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CrowdProperty Review
Development lending from one of the most established players in the market
CrowdProperty's Bridging & Development loans received an Exceptional 3/3 4thWay PLUS Rating.
This account has recently been paying lenders 9.92% interest after bad debts.
Visit CrowdProperty or keep reading the CrowdProperty Review.
When did CrowdProperty start?
Established in 2015, lenders have lent £425 million to nearly 300 different borrowers.
What interesting or unique points does CrowdProperty have?
CrowdProperty is mainly focused on property development lending to experienced developers, offering first-charge lending only against developments that already have planning permission.
Since early 2019, it’s also offered short-term (bridging) loans to developers, e.g. for purchasing land or property.
CrowdProperty has told us that its own experienced founders step in to run development projects to completion, if necessary.
How good are its loans?
Some basic percentages for you:
The typical maximum loan is 70% of the hoped-for sale price once the development is completed, which is a standard maximum and its typical average of about 60% is good.
CrowdProperty will consider funding up to 100% of the construction costs, which is higher than usual. An 80% maximum is more standard.
CrowdProperty accepted its first bridging loan in early 2019 and it’s now done around 100 of them. The vast majority are already repaid and just a small number of them are late or being chased for bad debts.
The maximum bridging loan allowed is as much as 75% of the property value. That’s not too high, but it’s higher than we’d ideally like in the lowest-risk lending.
Its decent underlying loan quality is currently needed, as there have been poor economic and market conditions in recent years. More on that in the section How good are CrowdProperty’s interest rates, bad debts and margin of safety?
Other points on its loan quality
Unusually for these kinds of loans, CrowdProperty takes a quantitative approach, learning from data and relevant numbers. This might help improve the loan quality further as more years tick by, although I expect the impact to be marginal.
Developers usually raise the money they need through CrowdProperty in tranches, as each phase of the development is completed.
That’s pretty common in P2P development lending, but it’s not optimal. It means there’s a small risk that funding will dry up part way through a development project, that the developer can’t complete it, and that lenders are at a slightly greater risk of not getting all their money back.
How much experience do CrowdProperty’s key people have?
The key people at CrowdProperty have clearly demonstrated the talent and deep experience needed to properly assess complex development projects, monitor them, keep them on track, and take steps when things go wrong.
I believe they are fanatical about maintaining quality and that their development experience counts well in its stead.
CrowdProperty review: lending processes
CrowdProperty has talked us through its 60-step lending criteria and provided supporting evidence of its top-quality processes.
It’s critical about the progress of development projects throughout. It has also taken us through the steps it has historically taken on some of its loans that fell substantially late; it’s typically found elegant solutions to ensure lenders received all their money and interest in the end.
Where it might possibly do better is to be more strict on loan-to-cost, to potentially provide more runway to the projects by assuming more potential delays and to raise the full funds to take developments to completion in advance. (Although the latter is admittedly usually a bit of a tall order in P2P lending.)
How good are CrowdProperty’s interest rates, bad debts and margin of safety?
CrowdProperty’s lending rates remain about 1.5 to 2 percentage points higher than usual to combat inflation as well as the increased risk of losses in loans approved in 2022 and 2023. Those additional potential losses are due to worker shortages and a spike in construction costs, among other factors that all hit at once.
Looking back, a lot less than 0.1% of the total amount lent through CrowdProperty has been written off after all recovery attempts were completed.
Looking forward, I expect more losses on outstanding development projects that were approved for lending 1-3 years ago. As of end 2024, fully a third of outstanding development lending – that’s £47 million – has been delayed by at least 180 days or has fallen into official default.
It’s a climactic moment, as this will likely prove to be the peak of the delayed or troubled developments. Now it only remains for us to see what proportion ends unhappily.
Nevertheless, 4thWay stress tests CrowdProperty’s loan book based on the assumption of horrendous macroeconomic conditions. These tests are a rather more strict version of what global banks are required to do under the Basel Accords.
Those awful conditions have now occurred in development lending, as this has clearly now been a highly stressed environment where the consequences are peaking. It’s therefore no major surprise to me that CrowdProperty’s exceptionally low number of problem loans over most of its history is not currently being displayed.
And yet the amount of lending through CrowdProperty that is either very late or has turned officially bad is still within our stress-test conditions.
This means that currently I still expect any losses from those outstanding loans to remain contained and for lenders ultimately to be satisfied with their returns on those loans. Additional penalty interest earned on loans that turn bad and then ultimately repay will also help offset any losses.
CrowdProperty also continues to have good protection in the form of valuable property security that can be sold. And it offers the last backstops that it uses its experience to find creative solutions to get the development sold, including CrowdProperty’s own capable directors completing developments themselves, if necessary.
As a result of its continued results matching expectations under recent conditions, and its protections against losses, CrowdProperty retains its quantitatively calculated 3/3 Exceptional 4thWay PLUS Rating.
The current average lending rate of 9.92% provides a decent margin of safety for lenders who put a small proportion of their money in any one loan and not too much in any one development (which could be made up of multiple loan tranches).
Has CrowdProperty provided enough information to assess the risks?
CrowdProperty provides 4thWay with all the data and direct contact we need, and also volunteers a great depth of information before we are even able to ask for it. It’s provided more than enough information to assess it, and has committed to doing so in the future.
Is CrowdProperty profitable?
A little history on its profitability.
CrowdProperty roughly broke even in the year up to March 2018 and March 2019 and turned profitable after that.
In 2021 it chose to again operate at a loss, in order to spend more to grow more.
Nevertheless, while it continues to put a lot of money back into the business to grow it further, it still managed to make a profit again in the year to March 2023 – a larger one of about £1 million.
CrowdProperty has exclusive access to a large, direct market of property developers, so it doesn’t have to pay fees to loan broker, which can be very expensive. In my opinion, CrowdProperty is probably already a stably profitable business.
That said, its massive increase in rates paid to lenders appears to be a largely unfunded increase, meaning borrowers aren’t paying much more to maintain the spread that CrowdProperty earns between borrower and lender rates. This will certainly hit CrowdProperty’s bottom line, so it must be seriously looking to keep growing in size for some time to come, even at the cost to its bottom line in the short term.
What is CrowdProperty’s minimum lending amount and how many loans can I lend in?
If you choose loans for yourself, the minimum you can lend per loan is £500. If you use auto-lend, you can lend as little as £50 per loan, although you must contribute at least £500.
Based on my analysis near the end of 2024, out of 66 loans (or loan tranches) funded over the prior six months, just five of those were completely new borrowers. The majority of the remaining tranches were for existing developments where the developer had not yet repaid any development facility.
I therefore believe it could take six months or longer before your money is lent in enough loans across enough developments and borrowers, so you might want to drip your money in over that period. If you have higher sums to lend, it might take longer for you to deploy enough money to satisfy you.
Lenders might just keep a brief eye on whether enough of your loans are in tranches of separate developments and separate borrowers.
Does CrowdProperty have an IFISA?
CrowdProperty’s lending accounts are available as IFISAs.
CrowdProperty: key details
4thWay PLUS Rating
3 PLUSes is best. What does the 4thWay PLUS Rating tell you about the risks and rewards?
Interest rate after bad debt
Here we show the P2P lending site's own estimate (or 4thWay's if theirs are not appropriate)
4thWay Risk Score
Lower Risk Scores are better. How is this different to the 4thWay PLUS Rating?
Description
£425 m in development property lending & short-term property (bridging) loans since 2015, with optional auto-lend & auto-diversification. IFISA available
Minimum lending amount
Exit fees - if you sell loans before borrowers fully repay
Early exit is not guaranteed. Usually, other lenders need to buy your loans
Do you get all your money back if you exit early?
Loan size compared to security value
Reserve fund size as % of outstanding loans
Company/directors lend alongside you/first loss
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