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Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
- You could lose all the money you invest
- Shares in property related businesses are typically made through single purpose companies for a specific project. Investors in these shares can lose 100% of the money they invested.
- Simple Crowdfunding carries out limited checks on the businesses you are investing in, more details can be found in the Risk Statement. You should do your own research before investing.
- You are unlikely to get your money back quickly
- Even if the business you invest in is successful, property projects can overrun which can extend the length of time your funds are tied up in the investment.
- Property investment projects rarely offer to pay you back through dividends. You should not expect to get your money back this way.
- The platform does not offer a secondary market. While another investor may be interested in buying your investment, there is no guarantee you will find a buyer at the price you are willing to sell.
- Don’t put all your eggs in one basket
- Putting all your money into a single business or type of investment for example, 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.
- The value of your investment can be reduced
- If a property project overruns (time or costs) the company may issue new shares or increase its borrowings. This could mean that the value of your investment reduces as a result of more debt to pay or more shareholders to be repaid.
- Any new shares or additional borrowing may be payable before the existing shares which could further reduce your chances of getting a return on your investment.
- 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 here
- 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 here for information for consumers.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here for information on smart investments.
For further information about investment-based and loan-based crowdfunding, visit the FCA’s website here for information for crowdfunding.
Further details on the risks involved in investing through Simple Crowdfunding can be found here for simple crowdfunding risks.