Neat summary of potential dangers of buy to let crowdfunding

Would-be buy to let investors have been given a neat summary of the risks involved in entering the market via crowdfunding.

Letting Agent Today and Estate Agent Today has carried many stories in the past two years of crowdfunding - sometimes to fund agencies and other related property business start-ups, but increasingly as an alternative to traditional buy to let.

The new advice is not for those people using crowdfunding to invest in agencies or companies but is instead for those looking at buy to let via crowdfunding.

Several platforms exist which allow investors to sink relatively small sums, perhaps as little as £1,000, into 'crowdfund' BTL investments - the pooled money from a large number of investors is used to buy, let and manage a property.

Now a useful summary of the risks involved in this particular type of investment has appeared on the iExpats website, aimed at informing expat investors of opportunities, risks and challenges in the investment market.

Here are the four main risks of property crowdfunding as identified by the summary's author, Jim Atkins:

"1. No control – Investors are silent partners in the management of a property and have no say in issues like the cost of repairs but have to pick up the tab;

"2. Exit route – As a part-owner of a home, you cannot just put the property on the market and take an offer if you want out. You either have to wait until the property is sold or have to find a buyer for your share, which is likely to be at a reduced market value;

"3. Taking profits – Depending on the renovation costs and rents, the yields are likely to be low and any break-even on investment could take some time to materialise;

"4. Protection – Property crowdfunding is outside of the regulatory schemes giving access to an ombudsman and financial compensation if something goes wrong. The likelihood is investors would have to take expensive legal action to settle any dispute."