How To Become a Building Society

According to Google: building society, noun, British: A financial organization which pays interest on investments by its members and lends capital for the purchase or improvement of houses.

The 2008 financial crisis led to a number of banks closing down, and those still standing have tightened their lending criteria. Some of you have tried to get a mortgage but been turned down for not meeting the lender’s criteria, whilst others have decided not to even bother. I spoke with a developer, who was reminiscing about the good old days when development finance was easy to come by; now he only does cash deals but recognises that this is not the best way to leverage.

However, crowdfunders are filling the void created by banks, and their platforms are a new way for property investors to finance and invest in property. Crowdfunding (or peer to peer lending) is where a group of individuals (a crowd) get together to provide the cash for you to buy a property. But how does it work in practice?

Let’s look at the crowdfunding platform, Crowdproperty, who lend money to experienced developers and are currently promoting the following project to their registered members.

£650,000 to £1.4m Development Project

It is a development project in Fareham, Surrey, which involves knocking down the existing bungalow and erecting a 3600 sq ft new build, detached house. The current property is worth £650,000 and the detached house, on completion, will be worth £1,395,000. This is a joint venture development project between the existing owners of the property and experienced developer, Oliver Steele-Perkins, who has completed over 100 developments.

The key facts of the project are:

Open market value of the existing property is £650,000

Raise £275,000 to pay off existing debt on property and obtain a first charge

£275,000 on £650,000 = 42% LTV

Once planning has been approved, raise £575,000 to demolish and build a new detached house

Anticipated gross development value (GDV) is £1,395,000

Anticipated gross profit: £366,000

Expected return on costs: 32.6%

Term of project: 18 months (to demolish, build and sell)

Interest to investors: 10% per annum

Minimum investment: £500

This video explains the crowdfunding project in detail.

For more information about this project, go to www.crowdproperty.com

Please ensure you conduct your own due diligence as these investments are not protected by the Financial Services Compensation Scheme. For more information about other crowdfunding platforms visit the crowdfunding section.

Mortgageintellectual.com is not recommending that you invest in any specific property. You must conduct your own due diligence before investing in property or a crowdfunding platform. Property prices can rise and fall in value and past performance of the UK property market is no guarantee to future performance.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The Financial Conduct Authority does not regulate most types of buy to let mortgages, bridging loans, development loans and commercial loans.