We now start to move ahead with some of the more alternative and creative forms of financing open to us property investors and developers over the next few weeks.
We start off today by taking a quick look at peer-to-peer lending. I am joined on the show by one of these more emerging and disruptive players, with Ben Shaw managing director of HNW Lending.
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Resources mentioned
Free Property Valuation Offer: Send an email to Ben Shaw, quoting The Property Voice and he will agree to provide a free valuation on a peer-to-peer loan through his company High Net Worth Lending.
Ben Shaw’s contact details:
- Website - hnwlending.co.uk
- Email - ben@hnwlending.co.uk
- Phone - +44 7958 636 106
Link to the Podcast feedback survey
Today’s must do’s
Take a look at some of the peer-to-peer lenders out there. Some are banks in disguise for sure, but a growing number offer more flexible, alternative financing facilities particularly when you have a requirement for speed or handling an unusual situation perhaps.
Contact Ben to inquire about his free valuation offer, quoting The Property Voice obviously.
Subscribe to and review the show in iTunes…and while you are at it please help us to spread the word by telling all your friends too!
Send in your property stories, questions or moans to podcast@thepropertyvoice.net and we will try and feature YOU on the show too!
Property Investor Toolkit – here is the book link on amazon.co.uk & amazon.com in case you would like to get yourself a copy to accompany this series
Get talking!
Join in the discussion, either here in the comments section below, or by emailing us at podcast@thepropertyvoice.net
Start a conversation on Twitter with us @PropertyVoiceUK or on our Facebook page
Transcription of the show
Hello and welcome to another episode of The Property Voice podcast. My name is Richard Brown and it’s a pleasure to have you join me on the show again today.
OK, so we have spent the first couple of weeks getting ourselves reacquainted with some of the more obvious forms of property finance. However, we did attempt t0 consider these in a slightly less than obvious way along with a more practical application where possible.
We now start to move ahead with some of the more alternative and creative forms of financing open to property investors and developers over the next few weeks.
We start off today by taking a quick look at peer-to-peer lending. I am joined on the show by one of these more emerging and disruptive players, with Ben Shaw managing director of HNW Lending.
I will do a wider, follow up on peer-to-peer lending later, but for now let’s hear what Ben has to say on the matter.
Richard: Hello again and I’m very pleased to welcome Ben Shaw from High Net Worth Lending onto the show today, and Ben is going to tell you a bit about himself in a minute. We are carrying on our theme about creative financing in property. And Ben is going to tell us a little bit about what he does in the space of Peer to Peer lending, which is primarily where he operates. Ben, Hi, how are you?
Ben: I’m good thank you, thanks for inviting me to have a chat with you about this.
Richard: Absolutely, it’s good to have you on. Thanks for joining me. In fact, in that vein, it would be useful if you would mind giving an intro about yourself and your background. And, I guess a bit of a clue to the specialist knowledge you might have in this area, just so our listeners know who they are dealing with.
Ben: Yeah…my background, I started off as a chartered accountant, and then went into property and spent 15 years working for, probably the largest privately owned property company, that’s about 15000 properties. What I thought was a niche in the market, was to do financing, being a bit more creative, taking unusual assets—things like cars, boats, fine wine and the kind of exciting stuff. But the reality, given my background, most of my loans have been backed by property, but we do is more innovative, certainly more than banks and for most bridging companies out there, in that we will look at a property financing and try and give the customer exactly what they need. So, if they want a higher Loan to Value, we might take, some other piece of collateral, such as a boat, or a car or some fine wine, or indeed a second charge or third charge, over another property. If someone is looking for 100% to buy a property, traditional will only lend them, say 75% against it. We might still be able to lend them 100%, because we will put a further charge on the property that they are buying. And a second charge on maybe their house, or a Buy to Let that they have got. Or a car or a boat.
Richard: Yeah…we will come on to that. I think that’s one of the things…you actually wrote a blog post for us, The Property Voice, a while ago. And it was this whole idea of securing against unusual assets, as you describe, which really captivated my imagination. But, before we drill into that a bit more about what you can do as a company. It would be useful to pick your brains a bit, because I’m talking about this sort of, growing area you alluded to in your introduction, about alternative financing, creative financing, so it includes alternative lenders, Peer to Peer, Crowdfunding, those types of, let’s say, less than mainstream lenders, like the Buy to Let lenders and the bridging finance companies that you mentioned. So, you are obviously in the space, generally speaking, of being a Peer to Peer lender, would that be a fair description?
Ben: Yeah, that’s right. I guess, what makes us a Peer to Peer lenders, is we are taking money from individuals, rather than taking money from the bank, it gives us a lot more flexibility. Because the individuals aren’t as rigid with credit committees, and can be a bit more flexible about looking at unusual situations.
Richard: Yes, exactly and where would you say, Peer to Peer, generally fits in terms of, a less than mainstream financing landscape and for property investors, in particular? A lot of people possibly, might not be aware of this type of offering.
Ben: Yeah, I mean there are quite a few Peer to Peer lenders out there now. Quite a few of them are backed by banks and private equity houses, and are effectively very similar to banks and private equity houses. And it’s quite hard to work out which ones are a bit different and can really think outside the box. And there is not many of us like that, who are funded by individuals, so if someone turns around to me and says…they have got a holiday home in Majorca, can they use that as collateral, well very few companies in the UK would even think about that, because they are UK property lenders. But we would look at it and say, well I have got several of my lenders who have holiday homes in Majorca, therefore they are comfortable with values of properties in Majorca. In fact, we have done quite a large loan in Majorca, where the lender has said I am quite happy with his, it’s a really nice house, and if the worse came to the worse, id quite happily pay off the loan and on the house. And that’s a really good way of looking at it.
Richard: Yeah, so you mentioned there, the space is emerging for a start, it’s a disruptive type of market place isn’t it. You have got Peer to Peer lenders, who are literally individuals and there is a middleman or middle organisation, that puts borrower and investor together. People putting money in at the top and coming out at the bottom. Now, you have got this accumulation of bank, or private equity based sponsors or providers that you have mentioned, and you have got some people that security over assets and other people who don’t. So, there is this hotchpotch of different mixes. You are right, in what you say, insofar as what your company does, is maybe fitting a nice niche in that space. If I understood it correctly, this is what I am trying to get at really, is the landscape of the market. Would you say that Peer to Peer in general, Peer to Peer funding, represents quite a big opportunity for property investors, if not today but maybe going forward?
Ben: Well, I think it present s a good opportunity today as well as going forward. There certainly—I think the statistics show there is over £1 billion worth of Peer to Peer lending going on and its almost all in property. I think to be fair, you are still going to get a cheaper loan from a bank or a building society, than you are from a Peer to Peer lender. But the other side of the coin is, if you want to do something that’s slightly outside the box, a Peer to Peer lender may well be cheaper than a traditional Bridger.
Richard: Yes, and I think there is other criteria as well which we will come onto as the conversation unfolds, as to what differentiates Peer to Peer. But, looking I guess, at the benefits side of the equation, now obviously, to a property investor, that’s where I come from, in doing some research for this particular episode—I hope you don’t mind me mentioning but I came across another company called Borrow, and I think they emanated from the US. They do some lending which is geared towards property, themselves. But what are the general benefits of people like Borrow, or people like yourselves, High Net Worth Lending, to property investors overall and how does it differ from other types of financing that’s available?
Ben: Borrow is much more…its model is more a Pawnbroker, and they have taken on property, because they can’t get enough pawnbroking type deals at the ridiculous pawnbroking rates that they want to charge. I think there is a, the issue is that there is a lot of providers out there, and if you are doing anything that’s outside the easy mainstream, what a bank or building society, or if you don’t have the time to wait for a bank or building society to give their cheap Buy to Let or whatever type of deals that you want from then, Peer to Peer lenders offer a great opportunity. Because, I think a lot of us are cheaper than traditional bridging providers, and some of us are more flexible as well.
Richard: I think that’s what is was driving at, because I know, I looked at a range of different Peer to Peer lender, particularly operating in the property space and when I was looking at them, to be honest with you, I couldn’t see a great deal of difference, between them and let’s say a traditional bank. You know, they still wanted to do credit underwriting, valuations, and all of the affordability type of testing, all seemed to be a bank in disguise.
Ben: I think you are right and a lot of them are a bit like banks in disguise. And that is the difficulty, if you are a property investor, you need to find those that are not banks in disguise, otherwise you might as well go to the bank.
Richard: That was an observation, that you kind of just clarified really. I sometimes go off on a bit of a tangent. In terms of, investors getting themselves ready, maybe to engage with this type of lender, so somebody that might approach you for example, what should they do, and in particular, what should they do that might be different to how they would approach a mainstream lender, if there are differences?
Ben: I think the key difference, with somebody like us, is you can call us. You will probably end up speaking to me and I will tell you in the space of 2-3 minutes of speaking to you, whether or not we can lend to you, and roughly, what the rate is going to be. And the sort of service you don’t get from other people out there, because they have a credit committee and they have a whole series of checks they have to do and forms they have to fill and whatever. Now, I’m not saying we don’t have any forms to fill in, in order to get a loan, we are obviously going to have to ask you to fill in a form and say what’s your name and what’s your address and what property are using as collateral, how long do you want the loan for. But it’s really simple, it’s really quick and we have a very, very streamlined process and we can skip things. If you, if there is a real urgency and the Loan to Value makes sense, we don’t need to have a valuation done. If there is a problem with the title, that a bank would normally say no to…maybe there is a right of way over the property, we can take a view over that and say, ok, there is a problem with the property, it doesn’t really affect the value very much, we are happy to go ahead with the loan. And that’s the kind of flexibility that we can offer that most other people can’t.
Richard: I guess in general terms as well, if we just look at the wider industry of the Peer to Peer lenders, I know you don’t represent them and the industry, but when I go to their websites, they do sort of have information on their about how you can approach them, so I suppose that’s probably a good starting point. If they have any differences, but if they are the bank in disguise, you better get ready for the full-on finance application type of route.
Ben: I think you will find that a lot of the Peer to Peer lenders are like that. and its partly the FCA forces people down that route. Or tries to force people down that route, because it’s a route they are comfortable with.
Richard: We mentioned the FCA and that kind of brings us on to the regulation and compliance angle I wanted to talk to you about. What is the situation with compliance and regulation with Peer to Peer lending at the moment? I guess I am looking more at the borrower point of view, I am not saying use Peer to Peer as avenue for investment yourself, I am actually considering it here as a borrower, a property investor, who is using Peer to Peer as a finance vehicle.
Ben: I think a firm having FCA authorisation, whether its interim or full, and to be fair, nobody has got…I think there is 6 people in the country who have got full, none of the big players have got full registration. But as long as they are in the process, it gives you quite a bit more comfort than going to an unregulated player. The FCA forces you to go through a procedure that gives protection to borrowers, in a way that unregulated firms don’t have to do. I think, the FCA rules are challenging for everybody, which is one of the reasons why they let nobody through. But, I think they are good for borrowers, because they give borrowers protection, they wouldn’t otherwise have.
Richard: There is a bit of a trade-off there I suppose, isn’t there. Just taking about accessing you and other types of Peer to Peer lenders, would you say that Peer to Peer is more suited to certain situations, I think you kind of alluded to it earlier…
Ben: It’s definitely more suited to situations where you need the money in a hurry, and where it’s an unusual transaction, or there is something unusual about it. If you have got the time and you can get a cheap Buy to Let mortgage from a bank, that is always going to be your cheapest option, because their borrowing from the ECB at 0.5% and they are lending out at a couple of percent above that. It’s very hard at the moment to get anything cheaper than that. If you can’t then Peer to Peer lenders are an option, you should be looking at.
Richard: So, it’s pretty much a string, amongst many other strings, in your bow, really. That you should have in your armoury. So, I suppose if you need to move fast, maybe you have got an un-mortgageable property, that kind of thing. Even other types of challenges, Peer to Peer will probably come into your thinking, is that kind of the rule?
Ben: Yeah, yeah.
Richard: Fair enough. In terms of, we talked about regulation, it might be a difficult question for you to answer, but are there any downsides, or—I use the word ‘gotchas’, things that just the average property investor might not be familiar with, that you can give a few pointers towards, when it comes to specifically Peer to Peer?
Ben: Well I think you should try and work out, if you can, whether its bank in disguise as opposed to a Peer to Peer lender. Whether you are just going to have a very long drawn out process, or whether…a lot of these Peer to Peer lenders don’t have the funds. So, you might go through a whole process with them and they are relaying on people putting in £50, £100, £200 at the end of it, and it may not happen. The put the loan up on their platform and it never gets funded. Just be aware that is a possibility with some of the providers. And choose your provider accordingly. And the other thing I would say is, take comfort from the fact that a company is FCA authorised and regulated, it will give you as the borrower, more protection.
Richard: Yeah, you make a good point actually, because a lot of the platform, which post up your project, it’s the sharing economy type of space, its micro sums of money that gets bid to satisfy that loan. So, you are relying on quite a large number of people chipping in, generally speaking. But your model is not quite like that, if I understood correctly.
Ben: Our model differs. First of all, the founders of the business have got a lot of capital and will underwrite loans using their own money. And secondly, our lenders generally put in a hundred to a few hundred thousand pounds per loan, so if you are looking for a couple of hundred-thousand-pound loan, it’s usually a call to 1 or 2 people. If the founders are putting their own money in anyway.
Richard: So, I’m actually a bit curious Ben, because you talked about unusual situations, and you have talked about unusual assets, why don’t you just share, you talked about this property in Majorca, was it I think earlier. What types of asset have you actually lent against if you like?
Ben: We have done first, second and third charges against properties, in England, Scotland, Wales, we have done first and second charges on property in Spain and Majorca, which is obviously Spanish also. We have done first and second charges on properties in France. We have had loan offers out against properties in America, Bahamas, Argentina, a number of other places, Germany, for one reason or another they hadn’t transacted. Then of course, we have some of the more unusual assets, which include some very unusual cars, and some slightly less unusual cars, but very expensive cars. We have had a couple of planes, in fact, we have got two planes at the moment. We have done some fine wine, a little bit of jewellery, the most unusual I think was timeshare units. Which I was very lucky, I found someone who had the same timeshare units and was quite happy taking 50% Loan to Value against somebody else’s timeshare units, because they would be quite happy if the person defaulted, having their timeshare unit.
Richard: They get their timeshare at a discount.
Ben: I mean, these are expensive, this is a £100000 worth of timeshare units.
Richard: But that’s the point of what you do, you said earlier, you spotted a niche. You mentioned a lot of things you get involved with, seem to be property backed loans, but you drift into these other high value assets as well. Which I thought was really interesting when we first exchanged, about cars and fine wine, I guess antiques would fall in to that category as well, would it?
Ben: Yeah.
Richard: It’s fascinating. Are there any criteria that you would like to share now that’s relevant? Or is it just contact you for more information? What’s the best way for people to follow up?
Ben: Yeah, just contact us, I will happily spend a couple of minutes on the phone with you, because everybody’s scenario is different, so it would be silly for me to try and give scenarios. We are not a bank, we are not saying you have to fit into a certain box. You tell us what you want, you tell us what your assets are and we will do our best to work something out.
Richard: So, its personalised to the person effectively.
Ben: Yeah.
Richard: So, what’s the best way to get hold of you then?
Ben: Email…ben@hnwlending.co.uk or phone 07958 636106.
Richard: I will make a note of those in the show notes, as well so people can track you down. Before we perhaps draw to a close, actually, I have got one final question but one in anticipation of that. Is there anything I should have asked you but I haven’t that you think, Richard, you probably should have asked me this, its burning in my head…
Ben: I don’t think so. I think you have covered pretty well what the opportunity is in Peer to Peer Lending for property investors.
Richard: Ok, well that’s good. That’s the intention. One question I do tend to ask people like yourself who come on the show, is there anything in particular, whether it’s a special offer or something like that, you would like to make available to listeners of The Property Voice?
Ben: Yeah absolutely. We decided that what we are prepared to do is offer a free valuation to anybody who quotes The Property Voice when they submit their application. Valuations range from a few hundred pounds to a couple of thousand pounds when its multi million pound properties. So, that can be quite a good discount.
Richard: Yeah, quite generous. Thank you for that. I appreciate it that. Again, I will make notes on how to go about that but just to be clear, if you mention The Property Voice when you contact Ben, there is an offer of a free valuation. So, that’s fair enough. Ben it’s been great actually, really enjoyed talking to you, thanks for coming on. And I know you have been close to The Property Voice for a while, you submitted a guest blog. So, it’s always good to get your insights and I think in particular, in this space which is kind of emerging, and new. So, well done you for offering some alternative fiancé, which can often meet the needs of us strange property investors.
Ben: Yeah
Richard: Really appreciate it.
Ben: Great, it’s a pleasure
Richard: So, thanks a lot Ben, as I say I will get the recording and the show notes up there. Thanks for joining us. We will be in touch soon.
Ben: Great, thank you.
Richard: Take care
Property Chatter
Interview with Subject Matter Expert: Ben Shaw.
Resources & contacts:
Free Property Valuation Offer: Send an email to Ben Shaw, quoting The Property Voice and he will agree to provide a free valuation on a peer-to-peer loan through his company High Net Worth Lending.
Ben Shaw’s contact details:
- Website - hnwlending.co.uk
- Email - ben@hnwlending.co.uk
- Phone - +44 7958 636 106
So, just a quick wrap up from me this time. Lots of great advice in how to apply peer-to-peer lending, particularly when there is a requirement for speed or if the situation is a little less commonplace or unusual as Ben mentioned.
I have in fact worked with Ben on a couple of projects of my own and can vouch for the fact that he can act very quickly and adopt a flexible approach. Specifically, I remember when I contacted him about a project and he had a loan offer in my email inbox within a few hours. When you consider that we were each travelling and in different countries, with the property in yet another country, it was quite remarkable really.
Anyway, whilst P2P lending is an emerging and at times very useful form of financing to have available, it is not for everyone and every situation. I shall pick up this theme a little more in a follow up episode, so look out for that won’t you.
I hope you enjoyed listening to our opening foray into peer-to-peer lending, especially when it is not from a bank in disguise! I will return to the practical application part later, but for now let’s leave it at that.
By all means do email me personally if you want to talk about anything from today’s show or more general in property investing to podcast@thepropertyvoice.net, the show notes will be over at the website www.thepropertyvoice.net
Now all that remains is to say thank you very much for listening again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.