CrowditBuildit is a new enterprise, supported by Sheffield City Council, that uses crowd funding techniques to help finance affordable custom build housing schemes. Its first development involves a small parcel of brownfield land at Merton Lane, Wincobank, near Meadowhall which was bought from Sheffield City Council under its custom build programme.
The six Sheffield homes are all modest semi-detached properties, aimed at first-time buyers.They are priced at £99,000 each, which is £16,000 below their market value of £115,000. To stop speculators, there is a resale clause. Purchasers can only sell for 80 per cent of the market value in the first year of ownership, and 90 per cent in the second year. At the end of the third year they can sell for the full market value.
The land and build cost will be financed by equity-based crowdfunding rather than a bank loan using the ‘Crowdfunded Custom Build’ model (‘the CCB model’). “There are a few examples of build to-rent property projects that have been crowdfunded, but they are loan-based. This equity-based way of doing it is new, as is using it for custom building,” says John Paul Kawalek, a lecturer from Sheffield University’s School of Management, and one of the co-founders of the business.
The projected return for investors is at least 8.5 per cent. As soon as the build is complete and the properties are sold, the original outlay is returned along with the interest.John, and partner Yan Lewandowski, have invested themselves and are looking to raise £460,000 for the initial pilot project.
It has taken more than a year to get CrowditBuildit off the ground, mainly due to establishing new legal structures to satisfy the Financial Conduct Authority and organising contractual agreements for investors.
More information is available here.