Ireland’s first online peer-to-peer lending platform for property investors went live yesterday.
Property Bridges is targeting investors who are finding it difficult to secure a loan from a bank, or who need funding relatively quickly, with people able to invest in projects with as little as €500.
Marc Rafferty – who was also an investor in the SME peer-to-peer lending platform Linked Finance – is one of the Co-founders of Property Bridges.
Mr Rafferty said the platform “allows ordinary Irish citizens contribute to help funds housing development projects nationwide and at the same time make a decent and fair return on their money”.
The platform went live yesterday, with the first project seeking investment on the site a one-year project for a house in Sandycove in Dublin.
The borrower is looking for €250,000 and as of this morning they had managed to raise €36,500.
Mr Rafferty said that loan will be on the website for about two weeks and “during that time the citizens of Ireland will contribute to funding that loan”.
He added that “when those two weeks are up and the loan is fully funded, we will extend the money to the borrower so he can start the development.
Property Bridges promises a return of 8.5% for investors, while the platform extracts a fee of 4% from borrowers.
This means anyone looking to secure funding will be paying an effective interest rate of 12.5%, and they’ll need to repay the loan within 1-2 years (the average length of loans the platform is currently targeting).
The Property Bridges co-founder said the loan rates are sustainable and the types of developments the platform is looking to support are “the ones between about €500,000 and €3m.
“There is no finance available in Ireland for anyone developing at that level. There’s finance for massive developments but at this level – which we feel is the small-to-medium sized developments – there is none.
“So this rate is very fair for that type of finance,” he added, also pointing out that there is a duty of care that investors make “a decent and fair return”.
Prior to the financial crisis in Ireland, many people got into property speculation who potentially shouldn’t have.
In response to the suggestion that it could be dangerous to encourage smaller investors – who likely don’t know the market as well as seasoned investment firms – to put their money into such a potentially volatile property market, Mr Rafferty said the platform “will do everything we can to give them all the information they need”.
He added that “when these loans go live lenders can get involved with them for as little as €500 … they’re not sophisticated investors we’re talking about.
“We’ll put up all the information about the loans and our advice about them. This traditionally is information that used to be only available to very high net worth individuals. We’re making it available now to regular citizens to want to lend to these loans and we feel we will value these loans and credit analyse them well enough to protect all lenders.”
Property Bridges allows people who can’t secure funding from a bank or investment fund to ask for money from investors.
Mr Rafferty says “a lot of times banks stop lending and they stop lending at a rate and they just make a line in the sand that they don’t lend to projects under €5m and there’s no talking to them.
“In this particular case there’s a lot of work involved on our behalf of doing these loans … and some financial institutions don’t fancy doing all of that work.”