LandlordInvest: Filip Karadaghi
A new peer-to-peer lending platform, LandlordInvest offers buy to let and bridging loans - and is fully authorised by the Financial Conduct Authority
Tell us what your business does:
LandlordInvest is an online secured peer-to-peer (P2P) lending platform bridging the gap between lending markets and professional landlords. We enable lenders to invest in secured buy-to-let and bridging loans, and we let professional landlords with a track record raise capital from their friends, family and the crowd, all through a simple online process. Lenders can select the individual loans they wish to invest in, with a minimum investment of £100.
We provide a marketplace where lenders can earn higher returns, than lending through other secured P2P platforms, by lending to borrowers that have a near-perfect credit history. We intend to mitigate any additional risks that comes with lending to near prime borrowers by requiring stronger collateral and conservative underwriting standards including low LTV ratios.
We recently became fully FCA authorised, and are one of the first fully FCA authorised P2P platform for residential mortgages. We have also been approved by HMRC to be an ISA manager, meaning we can offer the new Innovate Finance ISA (IFISA). Currently, only a handful of platforms are able to offer the IFISA.
Where did the idea for your business come from?
The founders spent many years working with investors looking for decent and stable returns without the volatility of the stock market. Also, as landlords, we have been through the process of borrowing from traditional lenders and have first-hand experience of the many inefficiencies that exist in the market.
This led us to the idea to develop a simple and transparent platform that could cater to investors looking for stable uncorrelated returns and borrowers that have a good credit history and an excellent track record but are still unable to access financing through traditional lending markets.
LandlordInvest is an opportunity for us to address these challenges and develop a solution to these market inefficiencies.
How did you know there was a market for it?
On the borrower side, research by the National Landlord Association shows that around 300,000 but-to-let landlords in the UK are unable to expand due to difficulties in accessing financing. Indeed, 59% of landlords say that lenders fail to consider their individual circumstances and 56% of landlords believe that current buy-to-let criteria is too conservative.
On the lender side, savers in the UK are getting historically low rate of return due to a prolonged low rate environment – this is unlikely to change soon as low global growth and low inflation leaves little room for rate increases and volatile financial markets is likely to lead to further quantitative easing.
What were you doing before starting up?
I worked for a family office managing mostly real estate developments in the US and in Europe. Prior to that, I worked in the City in various finance roles including at Societe Generale Corporate and Investment Banking and Bloomberg.
Have you always wanted to run your own business?
It is a dream I had since I was a child. I had many ideas prior to setting up LandlordInvest and finally took the plunge as I was no longer motivated by a well-paid corporate job and everything that came with it, including business class trips to exotic locations, but wanted to finally pursue an entrepreneurial path.
I have always been a risk taker and not afraid of failure so it was a step that was not that difficult to make, although I have probably had mores sleepless nights since setting up LandlordInvest than during my City career.
How did you raise the money?
We raised funds from two business angels that also serve on our board as advisors. Raising funds to LandlordInvest has been one of the biggest challenges that we have faced and proved to be much more difficult than we anticipated. I guess it has to do with that we do not have any track record as entrepreneurs, although our team has combined decades of experience working in financial services and are well-versed with the fundraising process.
Describe your business model and how you make money:
- We charge borrowers an arrangement fee of up to 2% on the funds they raise. This means if a borrower raises £200,000, they get £196,000 and we earn £4,000.
- We charge an annual servicing fee of 1.0%. This means that on a £100,000 to a loan with a three-year term, we earn £3,000 (£1,000 per year).
What challenges have you faced and how have you overcome them?
The biggest challenge so far was to become fully FCA authorised. It took almost two years, during which time we had to keep the team together, as we were unable to pay any salaries, whilst focusing on developing our lending platform and having a FCA compliant infrastructure in place. It was indeed very challenging as we never knew when, and if, we would become authorised and could not really plan for the future.
Not many entrepreneurs would overcome such challenge, and I believe that the only reason that we managed to overcome this challenge is due to the team’s belief in the business model and LandlordInvest’s mission: disrupting the old fashioned mortgage industry.
What was your first big breakthrough?
When we finally became fully FCA authorised, ahead of many much larger P2P platforms including the Zopa and Funding Circle. It happened 1 December this year, a date that will stay with us forever.
What advice would you give to budding entrepreneurs?
Build up a good team, as per our experience, a good team is the key to overcome any and all challenges.
Where do you want to be in five years’ time?
We have either gone public, subject to business requirements, or applied for a banking license.