18th August 2015 Crowdahouse

Equity or P2P Property Investment – Which is Best?

There’s so much information out there on the currently hot topic of property crowdfunding platforms, yet with everyone touting their model as ‘the best’, the key differences between peer to peer (P2P) lending and equity crowdfunding may not be that obvious. As an investor or lender you need to make sure that you are aware of the risk and rewards involved in both types of crowdfunding.

So here are the pros and cons of each. Of course, each lending platform offers a different solution and terms, so please check carefully and seek independent advice before making any investment.

Equity crowdfunding


* allows you to actively invest and participate in the housing market

* you can benefit directly from any rise in property prices

* you can spread your risk by buying a share in several houses, rather than just one

* you won’t need to apply for a buy to let mortgage yourself but still be a part owner


* projected income and profits are just that – only projections; properties may not perform as promised

* shared ownership of a property can be complex and potentially risky

* property prices can also drop, meaning your investment and eventual share of equity could drop too

* you should factor in crowdfunding platform fees for lending, property management and property maintenance, plus the platform generally takes a percentage of your equity

* the crowdfunding of leasehold flats is particularly fraught with pitfalls – unknown future maintenance costs and service charges are beyond the control of you or the platform and flats are notoriously hard to sell for the best price in a downturn

* management issues could either be completely out of your hands if handled solely by the platform or result in disputes among the crowd

* you may not be able to sell and release your cash when you want to if the majority of the crowd wants to hold on to the property (check to see if the platform offers a secondary market)

* make sure the platform has contingency plans in place in the event that something happens to it


Peer to peer (P2P) lending


* offers simple lending opportunities – you simply lend money in return for interest payments over a fixed term

* you can spread your risk by lending to several projects rather than just one

* the interest is contractual (in the agreement with the borrower) and not projected

* lending is generally secured in the form of a first charge over the property

* the borrower is a property professional and remains the owner of the property. This means that he or she buys and maintains the property and looks after the tenants

* you don’t have to worry about the problems associated with buying property with a crowd of strangers

* even if property prices fall, the borrower is still contractually obliged to pay you back


* the return on your investment may not be as high

* you won’t benefit from the rise in house prices over the term of the loan you make

* you may not be able to exit your loan early if no one wants to buy it from you (check to see if the platform offers a secondary market)

* the borrower could default on interest payments or be declared bankrupt -make sure the platform has contingency plans in place to cover this

So, which is best?

It really depends on your goals or aims as an investor or lender and your appetite for risk, but you should definitely weigh up the pros and cons of both equity crowdfunding and peer-to-peer lending before making your decision.

  • Helen Yuet Ling Pang

    Director of Operations

    Helen Yuet Ling Pang
  • Helen Yuet Ling Pang

    Director of Operations

    Helen Yuet Ling Pang

About Crowdahouse®
Crowdahouse is a business-to-business (B2B) property crowdfunding platform lending to business borrowers, always secured against property. Instead of lending to individuals, we’ve reduced the risk by offering you the chance to lend only to property businesses. You join a crowd to lend money in return for interest on your money. Your loan is secured with a first charge over property, just like a bank, and you pay no fees as a lender. You can also exit early by selling your loan to other members.

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