Property takes a liking to crowdfunding possibilities

Property takes a liking to crowdfunding possibilitiesImage Credit: Supplied

Be it funds to expand a property services firm or to do the fitout of a property, the ''crowd'' is where you go to. And businesses are finding there is enough depth in the local crowdfunding space to get what they want.

Homes or Houses, which specialises in UK specific property investments, has just put up its pitch on the dedicated portal in a bid to raise new capital for its expansion needs.

The intent is ''to allow our clients and investors to share in the potential we see,'' said Jackie Fitzgerald, Director at Homes or Houses. ''The monies raised will be utilised to bring experienced staff through recruitment to the business, [and] make further investment into property management software to improve efficiencies. And we intend to look to establishing a UAE office in the future, as this is currently where 80 per cent of our clients are based.''

Homes or Houses' business model is different in the sense that it stays off the well trodden paths when it comes to its investment property portfolio. Rather than areas in and around London, it's offerings are in the UK's northeast, ''from Leeds to the Scottish borders'', according to Fitzgerald.

''What makes this region quite interesting is that property is approximately a third [of] the cost of areas such as London. This allows people to use Homes or Houses to build a portfolio of real estate investments, rather than perhaps buying a single, much more expensive property elsewhere.''

Residing overseas

According to Fitzgerald, ''The majority of the properties are freehold (the investor owns the land too — we only purchase leasehold if the unit is in an apartment block). Once a client purchases a property, what they choose to do with it is up to them.

''Since they will be residing overseas [this is a prerequisite of being eligible to use the Homes or Houses service], many customers choose to rent the property to generate revenue. Others may renovate and look to resell quickly.

''We aim to produce rental income within one month of legal ownership and capital gain can be achieved when the investment is sold.''

The Homes or Houses pitch raised $70,000 (Dh256,900) in its first two hours and has since gone past the $100,000 mark.

Meanwhile, UAE based portal EstateUp recently closed one transaction where it brought on board investors to finance a fitout for a new business centre. Another such proposal is currently being structured, again for a business centre and one located on Shaikh Zayed Road.

''In many instances, the property owner doesn't want to go through the whole process of appointing a fitout contractor and then find the project getting hit with cost and time overruns,'' said Aakarshan Kathuria. Partner at EstateUp. ''We sign a commitment with the property owner and deal directly with a contractor who can stick with our schedule and budget.

''The required payments are then put out to the crowd, whereby they get a low-risk return. This income comes from the future rental income the business centre will generate.''

Future payments

According to EstateUp, the holding period usually extends from six to 12 months, and the returns to investors could be 24 per cent on an annualised basis (with security).

The investors are issued with cheques from the property owner as guarantee of future payments.

In the first deal, two investors came on board with $60,000 for the 6,400 square feet facility in Business Bay. For the second project, the fitout space will be 14,500 square feet that can accommodate 40 plus individual offices. Minimum investment will be set at Dh50,000.

''There are plenty of investors with ready funds, small and substantial, who are willing to seek options other than the traditional ones,'' said Kathuria.

Further down the line, EstateUp plans to introduce a crowdfunding option for 30 medical offices in New York. ''If we do get involved, our target would be to raise $2.8 million and with a minimum cut-off of $500,000.''

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Source: Manoj Nair, Associate Editor,


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