New to property lending investment? Here’s what you need to know
Property-backed loans can deliver competitive yields and exposure to an exciting market. Just as long as you choose the right platform. By Harry Ellis, head of capital markets at easyMoney
Property is one of the most popular investments in the UK, and with good reason. An ongoing housing crisis in the UK has created unprecedented demand for new builds and rental units. Meanwhile, property prices continue to rise even against a background of macro-economic instability. According to the most recent Nationwide House Price Index, the average UK property value grew by 2.2 per cent in September on an annual basis, up from 2.1 per cent in August.
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But the reality of property ownership can be challenging. Stamp duty can add thousands of pounds to the cost of a purchase, while incoming government policies threaten to limit BTL yields. And then there is the cost of property maintenance, taxation, and the hassle of dealing with difficult tenants.
It is hardly surprising then that more and more savvy investors are turning to property-backed loans as an alternative to property investment. This is a trend that we are watching play out in real time at easyMoney.
How to choose a property-backed lending platform
If you are thinking about entering the property-backed lending space, it is important to choose the right platform for your own individual investment goals and risk profile.
For example, some platforms are inherently illiquid, meaning that your money is tied up for the duration of the loan term. Other platforms advertise high double-digit returns by taking on higher-risk projects which other lenders have passed over, which can increase the risk of a borrower default. In recent years, a few platforms have hiked their minimum investment thresholds, making it more difficult for the average investor to enter the property-lending space.
What makes easyMoney different
easyMoney is one of the few platforms which operates an active secondary market, where investors can buy and sell loan parts. This means that our investors have the ability to exit loans early if they need to access their capital at short notice. We are able to do this while continuing to offer target returns of between 5.4 per cent and 10 per cent, depending on the type of account chosen. The minimum investment for our Premium Account is just £100, reflecting our commitment to our retail investors.
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But it is our strong track record of performance and our commitment to conservative lending that has helped us become the UK’s largest real estate focused P2P lending platform.
Focus on due diligence
Since the launch of the easyMoney platform in 2018, we have maintained a zero-capital loss rate for our investors. We have done this by prioritising strong due diligence at every stage of the lending process. Our credit committee has decades of experience within the property lending sector, and we only work with the most creditworthy borrowers. When a new loan has been added to the platform, we monitor it closely for the duration of the term. This involves paying regular visits to development sites and staying in constant contact with our borrowers so that we can head off any potential issues before they have a financial impact.
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We also take property as collateral on every loan that we underwrite, at low loan-to-values (LTVs). In the event of a default, we can sell the underlying property to recover our investors’ capital.
Our commitment to careful loan management and our ability to offer liquidity and competitive returns has allowed us to build a platform that delivers all the benefits of property investing without the burden of property ownership.
Capital is at risk. Past performance is no guarantee for future results. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future.
This is a financial promotion and is intended to provide information, not investment advice.
This is commercial content, produced in partnership with easyMoney.
