Property Partner Review
** Property Partner review updated February 20th 2017 **
Property Partner is an online crowdfunding platform that funds property deals ranging from houses to apartment buildings. Each investor owns shares in the property through an SPV Company. Shares can be bought and sold on the secondary market. Some properties are purchased with mortgages of up to 60% of the purchase. This increases dividend returns but increases risk. Read more below for my unbiased exclusive Property Partner review and my experiences as an actual investor.
My February 2017 Allocation: Increased
My annual rate of return: 3.7% (Net return before tax)
* Dividends ** This opinion risk grade factors in types of loans offered, interest rates, platform history, default numbers and my own investing experience. *** Property Partner keeps a repairs provision fund for future needs.
The Property Partner Review: What You Need To Know
- Investors own shares in the properties
- Secondary market to buy and sell shares
- Extensive research performed on property purchases
- Property usually secured at a discount
- Pre-fund investing for upcoming properties
- Auto invest for those who want a hands-off experience
- Dividends paid monthly
- Possible tax benefits for some
- Instant debit card deposits
- Easy to use website
- Dividend yields can be low
- Some properties are leveraged with mortgages, increasing risk
- Risk if Property Partner stops paying on the mortgages
- Fine print in terms gives company final control over the properties
- High London exposure
- 5 year investment means many unkowns
Property Partner Review: My experiences so far….
I have been investing in Property Partner since early 2015. As with all property crowdfunding sites, the unknown outcome factors make for an interesting investment. When I started investing, Property Partner only offered deals in London but have since expanded to other parts of the UK such as Eastbourne and Lincoln. Yields on deals outside of London tend to be more attractive. I have been investing in properties outside of London as I believe the London prices are inflated. Monthly dividend payments have always been received on time and so far, I have been very satisfied.
What Is A Property Partner?
Property Partner acquires property (sometimes with mortgages) then offers the property shares to investors. The properties are held inside individual SPV companies registered at Companies House. Property Partner manages the rental collection and pays montlhy dividends. They also handle any needed maintenance. Properties are held for a period of five years at which time, shareholders vote on holding or selling.
How Can I Contact Property Partner?
UK Tel: 020 3696 5600
When Did Property Partner Launch?
Are They Regulated?
Yes, by the UK Government’s Financial Conduct Authority #613499 under interim permission. FCA regulation is nothing like the FSCS (Financial Services Compensation Scheme) that covers consumers from bank failures. The FCA does have the ability to pursue criminal action against companies it finds are in violation of its standards, but it’s not a government entity and is funded by the very companies it regulates.
How Do I Sign Up?
Click Here and receive £50 cashback when you invest £1000. (This is a referral link and helps keep this website operational.)
Who Can Open An Account?
Anyone who can pass the security verification checks. No accounts for U.S. residents.
What’s The Signup Process Like?
They run the usual i.d. verification checks to make sure you aren’t a money laundering pilferer.
How Are Deposits Made?
Debit card card deposits (recommended and free) or bank transfers.
What’s The Minimum Deposit / Investment?
Deposits: £50 minimum
Pre-orders on new offerings: £50 minimum
Secondary market shares: 1 share minimum (price varies)
Do I Need Funds In My Account To Buy Shares?
Yes but you can use a debit card for instant funding.
Does Property Partner Offer An Innovative Finance ISA?
Not yet but once Property Partner becomes a full member of the Financial Conduct Authority, it will be able to offer the new IFISA. I predict this should happen sometime in 2017.
How Much Interest Return Does Property Partner Pay Lenders?
Property Partner doesn’t pay an interest rate since investors actually own the properties. They pay monthly rental income in terms a dividend yield. Net dividend yields range from 2-5.8% but can be affected by rental occupancy and delinquent rent payments.
Are Dividends Paid Immediately Or When the Investment Starts?
Dividends are paid once rent is received. It usually takes four to six weeks after the investment closes to receive your first dividend payment.
When Are Dividends Paid?
Fifth of every month or the following business day on bank holidays.
Am I Lending To Property Partner The Platform?
Neither. You own shares of each property you invest in. Each property is held inside a separate SPV Company which is registered at Companies House. Property Partner is more of a crowdfunding website than a peer to peer lending company.
What Are the Fees?
Share buyers pay a 2% one-off fee of funds invested into a project (new and secondary market investments). Share buyers also pay a 0.5% fee which goes to the HRMC for Stamp Duty. There are no fees for selling shares.
Property Partner charges 10.5%+VAT (total of 12.6%) of gross rent for management and rent collection. Other fees are added to the property acquisition including mortgage origination fees.
What Are The Length Of The Investments?
Is There A Secondary Market?
Yes. Investors can buy and sell shares at a price of their choosing, including at premiums or discounts.
There’s no charge to sell shares on the secondary market. Share prices are determined by independent monthly valuations and buyers are always offered the cheapest shares first. The secondary market for selling can be somewhat stagnant at times, so don’t rely on being able to quickly offload shares, even at a discount.
Property Partner also has a bid / offer option on the secondary market. This is where you can bid a price you are willing to pay as a buyer, or offer a selling price you are willing to accept as a seller. It’s an interesting concept but it does complicate the once simple secondary market.
What Are The Main Risks?
Platform failure: If Property Partner fails, there are many unknowns as to how investors would really fare. Property Partner states each investment is individually ring-fenced outside the platforms assets and liabilities and uninvested funds are held in a segregated bank account. Since investors own property shares held within an SPV Company, in theory a platform failure wouldn’t be catastrophic. How administrators would wind up Property Partner’s affairs and continue to collect rental payments is anyone’s guess. Let’s hope we don’t get to find out!
Tenant defaults: If tenants don’t pay rent, then investor returns would suffer. You rely on Property Partner’s ability to implement quality management and attract quality tenants. No issues in the properties I’ve invested in so far.
Mortgages: Property Partner sometimes acquires properties using mortgages. Mortgages increase investment risk because if Property Partner don’t make the payments on the investors behalf’s, the banks could repossess.
Calculation errors and unpredictable events: There are so many unknowns that go along with landlording. If Property Partner miscalculates expenses or valuations are incorrect, investors may lose money. Tenant property damage cold also reduce returns.
Property market downturn: Property values could decrease and be worth less than they were purchased for. Property Partner is heavily invested in London, a market considered to be on the verge of a bubble. Having mortgages on properties also increases risk during a downturn.
Sector specific: Being 100% in the real estate sector is risky should a downturn occur.
Is There A Provision Fund?
Property Partner withholds a repair fund for each property for future use.
What Happens If Property Partner Goes Bust?
Investors property shares are ring-fenced and held separately within SPV’s. Any uninvested funds are in a segregated Barclays account. In the event of platform failure, third party liquidators would be appointed to manage the properties “in accordance with terms of the investments”. All uninvested funds would be returned to investors.
How Is The Deal Flow?
Property Partner has a consistent flow of new property deals with one or being offered at a time. Recently they have been offering geared (mortgaged) apartment blocks. Since opening in early 2015, Property Partner has offered 150+ property deals with a total investment of over £20.5m. Impressive!
THUMBS UP FOR PROPERTY PARTNER:
You’re Investing in Property
UK Property has always been secure investment. Property Partner has a very experienced team who are able to locate quality investments. I believe this is a relatively secure investment and in the worst-case scenario, rental dividend payments should partially offset any potential property price declines.
The market is great for buyers trying to diversify their holdings or new investors who are building a portfolio from scratch. Selling on the other hand can be slow going so plan on holding any shares you buy long term unless you are willing to sell at a steep discount.
It is possible to buy a single share of a property which helps when reinvesting dividends. Property Partner’s low minimum makes it easy to diversify across many properties.
Auto-investing alleviates some of the headaches and hassles of manual investing. After an initial lump sum investment, a monthly contribution amount can be set and Property Partners invests the contribution into a minimum of five properties:
Auto-invest allocates your funds into the next upcoming five properties regardless of when they occur.
Personally I don’t use auto invest as I like to pick and choose which property shares I buy but if I wanted to save time, I’d consider using it.
Property Partner offers pre-funding (email notifications are sent) to investors prior to new properties being released. Depending on the size of the deal, allocations are given to investors in equal amounts. Sometimes it’s possible to receive 100% of your pre-fund allocation but it all depends on demand and supply and it’s difficult to predict. If you’re allocated more shares than you need, you may not be able to sell the excess on the secondary market for plan accordingly. There are currently no pre-funding limits.
The properties are the security. Nothing better than owning brick and mortar. All properties are owned by an SPV which can be viewed on Companies House. Some properties do have partial mortgages on them which Property Partner acquires.
Deposits and Payments
Property Partner allows debit card payments for instant deposits at zero cost to investors. Rental dividend payments are deposited into your holding account and I have always been paid on time. Withdrawals to your bank account are fast and easy.
Decide how many shares you want to buy or sell and the information is laid out in a concise manner, including any fees:
With 150+ properties offered since launching, the deal flow has been excellent.
Every property you invest in will pays a rental dividend each month, as long as rent is collected.
Possible Tax Advantages
I usually don’t discuss tax in the reviews as everyone’s tax situation is different but Property Partner may offer some of you certain tax advantages using the HRMC’s Capital Gains Tax allowances. Please consult your tax professional for more advice on this.
THUMBS DOWN FOR PROPERTY PARTNER:
Low Dividend Yields
Compared to competing peer to peer lending sites, Property Partner’s estimated returns are on the low side. Property Partner estimates returns will be in the 13% per year range but I can only base returns on dividend yields as future valuations are speculative. Current dividend yields range from 2% to 5.8%. Any capital appreciation will be a bonus but isn’t guaranteed. Investments may offer tax advantages for some people.
Gearing / Mortgages
Property Partner started offering deals in which they secured loans of up to 60% to acquire certain properties. This results in higher dividend yields for lenders but increases the risk and purchase expenses.
One of the greatest risks to lenders is we are relying on Property Partner to make the mortgage payments. If they don’t pay the bank, the bank forecloses on the property and investors could lose everything.
Mortgages always increase risk. With future interest rate rises a certainty, it remains to be seen how Property Partner will address the mortgage situation. Personally I think Property Partner should stick to allowing investors to fully fund properties with 100% cash. You can read more about how Property Partner addresses leveraging here.
The Fine Print
One very important terms that you should be aware of (taken directly from Property Partners website):
“It is possible that a cost is incurred that is larger than Gross Rent, and may be unexpected and also uninsured. In such a scenario Property Partner reserves the right to take out a loan which is secured against the property, to fund the expenditure. That loan is repaid from Gross Rent, and this impacts the investors’ returns accordingly. If this situation were to occur, the matter would be communicated clearly to existing and prospective investors alike in a clear, fair and transparent manner.”
Basically Property Partner can take out a loan on any property it chooses without investors consent. This term isn’t ideal but I assume Property Partner has to include such a term to cover their bums in worst case scenarios.
Five Year Investments
Five years in crowdfunding / peer to peer lending can feel like a lifetime. No-one knows how these property investments will pan out after five years and obviously there is some speculative risk that goes along with investing through Property Partner. I’m comfortable with the risk level but only time will tell.
As time has progresses, I like Property Partner more and more. The experienced team appears to run a tight ship and I particularly like the analysis they provide on each property as to why one should invest. Currently I own shares in over 25 properties as I believe diversification is key. I first invested in a few centrally located London properties, later branching out into other locations such as Lincoln and Brighton. My general view is that the London property market may be overheated so location diversification is important. I view Property Partner as a long term investment as I plan on holding until the end of the five year investment period.
Partner Review Conclusion
My experiences investing in Property Partner investing have been encouraging. There are some definite pro’s and con’s. For those looking for more hands-off investing, the auto-invest feature may be beneficial. The low minimum share pruchase amount will suit people of all budgets and pre-funding means one doesn’t ave to be online at the time of new property offerings. Projects are held for a period of five years which makes it a longer term investment. Despite the downsides, I will continue to invest through Property Partner. I hope my Property Partner review will make your investing decision easier.
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** This Property Partner review is for information purposes only and should not be regarded as investment advice. Opinions expressed in this Property Partner review are current opinions based on my own personal experiences. Peer to peer lending contains risks so never invest more than you can afford to lose. **