In today's episode we talk about how the way people invest has changed over the past 10 years. With one form of investing exploding in popularity, Crowdfunding. Make sure to tune in to find out what CrowdProperty is and how to use the platform to fund projects with provide solid returns.
The way that people invest has changed over the last 10 years due to the advancement of technology. Crowdfunding has exploded in popularity because it blends the use of this technology with the ability for investors to feel much more connected to the projects that they are investing in. CrowdProperty is a company that spotted this area of growth but also the challenges that developers were experiencing around 2013 with traditional sources of funding. The result is an easy to use platform which allows investors to fund projects which have undergone rigorous due diligence and provide a solid return on investment.
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Unknown Speaker 0:01 The purpose of wealth talk is to educate, inform and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.
Christian Rodwell 0:19
Welcome to Episode 65 of wealth talk. My name is Christian Rodwell, the membership director for wealth builders. And I'm joined today by Mr. Kevin Whelan, our founder. Hello, Chris, How are you this morning? Very good. Thank you, Kevin, good to be catching up with you again. And back with another episode this week. And this week, we're looking at a topic, which is crowdfunding and specifically crowdfunding around property. But if you don't mind, Kevin, talk about crowdfunding and the popularity and maybe some of the reasons why it's grown in popularity over the last few years.
Unknown Speaker 0:52
Yeah, I mean, I think there are a number of factors that have conspired together really to to give The whole concept of crowdfunding, the concept is born out of some basic, you know, economic realities, that when you get a love affair with property like you have in the UK, you know, you've got a huge desire for people to want to invest in property, which is where Mike will talk at length about and, and you've got the idea of people wanting to be more connected to their investment rather than the sort of disconnection that often appears when people simply invest in the market. And so the whole concept of not not just crowdfunding for property, but crowdfunding generally has been born out of, you know, the use of technology, the ability for marketing messages to get out there so people can identify with what they want and that that burgeoning of the technology, plus people choosing what they want to see their money investing in rather than In some homogenous market, they get to be very specific about what they like and what they don't like. I think it's completely changed the way investments are done, Chris, and I think you'll hear in, in Mike's voice, the enthusiasm that He has for the subject matter.
Christian Rodwell 2:17
So Kevin, what's your association with Mike?
Unknown Speaker 2:20
Mike is you know, great guys you'll tell and he was connected to me by my good friend and property expert and really somebody who I resonate with very, very fully Simon Lucci. So Simon's Lucci is the founder of the crab property business. And Mike is the CEO and Mike's done a sterling job in really giving that the full on energy that that business needed. And as you'll hear from Mike, you know, it's done incredible things. And, again, we resonate with what they do, and I'll talk about why after we've had a chance to listen to him. Okay,
Christian Rodwell 3:00
let's head on over to our conversation with Mike Bristow. Mike, welcome to wealth talk today. Thank you. Great to be here. Very good. So Mike, for those listeners who perhaps have not heard of crowd popsie and don't know your story, would you mind just giving us a bit of background please?
Unknown Speaker 3:14
Sure, certainly. Well, we set up our crowd proxy actually in 2013. And we've been lending since 2014. What we set out to do as a business is set up a marketplaces serves two big pains in the marketplace. Firstly, property developers really struggled with traditional sources of funding for that property projects. You know, mainstream financial services were much more commoditized and walked away especially from SME small and medium sized developers doing property projects. Okay. So we said, knowing that ourselves and experiencing ourselves will build the best lender in the market and attract the best projects. To apply for funding from us, and we'll provide a brilliant service for that. And, and, and then and then we sort of thought about, well, where does the capital come from? Okay. And so we looked at the peer to peer lending model crowdfunding model to say, Okay, well potentially, we could, once finding great projects, we could invite people to participate, okay? And so rather than individuals say, you know, going to their IFA, and then going to putting money into a fund, then that fun breaking it into a dedicated property fund and that property fund finding a broker and that broker, finding some property developers, all of which have cost and profit, what we'll do is build a more efficient system to get those individuals that participate, a better share of the returns. And so our we work very, very hard on doing is a VA quality See if the property projects we find in the curation of that in that you diligence of that we'll probably touch upon that. And, but but but match the capital is technically matching the supply and demand the capital as efficiently as possible. And that means that of the average, that's a very, very simple terms, a borrower might pay 10% interest rates, okay? Well, we give the lenders, the investment vessels on the platform 8%. Okay, so they're getting a much better deal, a much better share of those returns. Because we've disintermediated the whole system. We've matched it more efficiently. We've got purpose built systems. And that's great for property developers with a far better service and investors with a greater share of those returns, backed by all of our due diligence and the security we didn't put behind that touch.
Christian Rodwell 5:55
Yeah. You asked for in that introduction, when I'd notice That's fantastic. And I know it's, you know, been hugely successful since launch. So, you know, give us an idea, Mike of the number of deals and some of the, the figures that have been achieved so far.
Unknown Speaker 6:12
Sure. So literally this week, we've just gone through a few landmarks. So So firstly, we've now we've now funded a threat the building of 1000 homes in the UK, which which we think is a great outcome. And, and not only are we helping housing on the supply and the housing crisis in this market by getting finance out quicker and better, okay, but right now, what's really important is that that is actually spend in the UK economy, on labour on materials on services in Building and Construction and hey, we need that as a country right now. We need to be building so yeah, thousand homes, they have a worth a total of 170 million pounds. We've now lent over 75 million. And we've been lending since 2014. And we've got 100% capital and interest pay back track record, and lending for six years into the property development space. Nobody else in the UK market has that track record. And that's including, you know, banks and non bank lenders, etc. and some do it really, really well. And we've got over 10,000 investors on our on our platform. And you put all of that together. And it's quite exciting because our last 20 projects actually during lockdown have all sold out in under a minute. I think our average is now 41 seconds over the last 20 projects since lockdown. So we've been out there funding in the markets, when the whole development finance sector has packed up because they got very concentrated institutional source of capital. We have institutional source of capital as well on our platform. Got a very diverse mix, that means we can be reliable backers of property projects through any markets in a very prudent way. So, all of that, you know, they're they're getting to quite interesting numbers, but I mean, lips, it's just the start. We, you know, we see huge growth trajectory on top of the platform, we've built a scalable business that we've built and all of that tech infrastructure, data analytics, and our brilliant team. We know that we could be doing 10 times that, that lending interest a few years, huh,
Christian Rodwell 8:37
yeah, I want to pick up on that then Mike, you know, really, I guess, looking at the sort of fundamentals of, of a business here in the top there about systems using technology and, and teams. So you're really leveraging to be able to scale now. But initially, you have to identify problem, don't you, you have to identify a need and that there's a hungry market. And that's obviously the time was was great back when you launched? And I guess, how have you seen the technology advance even in that space of time? You know, since 2013 14, how's it helps you to kind of grow and adapt and keep, keep evolving?
Unknown Speaker 9:15
Yeah, great question. So, you're right. The best way that businesses starts is when the founders experience the pain themselves. And they have clarity of vision of what the better solution is. And that's exactly what we have. And, and so, so at the start, you know, we listed, so I'll talk a little bit about both the borrower and the lender site. And we listed our first project in 2014. And it took 10 weeks to fund on our platform. And that wasn't very helpful to anyone. But you've got to start somewhere. Okay. And, and in with that first project, you know, we were, you know, we hadn't built out all of our technology. So some of that Was it you know, the back end was right, you know, lists of investors in spreadsheets and transferring funds, you know, in and out of our client account, obviously client account, but but manual transfers and, and quite a rudimentary platform where, where we'd get notifications of people wanting to participate in a project. Right. But over time, I mean, yeah, we've got a team of 30 to a third of that team has AI tech engineers. And we have built in house, a brilliant, brilliant technology platform, okay. It's really important that it's not only in the house, as in as in, they are employees of the business, but but they're not employees of the business in Ukraine or something that you know that in our office, okay? And that absolute control over the technology, okay? underpins, you know, how we serve our customers best Okay, and this market, especially on the borrower side of property developers are wanting to wanting to raise funding for their projects. Yeah, that banks had entirely forgotten that, that there's a customer and the customer has needs. And if you serve those needs, well, they come back and they tell their friends and you grow it, you know, it really was just just a forgotten market. And, and that's what we built so consumer so customer centric, in everything we do, we do a load of research on customer needs, on their feedback on their their priorities. And, and that's by borrower side and lender side. On the borrower side. We also have our own expertise and experience in as having been in borrower's shoes. Of what are the kind of things that they'll want to build. But on the lender side, for example, and, you know, we've done things When projects started selling out in seconds, a year and a half ago or something, and we got complaints. I mean, even my mother complained that she couldn't get into projects, because she could type quick enough to get everything in, you know, we get a lot of complaints of frustration around that. So overnight, and, you know, because I, our tech team is here, and it's all and they're awesome. And we, I sort of went out and bought the common currency of the tech developer, which is pizza. And, and, and we sat here overnight, and we just built a built pledge limits into our into our tech system and rolled them out overnight. Okay, to enable people the next day to get into projects. So we listened and we adapted and we delivered and we delivered quick. Yeah. And so and then you extrapolate that over everything that we built and everything we've built into our proprietary systems. You know, something like the auto invest algorithm that we've got is incredible. It's so complex. And it delivers such meaningful value to investors who don't want to necessarily pick individual projects. They say, Well, wait a minute, crap property, listing this project, they've seen 3 billion pounds worth of projects, and they've only ever funded 75 million that, you know, those, they put a great amount of scrutiny onto it. So what I want to do is actually spread my investment over lots of projects, but I don't want to always log in at 10am and have the try and buy Glastonbury tickets bumfights. And so we delivered that for lenders as well, that enables people to spread across a load of projects in a stress free and easy way. And diversification is a very good and important investment strategy. Yeah,
Christian Rodwell 13:47
yeah. Yeah. So good use there obviously, of leveraging technology and and the team very important. I think. We always talk about wealth builders about education, support connection, and I think often when people are investing They're not necessarily very connected to the investment. So I guess that's, you know, one of the differences is that people really see the projects, they get to understand the people behind them as well.
Unknown Speaker 14:10
Very much. So it's really important properties is a people business where everything is a people business. Yeah, but people forget it. And, and, and, you know, you can over tech things, what you want is tech to be a brilliant enabler of an exceptional service. And that exceptional service is, for example, on the lender side, face to face, you know, people can actually phone up and speak to humans in our business. It's a bizarre concept in it in modern modern day financial services. And equally, borrowers when we speak to them a lot and an hour, a human expertise in the business around property is really important because we can add value to those projects through the process. And so, you know, those elements are I just Just critically important to building a well rounded customer facing proposition. But you're right, one of the great things about property, okay, is that everyone has a view on property. Okay. And, you know, it's a, it's a, it's a national passion in many ways. And that's why for years, we only had until things started selling out very, very quickly, we only had the option for people to log on and actually actively select projects. Okay, I like that one. I don't like that one as much and, and the reasons for that can be multifold, they could be in the detail of the numbers, they could be in the planning content, it could be in the pictures, it could be in the end product or the or the market is being built in. But people have a view and they like to engage in that. Okay. And, and then we saw the pattern on the platform in our customer base. That was will some people would actively select and would go in, you know, that one, not that one, that one, not that one. Some were just logging in and unplugged. across all of them to diversify, maximum, and that's when we introduce or to invest again, because we could spot that customer need that customer demand. So developed it for that.
Christian Rodwell 16:10
Yeah. So Mike, you're, you're well aware of the wealth builders Seven Pillars model and we talk about generating recurring income from as many of those pillars as possible. And I think many of them kind of crossover with with crowd property. And one of those, of course is pensions. And many of our listeners will be clients of our property I know and perhaps they may be using their pension. So could you just explain to people how that works?
Unknown Speaker 16:38
Yeah. So So the best example and the most flexible type of is the SAS pension which which, and we've got millions of pounds worth of pension money capital on our platform. Okay. And when we understand well, what's the customer driver behind that? Is that they say, right, I've got a I've got a pension pot. I've got great decision. Question under the SaaS structure, which makes it so, you know, such a brilliant product. And they look at it and say, right, okay, I might put some quite speculative high risk, I might work with some, you know, for example, some property developers or I might, you know, directly and I might do some equity investments or oil or whatever. But if you think of a spectrum of risk, especially given returns, and what we see is that these large proportions of people SAS pensions, they turn to us and say, Look what I really want, okay, I like property. Unlike residential property, you have a way your platform can enable my suspension to invest in residential property projects. And I want to diversify that. And I also want to outsource all the efforts of selection. Okay. And this is really important because I meant I mentioned earlier, we've seen 3 billion pounds worth of Apple And we funded 75 million. Okay, we are very, very critical on projects and we pick the best ones. Okay. And we do that with our brilliant team, our tech, our analytics, our data, our data learning, and all of the amazing things we built into our system. So that you don't have to. And, and so you can be assured that that relative to billions of pounds of project anything we list is right at the top of quality level. And so, so, they so people love that. Okay, firstly, secondly, there's then the important point of capital preservation. Okay. And, and we see that as a major need or requirements certainly people with with larger pension pots. And all of our lending on the platform is first charged secured at modest loan to value rates and if I go Little bit further than that, okay. We, we actively select projects that serve that where the end product will be for domestic undersupplied housing. Okay. In liquid markets at mainstream price points, so our average pounds per square foot exit prices 290 pounds mainstream stuff, it's not, you know, crazy sort of, you know, prime central London You know, you're so sensitive to foreign exchange rates no no undersupplied domestic demand that will sell and having during demand. Okay. So that's the capital preservation sides and then there's the will getting better returns and, and, you know, as I said earlier, the important thing is you get a bigger share of the return, you know, because we've built the efficient system and you got a better, a better proportion, okay. And those elements together Make this a really powerful product for SAS pensions. And just adding finally to that one of the final developments of our auto invest algorithm was actually working with pension administrators to make sure that we could structure the auto invest pension product really, really well and appropriately given all the regulatory requirements of ring fencing, etc. So we now have auto invest for pension, and auto reinvest for pension. And what that means is that you could put money into a pot and relatively passively that would be diversified across all completely passively diversified across many projects. And then when they pay back, they will be auto reinvested into projects, compounding those returns. So actually you can benefit from from relatively easy handle stress free rolling returns from many, many projects with good diversification principles. Hmm. Now, Mike,
Christian Rodwell 21:05
I'm gonna put you on the spot, maybe here, but we're obviously coming out of a difficult period at the start of 2020. You've been, you know, in there seeing really what's happening across the market? And how do you see the next six to 12 months? And what are the signs out there for investors?
Unknown Speaker 21:23
So I look at this from a few ways, and I thought quite a lot of this. So we and our analysts and myself personally as well get right stuck right into the detail of the analytics around what we think about the market forecasting thing. I'm going to assume, and rather than dwelling on GDP, I'm going to zoom bit more into property and particularly residential property market. So I look at this in two ways. Firstly, is there a correction waiting to happen? Or has there been a correction waiting to happen? Because we saw that in 8990, we saw that in Oh 809 years of evil A real growth. So inflation adjusted growth, okay years of growth, that basically a shock then says, actually, let's correct those prices. Right. Interestingly, in the current market, if you inflation adjust on an average basis cross wit, with 17% below our Oh, a, oh, seven prices right now, when inflation adjusted, okay, we're currently on average, the same property prices as 2015 2010 and as 2004. Okay, so my view is there's not a load of growth that needs to be corrected and wiped out by a shop, which often happens. The second bit is then it's a supply and demand argument. And the big big factor on the demand side will be about unemployment and how that plays out. But most importantly, this is different to 809 because no 809 loads and loads of people needed to say Some people need to sell in any market, loads of people need to sell. And then the banks went repossessing everything and needed to sell. So there's loads of supply into the market, and very few people could buy, because the debt market caused the whole thing in the first place and was in was in was in disarray. In this market, it wasn't caused by financial institutions. And what we will see is lending come back into the market quicker. Those people that need to sell will still list. Those people that have discretion over timing will hold until that debt market comes back. So yes, we will see drops in prices reported there'll be on low transaction volumes, but I see the market recovering to be fairly stable, you know, relatively quick, certainly not the 83 months it took to recover in Oh 809 in nominal prices, and the final point
Unknown Speaker 24:00
on on on that is, is that?
Unknown Speaker 24:05
You know, we're not going to see years of runaway capital growth ever again. Yeah, that happened for many, many different reasons not least because of the just higher LTV levels in the debt market getting really, really competitive for investment monitors. Well, I think we're going to see is much more reduced volatility and smoother capital growth. And, and, and, and that is what we're making sure we're putting products and funding product to the best and most liquid points and under supply points in that in that market. So slightly complex answer to that. But that's sort of my view of how the how the residential property market will play out. And
Christian Rodwell 24:50
right now, it's very insightful. And before I let you go, Mike, what is the future for crowd property look like?
Unknown Speaker 24:58
I mean, it features really excited Okay, and and it's really exciting because we can do more and more and more of the same. Okay? Because what we're doing really works and it's really in demand by both quality property professionals doing quality projects, and by investors. And our and we have an absolute focus I have a phrase that I often uses is you don't see Tiger Woods playing much tennis, okay, if you focus you become world class. And we our absolute clear focus is to be world class on the borrower side world class on the lender side, put those two together. And, and, and just do brilliantly by customers, okay, through any markets. And on that basis. There's a huge future for crowd property and I can see I can see the business lending tenfold at the amount that we're lending now. I wish you
Christian Rodwell 25:53
all the best with that. Mike, thank you very much for sharing with awesome wealth talk today.
Unknown Speaker 25:57
Thank you.
Christian Rodwell 25:59
So like it great entrepreneur there, Kevin, we heard how Mike really spotted an opportunity back around 2013. And it's all about understanding your market. And obviously, Mike really did understand property market and saw that, you know, people were facing challenges around funding and that was obviously the birth of crowd property.
Unknown Speaker 26:18
Yes, all good business ideas come from, you know, a recognition of something that's not right in the market. I mean, that is the essential skill, Chris, that we help people identify, don't we in the in the wealth builder community, this idea that you can recognise what what are the frustrations, we call them the key frustrations that are happening inside an industry and what can you do that just recognises them and then creates an ethical but a logical solution. And I think Mike and his team have done an outstanding job in doing that. So let's just touch on that for a moment, Chris on both sides of the fence. So on the one hand, You know, if you look at what was frustrating developers, it was getting access to ready supplies of cash, with, you know, a single point of underwriting. And in a way that would, would really work. So, you know, there's nothing worse for a developer, then the the promise of money, the promise of funding because their projects do not become reality homes do not get built, unless they're funded. And there was challenges, you know, post 2008, nine, in the credit crunch. And that problem hasn't really, fundamentally changed. There's still challenges there. The second, if you think about it from an investor viewpoint, investors have become more switched on, they become more technologically friendly, and they look at opportunities and if the only thing they ever saw was an investment in the stock market, and that was frustrating them now They can invest in projects, they can see, they can check them out on the crowd property platform, they can look at the due diligence to see what they've done. And let's not forget here, these are investments with first charge security. You know, first charge is the highest ranking charge you can get. In other words, if the developer fails to pay crab property have the legal ownership of that site, or that development or that piece of property. And that's incredible security. So when you combine then great security and a return and he's talking about returns of 8%. I mean, you can't get that with consistency in the stock market. So so I think when you match them both together, you know, he called it used a very long word, Chris, I don't know if you picked it up, but he called it disintermediation. And that sounds like a bit of a mouthful, doesn't it? But what it means is, they've removed the need for all the layers of costs and charges That would normally exist in that situation and almost plugged the developer into the investor with them acquire property operating at the centre in this kind of a hub. And you remember how I talked in our, to our property community, not our property committee, your business community, Chris, and talked about the need for being able to sort of see a gateway, how you connect people. So it isn't always the service you offer. It's the fact that you recognise the problem between two groups, and you make that connection and that's what they've done so elegantly here acquired property. And we talked about the wave of wealth the five different stages and due diligence came up with the conversation with Mike obviously rigorous due diligence, we know how important that is when it comes to any kind of investment and no better diligence really then the security of first legal charge. And I think, you know, they did mention have many property opportunities. They look at and the number of cases that they accept, you know, that's pretty rigorous. You know, so I think investors can be reassured, at least as far as they can be by checking that DD, remember, you must check your own DD. You can't rely on anybody else's. That's important as we know, however, you know, they do publish that DVD and you can go and inspect that. So I think when you can combine those, those things, you know, an interesting investment with a decent return and visible and transparent DVD. No wonder they're selling out pretty fast.
Christian Rodwell 30:34
Yeah, and, of course, the ability as well to invest using your pension. So, you know, leveraging multiple pillars here.
Unknown Speaker 30:41
Exactly. And I think definitely, both Mike and myself, we've identified that there's a massive connection between pension investment and investments in property. I mean, in the end, those people who have traditional pensions are really forced only to invest in the stock market. But with the massive growth and I'm proud to be part of that leadership of the concept of the SAS pension, you know, the pension that gives directors the ability to own and control and, and drive or pilot their own pension and invest in what they want to No wonder. This is a very popular investment for, for our SAS holders. And in fact, actually, Chris Mike and I will be sharing a virtual stage soon. There's a conference a national conference held online this year for SAS Alliance. And there's going to be I think there's possibly getting up towards 1000 people registered for that. And when you get the opportunity for those people who are willing to take that control, and good speakers talking about you know, where you can invest and how you can invest and what you diligence you can do and how it's done. Then, you know, that's going to be a great conference and that's on the second of July. It's free to attend. So you know if you want to sign up for that if you're interested in the concept of SAS or you're interested in hearing more from the enthusiastic my Bristow, then tune in to the SAS Alliance conference at SAS alliance.org, I think is the website, Chris, I'm sure you can put a link to that. Anyway.
Christian Rodwell 32:17
Yeah, SAS Alliance. org. And yeah, we'll certainly link to that in today's show notes, as we will to, to our Facebook group for anyone who wants to connect with other like minded people in the wealth building space, and can head over to wealth builders.co.uk forward slash facebook and join us there. So do we have any final final conclusions on crowdfunding, Kevin, and some of the advantages and why, you know, this is a great option for people.
Unknown Speaker 32:44
Well, the other thing he mentioned is diversification. You know, diversification is a key skill and a key part of the whole wealth building process. You know, we teach an advocate the importance of building wealth and multiple pillars and just as you make investments Where you make them personally, whether you make them from your SAS, whether you make them from your business, it's important that you diversify. And while crowd property is a great example, you know, there are other crowd funding sites that allow investments to be made in a whole raft of different ideas as well as property, there's business. So, you know, use use this sort of, I guess, this podcast as a way to think about looking at crowd funding generally, and lots of reasons why people would want to plug investors directly into an opportunity, and go and look at those as well.
Christian Rodwell 33:37
And interesting as always, Kevin, thank you for today. Thank you to everyone for listening, and we'll catch up on the next episode of wolf talk.
Unknown Speaker 33:44
Okay, Chris, until next time, see ya.
Unknown Speaker 33:49
We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the wealth builders membership site to help you create, build and protect your wealth, head over to wealth. builders.co.uk slash membership right now for free access. That's wealth builders.co.uk slash membership