out in the capital stack.
Wholesale investors using CrowdProperty can review all property project loans on the platform and invest their funds to the ones they like the look of based on project information, target income returns*, project timeline, and so on.
The core benefits to investors using CrowdProperty are:
- Target income returns up to 7% p.a.* depending on the terms of the project loan
- First mortgage security over residential property assets
- Investors do not need to outlay a large amount of money — invest from a minimum of $10,000
- Investors’ money is not likely to be tied up for years — terms between 6 to 18 months
- Investors can diversify their investments across a number of selected project loans
- Individuals, SMSFs, Trusts and Companies can invest
- Investors have the option of reinvesting capital and income into new project loans which will be continuously added to the platform
- CrowdProperty has many decades of actual property development and investment experience at the heart of the business meaning hands on, expertise-led due diligence — including a rigorous 53 step process — and loan monitoring
- Established in 2014, CrowdProperty has 100% track record of principal and interest repayment^
How accountants can help their wholesale clients
Partnering with CrowdProperty Australia offers a number of benefits to accounting firms and their clients:
A simple investment alternative to direct real property investment
Each project loan secured by a first mortgage security plus an independent valuation
First mover advantage — preview our Australian projects first before they go live on the platform
Create your own CrowdProperty ‘hub’ bringing your property developer and investor clients together on our platform
Diversify your clients’ portfolio to comply with the ATO SMSF investment guidelines
Direct origination — see more residential projects that benefit from our expert due diligence and tighter monitoring
For your property development clients, we can solve their need for alternative finance that offers speed, ease and certainty
- Track record^ — over A$200M lending to date from A$6.7bn of applications across c.230 loans on c.170 projects with 100% capital and interest paid back
- Lending profile^ — average initial LTV 59.7%; capital to GRV 53.5%; loan incl. interest to GRV 58.5%. 70% maximum LVR
- Inhouse expertise — real Australian property development experience
- Scalable growth potential — a tested bespoke end-to-end loan management platform (now funding A$100M+ p.a.) with over 1000 investors in each loan^
- CrowdProperty Investment Trust – Quay Wholesale Fund Services is an ASIC licensed provider of Trustee services that works with CrowdProperty in the event of a default
- Our Trust is structured to mitigate any risk of loan defaults contaminating another
^Based on CrowdProperty UK performance to date
*Target returns, not forecast returns. For wholesale investors only. Terms, conditions and risks apply.
† Source: ATO SMSF Quarterly Statistics 31 December 2020