A new online investment project that works like a property ISA meaning it is capital gains exempt, investing in properties in Birmingham, Leeds and Manchester, has raised £1.3m in seed funding from Alex Chesterman’s Zoopla and serial investor Robin Klein.
Bricklane.com’s online platform allows savers to invest from as little £100, earn a share of the income earned by the properties invested in via a Real Estate Investment Trust (REIT), and withdraw their money at any time without incurring minimum term or exit fees.
The theory goes that the price achieved at withdrawal is likely to be superior to that achieved by investing the money elsewhere, at a high street bank, for example, because house prices are rising faster than rates of income and interest rates.
The company cites an example that an investment in the Birmingham, Manchester or Leeds areas 5 years ago would have returned £1,360; a 6.3% annual return.
The product is firmly aimed at “generation rent”, who are encouraged to invest through an ISA (Bricklane can even transfer existing ISAs) and earn a better return on their savings, making the purchase of a home a possibility, quicker. The firm say that according to the Office for National Statistics, only 37% of 25-24 year olds’ owned a home in 2015 – down from 57% 10 years previously.
Bricklane, says its founders, is a great way to make sure the interest on savers money grows at the same rate as the price of the house they are trying to buy.
Simon Heawood, CEO said: “The problems facing ‘Generation Rent’ are all too familiar. With Bricklane.com, we want to support renters in doing something about it. Our aim is to help those saving for a first home to get on the ladder years earlier than they would by saving with cash. Alongside, we will provide a great service to residents of properties owned by our community of savers.”
Tom Cavill, Heawood’s co-founder and CDO, said; ““Through innovative technology and thoughtful design, we’re aiming to make the property market more inclusive. With Bricklane.com, anyone can own property, whatever their financial position.”
Bricklane.com plans to use a traditional REIT, or Real Estate Investment Trust, and invest savers money directly into rental properties – any gains made by either rental money received or the rise in the value of properties will be returned to savers tax free, the same tax treatment as if the property were their first home.
Zoopla, LocalGlobe, the venture capital firm run by Robin Klein, and various angel investors have all contributed to the £1.3m of funding and Bricklane.com has also appointed a number of advisors; Chris Strickland, Chairman of the Peabody Trust housing association, has joined as non-executive Direcector, former CIO of CBRE Global Investors EMEA, and Craig Hallam, MD Property Services at Salamanca Group, who the firm say has “£5 billion of deals under his belt” have also joined the advisory team.
“Bricklane.com’s product is an elegant, tech-enabled answer to the problems of the housing crisis, and could help a whole generation of people who feel shut out of the market gain an entry” says Klein, whilst Alex Chesterman, CEO of Zoopla said “We wanted to invest and partner with Bricklane.com due to the strength of the product, innovative thinking from the team and clear fit with our users.”
By 2050, according to a United Nations source quoted on the start-ups website, 7 billion people will be living in cities. Bricklane.com say they want to “make sure that, in the future, ownership of our cities is spread across as wide a range of people as possible, and that financial position is not a barrier to participation.”
The prop-tech revolution is gathering pace; last week, Airbnb secured $555m of funding at a valuation close to $30bn, and there is a lot of excitement in San Francisco about Andreessen Horowitz’ backing of Point, to the tune of $8.4m.
Point allows prospective homebuyers to secure equity funding rather than take on debt – in exchange Point takes on equity in the property. If Point, after evaluating the property and the buyers’ financial circumstances, decides to “co-invest”, the money is paid within 4 days. Point has already raised $15,4, but the service is still only available in California whilst new markets are evaluated.
Given the current almost feudal relationship between the property haves and have-nots, it’s heartening and overdue to see the tech and investment community pivoting the market into an eco-system that works better than the broken model which emerged in the aftermath of the 2008 stock market collapse, which was driven, of course, by so-called “mortgage backed securities”.
Bricklane’s product, similarly to Nutmeg, the award-winning investment platform, with similar branding, it has to be said, looks to be a more transparent and down to earth product, that give the customer, who can dip in and out of the fund, more flexibility and less risk.
Bricklane.com say they plan to launch a second fund to invest in London properties. London’s property market is as safe an asset as can be found in the current climate – unless that changes dramatically, any opportunity to invest in property is worth looking at.