Individuals rarely purchase commercial property, it’s usually a pension fund, an investment company or an institutional investor.  What they have in common is that they put lots of different people’s money into a company structure that then buys the property and shares the proceeds.  To put it another way, it’s Crowdfunding – but – the crowd don’t always know what they are investing in and there in lies the problem.

Many would argue that property and the banks crashed because funds had targeted high yielding but extremely risky portfolios to make up short falls in other under performing assets.  The problem in my view is that investors didn’t always see the whole portfolio, so the crowd was kept in the dark and didn’t see the crash coming.

In the post big bank world we now live in, where crowd funding is helping fill their void, a new peer to peer lending website called Relendex is planning to launch later this month in the commercial property sector.  The only real surprise is that it has taken so long for someone to capture this space.

Why has there been this delay in crowd funding or p2p lending entering the property world? I think it has been fear.

There is genuine fear about investing in property.  Everyone knows someone who has a buy to let they can’t afford or has lost a fortune in a property fund.  They also look at the empty shops on the high street and the abandoned building sites and assume, it’s too dangerous to invest in property.

But as Warren Buffet puts it “attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

If a commercial property has a good tenant, with a long lease it will be producing good steady income.  Previously, banks would have happily lent on these assets but as they rebalance their books, they no longer can do this.

The same must be said regarding construction.   A well positioned newly built residential property or a commercial property, correctly priced in an area of demand will sell.  If information regarding the developer and contractors are provided and trust can be established then this is an area where small investors can profit.  

The much feared buy to let sector is also worth considering - as long as you have a good management company, credit checked and performing tenants - there will be opportunities to get double digit yields. 

The current fear around property should be compared to the proliferation of equity crowdfunding sites.  They are providing investors with excellent opportunities to share in start up company’s success.  The sites are encouraging investors to build portfolios of shares in small businesses with the hope that one of them will turn out to be an Apple or Microsoft.   They also give investors the opportunity to share in the magic of a start up.  You can go online and hear the passionate pitches from true believers, who have poured their heart, soul and every penny into their idea.  You, the investor can then share in that journey.

The fan fares that Crowdcube and Seedrs are attracting bring me back to Mr Buffet. There should be more fear around crowdfunding a start up business that will inevitably come back to you for second round funding and then potentially fold, than in investing in a fixed asset with an income stream. 

It’s true a property portfolio is unlikely to give you the spectacular returns that a technology success story will, but that will require the investor to invest in a wide range of companies to stand any chance of getting a successful return.  

What you can get a little greedy about are the high fixed returns from a well chosen property portfolio.