As we start to look to 2022 the uncertainty, apprehension and fear in the business world continues. One thing David Johnstone from LEOcrowdfunding is certain about is that 2022 will be the year when equity property crowdfunding will not only grow as a market sector, but will become firmly established as an attractive option for alternative property funding for property developers. We are living in the middle of a paradigm shift, when the business clock goes back to zero, rule books are ripped up and thrown in the bin and new opportunities arise. David says he has never been so pleased to be CEO of an equity crowdfunding platform explains why so in 3 reasons.
Most property projects require equity
Firstly and somewhat stating the obvious, the vast majority of property projects in the UK require equity. While usually underpinned by senior debt from a bank, bridging company or even a P2P crowdfunding platform, the capital stack nearly always has a need of equity. With the ‘build build build’ policy from the Prime minister and new funds being made available as announced in the budget there remains a focus to increase UK housing. Traditionally, providing the fundamentals of the development pass basic scrutiny, sourcing senior debt is not that difficult. That is a competitive market place and there is plenty of funds available for developers to access. The challenge is often the equity slice. If the fundraiser does not have the funds themselves, where do they find it? Regulation and compliance issues make the sources of equity even more difficult. I am not aware of any lenders who offer 100% of the total costs of a property project so without equity deals simply cannot be done. A great place to source that equity needed is on equity crowdfunding platforms, where a large group of property investors are in one place looking for deals to invest in. Once fundraisers pass the due diligence threshold they can promote their projects and pitch for the equity they need.
Online business relationships
Secondly, whether we like or not there is an unmistakable and potentially long-term pivot to online business. I am not just referring to the obvious lockdown restrictions limiting face to face contact but how the last 9 months have ushered in a new way of doing business. Do not get me wrong, as humans we will always want company and face to face contact but does anyone really believe we are going back to packed hotel events, bunged restaurants and crammed offices any time soon? I do not think so! I have a member of staff who joined LEOcrowdfunding 14 months ago and I have never met them in the flesh! We have spent literally weeks’ worth of time on zoom, built a productive working relationship but all virtually. Is this the new normal? There will certainly be a definite impact on fundraisers meeting potential investors and investors being able to visit potential investment sites so alternatives must be found. I believe 2022 more than ever before will see business relationships between developers and investors flourish and grow without people ever meeting in person. This has time benefits as well as eliminating geography as a major factor. An equity crowdfunding platform allows such relationships to result in significant property projects to be funded.
Technology gives investors access to information
Thirdly, technology allows investors to access the info they need online in the comfort of their own home. Google maps, Rightmove, land registry, online networking events and zoom all combine to offer investors incredible tools. So as fundraisers and property investors spend more time at home, become more active online and take advantage of these tools funds will continue to be raised or invested. If you are an investor looking for good deals or you are a fundraiser looking for equity for a deal then equity crowdfunding is where you need to look. From the comfort of their own home property investors can have vetted and financially approved deals brought to them, they can meet the fundraisers via webinars, watch live virtual site visits and engage with the fundraiser and other investors on a closed forum, all through their crowdfunding platform. Fundraisers can access a pre qualified and motivated investor base who are actively looking to invest in property. All of the above factors merge on an equity property crowdfunding platform.
As more and more fundraisers and investors understand the significant benefits of equity property crowdfunding then more and more will use it to achieve their property goals. How we do almost everything has changed in the last 9 months and within the world of property we may never go back to what we thought ‘normal’. Whatever changes come in 2022 I believe property crowdfunding will grow as a market sector.