How-to Guide: Investing in Property

Bricks and mortarProperty has long been one of the nation’s favourite investments, giving people the ability to generate a considerable and consist-ent income. So it’s no surprise that bricks and mortar remain one of our most popular investment choices. Yet stamp duty hikes for Buy-to-Let investors as well as soaring purchase prices in an in-creasingly crowded market make it a challenging sector to get your foot in the door.

Widen your perspective however, and there’s huge potential...

From crowdfunding to peer-to-peer lending, the growth of online investing has surged in the last few years. But it takes many forms, with different risks, rewards and considerations.

In this guide we provide you with a snapshot of these alternatives and share our own tips on getting started.

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Contents• Alternative ways to get on the property ladder:

property funds, crowdfunding, peer-to-peer lending (p.4)

• Your investment checklist (p.6)

• Learn from the experts (p.8)

• Property investing: keeping up to date (p.9)

• Glossary (p.10)

This is not advice but a collection of well-considered ideas intended to be helpful. We recommend that you seek professional investment advice before making any investment decision.

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Alternative ways to get on the property ladder

Property funds

Previously, investing in property has required you to be in a position to purchase. This limited the market to institutional investors, with large amounts of available capital to spare. However the growth of online has equalised the market, opening up the opportunities for investors through marketplace lending.

Let’s look at some of these alternatives, from the more established property funds, to crowdfunding and peer-to-peer lending:

Property funds offer investors a professionally managed portfolio of commercial, corporate or rental properties. These can be either do-mestic or overseas.

Offering investors access to large commercial property develop-ments means they do usually require investment for a substantial peri-od of time and are therefore a relatively illiquid asset.

Performance of property funds usually follows the economy, reacting to periods of recession and inflation accordingly.

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Crowdfunding

Peer-to-peer

Crowdfunding is the practice of funding a project or venture by raising money from a large number of people, most often via an online platform.This is likely to be equity based, whereby people (the ‘crowd’) invest in an early stage unlisted company in exchange for shares in that company.

Property crowdfunding allows investors to make equity investments into commercial or residential properties. In exchange for funding the project, the investor receives an equity stake in the property and re-ceive returns in the form of a share of the rental income.

As a shareholder, you own a part of that company and stand to profit should the company do well. The opposite is also true, so if the com-pany fails investors can lose some, or all, of their investment.

Peer-to-peer lending is the practice of lending money to individuals or businesses, typically online. The process matches those who want to lend money (lenders) with those that want to borrow money (borrow-ers).

Typically debt based, loans are secured against an asset. This gives the investor some protection should the borrower fail to repay.The attraction for investors is the fixed rate of return based on the interest charged on the loan.

In the case of LendInvest, loans are secured against UK property and the interest rate agreed will vary loan to loan according to our assess-ment of each case.

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Your investment checklist

Time

Knowledge

With plenty of options out there, investing online has never been easi-er. But taking that first step can feel a bit daunting. Here are some key considerations:

It’s important to be aware of how hands-on an investment requires you to be. Consider how regularly you need to be involved and whether this suits your lifestyle and interest levels.

TIP: In some instances, your investment decisions can be automated. Certain platforms provide an auto-invest feature that allows money to be re-invested depending on the level of risk our investors are com-fortable in taking.

“An investment in knowledge pays the best interest.” – Benjamin Franklin

Take the time to educate yourself in the language of investing. This will allow you to make your investment choices confidently and intelligently.

TIP: Familiarise yourself with the resources available to help you eval-uate your options. Online resources dedicated to this such as Investo-pedia can help breakdown even the most complicated of terms, while glossaries such as our FinTech jargon buster, will help to give you a firmer grasp of the latest concepts and buzzwords in the industry.

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Diversification

Know the detail

Test

Diversification is fundamental to reducing the risk associated with in-vesting. It’s important to remember that, no matter how diversified your portfolio is, risk can never be eliminated completely but you can reduce it.

TIP: Experienced investors choose to invest small amounts across dif-ferent platforms in order to mitigate their risk.

Be sure to do your homework before you invest. Look at the underlying business model of the companies offering the investment options you are interested in and don’t just take their word for it.

TIP: Are they in the press? What can you learn about them from social media? What are their existing customers saying about them? Review communities such as TrustPilot can offer valuable insights.

Many platforms have minimal investment amounts that are ideal for the novice investor, allowing you to test out the platform before you com-mit larger investment amounts. While you may have already decided the overall amount you’re happy to invest, a gradual approach will allow you time to understand all the specifics as you go.

TIP: Most platforms allow you to register without making an investment. This is a great way to familiarise yourself with the types of loans availa-ble, before you commit any money.

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Learn from the expertsIf you’re new to investing one of the best things you can do to learn is read. Here we’ve selected the best investment titles to help you make wiser decisions with your money.

The Richest Man in Babylon by George Samuel Clason

The Richest Man in Babylon provides financial wisdom told through a series of stories set in ancient Babylon. The book is hailed as one of the greatest books ever written on personal wealth and financial planning, sharing the secrets to managing your money and achieving personal prosperity.

Think and Grow Rich by Napoleon Hill

In Think And Grow Rich, Napoleon Hill draws on stories of several entre-preneurs, including Andrew Carnegie, Thomas Edison and Henry Ford, to find out what made them the successful businessmen they were.

The Essays of Warren Buffett: Lessons For Corporate America by Lawrence A. Cunningham

If you’re going to learn about investing, why not learn from the most suc-cessful investor in the world, Warren Buffet?

The Intelligent Investor by Benjamin Graham

Benjamin Graham, known as the “Dean of Wall Street” was known for making money on the stock market without taking big risks. His book, The Intelligent Investor, teaches timeless lessons, particularly the philosophy of ‘value investing’ and the importance of developing long-term strategies.

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Keeping up to date

Industry news

Regular publications offer a wealth of information online to help you broaden your knowledge. Sign up to their newsletters to follow the latest industry developments. Some of our favourites include Moneywise, What Investment and Shares Magazine.

Be social

Be rigorous in your research by following and engaging with companies across their social channels. While they may not be able to offer you fi-nancial advice, social media feeds, blogs and news stories will help you broaden your knowledge and keep up to date.

Broaden your outlook

Today it’s easier to self-teach than ever before. Cherry-pick and build your knowledge on money management, saving and investment by follow-ing some of Twitter’s best purveyors of financial information for self-di-rected investors. See our recommendations.

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Glossary

Crowdfunding - Crowdfunding is a new way of funding business ventures and projects. It involves an individual proposing a new idea which is then funded by a large number of investors each contributing a small amount of capital. There are three main types of crowdfunding; equity, debt and donations.

Debt investment - An investor loans money to a business or individual that borrows the funds for a defined period of time at a fixed interest rate. Typically seen as lower risk.

Diversification - Diversification is the process of investing in different types of assets, minimising a portfolio’s overall risk by lessening the impact from a single asset loss.

Equity investment - An investor buys an equity stake in a business. The value of that stake depends on the performance of the business. Typically seen as higher risk.

Institutional investor - An institutional investor can be either an individual or company that invests in larger amounts that qualify them for preferen-tial treatment and lower commissions. Institutional investors face fewer protective regulations because it is assumed that they are more knowl-edgeable and better able to protect themselves.

Marketplace lending - This is lending which occurs through an online plat-form. Funding Circle, Zopa and LendInvest are all examples of this. Their business models vary enormously. Sometimes a borrower and individual lender are directly connected, sometimes indirectly.

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Peer-to-peer lending - The practice of lending money to individuals without the use of an official financial institution as an intermediary. Peer to peer lending is often facilitated through online platforms which are able to offer good rates due to their efficiency.

Property funds - Property funds offer investors the opportunity to invest in a varied portfolio of properties. Rental or sale fees generated from the fund’s properties are also distributed to investors.

Secured loan - When a loan is secured, the borrower has provided an asset (e.g a property) as collateral for the loan. This then becomes a secured debt owed to the loan provider if the borrower was to default.

Shareholder - A shareholder owns a defined portion of a company. They have the potential to profit if the company does well, but that comes with the potential to lose if the company does poorly.

Unlisted company - A privately owned company whose shares are not listed on a particular stock market.

Want to expand your knowledge further? Read our FinTech Jargon Buster.

Welcome to your simple and safe online investment platform

At LendInvest we believe that property investment should be more acces-sible, which is why we are on a journey to disrupt the status quo.

LendInvest is a simple and safe online platform that allows you to invest in loans secured against property, all at the click of a button. You’ll start earning returns from 5% per annum as soon as you invest.

We believe everyone should be able to invest in property. Now they can.

Start investing

Find out more

There are many other features to the LendInvest platform and we’d encourage you to explore them. You can also discover what our investors ask us the most and how we answer them here. If you are unable to find the answer to any of your questions here or on our Frequently Asked Questions page you can contact our Client Services team by emailing support@lendinvest.com or calling us on +44 (0)20 7118 1900.

This is not advice but a collection of well-considered ideas intended to be helpful.Whilst the loans which you invest in are secured against property, your capital is at risk. LendInvest is registered at 8 Mortimer Street, London W1T 3JJ (Company

No.08146929), authorised and regulated by the FCA, no FSCS