Rapid growth in Buy To Let crowd-funding

Research by Letting Agent Today shows there are now at least seven significant crowd-funding platforms' aimed at buy-to-let investors who either cannot afford or do not like the existing business model of traditional small-scale residential investment.

Crowdtolet, House Crowd, Crowdahouse, Propertycrowdfunding, Crowdfundproperty, Propertymoose and Crowdsourcing all aim, wholly or partly, at attracting investors who may not be able to afford a deposit on a BTL property, or who do not want to risk such a large sum in one property or location.

Most of them operate in what has become the established crowd-funding manner.

Investors pay, usually in £250 or £500 increments, to invest in a property or a group of properties promoted on the platform's website. Usually these websites contain market information and simple credit card payment facilities to appeal to small-scale investors.

Each investor typically receives what is effectively a share, or shares, certificate equivalent to the sum invested. These shares are issued by a Special Purpose Vehicle - financial jargon for a limited company which is the vehicle under which the property is subsequently purchased.

Some crowd-funding platforms them handle the letting too, preparing the property and using either a local lettings agent or its own representatives to handle the finding of a tenant, the AST tenancy documentation, rent collection and routine property management.

Then individual investors receive their rent money monthly, in arrears - remembering that it will obviously reflect the modest scale of the investment, minus admin charges.

Will this catch on Well, it has worked elsewhere in the industry.

TV's Grand Designs guru Kevin McCloud used it to raise over £1.9m (through a general crowdfunding platform, not one dedicated to property or residential investment). McCloud has used the funding to help build eco-homes.

Online estate agent Hatched wants to attract £250,000 in investment this way, to expand operations beyond its existing seven offices in Hitchin, Sheffield, Manchester, Birmingham, Reading, Maidstone and Exeter. In return for a five per cent share of equity, the investment secured through the Hatched crowdfunding campaign will be put towards recruiting 35 so-called field agents' within the next year.

One of the current BTL crowdfunding platforms, House Crowd, says it owns and manages 62 homes and now buys an average of one a week.