“Disruptive” Property Investment

“Disruptive” Property Investment
November 5, 2019 Hugo Fairey

What is “disruptive”

Over the last few years, the word “disruptive” has been bandied around by new companies looking to show their models or products in a different and exciting light. But, notwithstanding a few exceptions like Apple and the 1st iPhone, most “disruptive” companies tend to take an existing idea and add a new bell or whistle that separates them from the pack and creates rapid expansion.

For example, Ford did not invent the car, but their assembly-line process allowed them to produce and sell the Model T at a significantly lower price than the competition, which created a new, rapidly growing market. Likewise, there were social networks before Facebook, taxi apps before Uber, and music streaming before Spotify. All these large companies hit on something unique within their market, but did not invent the market.

At Brickowner, we have discussed where or if the company fits into this paradigm. To try to answer this, let’s take a look at the property investment market in the UK and see if it’s ripe for a “disruptive” company like Brickowner.

Born out of frustration and a problem

Frederick Bristol (Brickowner’s CEO) has said that his motivation to found Brickowner came from his frustrations with the property investment market:

“During my time working in property, I saw the difficulties that many developers had in securing, managing and structuring funding. Also, many investors were unable to find the best investment opportunities, and when they did, could not invest due to high minimum investment thresholds. Brickowner was born out of a desire to solve these problems – for developers and investors.”

Speaking to anyone who works in property development, the problems mentioned above are typical. Securing funding for developments and investing in property is a famously slow, bureaucratic process, with far too much paperwork.

The due diligence work for a £500K site is roughly the same for a £50M site, meaning smaller sites and developers often get overlooked. To compound the problem, lenders (banks) are constrained by regulators as to the degree of risk they can carry on their books, with loans to smaller developers perceived as riskier. This has locked up vast potential within the market and has contributed to the UK’s chronic shortage of housing supply.

 

Since the financial crash of 2007, interest rates have been so low that the attractions of yield-generating asset classes such as property are obvious to savers and investors alike. Yet the financial services sector has been ineffective at coming up with products to service this need.

And the products that they are producing normally involve a convoluted arrangement of different parties, all wanting a share of fees. These come in the form of financial advisers, fund companies or banks, property lenders and brokers. They all stand between the investor and the developer (see chart). They each need to cover costs and make profit, potentially reducing the size of the return available to investors.

With bureaucratic processes and lower returns for investors, it could be argued that the traditional property investment market in the UK needs reform. So where does a “disruptive” company like Brickowner fit in?

Simple access to smart investments

The purpose of Brickowner is simple: to offer a better deal to both property developers and investors in a simple and easy to use way.

By removing bureaucracy using tech, we can raise funds quickly and efficiently for developers that have been locked out by the traditional market.

By removing the middlemen and their fees (see below), we can offer higher returns with a reduced level of risk as the investment is secured against property in the form of a 1st or 2nd charge.

Investing puts your capital at risk and returns are not guaranteed.

The “disruptive” paradigm?

So where does Brickowner fit into the “disruptive” paradigm?

Removing intermediaries and bureaucracy is a good thing, but it could be argued that this is nothing more than bells and whistles.

Brickowner’s innovation comes from the experience of the team as both property developers and investors, who are unlocking the vast potential in the smaller sites and developers that have been overlooked by the traditional market for too long.

In doing so Brickowner has created a product that helps address the shortage of housing supply and allows everyone involved to engage and benefit from property investment.

If that is not “disruptive”, what is?

 

All investors should be aware that their capital will be at risk.  The value of investments can go down as well as up. Forecasts are not a reliable indicator of future performance.  Brickowner investments are not covered by the Financial Services Compensation Scheme. There is no recognised market to sell Brickowner investments.  Brickowner investments are illiquid. Always seek the advice of a qualified independent investment advisor with any questions you may have regarding any of the above.