This article is part of our series on Property Development Loans. Here we explore how Crowdstacker asseses each investment opportunity, and how it determines the terms and conditions offered to both the borrower and to investors.
Our products provide the mezzanine layer of finance which complements the funds provided by the senior lender.
This means that they will have undertaken a great deal of work required to assess the creditworthiness of the project. Including, for example, reviewing the developer's planned work costs schedule and analysing this to determine how realistic and accurate it is. Crowdstacker supplements this work with our own analysis of the project.
Reviewing the market
Another key part of the assessment process is to understand the exact nature of the property market local to the devleopment in question.
Crowdstacker assesses valuation documents produced by professional surveyors. These skilled practioners look at the proposed development plans to come to a view about the likely sales price.
They consider elements such as the quality of the build and the fixtures and fittings that will be used to assess what type of buyer will be attracted to the property or properties. They review amenities such as whether there are en suite bathrooms or outside space. To this they add their knowledge of the local area and the dynamics of the local property market - what they know sells well, and the types of properties they consider to be more difficult to sell. Both the local economic environment and the national, or even international economic outlooks are reviewed. Sale prices of properties that closely match the specification and target buyers are brought into the mix so they can also think about the likely sale prices.
This in-depth analysis based on numbers and factual information, enables a solid assessment of the likely outcome from the development project being undertaken.
Experience and knowledge
Crowdstacker also needs to know the people managing the project have good credentials and experience.
We look for a sound understanding of the development process and ability to carefully manage a building project.
A developer who has been around the block a few times will know what to watch out for, and how to successfully navigate the process.
All the investment opportunities are balanced so that the identified and quantified risks can be balanced against the rewards offered - in this case the interest rate paid by the borrower.
If you are thinking about investing in one of our PDLs it is important that you also assess the likely risks against the potential rewards, and that you consider each PDL as part of your overall investment portfolio. Balance should be the underlying principle to a healthy portfolio.
You can find out more about our current PDLs and the rest of the series on PDLs below: