LandlordInvest, the peer-to-peer platform that specialises in buy-to-let and bridging loans, has expanded into development finance.
The P2P lender is focussing on residential developments and has already completed two cases where it claims the risk was minimal due to most of the construction having already been completed.
LandlordInvest helped a developer in Croydon who needed money to complete the build and was able to sell the property. In North East London, the firm lent to a couple who had already received planning permission and had started building, but just required additional funds to complete the build.
“We do buy-to-let and bridging but all on complete properties, and now we’re moving into development finance,” said Filip Karadaghi (pictured), co-founder and chief executive of LandlordInvest.
“We’re moving into the higher-risk end. The risk is much higher, but the returns are much higher too.
“We want to complement our buy-to-let product. Consumers can still invest into buy-to-let.
“With buy-to-let, it’s income and the income from the assets will cover payments and maintenance fees and so on, if lenders do the work properly.
“But with development finance there’s more risk such as construction risk and the cost of overruns.
“When stuff goes wrong the banks don’t always act in the best interests of the developer, they have a duty of care to customers and reputation to think of. Banks have a much higher threshold.”
Karadaghi emphasised that LandlordInvest will be focussing on residential development projects that involve building flats or houses, rather than commercial developments which he said involves more compliance and risk.
He said the move to development finance has been smooth as there is no difference between procuring these loans and bridging loans, and the platform plans to start ground-up development finance deals soon.
“You establish a connection with brokers and tell them what kind of deals you want to see, send over a product sheet and hopefully it matches up,” Karadaghi said.
He said the platform has completed various buy-to-let or bridging deals across the country, including London, Birmingham, Leicester, Wales and a couple of small deals in Yorkshire.
“We have no geographical restriction, but you also have to consider the location and the valuation of the property,” Karadaghi said.
“For example, it’s more difficult to sell in a village than in London.”
Last year, LandlordInvest increased the size of its loanbook by about 60 per cent year-on-year without seeing any losses.
Karadaghi said he has witnessed the effect of the Boris bounce in the housing market.
“2019 was a good year,” he said.
“We’ve built up a good track record which will attract more capital and will be a main priority.
“Since the election we’ve definitely seen a big increase in enquiries, some of the borrowers are able to exit their products.
“Brexit uncertainty made it difficult to exit development finance loans, but now with a pick-up in activity people are more keen to buy and borrowers are more able to sell the property and repay the debt.
“This year we are looking to grow the platform organically with a mix of capital from both retail and institutional investors.”