Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
1. You could lose all the money you invest
- It's essential to bear in mind that investing in the property market comes with the risk of incurring losses, which could result in receiving a return on investment that is lower than the original investment amount.
2. You won’t get your money back quickly
- The availability of buyers and sellers can affect the ease of selling your shares, and the sale price may be less than what you paid for them initially.
- In the event of unfavourable circumstances, it may take a prolonged period of time to recover your investment in certain types of properties.
- The payment of dividends is not assured and is dependent on the decision of the property-holding company's directors, who consider the property's financial condition. In the most extreme case, dividends may be halted.
3. Don’t put all your eggs in one basket
- Putting all your money into a single platform or type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
4. The value of your investment can be reduced
- The value of your investment in property can be influenced by various market factors and specific risks, which are detailed in our Key Risks section. As your investment is tied to the underlying property value in your portfolio, it is subject to potential fluctuations in value, both upward and downward.
- In some circumstances, properties may require extra funds, which may be raised through the issuance of new shares. If more shares are issued, the proportion of ownership in the property that you originally invested in will decrease. This may result in a reduction in the value of your investment, depending on the extent of future fundraising needed.
- These new shares may have additional privileges that your shares do not have, or may be available at a lower price than what you initially paid for your shares. This could further diminish your chances of earning a return on your investment.
5. You are unlikely to be protected if something goes wrong
- Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection.
If you are interested in learning more about how to protect yourself, visit the FCA’s website. For further information about investment-based crowdfunding, visit the FCA’s website.