The risks involved when investing through property investment platforms can be confusing

Posted June 30, 2019

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The risks involved when investing through property investment platforms can be confusing

We commissioned new research which has revealed a lack of understanding of some of the fundamental risks involved through investing through property investment platforms.

We feel that the industry must strive to ensure that each opportunity promoted to private investors is clearly explained, the risks are transparent and the returns appropriate. This will help ensure that investors have the necessary information they need before deciding to invest.

Key areas of online property investing that cause confusion

real estate investing can be confusing

How we are minimising risks for our investors

We launched Fitzrovia Finance in 2017 as a secured property debt investment platform for institutional investors, and to date we have entered into £119.9 million of loans, with no defaults.

Because of growing demand for better returns, given poor bank interest rates, the property debt investment platform sector allowed us to offer institutional quality investment opportunities with a clear and transparent process for keeping risk to a minimum and delivering attractive risk adjusted returns of over 5%* to private investors.

We focus on providing investors, with the enhanced reassurance of a business built and run by a highly experienced, expert team operating a ‘7 Step Risk Control’ process. Anyone that signs up to our platform can access our Investing Guide which aims to build investors understanding and confidence in the asset backed investing. We also publish regular articles such as this guide to loan security.

 

It is important that investors understand the risks

The findings to the research follow the recent announcement that later this year the FCA will introduce more explicit rules to strengthen peer-to-peer lenders (many of which are property lending platforms) risk management and governance.

There are some ‘property’ investment opportunities being offered to private investors where for example, the returns are 8% or 14% or even higher. These will include a lot of features that represent higher levels of risk such as second charge loans or unsecured debt, and this must be clearly explained to investors.

Fitzrovia Finance has also just completed a review of 20 of the most prominent online property investment platforms in the UK, and the investment opportunities they are promoting. The returns offered through these platforms ranged from a modest 2.8% to 15% reflecting a significant variance in risk as well as return – and not always correlated!

We would recommend that you do your research and consider taking advice from an independent financial adviser.

Sign up to access our guide to property-backed lending.

* The indicated return is an estimate that investors can earn, after fees but before bad debt and tax. View our platform statistics for more detail.

Source: Consumer Intelligence conducted research with 311 retail investors who have used property investment platforms. The survey ran from 19th to 20th June 2019.