All investments are subject to risks. The same is with investing in real estate.
We encourage you to diversify your BitOfProperty investments across multiple properties to safeguard against excessive exposure to any one property that could incur issues such as tenant default or a problem specific to that property that impacts valuation.
The value of your BitOfProperty investment can go down as well as up and historic performance is not a guide to future performance. A fall in the value of your investment may be due to a number of reasons, such as a fall in the underlying value of the property or a problem with the property that will need to be funded from future rental income.
Please see below risk categories, which you need to consider before making an investment:
Market risk is the possibility for you to experience losses due to factors that affect the overall performance of the financial markets in which you are involved. Sources of market risk include macro-economic, political, social instability etc. These events can may lead to changes in real estate prices and volatility. In order to mitigate the risk, we highly recommend to diversify your investments across different properties and markets.
Currency risk, commonly referred to as exchange-rate risk, arises from the change in price of one currency in relation to another. Investing in another country or in another currency, you are exposed to currency risk that may create unpredictable profits and losses.
Legal or regulatory risk arises from the fact that the legislative acts regulating the asset, investment activities or taxation of earned income may change during the investment period.
Political risk or country risk is the chance of investment value changing due to the political changes or instability in the country. Radical changes in economic or legal environment (such as nationalisation), internal political affairs or social crisis situations (such as civil unrest) are all examples of political risk.
Occasional oversupply might arise in certain regions or market segments, causing fierce competition resulting in difficulties in achieving planned rental prices.
Investing in only one asset class and/or market may impose concentration risk of your investment. The risk can be reduced by allocation money between different asset classes and/or markets, thus in case some investments underperform and other stay neutral or perform well, then you will not lose all your money.
Whilst you can advertise your share in the investment for sale to other BitOfProperty users at any point, there may not be anyone willing to buy your investment at a price that you deem reasonable (or buy it at all). In such event, you will be required to wait until the end of investment term. Even at this point, the timing and ability to exit will depend on completion of a transaction to sell the underlying property. This transaction could take several months.
Whilst BitOfProperty provides gross rental income estimates based on information from third parties, these are not guaranteed. It may be that lower rents are secured. Furthermore, rental income could cease completely for certain periods. For example if a fire were to occur which was not covered by insurance.
Vacancy refers to the situation when there is no tenant in the property. When it happens, you are immediately exposed to the loss of rental income and decrease in the investment returns.
Bad tenants refusing to pay rent or leave the property in worse shape before moving in, can significantly reduce the value of your real estate investment. Disputes with tenants may take long time and incur significant expenses. The lack of rental income might lead to temporary losses in times where ownership expenses exceed current income.
Technical risk describes a situation where real estate investment’s covert technical defects can cause a decrease in rental income or adversely affect the property's sales price. Technical risks may lead to the need for unplanned repair costs and renovation.
Location risk refers to the situation where the property’s location might become less favourable over time, which might lead to the reduction in rental income or potential sale price, thus having a adverse effect on investment’s overall profitability.
Each property investment is separately ring-fenced from the assets and liabilities of BitOfProperty, as well as any other property investments on the platform.
If BitOfProperty were to fall into financial distress an alternative manager could be appointed to continue management of the assets in accordance with the terms of investment.
Any funds that are held in your account, but not yet invested in property, are held in a client monies bank account. This is a separate bank account that is ring-fenced from the monies of BitOfProperty and will be returned to investors in the event of BitOfProperty falling into financial distress.