Property Partner, a crowdfunding platform that lets people buy a small slice of a rental property for as little as £50, has raised £15.9 million in equity and debt to fuel growth and launch new products.
Launched 14 months ago, the London-based ‘proptech’ startup has already raised £12.9 million in equity funding in a round led by Octopus Ventures, which was a seed investor in the business. Existing investors Index Ventures also took part in the round, as well as Dawn Capital.
Property Partners has also secured a £3 million venture debt facility from Silicon Valley Bank, raising its latest funding round total to £15.9 million. In a release announcing this news, the company says it will use the money to “expand across the board,” with plans to launch new products for shared ownership and for institutional investors, as well as aiming to expand beyond London.
The business model
Property Partner enables anyone to invest in individual residential property for as little as £50 and so far, 6,200 people have invested £24 million into 166 properties across London.
Property Partner sources houses and developments, negotiates a deal with the current owner and then posts the property on its platform. The company pays the deposit for the sale from its balance sheet and underwrites the deal, working under the assumption that the investors will cover the whole price.
Investors get a proportional amount of the rental income in relation to their shareholding and also benefit from any increase in the property’s value. Independent assessors regularly revalue the properties to adjust share prices. The company boasts an estimated return of 13 per cent per annum after fees.
Proptech: the answer to declining home ownership?
Britain’s home ownership has fallen from a peak of 73 per cent in 2007 to below 61 per cent at the end of 2015 . According to Paula Higgins, chief executive of the HomeOwners Alliance, the nation has a ‘home ownership gap’ of about five million households – people who want to live in their own home, but have to rent instead. “Buying your first home is no longer a joyful rite of passage for young adults, but returning to being a privilege of elites,” she said.
This is where businesses like Property Partner come in. Founder Dan Gandesha started his business out “frustration” at the market’s barriers for buyers. “The reality is that buying a residential investment property is more like starting a business than making a simple investment!
“Hurdles include a huge up front cash requirement, a mortgage that leaves you exposed to funding significant re-payments if the property is empty between tenants, dipping into your (now depleted) savings account if something goes wrong, not to mention onerous admin and legal obligations,” according to Gandesha.
The solution to the nation’s declining home ownership statistics may lie in making property more accessible. Like with every field, technology has disrupted the market considerably, starting with pioneers like Zoopla and Rightmove moving estate agents online. The second wave has been crowdfunding property purchase sites like Crowdahouse and Property Moose, and crowdfunding mortgage sites, like Landbay and LendInvest.
International comparisons suggest that the UK now has the fourth lowest level of home ownership in the EU according to Eurostat. If league tables are anything to go by, this may be the market opportunity proptech firms have been waiting for to reach the five million households looking to put down roots.
