Compare P2P lending accounts and IFISAs now

Crowd BTL Investing: Landbay vs CrowdLords

Click "Learn" to get help

By on 26 May, 2015 | Read more by this author

Landbay* is a P2P lending website that allows you to lend your money to experienced buy-to-let investors.

CrowdLords is not P2P lending. It's being a buy-to-let investor yourself, albeit as part of a crowd of landlords sharing a property.

Note that CrowdLords is for people classified as “high-net worth” or “sophisticated investors”. Still, the following article might interest you because much of it is still relevant if you want to know the difference between lending to landlords through P2P websites and becoming a landlord yourself.

BTL lending (Landbay) is lower risk

Lending to landlords is lower risk than being a landlord yourself, which means, everything else being equal, Landbay is lower risk than CrowdLords.

The main reason is that you're higher up the food chain if the property needs to be sold when something has gone wrong. After the sale, you get your money back first, including interest, then banks and other lenders do, and, finally, if there's any money left, the landlords get some or all of their money back.

If Landbay didn't know what it was doing or if it was deliberately aiming for higher-risk lending, the above might not have been true. But Landbay is highly selective of the landlords it allows to borrow and the properties must be earning at least 1.25 times the mortgage payment in rent.

In addition, the most that Landbay* will allow landlords to borrow is 80% of the estimated value of the property, giving individual lenders a safety net in case the property needs to be repossessed and sold.

BTL investing (CrowdLords) is higher reward

Precisely because it is lower risk, Landbay's mortgages pay you less too.

You are currently offered 3.56% for easyCrowdLords v Landbay: Easy access isn't guaranteed access (see sidebox) or 4.4% for a three-year fixed deal, with the protection of a modest bad-debt provision fund and the substantial protection of the property itself.

CrowdLords, on the other hand, is offering projected returns of between 6% and 8% on the three properties currently available for you to become a joint BTL owner in right now.

That estimated return of 8% per year might typically include 3%-4% per year in income from rent (after costs) plus a guess at how much profit you'll make on selling the property at a higher value in five years, e.g. 16%.

Even higher returns are available if you invest in developer-BTL properties, which means your investment helps fund the development and then, when it's completed, it turns into a BTL property that you co-own. There's one such property offering an estimated 16% per year, but the risks are also substantially higher.

CrowdLords isn't identical to BTL

CrowdLords properties come from other landlords, who pass on some of their ownership to you, so that they can buy even more properties

These landlords run the properties for you, so you don't have to.

On the downside, one of the attractions of being a BTL landlord is that you increase the rewards (and risks) by borrowing most of the money you need to buy the property.

Here's an example to clarify that. Say you have £100,000 to invest:

  • If you buy a property for £100,000 with cash and the price rises 10%, you make £10,000.
  • If you put your £100,000 down as a deposit on a £200,000 property, and that property rises 10% in value, you make £20,000, so you actually make 20% on the deal.

So your initial outlay is the same but you make twice as much money. Naturally, borrowing increases your risks considerably too.

Through CrowdLords, you miss out on the advantage (and risk) of borrowing to buy. That probably explains why the returns of 6% to 8% are a modest premium over many of the safest P2P lending websites for the additional risks involved.

CrowdLords is not selective

One thing that increases your risks is that CrowdLords doesn't select investments for you like Landbay selects its borrowers.

Even new and accidental landlords are allowed to offer you a share of their properties through CrowdLords. So it's entirely down to you to judge them.

This never happens in P2P lending, at least not yet, where borrowers usually have some very stiff, or at least reasonably stiff, checks that they have to pass before they're allowed to access your cash.

CrowdLords has virtually no history yet, so we'll watch it with interest – albeit from the sidelines, since it's not P2P lending and therefore not part of the 4thWay to save and invest.

*Commission and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from Landbay, and other P2P lending companies not mentioned above when you click through from our website and open accounts with them. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.

Leave a Reply

Your email address will not be published. Required fields are marked *

Today’s average interest rates

What is the “4thWay”?

There's the savings way, the property way, the stock-market way, and now there's the peer-to-peer lending way. The 4thWay® to save and invest.
Learn more.

What does 4thWay do?

We help people save and make more money, more safely when they cut out the banks and lend directly to other people and to businesses.

Why use 4thWay?

4thWay® is shaped by investors, bank risk modellers and a senior debt specialist, and we're governed by our users to ensure our comparison services and research are trustworthy and complete.

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Orchard’s interest rates different?

Orchard’s lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Orchard’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

We make no money from reviewing CapitalRise. Weeks of man-hours and expertise has gone into it. (Interviews, reviewing facts, programming bespoke analysis software, manual data analysis…) Millions of pounds are invested in P2P lending accounts each year on the basis of our research. That’s why we ask for a small donation by clicking this text. Even just contributing £10 per £1,000 you invest (1%) helps.

Close

×
Back to top