The House Crowd Review: Should You Invest? - The Humble Penny (2024)

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Please do your research before investing. Peer-to-peer lending is a risky asset class. This is not financial advice.

Peer-to-Peer Lending as an alternative asset class sits between savings or shares.

As with any asset class, it comes with risks attached and promises of good returns.

A while back, I wrote an Ultimate Guide to Peer-to-Peer lending to get you started.

There has since been a growth in investment in this asset class and with more providers available.

This growth in investment has partly been driven by investors who want to:

• Diversify their assets,
• Get exposure to property without a lot of capital and without a mortgage,
• Generate good returns with clearly defined terms.

The increase in providers also means that it can get confusing for a new-ish investor to decide which to invest with.

One such provider is The House Crowd, a platform used by over 27,000 members, with the offer of returns of up to 10% per annum.

10% returns certainly exceeds what I’m used to generating via passive index funds, so it got me naturally curious.

This post documents my findings and should help you in your decision making about whether to invest in P2P via The House Crowd.

As ever, I take what I write in this review very seriously, with the goal of giving you a balanced perspective.

The decision to invest is ultimately yours!

The House Crowd: Who Are They?

The House Crowd is an FCA regulated peer to peer lending platform, operating in the UK since 2012.

Their website helps to connect you as an investor to third-party borrowers in the property space.

These investors borrow money typically to refurbish and sell properties.

They also do it to take advantage of opportunities or to re-arrange their finances.

At launch, it was the first property crowdfunding company in the world, according to the website.

The founder, Fraser Fearnhead, is passionate about helping people build their wealth and prepare for the future.

He created the platform to help people do this quicker and with a better balance of risks and returns.

Since inception, more than £100m has been raised on the platform and nearly 25,000 investments made.

The returns have varied depending on the product type investors have chosen.

E.g. An average return of 9.22% p.a. has been generated on the bridging loan portfolio for the 2 years to 2018.

I cover more on the product types and expected returns on offer below.

The House Crowd: How Does It Work?

Peer to peer lending platforms typically lend money to property owners, developers and businesses.

However, The House Crowd only lend money to property owners and developers.

The minimum amount that you can invest is £1,000.

To invest your money, there are 4 product options with important differences:

Option 1 – Peer To Peer Lending aka “Secure Bridging Loans”

Here you’re lending money direct to third-party borrowers via the website.

What you are investing in: A loan for an agreed term with the borrower.

Your Money Back: Capital and interest paid once the loan is repaid.

When you get your money back (capital and interest) is when the borrower repays the loan borrowed.

If they repay the loans late, late penalty rates are applied to their loans.

This means that you can earn more of an interest than previously anticipated.

Typical term of investment: 3 – 12 months

Expected returns: 9% per annum typically

Option 2 – Property Development Investment

Here your money is part of a crowdfund to build and sell new properties.

What you are investing in: A loan to House Crowd Developments (a company) to manage the development project from start to finish.

Your Money Back: Capital is repaid as a first priority when a sufficient number of properties have been sold.

Interest is paid separately after all investors have received their capital back and enough properties sold.

The House Crowd only take their development profits after investors are repaid their capital and interest in full.

Typical term of investment: 12 months

Expected returns: 10% per annum typically

Option 3 – Auto Invest

Invest in just a few clicks with your investment automatically spread across their loan portfolio to reduce your risk.

What you are investing in: Combined pool of money spread across multiple loans and projects.

Your Money Back: Receive interest twice a year.

You can also compound your interest or withdraw it after 12 months with 30 days notice.

Typical term of investment: 12 months minimum

Expected returns: 7% per annum typically

Option 4 – Innovative Finance ISA

Here you invest tax efficiently up to your annual ISA allowance of £20,000 per annum.

You can also transfer an existing ISA for up to £5,000 or more for free.

What you are investing in: Combined pool of money spread across multiple loans and projects.

Your Money Back: Receive interest twice a year.

You can also compound your interest or withdraw your funds the end of term with 3 months notice.

Typical term of investment: 3 years minimum

Expected returns: 7% per annum typically

With all 4 options, there are no guarantees. Investments can go up as well as down.

There is information below on what steps The House Crowd takes to ensure the risk of losing your money is minimised.

To date, they have never lost any investor capital.

For more details on the above investment options or how to get started, click here.

The House Crowd: What Are The Risks?

Here are the key risks you should be aware of:

1. Smaller Operation

The House Crowd is a smaller operation compared to some other providers.

However, having said that, they are growing and have a healthy balance sheet.

Feel free to check them out on Companies House.

In fact, their Balance Sheet as at 31 May 2018 showed a stronger and better Net Asset position.

This compares favourably with some of the largest providers, with Net Liability balance sheets.

2. Risk of Default

This is the most important risk to be aware of.

There is a risk that the parties that borrow money do not repay on time or at all.

“Default” is defined on their website as:

“a loan that was either repaid more than 8 weeks following the end of the loan term or is currently in default”.

This would usually lead to possession (and sale) of the related property to recover the money but this process can take time.

Sometimes, many months!

The time it takes to chase holders of defaulted loans is one that frustrates investors.

This isn’t unique to just The House Crowd though, however, it is something a small proportion of their investors have had to deal with.

If you take a look at the reviews on Trustpilot, you’ll see that their response rate to these concerns is fast.

I’d recommend reading the Risk Warnings as well as the page of important information before investing.

The second link shows you flowcharts for the process of recovering property assets in the event of default.

It also gives you an up to date information on default rates by year and cumulatively.

3. Valuation Risk

The price of a property can go up as well as down.

As such the return on your money may depend on a borrower selling a property, which isn’t guaranteed.

4. Illiquidity

If you invest in individual P2P loans, your investment is illiquid. i.e. not easily convertible to cash for that period.

You’re committed for the period of the loan.

If you invest via an Innovative Finance ISA (IFISA), there is a minimum investment period of 3 years.

The House Crowd: How Do They Mitigate Risks?

The main protection re loan default is the availability of a legal charge with every investment over related properties.

This happens in the same way that a bank secures a mortgage when they lend to you and me for our residential mortgages.

They also go through an extensive due diligence process of each project and the borrower.

This is done before any project gets accepted and listed on the website.

The due diligence process, however, does not 100% remove the risk of a possible default.

What Do I Like About The House Crowd?

1. They have never lost any investor capital (as at the time of writing).

100% of capital has been repaid on all loans as at the time of writing.

This ofcourse could change in the future.

2. Unlike other peer-to-peer lending platforms, they also build their own property developments.

As a result, they have a vested interest in ensuring the success of the projects they advertise.

3. If you don’t have £1,000 or more to invest and would prefer to invest from your income, they’re working on a brand new platform called Money Mog.

It is scheduled to launch later in 2019.

You will be able to invest on this platform from £50 a month and can sign up for newsletters in the meantime.

4. They have good customer service and are transparent in their communications about the status of investments etc.

What Do People Say About The House Crowd?

The majority of reviews on Trustpilot are very positive.

As the time of writing 89% of reviews from investors were rated “Excellent” or “Great”.

There are ofcourse reviews from investors who are unhappy about one thing or another.

Read these for yourself and make an informed decision about whether you want to invest or not.

The majority of these are related to loan defaults, with many of them ongoing as a work in progress.

Naturally, these are frustrating for the people involved as no one wants to lose money.

However, the team at The House Crowd appear to be responsive and helpful.

This also further highlights the importance of understanding what you’re investing in from the outset.

Is The House Crowd For You?

Investing in Peer-to-peer lending via The House Crowd might be for you if you:

• Are not a complete novice at investing.
• Want access to property returns but don’t want a mortgage,
• Have a medium horizon,
• Want your cash at work for returns beyond inflation,
• Understand that risk comes with expected returns,
• Want a less risky alternative to shares.

The more of these that you tick, the better.

If you’re interested in exploring them further, visit the site and consider opening an account.

Final Words…

Peer-to-peer lending remains an interesting and growing asset class, but with a risk warning attached.

Especially so in times of uncertainty such as Brexit, although I could argue that uncertainty is inherent with every investment.

Whether you decide to invest through The House Crowd or any other platform, ensure you do it with asset allocation in mind.

Do not invest a significant portion of your money into one asset class and certainly don’t do it if you’re in debt.

Remember that investing should be tied to your financial goals, and done with a decent time horizon in mind.

Do your research, due diligence, read the reviews and if you want to invest, start small to see how you get on over time.

Related Posts:

• Ultimate Guide: How To Start Investing In Peer-to-Peer Lending
• RateSetter Review and Bonus Cash: Should You Invest?
• 7 Income Generating Assets For Passive Income
• Investment Asset Classes: Pros and Cons
• 9 Smart Ways To Invest £1,000

What is your personal experience of investing in Peer-to-Peer Lending? Or in platforms similar to The House Crowd etc?

Do please share this post if you found it useful, and remember, in all things be thankful and Seek Joy.