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Crowdfunding a Self Build


Stones
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AIUI peer to peer funding setups gain their 'insurance' by one or more of :

 

1 - Splitting an investment across a number of loans.

2 - Putting a small levy aside into a pooled fund to repay losses.

3 - Use of guarantors for borrowers (eg Amigo).

4 - Securing against property (eg Folk2folk, who limit the loan to 50% of value and roughly match one lender to one borrower. They already do self-build, as we know from @Grosey.).

 

I think the record so far is on the whole quite good.

 

ISTM that the challenges here are:

 

1 - Deciding where we are on the altruistic ... commercial scale. Different in each case? What return is expected if any?

2 - Getting a balance between complexity of admin and size of each stake.

3 - Being more effective than other sources. At present it is probably more effective cost-wise to take a 1-2% mortgage or balance transfer credit card in most circumstances.

4 - Capacity.

 

Ferdinand

Edited by Ferdinand
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1 hour ago, Stones said:

[...]  how one would go about doing it.

 

Start somewhere. Anywhere. And keep going.

 

How about talking  to reading about groups of people who have done something similar ?

How about setting up a section of the site devoted to  the  research / thinking / discussion process ?

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How many loans before a pool becomes "exhausted" eg each person has maxed out their comfort amount. 

I think to be fair this was initially raised to help poor old @ProDave out, so let's stay focussed on that as there's nothing worse than feeling that hope was within reach but then fizzled out in the peripheral white noise. 

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Not wishing to be a party pooper but, realistically, as friendly as this forum is, as good a bloke as @ProDave undoubtedly is, and as sympathetic as we all may be to his (and others) predicament, IMHO there simply aren't enough members here to make this work. Even if 5% of members were prepared to put an average of ₤100 each into the pot (and I doubt that many would), you're looking at little over ₤4k. Is that really going to solve Dave's problem?

 

Don't get me wrong, it's a lovely idea, but I'd hate Dave (or anyone else) to get their hopes up and then have them dashed. 

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3 hours ago, SteamyTea said:

You not heard the news then, Bitcoin has crashed by 20% in the last 24 hours from a peak of around $10000

 

The peak was actually well over $11k. It spent a few days getting to $10k, then hit $11k less than 24 hours later, crashed to nearly $9k in a heartbeat, bounced back up and is now oscillating its way down. I expect more correction - it regularly loses well over half its value before consolidating and heading up again.

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I'm in. I've toyed with 'investing' this way before! Lots of small sums to reduce risk. Just never quite got round to it.

 

It's what the world needs to be more about and no better forum to try than here. I'll try do some digging when I'm at work, but I've looked at a few different platforms in the past. 

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I think min investment would have to be 1000 maybe 500 at a minimum. As Ferdinand said above though on the whole a mortgage on Dave's existing house at low LTV would probably produce the cheapest borrowing. The debt would be serviced by the rent you receive and maybe even cover it a good number of times depending on amount you raise. Think that is the answer. 

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51 minutes ago, jamiehamy said:

[...]   It's what the world needs to be more about and no better forum to try than here. I'll try do some digging when I'm at work, but I've looked at a few different platforms in the past. 

 

I have a strong feeling that there are many of us who have done a bit of research privately but, unlike @jamiehamy,  not told anyone else. 

 

I think we - that is this discussion group / board - should provide a space for us to 'dump' our research notes. A simple repository of unedited, un-filtered information.

 

I will personally commit to check and summarise that information and publish it here for comment by all.

 

My question is: do you (that means anyone reading this thread - anyone at all) agree that we should provide a work-space for anyone to contribute?

The end in mind is clear. 

 

We should  examine whether or not it is possible for us collectively to provide some sort of crowd funding organisation for self-builders?

 

For my part, I'll have a word with the Forum Management Group and see what the mood is there. Who knows, I might have read this thread wrongly.....

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This is an interesting thread. Its a subject I don't know anything about but I'm certainly one of those that would consider investing a sum (no larger than I would be prepared to loose). For me though I'd want to do it through a recognised platform which had transparency to all.

The idea of "an exchange of emails and here's the cash" is not much more then lending your mate money in the pub :).

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Were something to be done via BH, another issue will be where to get the infrastructure.

 

I that informal + trust may work as a 'trial' - though perhaps the various efforts for @recoveringacademic may count as testing the individual action impulse (imo proven), though not coordination.

 

The question then is whether and how to organise something around here, or by borrowing a platform. There is nothing to say we couldn't use one of the established crowd-funding platforms as our "outsourced admin" - that then comes down to reliability of the platform and cost of using it. 

 

Were we to look for a wider initaitive, things as available such as building our own platform or organisation (overheads?), collaborating with an existing setup, or other option. Possibilities could include forming or piggybacking on a Credit Union or Peer to Peer investment organisation.

 

But I do not think we really have the scale of numbers yet, and the better option would be using an existing Crowd Finding platform to manage each project would be the most flexible practical at present.

 

Due to too much going on at present, I would sit this out for now. 

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2 hours ago, recoveringacademic said:

My question is: do you (that means anyone reading this thread - anyone at all) agree that we should provide a work-space for anyone to contribute?

The end in mind is clear.

 

 

Yes, I think providing a space to discuss possibilities, advantages, disadvantages etc is an ideal function for a part of this forum.

 

2 hours ago, recoveringacademic said:

We should  examine whether or not it is possible for us collectively to provide some sort of crowd funding organisation for self-builders?

 

Whilst I agree with the basic sentiment, I fear that if the forum was to venture into providing some form of crowd-funding organisation then it would need a lot of careful consideration.  There are a lot of potential pooh traps waiting in the finance sector.

 

Personally, I think that P2P lending and borrowing is a very much better match to self-build and renovation.  Crowd funding is primarily about new products or charitable fund raising, whereas P2P lending and borrowing is about ethical use of money to allow people to invest with a better understanding of what they are investing in and for borrowers to have a closer relationship with those investors.  This aligns very much more closely with the aims of this forum than crowd funding, IMHO.

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Hmmm. 

At this stage, every way we  turn, there are more questions than answers.

 

It would be useful to formulate  key questions. Reading the contributions above, how about this for an initial list....

  • P2P lending OR  crowd funding for self builders. Which? Both?
  • Does a P2P lending system for self builders already exist?
  • Infrastructure: trying to avoid reinvention of wheels: how have people operationalised  P2P lending?
  • What models for P2P lending and crowd funding exist? 
  • Are there any formally recognised associations  for each sector?
  • Are there any National Level guidelines for P2P or Crowdfunding?

I expect I have missed things off the list. It's not meant to be exhaustive. It already looks exhausting. And it's not as if we haven't got much to do anyway....

 

I'll ask later today at Lancaster University Management School  (make Debbie do some work) whether there are any lecturers  or PhD students who are researching the field.  Should at least be able to get a good reading list.....

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Can we please separate out P2P lending from crowdfunding?  The two are totally different concepts, and I fear there may be confusion here between them.

 

Crowdfunding

Crowdfunding is solely a means of raising capital, with no absolute obligation on the recipient to  pay anything back at all.  It is primarily used to provide investment for start-up companies, where initial investors may receive a reduced price product in return for their investment (assuming the company gets off the ground), and more recently has been adopted as a way of raising non-refundable donations for specific charitable cases (like sending a person to another country for medical treatment not available in the UK).  It is not a lending or borrowing scheme in the usual way we would understand such a thing, and anyone who invests in a crowdfunded project has to treat it like any other high-risk investment or donation and not expect to ever get their money back.  There are exceptions, but this is generally how crowdfunding works.  In terms of self-build and renovation, I can see a place for crowdfunding a start-up company that has come up with a product or service that looks to be beneficial to self-builders.  I cannot possibly see how crowdfunding could be used as a substitute for a lending scheme, like a conventional mortgage or loan.

 

P2P (Peer to Peer)lending and borrowing

P2P is a means that allows usually small investors to invest money at an agreed rate of return to borrowers that they choose.  It's a logical extension of the principle of informally lending a friend some money for a time and then getting it back, with the difference that P2P almost always carries some interest with that borrowing, although often far less than that charged by conventional lenders.  P2P also allows groups of investors to amalgamate a number of small investments in a single project, but this is the only similarity with crowdfunding, and is, I think, where some confusion may result.  The key difference is that with P2P there is a formal agreement that the investor will get their investment back after a defined period of time, plus an agreed level of interest (usually, there are schemes that operate within Islamic law that get around the issue of interest, as interest is haram in Islam).

 

In my view, I think we need to dismiss crowdfunding, in the context of individuals who are self-building or renovating and looking to borrow money.  What we should concentrate on are P2P models, how they operate, how the agreements are structured, what the typical investment return should be, how the organisation of investors and borrowers is arranged, and, most importantly, how the law and financial regulation applies to such agreements that are made outwith the normal regulated environment of the banks and building societies.  I don't want to make an issue of this last point, as we already have schemes, like car personal lease plans, that similarly fall largely outside FCA regulation, so it is not, in my view, a show stopper.

Edited by JSHarris
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23 minutes ago, JSHarris said:

Can we please separate out P2P lending from crowdfunding?  The two are totally different concepts,

[...]

In my view, I think we need to dismiss crowdfunding, in the context of individuals who are self-building or renovating and looking to borrow money. 

[...].

 

Thanks for the summary, J.

I wonder what @Stones thinks? He did after all start the thread as 'crowd funding' 

 

Like to comment Jason?

 

Ian

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I started this thread to try and tease some of these issues out (crowdfunding and P2P mentioned in my original post) and see what was or was not possible / realistic, and obtain any direct member experience.  I think @JSHarris has provided a useful summary of the two forms of funding and their potential applicability and limitations.

 

P2P does indeed appear to be the model to explore further, but equally helpful to look at alternatives, even if we now dismiss them.

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Ok

How about a sub-section of this site entitled.....

 

Funding Self-builds

and then these sub-sections - (just a quick stab at them)

  • P2P lending  for self builders
  • Current P2P models, examples
  • Infrastructure: operationalising  P2P lending
  • P2P :  national level issues
  • National Level guidelines for P2P 
  • Other research sources
  • General discussion area
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33 minutes ago, recoveringacademic said:

 

 

Interestingly, that link 403's for me.  I wonder why?  I used to be able to view the old Ebuild archive, but it seems that now I cannot, as it still 403's when I try and go directly to the base URL.  I just get the classic message:

 

"Forbidden

You don't have permission to access /topic/12078-anyone-heard-of-peer-to-peer-lending-for-self-build/ on this server.

Additionally, a 403 Forbidden error was encountered while trying to use an ErrorDocument to handle the request."

 

when clicking that link, which suggests that even view permissions have now been withdrawn for me.  Not sure how he's doing this, as I have no Ebuild cookies set that I can see and have tried going in via a VPN, so it looks as if I'm in the Netherlands, just to look like any other anonymous surfer, and I still get a 403.

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