What’s the best way to invest in property? With exorbitant prices across the UK making an outright purchase all but impossible for many first-time buyers, “alternative” channels are increasingly finding favour. Letting Agent Today claims that property crowdfunding is “the investment of choice” for millennials.
“Shojin Property Partners claims to have seen a 20 per cent increase in millennials aged 18 to 30 investing in property crowdfunding projects since launching it launched last year, with the demographic now accounting for almost fifth of all who invest through the firm.”
There’s also an alternative to the alternative. One of our offerings on site is a fixed-rate loan at a yield of 8 per cent, rated A. This loan of £200,000 is property-backed, with an A+ rating from our credit committee. It’s a pure loan, not a participation stake, but it offers the security of real estate (roughly at 64 per cent loan-to-value). A gross yield of 8 per cent equates to a return of 7 per cent net of our fees.
The other offering is from Elliotts Hair, rated B+, with a yield fixed by the auction process. The indicative yield (the credit committee’s estimate, more or less) is 9 per cent gross. The current average of bids is 9.8 per cent, with 55 per cent of the £200,000 loan offer filled.
If you invest via our Innovative Finance Individual Savings Account (ISA – see below for a step-by-step guide to how this works) you will receive the income tax-free.
All loans on site are eligible for inclusion in a Money&Co. ISA. If you do not have a Money&Co. ISA yet, please click on the ISA application tab on the Home page and fill in the form. You will need your National Insurance number. The ISA allowance for 2017/18 is £20,000 and you must commit funds by midnight on 5 April or you will lose your ISA allowance for this year. For full detail on the process, see below.
A Process Guide To Innovative Finance ISA Investment
Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2018/19 is unchanged from last tax year at ú20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate ú8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.
It’s relatively easy to logon to our site and register to become a lender. But if that’s all too new-fangled, you can call us on 020 3143 4004 or write to Money&Co., 58 Glentham Road, London SW13 9JJ. We’ll then send you an ISA Brochure, and ISA Transfer Authority form (if you want to transfer monies from a Cash ISA) and a Freepost envelope. Then it’s just a question of following your nose to get that income…