Whether or not you agree that real estate should be viewed as an asset class, as opposed to simply a much-needed way for everyone to put a roof over their head, there’s no doubt that the sheer expense of investing in property creates incredibly high barriers to entry. Home buyers often talk about the difficulty of ‘getting a foot on the property ladder’, and investing in real estate for rental is no different.
Enter Property Partner, a London-based startup that lets anybody invest in the ‘buy to let’ market (as it’s called here in the UK) starting from as little as £50. Today the company is disclosing new backing to help expand across the UK and beyond: a £5.2 million Series A round led by Index Ventures. Existing investors, including Octopus Ventures, Seedcamp, and Ed Wray (co-founder of Betfair) also participated.
Launched in January 2015, Property Partner currently lists properties in London and the South-East of England, for anybody to invest in. As well as a share of each month’s rent, there’s the potential upside when the property is sold. And, similar to a stock exchange, Property Partner operates what is essentially a secondary market, letting you sell your shares in a property to another user of the site if you want to exit before five years.
“Property Partner was born out of my own frustration,” the startup’s founder and CEO Daniel Gandesha tells TechCrunch. “Time and time again I wanted to invest in residential property in a particular area. I would see nice coffee shops starting to pop up, steady increases in the number of estate agents setting up shop, regeneration plans being approved, but still didn’t make the step.”
That’s because, says Gandesha, buying a residential investment property is “more like starting a business than making a simple investment”.
“It needs lots of up-front cash, a mortgage that leaves you needing to put extra cash in if anything at all goes wrong, and there’s a huge amount of hassle that goes with it all. Our purpose is to solve these problems, starting with what the investor wants,” he adds.
To date, the startup says more than 1,000 people have invested sums ranging from £50 to £50,000 in homes listed on Property Partner’s platform. In addition, it says there’s been “significant activity” on its ‘resale’ market, citing the first property to be crowd funded via the site, a house based in Croydon, which it says has seen more than 50 per cent of its shares traded after it was purchased.
Meanwhile, Property Partner itself makes money through a one-off transaction fee of 2 per cent charged on the purchase of your investment (not annually recurring and no charge on disposal), and an “industry standard rate” of 12.5 per cent (plus sales tax) of rental income. The latter is designed to cover the cost of advertising, letting and managing the property.
When asked about direct competitors, Gandesha says that no one else is addressing residential property using what he calls a stock-market model. “There are one or two early-stage residential property crowdfunding sites in the UK and sites for crowdfunding property developments in the U.S. (e.g. FundRise, Realty Mogul), but our model is globally unique in that it allows you to exit your investment… whenever you like.”