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Interview with CrowdToLive CEO Anouar Adham

What is CrowdToLive?

 CrowdToLive offers a new way for would-be homeowners and buy-to-let investors to realise their dreams of property ownership. To do that, our innovative platform leverages the power of crowdfunding.

Our buyers – we call them Champions – use our service to take a minimum of 5% equity in a property, while professional investors take the remainder. Champions pay inflation-linked rent on the portion of the property they don’t own. Both Champions and investors share proportionately in any capital appreciation when the home is sold. 

This co-investment model helps align the interests of tenants and investors, while also mitigating many of the issues that have made institutions wary of the UK residential market up to now.

Who are your Champions?

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Like many of the best ideas, CrowdToLive was developed to solve a problem. We wanted to address the immense difficulties facing certain types of buyer when they seek a home of their own or wish to access rental yields from buy-to-let properties. 

Such buyers include the self-employed, first-timers, Muslims, expats, and NHS workers. They are the Champions – but we also cater to anyone with property-owning ambitions.

What are the buy-to-let issues that CrowdToLive helps to mitigate?

There are five main ones

First is every landlord’s constant worry, the so-called ‘void period’ when, following a tenancy termination, the property is unlet for an indefinite time. With CrowdToLive, that uncertainty is lessened because every tenant signs a five-year lease.

Secondly, we sidestep the bulk of estate agency fees. Tenant-finding fees, inventory fees, property management fees all add to the landlord’s expense ratio. 

In recent years, moreover, changes to the law have made it increasingly difficult for agents to charge fees to tenants, leaving landlords to carry that additional burden. 

With CrowdToLive®, in contrast, the investment property comes fully-let for a minimum of five years. 

Besides, our management fee is only 2% of the rent, compared with estate agents’ typical 12% levy.

Thirdly – and this is a key attraction for our professional investors – most expenses are insured and insurance premium are paid by the Champion. 

Any landlord’s nightmare is a tenant who stops paying rent while mortgage payments continue. CrowdToLive® is different. We are an all-equity platform, so the property is debt-free: no mortgage, no lender lien of any kind, no interest payments – hence, the attractions of our service for Muslims.

Moreover, Champions pledge their equity against unpaid rent and fees arising from any breach of the tenancy agreement. If we can’t resolve that breach with the tenant within an agreed period, we’ll start an eviction process. Once the property is vacated, we will sell it and the proceeds of the Champion’s equity will go to pay any outstanding rent and fees. This limits the cash-flow risk of unpaid rent.

Finally, there is the long-standing problem that property is an investment with a very high barrier to entry, given the average cost of £251,500 according to the UK House Price Index for end-December 2020. That compares with a minimum investment of just £40,000 on the CrowdToLive® platform.

Where are the properties located?

CrowdToLive properties are located all around England. However, our main current focus is on the larger cities, where the available selection of properties is wider and there’s good liquidity if we need to sell.

What is the CrowdToLive® exit procedure?

Champions have the option, but not the obligation, to buy more equity in their property every three months, with the percentage movement in the UK House Price Index as the basis for valuation. That provides the exit path for our professional investors.

Investors can also sell their equity at any time but they will first need to find a buyer – for which, however, there’s no guarantee. After five years, the property will be sold if the Champion does not want to renew a tenant’s five-year lease or if a majority of the professional investors want to sell the property.

What level of return is expected?

CrowdToLive targets a rental yield of 5% to 6% annually, net of expenses. It is worth noting that Champions and professional investors also share any potential capital gain when the property is sold. 

What are the main risks?

As with any investment, there can be no return at all unless some risks are taken. First of all, the value of the property could go down. 

Secondly, there is a liquidity risk because willing buyers may prove hard to find when it’s time to sell. 

Due to those risks, the product is only available to Sophisticated and High Net Worth Individuals.

However, the key to minimising such risks is diversification. No-one should invest all of their savings in property alone. It should be just one element in a balanced portfolio of complementary assets. 

Taking that one step further, CrowdToLive® could actually help to reduce the risks of property investing because its low minimum investment may enable buyers to hold a diverse range of properties (houses, flats, new-builds, conversions, etc) in different locations.

Our website outlines these and other risks. Go to: https://crowdtolive.com or click here to read our investor guide.

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