At LLB, we’ve looked at peer-to-peer lending to find an alternative income stream whilst bank rates have remained historically low in the UK. We felt that we wanted to take that extra bit of risk to invest in something that will provide us with returns well above inflation. Peer-to-peer lending is still a relatively new concept and its longevity is arguable (it’s been around less than a decade at the time of writing). MM and CS have both invested with popular peer-to-peer lending platform for small businesses, Funding Circle. MM also invests in Zopa, a peer-to-peer lending platform for individuals. This month we look at LendInvest, a peer-to-peer marketplace for investing in buy-to-let mortgages.
*What is LendInvest?
*LendInvest is a marketplace lending platform for residential and commercial mortgages. Put simply, if you want to borrow money to invest in property (that you won’t be occupying) then you can borrow between £100,000 and £5m for a fixed term and interest rate. If you want to invest your money, you pool your money with others’ to help fund property investment projects e.g. buy-to-let of residential or commercial properties. You get a set interest rate which you’re paid in monthly installments and every loan that you invest in is secured against a property in the UK.
What’s the fuss?
There are a few reasons why LendInvest is making its way into the headlines:
- Unlike investments that you make through Zopa or Funding Circle, your money is in invested in a loan that is secured against a property in the UK
- They boast a 6.65% per annum net interest rate for their investors
- Since they began in 2008, they have had no capital losses
- They’re the world’s largest peer-to-peer marketplace for real estate
- Over £200m has been invested through the platform to date
For borrowers, there’s speed, efficiency and less pain involved than the traditional route through a bank:
- LendInvest offers loans between £100,000 and £5m
- funding is usually provided within 2 weeks of submitting the loan request
- loan terms are between 1 month and 3 years
*As an investor, what’s the minimum amount I have to invest?
*You must invest a minimum of £1,000 per loan. As properties need more financing than small businesses and individuals, LendInvest requires a larger minimum investment to make the transaction worthwhile for both parties. This makes LendInvest a bit more challenging for those with smaller pots of money to invest. As an example dashboard an investor may hold around £200,000 in LendInvest.
*What are the risks?
*With the opportunity for strong returns on your investment, there always a risk that you will lose some or all of your capital. LendInvest makes the assurance that the investment is safer as it is secured against a property unlike other peer-to-peer lending platforms. Before investing in any new instrument, I’d recommend considering the following:
1) How would I feel if I lost £X amount? Am I willing to lose all of this money?
2) When will I need access to my money? LendInvest investors are required to keep their money invested for the full term of the loan unless the borrower decides to pay off the loan early. LendInvest will soon be implementing an open market where you will be able to resell your portion of the loan to another investor before the loan finishes.
3) Is there a better way to invest my money? If you don’t have much to invest, you may be better off investing in Zopa or Funding Circle first as they have a lower minimum investment requirement.
*LendInvest charges a fee of 30% of the gross interest (before tax) on short term loans and 20% of the gross interest on longer term loans. Fees are deducted each month from interest payments. As an investor you won’t need to worry about this too much because all rates shown online are the net fees or the money from interest that is paid to you after LendInvest has taken their share.
*How to invest
*You’ll need to register online and then complete their identity check. Every investor is subject to an identity check before they invest money to help prevent fraud and money laundering. You’ll then be able to add funds to your online account using a bank transfer and then wait for confirmation from LendInvest. View the current listings for loans and select Invest Now.
Have you invested in LendInvest? Has your experience been positive?
All information provided at Life-Life Balance is for informational purposes only. MM is not a qualified financial advisor. Before making any decisions on your finances you should seek advice from a qualified advisor.
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