Crowdfunding Equity for Property Development

Posted on Posted in Property Development

Are you interested in crowdfunding equity for your property development project ? Do you want to learn the best way to crowdfund equity for property development ?

If you have been following MELT Homes for a while, you will have heard about how we have successfully crowdfunded equity for our property development projects. We completed our first crowdfunded equity raise in November 2017, raising £200,000 in equity on ONE62, the development of six luxury flats in Hythe, Kent. You can see this development on the left hand side of the picture above.

This was a new approach for us; we launched this first raise to gain experience in equity crowdfunding and to test how it would work for our business. Our objective was to establish that crowdfunding would allow us to raise equity for projects quickly and reliably. Our first raise went a little slower than expected. Having seen other developers crowdfund equity for their projects, we had hoped to raise the funds within no more than a couple of weeks. In the end, it took us seven weeks to raise the full amount of funding we were seeking.

Our ambition was to be able to raise more significant amounts of funding for our projects – in excess of £1m – and raise quickly. Given that it had taken us 7 weeks to raise £200,000 and that 80% of this funding had come from investors that we knew already, we knew that we would have to change our game in order to achieve what we wanted. So we went back to the drawing board to figure out how we could achieve this.

Having taken some time to tweak and tune our approach, we launched our second crowdfunding campaign. We launched the project on crowdfunding platform Crowdwithus at 4pm on the 7th of July 2018 with a target of £130,000. By 10am the following morning, we had over £300,000 of funds committed and by the time the offer closed, we had interest from investors with over £1.5m in funds.

Based on this success, we launched a third crowdfunding campaign in November 2018, seeking to raise £1.13m of equity on Lime Grove, a 17 unit development in Gloucester. We raised £1.13m in just under three weeks and were again significantly oversubscribed – a further £600,000 of funding came in after the deal had closed.

Prior to starting equity crowdfunding ourselves, we had been keeping an eye on the property crowdfunding scene for some time. Having seen the growth of platforms such as CapitalRise in the US and considered launching our own property crowdfunding platform in 2013, we were acutely aware of the potential it had to revolutionise funding in the property sector.

We had previously worked with high net worth investors or JV partners on projects. However in order to comply with FCA regulations regarding collective investment schemes, we had to limit the number of investors we could work with. In practical terms, this meant that we could only work with investors who were able to invest at least £250,000 in a project. We knew that we had demand from smaller investors to invest in our projects, but needed a way to deal with these investors in an FCA compliant manner.

At Brendan Quinn’s National Property Development Summit in January 2018, we started a conversation with Rob Wilkinson from Crowdwithus about how we could work with them to reliably and quickly crowdfund significant amounts of equity. Crowdwithus are a professional FCA regulated property crowdfunding platform. With their support, not only would we be able to invite a wider community of investors to invest in our projects, but we would also have the essential support we needed to carry out the investment process efficiently.

In the next few weeks, I’ll be posting further articles here which talk about why developers should consider crowdfund equity for their property development projects, how to get started with equity crowdfunding for your development, what else is there to look out for when crowdfunding equity, how to run a successful equity crowdfunding campaign and what’s next for us in crowdfunding.

Follow MELT Homes (or our Founder and CEO Evan Maindonald) on Instagram, Facebook, Twitter or Linked In where we’ll be posting regular updates on this and links to more articles which will help you understand how to crowdfund equity for your property development.