Industry Investment Website www.thehousecrowd.com Founded United Kingdom | Products Property Crowdfunding Date founded 2011 | |
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Headquarters Manchester, United Kingdom Type of business Private company limited by shares | ||
The House Crowd is a UK property crowdfunding company. It allows investors to buy shares in investment property from £1,000. As of March 2017, it had fully funded over 290 projects, raising over £42 million in the process.
Contents
History
The House Crowd was set up in the UK in December 2011 and began trading in March 2012 and was one of the first UK property crowdfunding companies. It was launched at a time when, as The Guardian explains, ‘young professionals hoping to get a foot on the property ladder and people in their 40s or 50s hoping to fund their retirement through buy-to-let investments have had their plans thwarted by booming house prices.’ By June 2014, The Guardian reported that The House Crowd was buying ‘an average of one [property] a week.’ An article two days later by the same publication concluded that ‘the phenomenon of crowdfunding is booming.’ The following month, the Express reported that ‘[The House Crowd] has spent £5million buying and refurbishing 69 properties in the Manchester area.’ By March 2017, the number of fully funded properties had increased to 293, raising over £42 million in the process.
Business model
Through crowdfunding, The House Crowd enables investors, in the words of the BBC, ‘to club together to buy a cheap house, do it up, then rent it out.’ As the article continues, ‘each house is bought through a special purpose vehicle and shares are allocated to investors.’ As The Guardian explains, The House Crowd then ‘manages the property and pays a regular dividend, with the prospect of capital growth as the value of the property rises.’ Merryn Somerset Webb of the Financial Times and the MoneyWeek championed the model stating ‘[it is] wonderful to be able to own small bits of residential properties across the UK without any of the palaver that usually comes with ownership.’ Robin Ash of The Times followed suit, claiming that model ‘[allows] priced-out aspiring homeowners to benefit from the rising market — without ever needing to fix a roof or call a plumber.’
Risk and regulation
The House Crowd is not directly authorised and regulated by the Financial Conduct Authority. As managing director Frazer Fearnhead explained to the BBC, ‘people's investment is protected by the bricks and mortar value of the property and if you want your money back you either need to wait for the property to be sold or sell your share to another investor. We cannot guarantee you will be able to find a buyer but everyone who has wanted to sell so far has managed to do so within a few days.’
Returns
As Money Observer explains, an investor has two options ‘a fixed income-type product promising to pay between 7.5 and 10 per cent per year, [or] an equity set-up whereby investors take three-quarters of net profits.’