FAQs

Boom town? An introduction to George Town, Tasmania

Nestled on the north coast of Tasmania, just over 30 minutes’ drive from Launceston, lies George Town, one of Australia’s oldest European settlements. A recent article in the Sydney Morning Herald listed George Town and Bell Bay among what it described as ‘green energy mineral towns that could fuel their own property booms’. With a project launching soon in George Town, here’s the lowdown on this hidden gem. According to this [Sydney Morning Herald article](https://www.smh.com.au/property/news/the-green-energy-mineral-towns-that-could-fuel-their-own-property-booms-20220420-p5aerx.html), there are several towns around Australia set to benefit from the growth of green mineral mining and manufacturing. ‘Just as the demand for iron ore led to a mining and property boom in Western Australia, the green energy-driven minerals boom could bring population and property price growth to a string of Australian towns,’ the article says. ‘In regions such as Bell Bay in Tasmania [next to George Town], where aluminium smelters have existed for years, median house prices have skyrocketed 44 percent in the past year.’ The article references comments from Tristan Edis, director of clean energy advisory firm Green Energy Markets, who said demand has driven a price rise in many green energy minerals. He said the future of some minerals such as aluminium depended on the evolution of green energy. “As battery costs get cheaper and lighter, that premium of light-weighting [using aluminium] declines. If Tesla was using a lot of aluminium in their cars, that’s a sign aluminium is more important.” ‘Property prices in many of these green energy mineral regions have already exploded in their own right due to pandemic-driven demand for a tree-change.’ With other green energy projects planned for Bell Bay, such as [Line Hydrogen's $100 million green hydrogen project](https://www.pv-magazine-australia.com/2022/06/04/brisbane-based-green-hydrogen-company-wants-to-get-its-projects-off-the-ground-with-ground-level-crowdfunding/), George Town could well be a boom town in the making. Here are some stats we’ve learned about George Town in assessing this upcoming project in Tasmania: - Population approx. 2000 - Rental vacancy rate is less than 1%^ - The 3-year rental yield forecast is a +10.9% p.a. change^ - The median sale price for homes in George Town is $910,000^^ - Average home sale values have grown 40% since 2018 (Jan 2018 – Jan 2022)^^

Projects coming soon — April 2024

 ## East Corrimal, VIC - Project: 3 x 3 bedroom townhouses - Loan amount: $1,580,000 - Total loan facility: $3,050,000 - Project term: 18 months - Target return*: 8.5% p.a. **Project vision** This project is to build three 3-bedroom townhouses in Wollongong’s East Corrimal suburb. Completion of the project is set to be 18 months from settlement. Nestled within the picturesque Illawarra region of New South Wales, Australia, East Corrimal is a tranquil coastal suburb embraced by the city of Wollongong. Situated approximately 67 kilometers south of Sydney, this charming locale boasts the breathtaking Corrimal Beach as its centerpiece. With its golden sands, renowned surf spots, and inviting community parks, East Corrimal offers an idyllic blend of relaxation and vibrant lifestyle opportunities. Primarily residential, the suburb caters to a diverse demographic, from families to professionals and retirees, offering an array of housing options ranging from cozy established homes to contemporary developments. East Corrimal's intimate commercial hub provides essential amenities, while its close proximity to Wollongong ensures convenient access to a wider range of services and employment prospects. The first phase of this project will be raising $1,580,000 for refinancing the current loan, with subsequent phases to be used for construction. **Project developer** Assured Projects, spearheaded by Fergus Stokes, specialises in acquiring expansive properties in Wollongong with the aim of developing 3 to 7 residences. The company strategically targets CDC corner lots in established markets and properties with development challenges in burgeoning areas. Drawing upon Fergus's expertise in engineering and surveying, Assured Projects has successfully executed deals in East Corrimal, with a clear trajectory towards transitioning into full-time property development. This project is launching soon, **[register now](https://www.crowdproperty.com.au/investors)** to ensure you’re ready to invest in this project.  ## Newtown, QLD - Project: 3 Villas - Loan amount: $210,000 Total loan facility: $2,280,000 Project term: 15 months Target return*: 8.5% p.a. **Project vision** This project is to construct 3 Villas in the Toowoomba suburb of Newtown. The initial raise for settlement will be $210,000 with subsequent phases used for construction. Newtown is a suburb located in the city of Toowoomba, Queensland, Australia. Toowoomba is known as the "Garden City" and is situated on the Darling Downs, approximately 125 kilometers west of Brisbane. Newtown is situated to the northwest of Toowoomba's central business district and offers a range of amenities and services to its residents. The suburb is known for its family-friendly atmosphere and proximity to schools, parks, and shopping centers. Like much of Toowoomba, Newtown benefits from the city's well-regarded educational institutions and healthcare facilities. **Project developer** UNITED HOUSING GROUP PTY LTD - Directors, Ryan Glaser & Cheyne Cooke UHA is a specialist property development and management firm that provides innovative housing solutions to improve the lives of Australians living with disabilities, particularly those funded through the National Disability Insurance Scheme. Previous experience includes 2 completed SDA deals in Toowoomba. They have a vision to deliver $144m in the SDA space in 10 years. This project is launching soon, **[register now](https://www.crowdproperty.com.au/investors)** to ensure you’re ready to invest in this project.  ## Glenroy, VIC - Project: Construction and conversion to 2 x 6-bed co-living houses - Loan amount: $450,000 - Total loan facility: $1,340,000 - Project term: 18 months - Target return*: 8.5% p.a. **Project vision** This project is to build two six-room co-living rooming houses in Melbourne's Glenroy suburb. It has two stages — land acquisition (already completed) and construction. Completion of the project is set to be 15 months from settlement. The project is situated in Glenroy, VIC, 13km north of Melbourne's CBD. Very close to amenities, train, and employment hubs, it’s designed to fill a demand in the growing 'couples tenant' market. The development will be finished as 'turn-key', complete with fully furnished rooms including a kitchenette and ensuite. As rooming houses, they also feature a common kitchen and living areas and an onsite laundry. **Project developer** Cheryl Leong | Sahara Madhi | Matthew White Massive Impact Co. was formed to provide safe, affordable housing for the community as well as give the everyday investor access to high cash flow investments. Sahara and Matthew are known as Melbourne’s rooming house experts having completed over 100 rooming house projects. They also own nine rooming houses and are licensed operators. Cheryl is a developer and social entrepreneur who endeavours to combine purpose and profit to deliver projects that make a difference. Together they form a formidable team that is passionate, innovative and driven to deliver results and make a massive impact on others. This project is launching soon, **[register now](https://www.crowdproperty.com.au/investors)** to ensure you’re ready to invest in this project.

What is the ‘capital stack’?

 The capital stack is the structure of all the funding raised for a development project, including common equity provided by developers as well as the various forms of debt sourced from different lenders. The capital stack for a property development has a layered structure, and is stacked from bottom to top in order of security and priority of payment. Investments at the bottom of the stack are the last in and the first to receive payment, making them the most secure. Investments at the top stack are the first in but the last to receive payments, which makes them the riskiest. As with all investments, there is a positive relationship between levels of risk and returns on offer — the higher the risk the higher the level of reward. ## First mortgage security At the very base of the capital stack are first mortgage secured loans, sometimes known as senior loans, which usually comprise the majority of the funding amount. This is the most secure form of investment in a project, as it receives first priority when it comes to repayment. They are usually the last form of funding that enters a deal, so they are also the first to make an exit. This is the type of lending we offer at CrowdProperty — our borrowers (developers) need to pay the CrowdProperty loan back before settling any other debt, meaning our investors receive their capital and interest back before other lenders receive their returns. ## Common equity On the opposite end of the stack is common equity — the highest risk investment that also provides the highest returns. This is usually where the developers themselves provide funds in the form of their own capital. At CrowdProperty we always like to see developers who have invested their own capital and have ‘skin in the game’. While common equity provides comparatively high returns, it also ranks last when it comes to the order of payments. Investors in common equity are the first in with funds, but also the last to make an exit. ## Mezzanine debt and preferred equity Between the top and the base of the stack are intermediate forms of funding that can include preferred equity and mezzanine debt. These rank in between common equity and senior debt when it comes to both risk and returns. When it comes to order of payments, preferred equity and mezzanine debt is paid after senior loans and first mortgages, but before common equity. Mezzanine debt is also known as second mortgage as it refers to a subordinated debt piece that is usually secured by a second ranking registered mortgage over the relevant development property. This can be helpful for a developer seeking a higher loan-to-value ratio (LVR) than the first mortgage lender is prepared to offer. At CrowdProperty we typically lend up to 70% loan value of gross realisation value (GRV) or end sales value. As a consequence, a developer is usually willing to offer higher returns to investors than what he or she pays for senior loans, but less than those for common equity. The key to understanding the capital stack is knowing that it ranks different forms of funding in terms of priority of payment, and that there is a positive relationship between the risk of an investment and the reward that it offers.

Borrower FAQs

Marketing Operations Specialist

_A qualified engineer, Niña began her professional life working on construction projects in Singapore. She later changed tracks and applied her project management skills and analytical mind to marketing operations and data._

Structuring for property development

 In this guest blog, **[Business Concepts Group](https://www.buscgroup.com.au/)** director Chris Reed talks about mistakes to avoid when structuring your property development projects.

There are a number of common mistakes that can be made in the structuring of any development. The first mistake is not seeking advice at all, or not seeking advice early enough in the acquisition process. The potential for incurring unnecessary tax and stamp duty (potentially hundreds of thousands of dollars) should be enough for all developers to seek professional and specialist advice from the outset, to ensure the project is structured correctly. The second mistake is not using specialists. You need to get expert advice from a professional that understands property development. Primarily a development team will consist of builders, architects, town planners, engineering, etc (the actual team in producing the development). But that development team needs to be expanded. It needs to include accountants and advisors, lawyers, finance specialists, even equity raising specialists. When engaging with these professionals, you need to make sure that there is specialist expertise in property development and that they are not just a ‘jack of all trades’. The third mistake we see around property development structuring is that there is ‘no cookie cutter solution’. There are no templated answers to the question “what structure should I use?”. Every development can be different, so we need to make sure that structure advice is obtained for each development. The type of structure that was used for the last development may not work for the next one. A new entity, or special purpose vehicle (SPV) should be setup for each development. ## Key factors to consider when looking at our structures. **Asset Protection** We need to make sure that we've protected the assets that you have acquired to date, that we have protected the project as best we can, and to ensure that any profits from the project can be moved into a protected entity. **Taxation** The taxation of profits from a development can vary widely and this is all driven by the structure. From top marginal tax rate at 45%, the corporate tax rates of either 30% or 25%, or potentially even the superannuation tax rates of 15% or even tax free. **Project outcomes** What are we trying to achieve with our project? Are we building and selling them all? Are we going to sell some, keep some? Are we keeping them all to rent out? Maybe we want to keep one as a principal place of residence. Or perhaps a combination of the above. The project structure needs to allow for the desired outcome, and be flexible enough to allow for different combinations without incurring unnecessary stamp duty, income tax and GST. **Project funding** The structure needs to be able to allow for the funding requirements of the project. The project will be funded from two areas: debt and equity. Will we be bringing in investors/partners (equity)? Will we be borrowing (debt)? Is it a combination of both? Certain structures allow you to bring investors or partners in and provide equity, certain structures don’t. It is really important that developers understand the funding of their development and understand the debt versus equity components. The structures that you use for your developments are critical. They determine how much asset protection you have, what the taxation outcomes will be, and the options around funding the project such as the ability to bring in investors or partners. Structuring discussions should take place with an adviser (with specialist property development knowledge) before a contract is signed.

How does CrowdProperty make money

CrowdProperty is paid by the borrower for financing their projects - an initial fee and then interest on the amount they are loaned through the platform for each project, when it is completed.

What are wholesale and retail investors?

 **Many investment opportunities are classified as ‘for wholesale investors only’. Other investments are open to everyone — these are called retail investors. So, what are wholesale and retail investors? And what is a sophisticated or professional investor? We explain all here…** ## What is a wholesale investor? Wholesale investors, or wholesale clients, are people, trusts or self-managed superfund (SMSF) members that can be defined by the following classifications: - Has net assets of $2.5 million, or - Has gross income for each of the last two financial years of at least $250,000 a year , or - Invests a face value of $500,000 Alternatively, a wholesale investor can also be an SMSF, where the trustee(s) for the SMSF meet the above criteria, or controls gross assets of at least $10 million (including any amount held by an associate or under trust that the person manages). To confirm wholesale status, investors need their accountant to produce an 'accountant's certificate' qualifying that they meet the above test. ## What is a retail investor? A retail investor is, in essence, everyone who is not a wholesale investor and wants to invest in investment opportunities. ## What’s the difference between wholesale and retail products? The key difference between wholesale and retail investment products is in compliance. Retail products tend to have much higher regulation and disclosure requirements in a bid to ensure a greater level of consumer protection. Retail investments are generally available to all investors, and typically have a lower minimum investment amount. For example, our minimum investment amount for retail investors is $2500, whereas for our wholesale Partner Fund it's $25,000. Wholesale products are offered to investors who are considered to be more experienced in investing and are typically aware of the risks with investments like these. Furthermore, the documentation around wholesale and retail products is different with retail requiring significantly more detailed product disclosure statement outlining all the product information and associated risks. ## What is a sophisticated investor? If you read around the internet on these investor types, ‘sophisticated’ and ‘wholesale’ are sometimes used interchangeably. However, there is a difference. A sophisticated investor is defined as: - The holder of an Australian Financial Services License - Controls assets of at least $10 million - A listed entity, or similar Investing entities as sophisticated investors can be investment funds/trusts, superannuation funds, companies, and some other entities. ## What now? CrowdProperty Australia offers investment options for retail and wholesale investors (incl. SMSFs), sophisticated and institutional investors. **[Register with CrowdProperty](https://www.crowdproperty.com.au/user/register)** now and take a look at some of our projects and you too could potentially earn inflation-beating target income returns* in the CrowdProperty marketplace and help build more homes. _*Target returns, not forecast returns. For wholesale investors only. Terms, conditions and risks apply._

Debt financing is the single biggest barrier to building more homes

 Australia has faced a worsening housing crisis in the wake of the Covid pandemic, with affordability on the decline as supply growth fails to maintain pace with resurgent demand. Small-scale developers have a key role to play in helping expand housing supply, particularly when it comes to in-fill developments in established suburbs. They continue to face major challenges, however, when it comes to financing their projects. ## Australia’s housing crisis continues to worsen Authoritative observers from **[industry](https://hia.com.au/our-industry/newsroom/economic-research-and-forecasting/2023/04/housing-supply-worsens-as-demand-increases)** and **[government](https://www.aihw.gov.au/reports/australias-welfare/housing-affordability)** point out that the state of Australia’s housing supply has continued to worsen, despite mounting outcry over housing affordability for ordinary Australians. The resurgence of inbound migration following the lifting of Covid-related travel restrictions has created a sharp rise in housing demand, further exacerbating an unaddressed shortfall in housing supply. Analysis from **[MacroBusiness](https://www.macrobusiness.com.au/2023/11/australias-housing-supply-side-stuffed/)** indicates that over the 2022-23 financial year, Australia constructed 174,000 dwellings, compared to a record 626,000 increase in the country’s population. This has created a huge imbalance between new supply and incoming demand. The federal government has already initiated action to help address the issue, with the national cabinet announcing **[plans](https://www.pm.gov.au/media/meeting-national-cabinet-working-together-deliver-better-housing-outcomes#:~:text=That%27s%20why%20National%20Cabinet%20has,states%20and%20territories%20last%20year.)** to drive sizeable growth in Australia's home supply back in August. The plan calls for the construction of 1.2 million new ‘well-located’ homes over the five-year period starting from 1 July 2024, from an additional 200,000 new homes compared to the National Housing Accord target set last year. The housing market still has a long way to go when it comes to fulfilling these targets. **[Figures](https://www.abs.gov.au/statistics/industry/building-and-construction/building-approvals-australia/latest-release)** from the Australian Bureau of Statistics (ABS) indicate dwelling approvals are still on the decline, falling 13 per cent in the September quarter compared to the same period last year. Conditions remain acute on the financial front as well, with lending activity stymied by the Reserve Bank of Australia’s ongoing rate hikes. Housing Industry Association (HIA) economist Tom Devitt **[points](https://hia.com.au/our-industry/newsroom/economic-research-and-forecasting/2023/11/lending-for-new-homes-remains-at-20-year-lows)** out that property-related loans currently languish at two-decade lows. The September quarter saw loans for the construction or purchase of new homes plunge a stunning 27.7 per cent compared to the same period last year. “Lending activity has been weighed down by the fastest increase in interest rates in a generation. This is drying up the pipeline of new home building work across the country,” Devitt said. “This low volume of lending and approvals will produce a decade-low volume of new housing starts in 2024.” ## Debt financing still the biggest pain point for small-scale developers While the Australian government's housing ambitions will require a greater contribution from smaller developers, this cohort faces major challenges when it comes to the financing of their projects. CrowdProperty Australia conducted a groundbreaking survey of Australia's small-scale developer community to acquire a deeper understanding of the pain points they face in the current market environment. The **[survey](https://www.crowdproperty.com.au/8-key-results-from-crowdproperty-s-small-scale-developer-survey)** garnered 267 completed responses from 188 active small-scale developers around Australia. Questions covered a broad range of topics, including the background and experience of respondents, as well as their preferred project types and key pain points as developers. The survey found that debt financing remains the single biggest barrier to building more homes, with 56.14 per cent of small-scale developers considering it their number one challenge. Small-scale developers also said they waste too much time trying to solve project finance, as opposed to working on the actual task of building new houses. They also expressed widespread dissatisfaction with the financial services provided by traditional lenders, giving them an overall negative Net Promoter Score (NPS). Given the critical role that small-scale developers are expected to play in national cabinet's housing plans, these financing pain points could undermine Australia's efforts to overcome the home affordability crisis. ## Small-developers want to play a greater role Given the current state of the market, the property sector needs to dramatically accelerate the pace of development in order to satisfy the Albanese and state government’s ambitious housing targets. Members of industry **[point out](https://www.afr.com/property/residential/small-developers-hampered-by-financing-and-planning-hurdles-20230922-p5e6rz)** that small-scale developers could play a critical role in expanding home supply under the national plan, given that the target calls for homes that are "well-located." Well-located homes mean these new dwellings must be located in existing urban areas that are already equipped with infrastructure and amenities, as well as situated within reasonable proximity of business and employment opportunities. For this reason, much of the new housing under national cabinet's plan is likely to assume the form of in-fill developments in established suburbs, involving the conversion of empty spaces or older homes into new forms of accommodation. In many cases, smaller developers can be better suited to certain types of in-fill projects than large-scale developers. They are highly flexible and adaptable, which can make it easier for them to deal with the variable circumstances that in-fill projects in established built environments can entail. ## Marketplace lenders can solve financing pain points Australia's traditional banks are large-scale financial institutions with established business models, often lacking the flexibility to make rapid changes to their lending practices. For this reason, it could be difficult for them to adapt to the funding needs of small-scale developers, as they're called upon to play a greater role in the expansion of Australia's housing supply. This is where specialised marketplace lenders like CrowdProperty can step into the breach, helping to solve the financing challenges of property developers and alleviate Australia's housing crisis. CrowdProperty overcomes the debt financing challenges of small-scale developers by using an online platform to match funds from a diverse range of investors with individual property projects of their choosing. “CrowdProperty Australia is helping to overcome this issue by attracting new sources of debt capital to the market,” said David Ingram, CEO, CrowdProperty Australia. “We do this by enabling anyone to invest through our platform and to help build more sorely needed homes where people want to live.” As a marketplace lender specialising in the property sector, the CrowdProperty platform presents advantages and benefits for both investors and borrowers. On the investment side, CrowdProperty's team of industry experts conducts thorough due diligence on development projects before making them available on the platform. This saves investors time, money and effort, while also providing them with an initial level of reassurance. The CrowdProperty platform enables investors to allocate sums of as little as $2,500 to property developments, making them accessible to all players down to the retail level. For institutional investors, this level of **[control](https://www.crowdproperty.com.au/blog/the-opportunities-in-real-estate-debt-investing)** gives them the ability to diversify their portfolios across a broad range of individual projects, as well as different sectors and geographic regions in the property sector. CrowdProperty also offers strong returns to investors at a considerable level of safety. Retail — everyday investors can earn up to 8.5 per cent per annum target income returns* that are backed by first mortgage security, while the platform has a proven track record of 100 per cent of completed projects being fully paid back. Wholesale and institutional investors can make further target income returns. All of these advantages make it much easier and more convenient for investors to allocate funds to property projects, thus helping to overcome the debt financing challenges that remain a major barrier for small-scale developers. On the lending side, CrowdProperty provides a range of other advantages to borrowers. CrowdProperty's team of experts can provide specialised advice to developers, serving as partners for their projects as opposed to just providers of funds. Because of the specialised nature of its team, CrowdProperty can also review and approve applications for development loans far quicker than established financial institutions which lack comparable in-house expertise. By catering to the needs of both investors and borrowers, CrowdProperty helps to facilitate the funding process at either end of the equation. This can overcome the problems with debt financing that Australia's small-scale developers have long struggled to overcome, and in turn, empower them to help solve the country's financing challenges. Learn more about the barriers facing small-scale developers face and what they need to overcome them. **[Download the report.](https://www.crowdproperty.com.au/8-key-results-from-crowdproperty-s-small-scale-developer-survey)**

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