How Bricklane.com works: Growing customers’ savings
The UK housing market has delivered returns of 9.6% per year from 1996.
This has been great news if you’re a property owner (more money to do the things you care about), but very bad news if you’re on the outside (that first home getting further and further away).
Now that anyone can participate in the housing market through Bricklane.com, we wanted to write a post about how our customers can make money.
There are two ways that the property market generates returns: changes in the value of the property, and income from rent paid by tenants.
Added together, these make up the “total return” on your investment.
How does it work?
When a customer invests with Bricklane.com, their money goes into a fund along with others like them. This money in the fund is used to buy properties on their behalf. As more customers enter, the pool grows and more properties are bought.
Over time, the value of your savings will reflect the value of the properties — if they rise, your savings rise, if they fall, they fall. The potential fall is what we’re referring to when we write ‘capital at risk’.
As well as changes in property values, customers receive a share of the rent from tenants of the fund’s properties, after costs are deducted for property management and maintenance.
Customers can decide to withdraw this rent, or to reinvest it back into more property with Bricklane.com. Customers reinvesting would see their returns compound, which can have a powerful effect on returns.
What’s happened in the past?
If you had invested £10,000 in Bricklane.com’s Regional Capitals fund (focused on Leeds, Manchester, Birmingham) five years ago, it would now be worth £13,713* (a total return of 6.5% per year).
If you had saved using a Cash ISA, it would be worth £10,916 (a return of 1.8% per year). We should point out that with a Property ISA, your capital is at risk, whereas it isn’t with a Cash ISA.
However, as you’ll see on any investment website, “past performance is not a guide to future returns”. Just because a market has done something in the past does not guarantee that it will behave similarly in the future.
How does rental income work?
Let’s take our property on Greek Street in Leeds as an example. The flat will generate an estimated rental yield of 4.5% per year (after property costs). This percentage is the annual rent paid by the tenants (after costs) divided by the value of the property. This is an estimated yield only, and could change if rental income is lower, or costs higher than expect.
So that we can provide your returns tax-free, and that you’re covered by the Financial Services Compensation Scheme up to £50k, we charge an annual management fee of 0.85% of your holdings. This is equal to £0.85 per year for every £100, and means that a customer would receive about 3.7% from our Leeds flat, after fund management costs.
This means that for every £1000 you’ve invested with Bricklane.com, you would earn £37 per year from rent. With a typical Cash ISA, you would earn £6.
The rental yield can vary through time depending on demand to rent the property, unexpected costs and other factors. For our Regional Capitals fund, we’re targeting properties with a rental yield of 4.0% or more (after property costs).
What is going to happen to house prices?
In addition, the value of your holding responds to movements in the price of the properties owned by the fund.
The price of these properties can go down as well as up, and responds to many different factors, due to the economy at large, local markets and the property in question.
The truth is that no-one knows exactly what will happen to the price of property in the future. For that reason, we do not promise what return our customers will receive from price movements — your capital is at risk.
Total Returns with Bricklane.com
What we do promise is that customers’ money will be invested in expertly chosen flats in the cities in which we operate (Leeds, Manchester and Birmingham today). We only target the best areas and properties, with strong rental yields and potential for price rises.
Customers can expect a stream of rental income over time which could outperform Cash ISAs if house prices stay flat, and a particularly strong total return if prices continue to rise.
In times when cash is delivering very little, potential total returns from property could be very attractive, particularly combined with the security of owning a stake in real bricks and mortar.
Visit Bricklane.com to get started:
Bricklane.com provides a smart, tax-efficient and low-cost way to get exposure to the property market, through a simple and secure platform.
If you have any questions about returns, or anything else, you can email us at support@bricklane.com, talk to us through online chat, or give us a call on 0203 1111 432.
* This calculation is a simulated historical performance. Past performance is not a reliable indicator of future performance.
Capital at risk. As with all investments, the value of your Bricklane.com investments can decrease as well as increase. It could take the time it takes to sell a property, or longer, to get your money back at an acceptable price.
This is a financial promotion by Bricklane Investment Services Ltd, which is an appointed representative of Gallium Fund Solutions Limited, which is regulated by Financial Conduct Authority, FRN: 487176
