Having emerged only a decade ago, peer-to-peer (P2P) property lending has fast become a popular investment option for investors looking to get their foot on the property ladder but who can’t afford the deposit or those looking to diversify their property portfolio. Roxana Mohammadian-Molina, Chief Strategy Officer at P2P property lending platform Blend Network, spoke to IFA Magazine about the ultimate guide to P2P lending as she shares her top-tips for advisors.
IFA: Tell us more about what P2P lending is.
RMM: P2P is the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers. Having emerged only a decade ago, it has now become an asset class in its own right, with a devoted investor base that has been wooed not only by its attractive returns but also by its ability to let investors take control of their investments.
IFA: How much can investors invest in P2P property lending?
RMM: It depends on the platform that investors use to invest. For example, Blend Network allow investors to invest from as little as £1,000 and there is no maximum. We have a very diversified investor base, we have some very high net worth investors investing tens of thousands of Pounds on each loan, but we also have private investors investing £1,000 per loan. All investors get access to the investment opportunity under the same conditions no matter how much or how little they invest.
IFA: What are the returns like? How much can investors expect to earn with P2P lending?
RMM: It also depends on the platform that investors use to invest. Some platforms, such as Blend Network, offers up to 12% return p.a. (Blend Network offers 8-12% return p.a.). The interest earned by P2P property lending is higher than the interest on cash deposits (although cash investments are protected by the FSCS and P2P lending is not) and while there is a risk that a borrower may default, P2P property loans usually offer fixed returns, thus shielding investors from the volatility of stock markets. This has made P2P lending an attractive option to all investors looking to achieve higher returns.
IFA: Is P2Pproperty lending safe? What are the things that investors should look out for?
RMM: P2P lending is regulated by the Financial Conduct Authority. This has generally enhanced the trust in the sector and made lenders more comfortable about lending through an online platform. On top of that, the loans are generally secured against the underlying property. In the case of Blend Network, all loans are secured against a first charge on the UK property. Investors can check our track-record at www.blendnetwork.com/pages/statistics.
IFA: It’s also important that we talk about the risks. So, what are the risks of P2P property lending?
RMM: The risk is that a borrower may default. However, there are several ways that platforms such as Blend Network use to mitigate such risks. First, loans are secured against property. This means that if a loan defaults, we will step in to liquidate the asset and try to recover the funds behalf of investors. Second, some platforms such as Blend Network only lend in highly liquid parts of the property market. This means that in the event of default, the asset can be more easily sold and moneys recovered. Third, platforms generally have a maximum level of Loan-To-Value (LTV) they lend on. Blend Network offers maximum LTV of 68% but most loans so far have LTVs below 60%. So, those are all things that investors should look out for when investing with a P2P property lending platform.
For more information on Blend Network, visit www.blendnetwork.com.
Read some of the company’s excellent 4.8/5 reviews from lenders at https://www.trustpilot.com/review/blendnetwork.com.
And read an interview with a lender at https://blendnetwork.blog/2021/01/06/interview-with-a-blend-network-lender/.