Peer 2 Peer (P2P) Lending – 5 Things you should know before investing

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June 2017

P2P lending is the practice of lending money to businesses through online services that match lenders with borrowers. 

As we move into the second half of 2017 more property developers are having to turn to P2P lenders as their access to traditional forms of capital is tightening. 

The major banks are extending less credit to property developers, as a result credit is drying up to many development companies who are turning to these P2P funding channels – usually at higher interest rates.

Investors now have a wide range of options to obtain higher yields via participating in these loans but sorting the out the good deals from the bad is not easy as these investments are unregulated and carry substantial risks.

We take a look at 5  key things you should know about P2P lending before making any investment decisions:

 

  1. Don’t chase exceedingly high returns

 

If a debt offering is returning over 25% and is a “mezzanine style” deal chances are its extremely risky. A developer may have no options other than paying high rates like these over short periods but these deals are highly leveraged and need greater due diligence.

Bottom Line – Avoid deals that promise high rates of return, they are extremely risky and you may lose your capital.

 

  1. Know your investment timeframe

P2P lending allows developers to use your funds to grow their business by providing capital to buy new sites or pay their bills on existing sites.  

You generally won’t have the option of getting your funds back prior to the expiration of the agreed loan period. Most developers will need these funds for 12-24 months or longer until they complete their projects.

Be prepared for extended loan periods as projects encounter delays such as wet weather or underestimating the time to completion.

Bottom Line – Understand what project you are investing in and the agreed timeframes for your investment returns. 

 

  1. Investment Security 

 

Just like the major banks, P2P investors should be looking at security in the underlying asset to protecting their investment.

Lending on a first mortgage basis is the safest way to ensure your investment is protected. If a developer defaults on your principle or interest repayments you still have the benefit of first mortgage security. This puts your investment in a strong position as you have underlying ownership of the land. 

Bottom line – First Mortgage investment provides investment security. 

 

  1. Research the developer

Like the stock market, investors need to do some research. You need to understand the basics of a property market and drivers of economic development. How much of a track record does this developer (your borrower) really have?

Where is the project located? Is it close to new government infrastructure? Is there a need for housing, education, healthcare or retail services in that particular area?  

Does the developer have a proven development team with delivery experience on completed projects? Who is their preferred builder? What is the builder’s experience?

Bottom Line – You should ask all these questions prior to investing.

 

  1. Deal with reputable P2P lenders

Your best chance of a good initial (and repeat) experience in P2P lending is to do your research. The quality of the offerings (not quantity) is key. Online operators should have a local presence which is regulated by ASIC.

Bottom Line – There should always be someone you can talk to on any P2P website. Pick up the phone, make contact and get to know who you’re dealing with, you will soon find out if they know what they’re talking about.

 

About Crowd Property Capital: CPC is a modern property marketplace fueling a shift into the world that’s less dependent on the traditional incumbents and middle-men. For further information on P2P lending contact David Lovato on +61434932634  or visit https://crowdpropertycapital.com.au

25 Glasgow Avenue Bondi Beach – Unique Raw Development Site Opportunity

25 Glasgow Avenue is for sale by auction 8th April 2017

25 Glasgow Avenue is for sale by auction 8th April 2017

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A development site with the opportunity to build two executive residences (STCA) is for sale by auction on 8th April 2017. 

Located in the heart of Bondi Beach moments to the sand, surf, boutique shopping, and cafe precincts the property offers investors a solid value proposition.

Key investor information

  • Existing 3 Bedroom house on a 418m2 parcel with 18m frontage.
  • Raw development potential for two executive residences with car parking, extensive landscaping and plunge pool (STCA).
  • Strong rental yields post-acquisition, highly rentable existing 3 bed residence moments from the beach.
  • DA precedent for dual occupation design based on neighboring properties.

Whether your objective is to develop to sell both dwellings or live in one and sell the other this is a compelling investment opportunity.

The below information provides a concept design that has been produced in consideration of existing planning controls.

An artists Impression of the possible redevelopment of 25 Glasgow Ave Bondi Beach (STCA)

An artists Impression of the possible redevelopment of 25 Glasgow Ave Bondi Beach (STCA)

 

Basement and Ground Floor Design

Basement and Ground Floor Design

The concept design allows off street parking for two cars, generous open plan living areas combined with a spacious outdoor rear deck area, plunge pool, and outdoor shower area. The front study could also be used as a 5th Bedroom.

The upper level design includes generous sized bedrooms and an attic level.

The first floor and an attic level.

The first floor consists of three well-proportioned bedrooms, the master and rear bedroom have their own private balcony. Functional use of the roof has allowed a large 4th bedroom or teenage retreat in the attic space.  

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The above table summarises the proposed design based on the current planning controls of Waverley Council.

For further due diligence information on this property:

Email  dlovato@crowdpropertycapital.com.au 

Phone +61 434 932 634

Disclaimer: No enquiries have been made with Waverley Council regarding the suitability or acceptance of this  or any potential Development Approval. While much care has been taken to ensure that the data presented is accurate investors should make their own enquiries. This information should not be relied upon for valuation purposes.

Existing property at 25 Glasgow Ave Bondi Beach

Existing property at 25 Glasgow Ave Bondi Beach

 

The Rise of Chinese Developers in Australia

 

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February 2017

 

Knight Frank have just released a report into emerging trends of Chinese developers in Australia, the report shows statistically an insatiable appetite for site acquisition throughout the country. This long term trend is set to continue and it’s impacting local developers as they become the under-bidders and miss out on new sites.

 

The following are key takeaways from the report:

  • Chinese developers are buying larger sites, average dwellings per site in 2016 = 502 (versus 2012 = 103);
  • Chinese site acquisition represent a massive 38%  of all direct residential sites in Australia (versus 2% in 2012)
  • Chinese developers are interested in larger sites and are diversifying from apartment sites into house and land product.

These statistics underpin the strength of demand for Australian residential assets. This interest driven by China is a net positive for our region as it ultimately results in increased economic activity which in turn creates jobs. 

For access to the Knight Frank report click here

 

Shark Tank Rejected Property Investment Platform Reloads

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January 2017

 

In what was one of Shark Tank Australia’s biggest shutdowns of the second season, founder of Crowd Property Capital (CPC) David Lovato reflects on what was a cringe-worthy flat out rejection on national TV.

“From the moment I entered the shark tank I realised they hated the idea of backing a property industry start-up. I was a made to look like a property industry villain and walked straight into a bear trap.

I didn’t get any feedback from the show until the actual airing. As soon as I watched it I knew it was bad. Instead of my mates giving it to me there were crickets; not a word of banter but rather uncharacteristic blokey support which was concerning”

Fast-forward 6 months and the impact of getting on the show (and failing) has inadvertently become a major factor towards the early success of CPC. The online property development funding platform has taken on board the collective criticism from the sharks and changed the focus of the business model.

Originally the CPC platform was pitching to smaller retail investors, the focus is now purely on the sophisticated investor interested in lending debt capital to developers solely on a 1st mortgage basis.

The reality is, property development and investment are inherently risky and investors entering this space usually have substantial funds to invest, an appetite for risk and it’s not usually their first deal.

“There has been a lot of buzz around the ability of the online community via P2P and crowdfunding to open up the property industry to smaller retail investors. I learned from the Shark Tank that even the sharks don’t fully understand the risks and returns in property development; so obtaining investment from smaller “unsophisticated” retail investors is a hard sell.”

Since the Shark Tank pitch last year, David’s taken a measured approach to growing the CPC investment platform.

Teaming up with existing established private lenders, CPC has found its place in the market by offering 1st mortgage security investments yielding between 8 to 12% annually. The CPC website www.crowdpropertycapital.com.au showcases some of the available debt finance deals. This web-based platform provides wider access to potential investors both locally and offshore. All investments are debt style and start at a minimum of $500,000 AUD.

“CPC is essentially evolved into what I’d call a “trad-tech” investment platform. We are focusing on partnering with established private lenders to increase their investor base as there is a huge demand at the moment for non-bank finance.  

With the major banks reducing their exposure to development debt finance local developers are seeking additional funds to complete their project pipeline. 

Traditional private lenders have numerous quality deals with great returns that they are struggling to fund purely due to the gap that has emerged in the market from the majors scaling back. With the property market so hot at the moment, we are focused on cherry picking the best deals. Quality, not quantity is key.”

 

5 Tips for Better Understanding Peer-To-Peer (P2P) Property Lending in Australia

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Written by David Lovato – Crowd Property Capital

 

As a bumper year for property investment comes to a close emerging trends towards non-bank finance in the property space gather steam heading into the new year.

Developers need more funds to deliver their projects as the major banks pull back on finance.

As more investors get comfortable with researching higher yielding investment opportunities we take a look at the key things you need to know about Peer to Peer (P2P)  debt style lending in the Australian property market.

 

  1. Don’t chase high returns

 

If a debt offering is returning 18-30% and is a mezzanine type deal chances are its extremely risky. A developer is only paying this pain money as a last resort as accesses to cheaper funds are no longer an option for him.

If things go wrong you are at the bottom of the pile and you will probably not see a cent.

 

  1. Know your investment timeframe

 

Investing in a P2P loan means you are essentially becoming the bank and loaning money, borrowers (in this case property developers) are looking to use your funds and in return you are providing them with a fixed rate for your money for a fixed period of time.

You generally won’t have the option of getting your funds back prior to the expiration of the agreed period. Most developers will need these funds for 12-36 months until they get settlements at the end of the project.

 

 

  1. Seek investment Security

 

Just like the banks, P2P investors should be looking at security in the underlying asset to protecting their investment.

Security can be achieved in a P2P debt loan by being the senior debt provider and in exchange receiving the 1st mortgage over the property. Combine this security with lending up to a maximum of 60% of the Gross Realisation Value (the assets value once the development is complete) and your investment is cushioned with a relatively good factor of safety.

Lending on a first mortgage basis is the safest way to ensure your investment is protected. Generally returns around  7-10% per annum can be expected in today’s interest rate environment. If a developer defaults on your loan the benefit of first mortgage security is you have the ability to act swiftly and recoup your investment should things go wrong.

 

  1. Research sectors and markets

Like the stock market, investors need to do some research. You need to understand the basics of a property market and drivers of economic development.

Where is the project located? Is it close to new government infrastructure? Is there a need for housing, education, commercial offices, healthcare services or retail services in that particular area? What are the underlying economic forces that give this project the best chance of success. Does the borrower have a proven development team with delivery experience and track record.

You should ask all these questions prior to investing.

 

  1. Deal with local established private lenders

Your best chance of a good initial (and repeat) experience in the relatively new online P2P lending market is to deal with local established operators.

If you come across a P2P website pick up the phone, make contact and get to know who your dealing with. You will soon find out if they know what they’re talking about. 

Established operators operate in an ASIC regulated environment usually within Managed Investment Schemes. Invest in contributory mortgage schemes as opposed to pooled mortgage schemes. With a contributory scheme you are investing in a mortgage fund with the benefit of your investment being limited in default liabilty to only your project as opposed to multiple projects.

 

Private lending by pooling funds to loan to borrowers is not a new concept, it was once only available to wealthy individuals who had the contacts to achieve higher return. Now with the Internet opening up investment markets and major banks pulling back funding these P2P opportunities are becoming more readily available.

 

For further information on P2P lending contact David Lovato at Crowd Property Capital on +61 434 932 634 or visit https://crowdpropertycapital.com.au

Core Logic – Hedonic Home Value Index November 2016

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The monthly update on Australian house and apartment values has been released showing some strong trends as we head into the end of the year. Property investment proved again in 2016 that it remains a reliable and profitable assett class outperforming the stock market considerably in 2016.

The key findings for November can be summarised:

  • All states posted dwelling value increases in the month (except Melbourne)
  • The annual rate of capital gain has remained boyant in all states (except Perth)
  • Rental yeilds in Hobart were the highest in the country. Hobart remains the most affordable city.
  • Sydney remains the least affordable city.
  • Interest rates are predicted to rise next year which may slow down buyer activity and in turn reduce buyer demand in 2017

To read the full report click here