A new peer-to-peer finance-backed shared ownership scheme has launched, offering people a way to invest in residential property while supporting first-time buyers.
OnStep presents itself as a more ethical alternative to buy-to-let investing, which has been accused of taking homes away from first-time buyers and raising prices.
Instead, the platform supports people looking to step onto the property ladder without a mortgage and with a deposit of just five per cent of the property value. This acts as an equity loan and the rest of the money is then funded through P2P finance to form a shared equity mortgage.
Read more: Ethical property investing
A new property company is set up to purchase the home, which is then rented back to the tenants for seven years, at a discounted monthly rental fee.
Investors receive monthly income and share the capital growth with the tenant.
Annual returns start at three per cent, with capital growth estimated at 100 per cent over seven years, based on average house price growth.
The investment can be held in an Innovative Finance ISA.
OnStep founders Rito Haldar and Aswin Parameswaran (pictured) are also behind the asset-backed peer-to-peer lending platform Unbolted, which launched in 2013. OnStep has been launched under the same regulatory permissions.
“OnStep provides investors with a hassle-free, tax-efficient way to get involved in the buy-to-let market, without having to take on landlord responsibilities,” said Haldar.
“We’re clear that we hope to deliver annual returns of more than three per cent for investors as well as the opportunity for 100 per cent capital growth on their investment., which comes at a time when savings rates are historically low and property prices are continuing to rise steadily.
“All of this is achieved at the same time as helping first-time buyers get onto the property ladder and avoid mortgage heartache, so there’s a real social and moral purpose behind getting involved with OnStep.”
OnStep says it carefully chooses all of its tenants, verifying their income and expenses and making sure they have a clean credit history. As co-investors, tenants are responsible for all repairs and maintenance of the property.
People keen to buy a home via OnStep need to have an annual income of at least £40,000 and pass an affordability assessment.
Eligible properties must be valued at between £250,000 and £750,000, and unlike the government’s Help to Buy scheme, must not be a new build.
The focus is on good quality, existing family homes in desirable locations, to provide strong growth for investors.
“The mission of OnStep is to provide a service that makes a positive difference to our customer’s lives whilst also offering investors a sustainable and ethically conscious investment option,” said Parameswaran.
“At a time of weak investment returns and poor savings rates, OnStep is a great way for people to invest their money and genuinely help people step onto the property ladder. It also provides an attractive option for investment portfolio diversification.”