Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.
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Risk Summary

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  • You could lose all the money you invest
  • Most investments are shares in start-up businesses or bonds issued by them. Investors in these shares or bonds often lose 100% of the money they invested, as most start-up businesses fail.
  • Checks on the businesses you are investing in, such as how well they are expected to perform, may not have been carried out by the platform you are investing through. You should do your own research before investing.

You won't get your money back quickly

  • Even if the business you invest in is successful, it will likely take several years to get your money back.
  • The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
  • Start-up businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
  • Some platforms may give you the opportunity to sell your investment early through a 'secondary market' or 'bulletin board', but there is no guarantee you will find a buyer at the price you are willing to sell.

Don't put all your eggs in one basket

  • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Learn more here.

The value of your investment can be reduced

  • If your investment is shares, the percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
  • These new shares could have additional rights that your shares don't have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

You are unlikely to be protected if something goes wrong

  • Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker.
  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA's website here.

For further information about investment-based crowdfunding, visit the crowdfunding section of the FCA's website here.
Insights
Investing Capital
Craig Peterson
· 3 min read
· Updated on

How do you invest in property as a growth-focused investor?

Investing in property is one of the most popular ways for investors to generate additional income and increase net wealth. Vast and varied in terms of how this can happen, on the highest of levels it comes down to a choice between investing for income or investing for growth.

What we mean by this is understanding your requirements and expectations as an investor and determining whether you are looking to invest for a regular yield (income) or a return on your initial investment over time (growth).

Both having their own benefits - and with there no right or wrong answer, as property investors have seen considerable successes by investing in each (and both, as they don't necessarily have to be mutually exclusive) - today I want to look at how you can be a property investor with growth-focused portfolio requirements.

What is capital growth?

The dictionary definition of capital growth offers a really clear explanation:

Profit made on an investment or purchase of an asset, measured by the increase in its market value over the invested amount or cost price. Also called capital appreciation.

With capital growth generally achievable in some format with the majority of investment asset classes, if we look at property specifically, capital growth is usually classed as the amount of money you make when you sell your investment property (assuming a direct investment - or your shares in a property fund, for example, if indirect).

What opportunities do you have to invest for growth with property?

Growth can be achieved through a range of property-based investments. Some are exclusively invested in for growth, whilst others have the ability for a combination of both growth and income.

Buy-to-let

Buy-to-let is a perfect example of this. Let's imagine you purchased a property for £200,000 and sold it after two years for £220,000. This would represent a growth of £20,000.

However, if throughout those two years you let the property for £500 per month and your mortgage payments were £150 (for example purposes), you'd be generating a £350 gross yield - or income - each month.

Property funds

Another similar example of being able to realise growth and some level of income is if you were to invest into a property fund or bond. Generally speaking an investment into these assets is made with the focus of seeing a return after a period of time - that could be at the end of a five year bond period or upon selling your shares in the fund (should they have appreciated enough to meet your investment expectations).

But they do both offer the potential of some level of income - if a fund performs as expected, dividends could be paid annually, whilst some of the newer property funds return a yield every six months.

Residential development projects

One of the property investment options we're focussing heavily on at the moment, residential property development projects are opportunities to invest in property from the very early stages - i.e, the purchasing of the land - right through to the stage of selling the developed homes.

Such opportunities can be perfect for growth-focused investors looking to invest a lump sum into an opportunity with the aim of seeing an enviable return after what's generally considered a short-to-medium period of time.

By investing directly into residential developments, investors should typically expect a 1.5x multiple of money return over a period of time that's generally between 18 and 22 months.

This means that if you invested £10,000 today into a residential development project and the project start date was 1st March 2018, on the assumption the targets were achieved, you could expect to see a return of £15,000 before the end of 2019.

Read more: the key benefits of a residential property development investment opportunity

The tax implications of growth-focused property investments

Generally speaking, gains achieved through growth-focused property investments are subject to Capital Gains Tax (CGT). With the current tax free allowance being £11,300, this means that any gain above this is subject to CGT being paid at the appropriate rate - which could be up to 28%.

Whilst you have a legal obligation to pay the liability, there are a number of ways that this liability can be deferred, reduced or even completely removed.

We've talked about this more in our post that looks at the link between tax efficient investing and property investing, but the primary focus is by investing your capital gain into a EIS or SEIS opportunity, you're able to defer the tax due until you dispose of the company shares (EIS) or remove the need to pay it either partly or entirely (SEIS).

Investing into property for growth

The entire focus of investing for growth is one that many would associate with traditional investing. You allocate the amount of money you wish to invest, determine which asset will most likely produce the return inline with your needs and expectations, and after a set period of time ideally be able to realise that return financially.

And on the highest of levels, this is exactly what's achievable with property for a growth-focused investor.

There are numerous opportunities for growth investments available, with varying entry points, risk profiles and return targets, meaning that should your preference be to see a return on your investment over time, there's very likely a property investment opportunity suited to you.

Download our 'integrating property investments into your portfolio' guide
Driving Growth.
Creating Value.
Delivering Impact.

Backed by

Growth Capital Ventures (GCV) is backed by funds managed by Maven Capital Partners, one of the UK’s leading private equity and alternative asset managers.