sand2880
Member of DD Central
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Post by sand2880 on Oct 4, 2017 13:32:06 GMT
Came across this site, FCA registered and interesting model, however costs seem a bit high for me to consider but thought I'd put a link on here for anyone interested. £500 minium per development, SPV structure, residential developments, expected term of upto 36 months with targeted returns of 20%+ over the project term. Costs: 5% initial 15% of profits Link below: Homegrown FAQsIf anyone has joined this, would like to know what your own thoughts are of the site. Cheers |
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macq
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Post by macq on Oct 4, 2017 15:21:36 GMT
like the way they say 2017 crowdfunding platform of the year award - then in brackets finalist but don't say who gave the award and all this on 7 projects.So guess they are doing something right.
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Post by buttchopf23 on Oct 4, 2017 15:49:32 GMT
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am
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Post by am on Oct 7, 2017 0:48:51 GMT
Having glanced at their web site (they let you see deals, if not the details, before registering - I wish more P2P platforms did that) I have some immediate reactions.
1) The projected annualised rate of return is 12% upwards. As equity holders are at the end of the queue when things go wrong, this means that the projects have to be better than projects at the likes of LY and MT and COL which are paying 12% upwards on debt. If things go badly wrong debt holders can still expect a decent proportion of their capital back; equity holders can expect to lose the lot.
2) All the properties funded so far are in London. IMHO opinion that makes them riskier; at FC I had a policy of not investing in London PDLs/bridges, unless the LTV was seriously low.
3) It depends on the debt/equity split, which I presume that you can see after registering, but the proportion of funding being raised via Homegrown looks to be small, so your right to vote as a shareholder in the SPV may be meaningless. Homegrown seems to be taking larger amounts in newer loans, so they may be fitting the amounts to lender demand.
4) How are the projected returns calculated? I am assuming it's after corporation tax, but is it before or after Homegrown's fees? (And is the 5% origination fee charged to the developer or to the lender?) Is tax charged on the profits before or after Homegrown's fees? Are fees charged against capital or dividends?
5) The secondary market valuation under simplified assumptions starts at 95% of your investment and increases linearly over the course of the term to the expected total return, so at the projected annualised rates of return you're looking at a loss for the first 5 or 6 months (unless the origination fee is charged to the developer). (Not as bad as UTs twenty years ago, where you paid the first year's profits in fees.)
Summary: this is a class of projects for which there should be a place in the P2P marketplace (the nearest equivalents that I'm aware of are platforms like PropertyCrowd who are doing refurbs), but I'm not sure the risk/reward adds up. One would need to take a closer look at project details to make an informed judgement.
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