"Property crowdfunding" is used to describe several different products. The two main types work very differently.
Debt crowdfunding
You lend money to a developer or property owner and receive interest. You do not own the property. If the borrower repays, you get your money back plus interest. If the project fails, you rely on the security over the property, and you can lose money.
Equity crowdfunding and fractional ownership
You buy shares in a company that owns a property. You share in rental income and in any change in value. There is no fixed return, but there is also no cap on gains.
| Debt crowdfunding | Fractional ownership | |
|---|---|---|
| What you hold | A loan | Shares in the property company |
| Return | Fixed interest if repaid | Share of rent and value change |
| Upside | Capped at the interest rate | Not capped |
| Main risk | Borrower default | Fall in value or income |
| Typical term | Months to a few years | Several years |
Some debt products can be held in an Innovative Finance ISA. Shares in unlisted property companies generally cannot be held in a standard Stocks and Shares ISA.
This guide is general information, not financial, tax or legal advice. If you are unsure whether an investment is right for you, speak to a regulated financial adviser.