House Crowd takes portfolio past £2m
The operator of a buy-to-let club which finances property purchases through internet crowdfunding says he has built a £2m portfolio in 18 months.
The House Crowd has so far acquired 33 properties, predominantly two and three-bed houses let to Housing Benefit recipients in Salford and Moston.
It typically raises £60,000 from a group of investors to buy and refurbish an individual property.
Investors are asked to provide a minimum of £1,000, with returns based on individual properties rather than the performance of the overall portfolio.
A limited company is established to buy each of the properties, which are bought for cash. A single share in the company is provided to investors for each £1,000 invested.
The average investment size to date is £3,750, with the largest single investor having committed £190,000.
One example of the properties acquired by The House Crowd is a 2/3-bedroom house in Scarborough Street, Moston. It was bought for £43,500, refurbished at a cost of £17,000 and is now let at £550 a month.
The House Crowd says the property has an estimated value of £70,000.
Frazer Fearnhead, pictured, director of the The House Crowd, said the properties typically yield rental income of 11%.
He admitted that the company had initially attempted to sell on refurbished properties in line with the wishes of investors but had struggled because of the housing market. Those properties are now yielding rental incomes closer to 8%, Fearnhead said.
The House Crowd offers two investment options: a dividend of 6% a year plus a 50% profit share when the property is eventually sold or a straight 7.5% a year return. Investors must agree to a minimum term of 18 months.
In return for managing the investment, the House Crowd typically takes a 4% share of rental income and a 50% share of profits when the property is sold.
Fearnhead accepts The House Crowd cannot offer the same protection provided to savings and investments in conventional accounts by the Financial Services Compensation Scheme.
However, he said that he personally believes that property continues to present a stable investment opportunity.
"There is the risk that the property market will fall massively but we are buying at the bottom of the market. The investment model we offer now is all about rental yields. That was our original plan. I admit that we went off track at the request of investors who wanted us to make quicker returns by buying and refurbishing properties for sale. We are now doing what we always thought was the best thing to do.
"It is a testament to what we do that many of our investors are now investing in every project we do and bringing in friends and family. It represents a great opportunity to earn a better return on your savings and unlike with a pension, you can sell or pass on the underlying asset."