Latest crowdfunding lettings product aims to avoid buy to let constraints

Another property crowdfunding investment product has been launched, aiming to offer investors an alternative to the increasingly regulated and taxed buy to let sector.

Shojin Property Partners has launched the product, in which landlords and investors invest funds which combine to buy a small portfolio of residential property to let out; income and capital growth are shared out proportionately to the individuals’ investments.

“Our crowdfunding model is unique, as it enables landlords and investors the opportunity to invest in accordance with their own preferences, requirements and tax position. Rather than the traditional structure with a bank and an equity investor, we have placed a mezzanine tranche in the middle” says a Shojin spokesman.

Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert to an ownership or equity interest in the investment in certain circumstances. 

“The beauty of this type of investment is that it is familiar to investors, but at the same time completely hands free” continues the spokesman.

“Most people in the UK do not utilise their capital gains tax allowance, so our structure enables higher rate tax payers to take a leveraged position in equity, while giving up the income. The mezzanine investor meanwhile benefits from a fixed return, regular income and higher security” he continues.

Shojin claims that the bulk purchasing of several units at a time, possible through a crowdfunding model that raises enough from investors, allows for a discount of five to 10 per cent off the market values of the properties - a quick gain for investors, it says.