Key Risks and Disclosures

Real Estate and unlisted share investments carry a risk. Your capital may be at risk and you may not receive your anticipated returns due to a number of varying factors. Estimates and forecasts provided are based on historical and market data and does not accurately predict future investment performance. Investors should perform their own due diligence and seek independent financial advice if necessary. This is not financial advice.

Risk Factors:

Important risk factors to understand before investing

Investors will not own the property directly but rather by way of owning shares in Crowdprop RF Limited that entitles each investor to ownership in their respective properties. Since Crowdprop shares are unlisted and not tradable on any local exchanges, they may be considered illiquid as they are not freely tradable on an open market.

For this reason, Crowdprop intends on opening a secondary market in the near future. This will allow you to sell your shares to other willing Crowdprop investors. Crowdprop does not guarantee a willing buyer at the price you require and you may have to wait until the end of the investment term to get your capital out.

Real estate is regarded as an “illiquid” asset class as it is not easily bought and sold like stocks or bonds. Since property is not easily sold, we may encounter difficulties in selling a property at the end of the investment term. This could result in investors experiencing a delay in receiving their capital or the property being sold at a loss.

For this reason investors are encouraged to only invest if they are committed to hold the shares for the entire investment period and are encouraged not to invest if liquidity is required in the short term.

Crowdprop does not negate any of the real-world risks involved in owning a property and there are certain property specific risks that exist when owning any property.

Projected income for any investment is based on information from third parties, historical and relevant market data. Projected returns are not guaranteed and may vary based on the following factors:

  • Lower rentals could be negotiated on a property 
  • Rental income could cease completely due to vacancy loss (no tenant in place)
  • Tenants could default on their rental payments
  • Maintenance and repairs 

The above factors all have the ability to increase or decrease your expected return on investment. It is reasonable to expect that from time to time a tenant may not meet their rental obligations or a property may be vacant without a tenant and this may result in returns being lower than expected. It is important to remember that:

  • The speculative nature of property investments mean that the market value can fall and rental income is not guaranteed.
  • Forecasted returns and historical performance are not an accurate indicator of future performance.
  • Downturns in the real estate market and wider economy can negativey impact your property valuation.

The value of your Crowdprop investment can be influenced by the above factors and achieving the rental and capital returns will depend on each individual property investment and the wider economy. 

Investors are encouraged to individually asses the risks from the outset and establish their individual risk tolerance before making any investment decisions.

When listing any investment on our platform there is a risk that the selected investment is poorly evaluated resulting in a poor performing property investment. This may result in a decrease in rental income and value of the property in question.

In order to ensure that only quality investments are offered on the Crowdprop platform, each property is subject to a strict due diligence process to determine the viability of that investment. Crowdprop utilises independent experts in verifying the accuracy and reliability of the property information to minimise the risk of poor investment performance.

Property investments are speculative and the property market can rise as well as fall as it is cyclical. Changes in the overall property market can materially affect property values and its associated rental income.

As a result there is a possibility for investors to experience losses due to factors that affect the overall performance of the property market.

Crowdprop’s Investment Committee will always endeavor to purchase properties at reasonable prices or below market value to ensure a margin of safety in the event of significant market risk.

Economic and political risk refers to changes in the overall economy or governmental aspects that may negatively impact the value of your investment just as they would other types of investments.

The state of the South African economy, political uncertainty and regulatory changes are all factors that are constantly changing. Property values and rental incomes can be adversely affected by these factors and this may result in losses for the investor.

Real estate as an asset class is considered an attractive investment due to its tangible nature and as a result can be seen as a hedge against economic uncertainty. Crowdprop has also employed a structure that complies with all relevant regulation and legislation to ensure that we operate in a manner that is compliant and legal.

If for any reason Crowdprop ceases to carry on its business, investors may lose funds, incur costs or experience delays in their investment being wound up.

To mitigate this type of risk Crowdprop will only offer freehold properties on its platform. This means that the risk of a property being repossessed by a bank and put on auction is zero as there is no debt on the property investments.

All investments are ring fenced and therefore the failure of one investment cannot impact the performance of another investment. 

There will always be a free hold property backing your investment in the event of any unforeseen circumstances and the ring fenced structure provides an extra layer of security as investment funds cannot be used to pay off Crowdprop debts.

Risk Mitigation:

Crowdprop aims to mitigate the above risks every step of the way by only selecting attractive properties that meet our stringent selection criteria

Due Diligence

Every investment is properly screened and vetted before being listed on our platform. These properties are subject to our strict due diligence processes and put to test against our financial models to ensure only attractive, qualified and viable investments are offered to our investors.

Independent Experts

We use independent experts with proven experience in the property industry as part of due diligence to determine the accuracy of the property information and the state in which the property is in.

Freehold property

We only invest in free hold property that will always have an underlying value attached to it should we need to sell the property. Ensuring that your investment will always have a value.

Effective Property Management

We contract independent and reputable property management companies to ensure that each property is rented out, tenants are properly screened and vacancy rates are at a minimum. These management companies will also ensure that the property is well maintained throughout its investment period.

Cash Reserves

We also provide for certain unforeseen expenses relating to the property by maintaining an adequate cash reserve from the property incomes. This will provide a safety net for investors should any unforeseen expenses occur such as repairs or maintenance costs. This also ensures that we never have to ask investors for additional funds for the property.

Key Disclosures

Real estate as an asset class requires a medium to long-term investment horizon in order to fully benefit from the rental incomes and capital appreciation that property has to offer. All investors are encouraged to only invest if they intend to hold the investment for the entire investment term. If an investor requires their funds in the near future, we recommend not participating in our investments.

Investors are encouraged to spread their capital amongst a variety of our properties to achieve diversification. This will safeguard your property portfolio against excessive exposure to any one property that could incur negative risk factors. Diversification will therefore lower your overall portfolio risk and give you exposure to various types of properties.

Crowdprop does not provide any financial advice and no assessment is made to determine if an investment is fit for all investors, therefore any investment decisions are made solely by the investor.

All investment information is provided to help investors make their own informed decisions. Investors must rely on their own due diligence before investing. If unsure, please seek the advice of an independent financial advisor.

All investor funds are held in segregated accounts by ELA Asset Management, an authorised financial services provider regulated by the Financial Services Conduct Authority (FSCA).

ELA is appointed by Crowdprop to collect, manage and distribute funds on behalf of Crowdprop investors. This is done in such a way that allows investor funds to be held independently of Crowdprop and its bank accounts. This ensures that Crowdprop is not in control of investor funds and provides greater security for investors as ELA is an accountable institution. Crowdprop is satisfied with the custodial systems and processes employed by ELA Asset Management and deems it appropriate to hold funds on behalf of Crowdprop investors.

Whilst ELA is appointed to manage funds for Crowdprop investors, Crowdprop remains wholly accountable for these investor funds as ELA does not have a relationship with Crowdprop investors directly. In the event that the company is insolvent or unable to maintain operations, investors funds will be subject to distribution rules by the Financial Services Conduct Authority (FSCA).

Investors will earn a return on their investment funds during the investment period.