Investment information

Key Investor Information

Find answers to some commonly asked questions about investing on Housemartin, ISAs, UK property investment, and more.

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Question

What Does Housemartin Do?

Housemartin acts as a conduit for investors to invest in UK residential property, more specifically property that is used to provide supported living.  

We create stand alone limited companies that are used to buy properties that are leased on long term, usually inflation linked leases to a partner who is usually a charity or registered provider of supported housing. The partner will then house a person or group of people who are in need of support while also arranging a separate care package.

Typically our partners are responsible for day-to-day repairs and are also required to pay rent whether the property is occupied or not.

We assess each property by commissioning an independent RICS survey and valuation and aggressively negotiate the purchase price to be as low as local market conditions allow.  We will not overpay for properties and believe it is important investors do not pay over bricks and mortar value except in certain circumstances. The valuation and survey reports are always displayed in full in the property details page of each opportunity alongside a copy of the lease with our partner, the loan agreement and any other relevant documents.

We monitor each loan throughout its term, collecting rent payments and paying monthly interest to investors. We provide monthly financials which are available on each property details page and provide updates as necessary. Any major decisions that need to be made regarding each loan or property are made by way of majority investor vote with investors alerted by email.

We provide transaction statements and also investment summary reports for all investors which shows the performance of each of their loans and also annual tax statements (available in the Reports section of the site)

We provide a secondary market (The Exchange) where each loan is tradeable in a variable market. The price of each loan is set by investors and will move depending on supply and demand. Availability may be limited.

A full risk assessment is also produced in real time for each loan (see below)

Portfolio performance Terms of Business
Question

What Is Supported Living?

Supported living refers to housing provided alongside support, supervision or care to help people live as independently as possible in the community within their own homes. 

The personal care is provided under a separate contractual arrangement to that of the housing which we help provide. The accommodation is often shared, usually as a small group, but can be single household.

Individuals using supported housing include (but are not limited to):

  • Older people
  • People with a learning disability
  • People with a physical disability
  • Autistic people
  • Individuals and families at risk of or who have experienced homelessness
  • People recovering from drug or alcohol dependence
  • People with experience of the criminal justice system
  • Young people with a support need (such as care leavers or teenage parents)
  • People with mental ill health
  • People fleeing domestic abuse and their children
Question

What Is Housemartin’s Investment Structure?

Each property is held in a stand-alone company we refer to as a ‘Property company’ that has legal restrictions placed on it that dictates all profits must be paid out to investors and also that all significant decisions must be made by investors by way of a vote.

Each Property company has a single shareholder; AE Ownership Company Ltd. which is a company limited by guarantee, established for the sole purpose of owning the shares of each Property company. It has a legally binding obligation to act in the best interests of Housemartin’s clients. As AE Ownership Company is limited by guarantee it does not have shareholders, instead it is owned by its members who are any investor who currently has an investment on Housemartin’s platform.

The property purchase is funded by a loan (called a peer-to-peer or article 36H loan) made by investors to the property company. An agreement is then made with one of our partners (typically a charity or housing association) to lease the property from the company for a period of time; usually 5-15 years. It is this lease that stipulates the terms of the annual reviews of the rent. The leases are available for investors to view in the property details page of each investment opportunity.

The size of the loan taken is the purchase price of the property, plus stamp duty, legal fees, Housemartin’s arrangement fee (see Fees below), an amount for any refurbishments if required plus a contingency fund for any unexpected future costs.

As a result, the total loan amount owed by the SPV can be higher than the property’s current market value. There is no separate mortgage or equity cushion; investors’ recoveries ultimately depend on rental income and the price achieved if the property is sold.

No mortgage is taken on any property.

Finally, the loan agreement (which is made up by the Terms of Agreement and Loan Conditions, can be seen on each and are available on the property details pages) mirror the terms of the rent review so that interest paid to investors will go up in line with the increases in rent.  Each loan is structured to end when the lease on the property ends and is not renewed or extended or an alternative lease is not arranged following an investor vote. 

At the end of the loan period, the loan will be repaid. We believe it is in investors interests to arrange a new lease and start a new loan if possible when a lease ends and is not renewed. The physical sale of a property inevitably leads to the write off and loss of the initial costs involved with the purchase. If an investor wishes to exit their investment it is preferential to try and do so by selling on The Exchange (liquidity permitting) which allows for the recovery of the upfront costs. In the event investors vote to physically sell a property at the end of a loan, we will sell the property at the best price achievable with investors voting whether any offers received  should be accepted.  Net proceeds after fees and costs will then be returned to investors to repay the loan.

Question

Who Sets the Yield on Each Investment?

Housemartin does not set the yield on investments.  

Interest on each loan is paid monthly and is a fixed amount that typically rises annually in line with inflation and is calculated as: rent paid less any applicable fees, such as our monitoring fee, a small admin charge and building insurance (if applicable).

The yield displayed on each loan is calculated as annual interest / current gross price of the loan expressed as a percentage.

We negotiate the rent for each lease in conjunction with our partners who typically receive the money by way of Housing Benefit received from the local authority where the property is situated. There are strict limits to Housing Benefit and Registered Providers must also follow the Rent Standard which sets requirements around how rent is set and increased unless they are exempt.

Providers of supported accommodation where care, support and supervision is provided are classified as “Exempt Accommodation” (which is a subcategory of Specified Accommodation) and are exempt from Housing Benefit limits which then enables them to claim costs for Intensive Housing Management. The majority of the properties on Housemartin are classified as Exempt Accommodation.

Furthermore, providers of beds that meet the criteria specialised supported housing (SSH), as most of our partners do, are exempt from the Rent Standard.

Information

Key Considerations

  • It is important to understand that investing with Housemartin does not give you direct ownership of a property. Investments are made by way of a loan to a standalone company whose sole purpose is to purchase a property and lease it out.
  • Your investment (except uninvested cash held on our platform) is not covered by the Financial Services Compensation Scheme (FSCS)
  • The price of property can go down as well as up. If, following an investor vote the property is sold for less than the loan value then you may lose some or all of your capital.
  • The secondary market can be illiquid.  There may not be liquidity at the price you wish to sell at and you may need to sell at a discount (a loss) to access your money
  • You can mitigate some of the risks of any one investment developing problems by spreading your investment across multiple properties on the platform.
  • Major decisions are taken by majority vote so the outcome of a vote may not be in line with your wishes
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Key Risks

It is important to note that Housemartin does not lend any money to third parties unlike the majority of other peer-to-peer investment platforms.  Investors are therefore not exposed to third party credit risk.  Instead the main risk to investors is that the following events happen:-

  1. The existing rental counterparty defaults on the lease or the lease ends and they do not want to renew
  2. We can’t find another rental counterparty to enter into a lease on roughly equivalent (or better) terms
  3. We sell the property (under instructions from investors) for an amount that, after fees, is less than the price they paid for the loan (we refer to this as a capital loss)

In extreme scenarios, including if Housemartin were to enter administration, an independent administrator could decide to sell properties to repay investors. Because loans can exceed the property value (after including purchase costs and contingency funds), if net sale proceeds are less than the total borrowed, investors would share the shortfall and could lose some of their original capital.

In addition, a rental loss can occur if a rental counterparty stops paying rent for a period which cannot be recovered. Any property that is in rental arrears of more than 30 days will be marked as “in arrears” on the site.

There is also a risk of a loss if refurbishment work is undertaken that runs into problems that result in additional costs in excess of the amount budgeted.

The risk of these outcomes occurring and the potential scale of any loss is assessed in real time with a risk rating being assigned to each loan.  More details of this process are provided below.

Finally, there is a risk that an investor can lose money if they invest in a loan and the price of that loan goes down so if they wish to realise their investment by selling on our Exchange they sell at a lower price than they originally paid.  House prices can fall as well as rise and prices on The Exchange are subject to investor supply and demand. Investors should pay close attention to the price they pay for an investment.  While we do impose some price caps to stop excessive price appreciation it is the responsibility of investors to ensure they are happy with the price they pay given all the information available.

Portfolio performance
Question

What Fees Do Housemartin Charge?

Housemartin is fully transparent on the fees we charge. We make revenue from three sources:-

  • Arrangement fee – When the property is first purchased we charge an arrangement fee which is included in the loan amount. When parts of the property are sold on the Exchange, this fee is added to the purchase price of the buyer and so is recovered by the seller. The size of this fee is included in the loan conditions.
  • Monitoring fee – We charge a percentage of the gross rent received for the property. The percentage is clearly stated in the loan conditions of the property.
  • Property disposal fee – A fee of 2% of the gross sales proceeds is charged if investors vote to sell and the property is physically sold.

The yields displayed on the site are after the deduction of these fees.

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Risk Framework

Each property is assigned a risk rating that helps convey our assessment of the risk of a loss to investors alongside a more granular risk coefficient. The rating and factor coefficient move in real time as various inputs into the calculation move (such as the price of the property on the Exchange, the move in the house price index for the local area etc).

A full breakdown of how this risk assessment and risk coefficient is calculated is available on each property detail page and a full explanation of the process is available in our Help Centre.

Risk framework
Questions

What Is Your Wind-Down Plan?

If for any reason we are obliged to stop operating our platform in the future we are required to have in place a wind-down plan that explains the steps we would take to protect investors’ investments and ultimately return their funds. This plan consists of two strategies and explains the steps we would take if this situation arose.

Wind down plan
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Have More Questions?

If you would like to discuss any of the above with a member of the Housemartin team then please arrange a call back

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