To help you understand the risks involved when investing on our platform, please read the following risk summary. It is important to read all available information, diversify your investments and understand that the money you invest is at risk.
Sections
Investing in Property Development Loans
Buying shares in properties
Property prices
Property prices can go down as well as up as a result of a wide range of factors on both a macro and micro level. Different property types and different locations may be more or less susceptible to reduced or negative growth. Additional risks are potentially introduced because you lack control over management and disposal decisions in relation to the properties.
We encourage you to diversify your Property Partner investments across multiple properties, as you would your own investment portfolio. This is to safeguard against excessive exposure to any one property that could incur issues, such as tenant vacancies or major works.
The value of your investment may decline
The value of your Property Partner investment can go down as well as up and historic performance is not an indicator of future performance. A fall in the value of your investment may be due to a number of reasons, such as a fall in the underlying value of the property due to market conditions, structural or non-structural matters which need to be rectified that may need to be funded from future rental income, and measures to strengthen the financial position of certain properties, such as the issuance of further shares, which could lead to a dilution of your shareholding.
Cost of borrowing
Where mortgage interest is variable it will be subject to interest rate changes, as set by the Bank of England. Fixed mortgage rates are subject to these rate fluctuations at the point of remortgage. Mortgage rate rises are a risk to a property's net income and, therefore, dividends. Mortgage debt amplifies the impact of property price movements - returns outperform the market if prices rise, but underperform if they fall. Rising costs of borrowing could make refinancing or existing interest uneconomical, leading to a forced sale which poses a risk to the money you have invested.
Legislative changes
Property is subject to significant legislation and legislative changes have the potential to impact both the income produced by and value of a property, impacting upon a property's dividends and are a risk to an investor's return.
Variable rental income
Property Partner provides historical gross and net rental income information. These are not necessarily a reliable indicator of future income. It may be that lower rents are secured due to market conditions. Furthermore, rental income could cease completely for certain periods of tenant vacancy.
Liquidity
You can offer your investments for sale to other Property Partner investors at any point on the Resale Market, there may not be anyone willing to buy your investment at a price that you deem reasonable (or buy it at all). You would have the opportunity to exit at the five year anniversary of that property's listing on the Property Partner platform (or such anniversary stated at the top of each property's investment page). The timing and price of exit will depend on completion of a transaction to sell the underlying property. This transaction is subject to market conditions and could take several months to complete.
Disposal/unexpected exit
Property Partner reserves the right to dispose of the properties and return net proceeds to investors. This may result in investors receiving back substantially less than invested. In the event that Property Partner is no longer able to trade, an independent professional firm will manage the sale of properties, which may result in losses.
Tax Advice
How investments are treated for tax purposes is dependent on the individual circumstances of an investor and levels of taxation are subject to change. We are unable to advise on individual tax liabilities or status. We recommend that investors seek independent advice from a regulated tax advisor.
Investment advice
Property Partner is regulated by the FCA, but is not regulated to give investment or financial advice. It is important that investors make fully informed decisions on investments and we recommend investors seek independent financial advice from a regulated advisor.
Investment safeguards
For a detailed explanation of how your investment is safeguarded, please click here. Please note that regardless of the fact there are safeguards in place, the money you invest remains at risk. In the case of the failure of the platform, an independent professional firm (PWC) will manage the sales of the properties which may result in losses.
Investing in Property Development Loans
Before investing in property development loans it’s important to understand the different categories of risk associated with this type of investment. As with all investments, particularly high-risk investments such as this, investors should diversify their exposure across a number of loans and limit exposure to any single loan. Click here to learn more.
The money you invest in property development loans is at risk. You could lose part or all of your invested funds.
Developer risk
Example: The developer becomes insolvent or fails to complete the scheme with the funding received and cannot secure additional finance.
Potential impact: The scheme is sold uncompleted to another developer for below its expected completion value (Gross Development Value, GDV). Investors could lose interest and capital.
Repayment delay
Example: The developer is unable to sell the completed property(s) or refinance the scheme before the end of the loan term.
Potential impact: Investors may have to wait beyond the end of the expected investment term to receive their capital and interest.
Market risks
Example: An economic shock leading to a substantial fall in property values, could result in the completed properties being worth less than the total outstanding value of debt secured against the project.
Potential impact: Proceeds of sale are insufficient to repay investors, and capital and interest is lost.
Lending partner risk
Example: Our lending partner becomes insolvent.
Potential impact: The lending partner ceases trading and is unable to fulfil its obligations to our investors, such as the repayment of capital and interest at the end of the loan term.
Senior lender risk
Example: The senior lender moves to enforce their security if the borrower falls into default at the end of the loan term.
Potential impact: The scheme is sold on an accelerated timetable for a low price, sufficient to repay the senior lender’s capital but not to cover our development loan.
Liquidity risk
Example: An investor would like to withdraw their capital from the investment before the end of the term.
Potential impact: The investor is not able to retrieve their capital until the loan is repaid, forcing them to wait longer than they would like.
You can learn more about investing in development loan bonds here.
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