Crowdfunding a Self Build

[Stones]

There have been a few mentions recently about members using or considering using peer to Peer lenders or Crowdfunding to finance part or all of a self build.

 

I thought it might be useful to collate experiences here.  I'm especially interested in the Crowd Funding concept, and the terms applicable (repayment, interest etc)

[MikeSharp01]

Crowd funding is a bit of an umbrella term covering a number of models some of which are charitably based, others commercial and others personal. They do not all have a repayment model some have an in kind return - IE a free flight in the restored airplane or free product from the first production batch others have a share concept with returns based on dividends. Peer to peer has been discussed here before and is more commercial. Both are largely unregulated and are delivered through on-line platforms some of which buffer the risks in the Peer to peer space I have not come across any buffering by the intermediary (meta middlemen) in the crowdfunding space.

Edited November 30, 2017 by MikeSharp01

[ProDave]

I think it's P2P lending that is being discussed.  If such a scheme existed then I might be interested in the short term as a borrower.

 

In the much longer term we will have a lot of capital to invest and work for us so then I would be interested being a lender in such a scheme.

[Nickfromwales]

I have to ask, with P2P lending in particular, what's the security based on ?

Tbh I never knew such a thing existed, other than "loan sharks" of course.

Tis a diverse place this . 

[Jeremy Harris]

I think a well-managed P2P scheme is an excellent way to be in far better control of your investments than using ANY recognised financial institution. 

 

Like many, I've been bitten (three times) by financial institutions making contractual promises and then breaking them:

 

First the endowment miss-selling scandal (I did get back about 60% of our loss after 12 years .........).

 

Second time was a few years ago, just before I retired, when RBS openly lied to me about the nature of some investments I'd asked them to advise on (in writing) and make for me.  I had specifically asked for zero-risk investments, as I knew I wanted to draw the money out for the self-build within around 3 to 4 years and didn't want to risk losing the money - they invested in stocks and shares, something that I'd specifically told them not to do, and they charged a whopping commission up front, without telling me.  That took the best part of a year and a complaint to the FSA (as it was then) to get them to refund the investment, plus interest, plus their commission, and, to be fair, a small "good will" payment (I still changed banks the next day, though).

 

The third time was when we wanted a small mortgage on our old house to help fund the new build.  Santander agreed, we paid the arrangement fees, had the valuation survey and received the written mortgage offer, with terms.  A couple of months later, when I went in to start to draw down from the mortgage account they told me they had arbitrarily cancelled it, as their lending policy had changed recently.  Four years later and I'm still battling to get back the arrangement and valuation fees from them, again it's in the hands of the regulator (now calling themselves the FCA).

 

The argument against P2P lending/borrowing is that it can be outside the regulatory powers of the FCA.  Frankly, based on my experiences, I'm not at all sure that is a significant issue.  There have been unregulated borrowing schemes running amongst the Jewish and Islamic populations here in the UK for decades, and they seem to generally work OK.  A well-focussed P2P investment/borrowing scheme, say aimed only at self-build, is probably no greater risk than dealing with a bank or building society, in my view.  It's easy to focus on the negatives and risk, but with lots of small investors lending to someone of a like mind, and who understand what the self-build financial roller-coaster can be like, it doesn't seem to be a very high risk to me.

 

I would be very interested in making small investments to fund self-builds when we have our money back from the sale of the old house.  Not only would it probably give a better return than the banks or building societies (not hard) it would give great satisfaction that the investment was contributing a little bit to someone else's self-build dream.

Edited November 30, 2017 by JSHarris

[daiking]

Didn’t it used to be called a ‘Building Society’?

 

Before they all became Parasite Societys 

[ToughButterCup]

1 hour ago, MikeSharp01 said:

[...] I have not come across any buffering by the intermediary (meta middlemen) in the crowdfunding space.

 

Hello, this is a nice party isn't it? Tell me how do you know the host?

 

Oh, well, we're both meta middlemen. 

 

That's nice.  Ermmm, sorry to be so ignorant, but I've never met people who called themselves  middlemen

 

No, no, we're both meta middlemen.

 

Ahhh, I see.  Can I get you another drink? You look like you need one.

[ToughButterCup]

56 minutes ago, JSHarris said:

[...]   I would be very interested in making small investments to fund self-builds when we have our money back from the sale of the old house. [...]

 

How many of us are in this situation? I know of three (including me) : many of us are asset rich,  cash poor and risk averse. 

 

While I know its unlikely (and may even be unwise) for members to follow Dave's and my example by being  up-front about it, I have  evidence  (PMs , private visits)  of a few more of us in similar circumstances. We all need to get our old house sold to fund the current build. But that process appears to be grinding to a halt.

 

Which brings me to @Stones point. This crowdfunding thread is a good place to mull over the issue within the context of self-building. 

 

My estate agent mate reports a significant slow-down in sales across the piece in't north west, Morecambe, Lancaster,  South Lakes  area. With the some highly niche sectors being buoyant. Rentals on the other hand are going strong.

 

And wouldn't many of us love to get to the stage where we could camp with some dignity in our new builds? And to do that with the aid of a small injection of capital would be just the thing.

Similarly, when the 'old house' gets sold and we're a bit more cash-rich, wouldn't we be more likely to lend a couple of thousand to self-build projects?

[ProDave]

For me, to get to the "camp in the house" point we need a working bathroom (working, not complete) which dictates hot water, even if that i just an immersion heater. And we need a working kitchen. SWMBO has given me "permission"  to install a temporary second hand one. Shame earlier in the year she refused that, and I let a functioning kitchen go to the tip (I was wiring the new one)  I am now eagerly awaiting the next kitchen rewire job.

[Onoff]

I've a 'removed due to a combi being fitted" copper cylinder c/w immersion you'd be welcome to but you're not exactly around the corner!

[MikeSharp01]

1 hour ago, recoveringacademic said:

Hello, this is a nice party isn't it? Tell me how do you know the host?

V funny - for recursion see recursion, I took meta as meaning somewhat abstract - middle men / women who provide the service but somewhat abstract from it by the process of linking, in the case of P2P, people together in a virtual space - while taking a cut. So as far as you are concerned you are linked to a peer but in fact this link could be of almost limitless abstraction depending on the set up. It is, after all, a form of financial engineering is it not.

[SteamyTea]

A quick google and just picked the first result that seemed appropriate:

https://www.p2p-banking.com/tag/default-rates/

Nearly 20% default rate.

 

"Never a lender or a borrower be".

[ToughButterCup]

41 minutes ago, ProDave said:

For me, to get to the "camp in the house" point we need a working bathroom (working, not complete) which dictates hot water, even if that i just an immersion heater. And we need a working kitchen. [...]

 

And that would cost? £5000?

100 of us £50 each. @ProDave moves in.

Too simple?

[MikeSharp01]

8 minutes ago, SteamyTea said:

"Never a lender or a borrower be"

Perhaps Sharia then... Its a cooperative effort no lending or borrowing -  technically not benefiting from lending or borrowing I think!

[joe90]

27 minutes ago, recoveringacademic said:

 

And that would cost? £5000?

100 of us £50 each. @ProDave moves in.

Too simple?

I like this a lot. Count me in.

[ProDave]

Please chaps I am not seeking charity. A LOAN perhaps but not a gift.

[Nickfromwales]

6 minutes ago, ProDave said:

Please chaps I am not seeking charity. A LOAN perhaps but not a gift.

Relax dave, I think the clue is in the reference to "lending", based on people's knowledge of you, your character and your known future worth.  

Im quite intrigued by this concept TBH, just as I am with this Bitcoin business.  

I believe this indeed refers to the money being loaned.   

[Nickfromwales]

And again, this forum shines brightly. 

To quote @ProDave, "this is more than just a forum".

This is an extraordinary example of that.

 

[joe90]

18 minutes ago, ProDave said:

Please chaps I am not seeking charity. A LOAN perhaps but not a gift.

Exactly. As I think more than one person thinks like I do that this is more than just a forum. I have met only two people on this forum but consider many of you as friends ( do I need a psychiatrist ?).

[Jeremy Harris]

2 hours ago, recoveringacademic said:

Similarly, when the 'old house' gets sold and we're a bit more cash-rich, wouldn't we be more likely to lend a couple of thousand to self-build projects?

 

That's exactly how I feel, in a nutshell.  I know that once we've sold the old house, and paid off the small mortgage we will have replenished our savings pots.  In my case, I've been eyeing up a new car, but will still have a fair bit of savings that will be looking for a good home after that's paid for.  The interest rate is almost academic, given the current savings rates available.  I would far rather risk some in helping to fund someone else's build for a year or two, than have it sat in a bank or building society.

 

The big question for me is how to do it.  I know nothing about P2P lending, other than that it's essentially unregulated and so not covered by the FCA.  That doesn't bother me particularly, as I wouldn't be willing to invest more than I would be happy to lose, and anyway I happen to think that the vast majority of self-builders are likely to be a very low lending risk (a conclusion I think that the Ecology building society, unlike some others, has also reached).

Edited November 30, 2017 by JSHarris

[TheMitchells]

15 minutes ago, JSHarris said:

 

That's exactly how I feel, in a nutshell.  I know that once we've sold the old house, and paid off the small mortgage we will have replenished our savings pots.  In my case, I've been eyeing up a new car, but will still have a fair bit of savings that will be looking for a good home after that's paid for.  The interest rate is almost academic, given the current savings rates available.  I would far rather risk some in helping to fund someone else's build for a year or two, than have it sat in a bank or building society.

 

The big question for me is how to do it.  I know nothing about P2P lending, other than that it's essentially unregulated and so not covered by the FCA.  That doesn't bother me particularly, as I wouldn't be willing to invest more than I would be happy to lose, and anyway I happen to think that the vast majority of self-builders are likely to be a very low lending risk (a conclusion I think that the Ecology building society, unlike some others, has also reached).

 

Ditto - I think we can all decide for ourselves which people we want to invest our savings in and I for one, think some of the people on this forum are far more worthy of the loan and I would be far more likely to get a better return on my investment than many other places. 

 

[joe90]

Is it like sponsoring an animal? Do I get regular updates and a cuddly toy ?.

 

seriously though, I would rather lend to a hard working couple than un trust worthy banks.

Edited November 30, 2017 by joe90

[Visti]

Aye, count me in too. Not been on here long but that's not stopped all of you from helping me out a dozen times already!

 

Plus, there's a high likelihood I'll be in the same pickle two years from now! 

[Stones]

As I'd hoped, this is becoming a useful discussion.  It would be good to hear from anyone has has actually used this method, pros and cons etc

 

Obviously individuals could make private arrangements between themselves, but there is also a lot to be said for doing something like this collectively, to spread the risk.  If enough people are interested, and as I get all my ducks in a row, I may well add my name to that list, the big question as @JSHarris says, is how one would go about doing it.

[Nickfromwales]

1) Agree an amount to lend

2) You state that the repayment need to be a min of 2 years / max of 5 years

3) You state any interest / fees / terms and agree the settlement amount. 

4) You exchange emails stating the outlines of the agreement and each agree by return.

5) As its unregulated you hand over the ?and it's done afaics?

 

There can't really be any more to it if it's on trust. ?