Risk

Understanding the risks of investing with Cahootz

Investing in property through Cahootz involves risk. You are investing in unlisted shares and could lose some or all of the money you invest.

Before investing, you should make sure you understand how the investment works, the risks involved and whether it is appropriate for your circumstances.

Your personal decision to invest

Cahootz does not provide personal investment advice or recommend that a particular investment is suitable for you.

Information on the Cahootz website is provided to help you understand the investment opportunity. It does not take account of your personal financial circumstances, investment objectives or attitude to risk. You are responsible for deciding whether to invest and how much to invest. If you are unsure whether an investment is right for you, you should consider obtaining independent financial advice.

What you are investing in

When you invest through Cahootz, you buy shares in a special purpose company (SPV) that owns a particular buy-to-let property. You do not own the property directly. Your investment is in shares issued by the SPV. Owning shares in the SPV does not give you a right to live in or otherwise occupy the property. The value of your investment therefore depends on the financial performance of the SPV and the value and performance of its property.

You could lose all of your investment

Your capital is at risk. The fact that the SPV owns a physical property does not mean that your investment is protected or that you will receive your original investment back. Property values can fall. Rental income can be lower than expected and the SPV can incur costs and liabilities. If the SPV becomes insolvent or its assets are insufficient to meet its liabilities, the value of your shares could fall to zero. You should only invest money that you can afford to lose.

Returns are not guaranteed

Any expected rental yield, dividend, capital growth, total return or other forecast shown by Cahootz is an estimate and not a guarantee. Actual returns may be higher or lower than forecast and you may receive no return at all. Rental income and property values can change substantially during the period you hold your investment..

Rental income can change

A property may already have a tenant when you invest, but an existing tenancy does not guarantee future rental income. Tenants may leave, rent may not be paid on time or at all, and there may be periods when the property is empty. Market rents can also rise or fall.

Rental income received by the SPV is not the same as the amount available to distribute to shareholders. Costs and other liabilities must be met before money can be available for dividends.

Property costs can be higher than expected

Properties require ongoing expenditure. Repairs, maintenance, insurance, property management, regulatory compliance and other costs may be higher than anticipated. Unexpected expenditure may also arise. Higher costs reduce the profits of the SPV and may reduce or eliminate the amount available to pay dividends.

Property values can fall

Residential property prices do not always rise. The value of a property can be affected by changes in the wider property market, interest rates, economic conditions and factors specific to the property or its location. Property valuations are estimates of value at a particular point in time. They do not guarantee the price that will ultimately be achieved when a property is sold. The eventual sale price could be lower than the price paid for the property and lower than previous valuations.

You may not be able to sell your shares

Cahootz investments are intended to be long-term investments. The shares are unlisted and there is no established public market on which you can sell them. You may be permitted to sell your shares privately, subject to the applicable transfer arrangements, but there is no guarantee that you will find a buyer. Even if a buyer can be found, they may only be willing to buy your shares for less than you paid for them. You should not invest money that you are likely to need access to at short notice.

Selling the property is not guaranteed

Cahootz intends to give shareholders opportunities to vote on selling the property after specified holding periods. A shareholder vote does not guarantee that the property will be sold, when a sale will take place or what price will be achieved. A property sale can take longer than expected and may be affected by market conditions, the condition of the property, an existing tenancy and the availability of buyers. After the property is sold, sale costs and any liabilities of the SPV must be dealt with before the remaining proceeds can be distributed to shareholders.

Diversification matters

Putting a large proportion of your money into one property or one type of investment increases your exposure if that investment performs badly. Spreading investments across different assets can reduce your dependence on any single investment. The FCA's guidance is that retail investors should generally not invest more than 10% of their net assets in restricted mass market investments. You should consider your Cahootz investments alongside your other high-risk investments rather than considering each investment separately.

Due diligence does not remove investment risk

Checks may be undertaken on a property, its valuation, the SPV and information provided in relation to an investment opportunity. Those checks cannot predict the future and do not guarantee the condition or future value of a property, the reliability of a tenant, future rental income or the return you will receive. You should read the information provided for each opportunity carefully and make your own assessment before deciding whether to invest.

Cahootz and ShareIn do not guarantee your investment

Cahootz is an appointed representative of ShareIn. ShareIn is authorised and regulated by the Financial Conduct Authority and provides the relevant regulatory permissions under which Cahootz carries on regulated activities. ShareIn also approves relevant Cahootz financial promotions. This regulatory arrangement does not mean that the FCA or ShareIn has approved the commercial merits of a particular property or guarantees the value or performance of your SPV shares.

FSCS and Financial Ombudsman protection is limited

The Financial Services Compensation Scheme (FSCS) does not compensate you simply because an investment performs badly, a property's value falls or your SPV shares lose value. FSCS protection may apply to certain eligible claims against a failed regulated firm, depending on the circumstances.

The Financial Ombudsman Service (FOS) does not compensate investors for poor investment performance. It may be able to consider certain complaints concerning regulated financial services provided in connection with your investment.

You can find more information about protection using the FSCS investment protection checker and on the Financial Ombudsman Service website.

What happens if Cahootz or a service provider fails?

Your investment is in shares issued by the relevant property SPV rather than shares in Cahootz. However, if Cahootz, ShareIn or another business involved in providing services to the SPV or investors stops operating, services connected with your investment could be disrupted. Replacement or wind-down arrangements may need to be initiated. These may take time and could affect the administration of your investment. The failure of a service provider does not guarantee that your investment will be repaid.

Tax can change

Tax rules and their application can change over time. The tax treatment of an investment also depends on your personal circumstances. Information provided by Cahootz about taxation should not be treated as personal tax advice. If you are uncertain about your tax position, you should obtain appropriate professional advice.

Forecasts are only estimates

Information about expected rental income, yields, costs, property values or potential investment returns is based on assumptions. Actual outcomes will be different from forecasts. Changes in rents, occupancy, expenses, property prices and the timing or price of a future property sale can all materially affect the return you ultimately receive.

Investment may not be appropriate for everyone

Cahootz property investments are high-risk, illiquid investments. They are not designed as an alternative to cash savings and should not be relied on for money you may need in the short term. You should understand the possibility of losing all of your investment and be prepared to hold your shares for a number of years. If you do not understand the investment or cannot accept these risks, you should not invest.

Before investing, please read the information for the individual investment opportunity together with the applicable FCA risk warning and risk summary.