Assetz Exchange Review – A Real Investor Experience (November 2020)

Summary of Assetz Exchange Review
Assetz Exchange is a new product which potentially targets some new types of property such as modular housing as well as established properties. It is also backed by an established operator in the market. The amount of fees charged has made investing in these types of platforms quite difficult in the past. It will be interesting to see how this unfolds.

Here is how Assetz Exchange compares to similar investments:

PlatformLinkTarget Rate (%)My XIRR (%)StatusLive Rating
ReviewUp to 8.5%-1.1%OPEN2/5

What is Assetz Exchange? 

The name may be familiar to seasoned P2P investors and indeed, there is a link. Assetz Exchange is a product that has been created by Assetz Capital, a leading P2P lender. A separate site has been created as the Exchange product offers markedly different products. Instead of financing projects through the means of debt, investors own a slice of the properties. The income stream is thus derived through rental income and capital gains (if any). This puts the model very close to the likes of Property Partner.

However, Assetz have sought to differentiate their business from the raft of companies operating in that sector. Their first selling point is that many of their properties are rented out to charities or housing associations. These tenants often sign longer contracts than private individuals, which gives greater certainty to the income stream. The businesses that start behind these tenants also potentially represent a lower risk of non-payments.

Another type of investment offered is development loans. These differ in that a loan is provided by investors to purchase land. Basic services are added to this in the form of utilities and transport, and the land is sold on as ‘serviced plots’, hopefully at a profit. This removes much of the development risks for the investor as seen on other platforms.

Assetz Exchange also offers investors the chance to get involved in the ‘next generation’ of homes. Projects such as eco and modular homes feature on this platform, which often are quicker to complete. In the case of eco homes, they also come with a lower impact on the environment. They also offer investments into serviced plots, which allows the buyers of which to construct a home as they wish.

Here is a list of Assetz Exchange features:

Advertised ReturnsVariable
Investment TypeProperty
Loan SecurityFirst Charge
Minimum Investment1 lot (price varies)
Cash DragSome
Secondary Market?Yes
Fees12.5% monitoring fee (applicable to rentals)
3% secondary market buy fee
2% transaction fee on property sale
Provision Fund?No
Auto Invest?No
Available in ISA?Yes
FCA Authorised?Yes
Active on forum?Yes
Sign-up offers?£15 on account opening

Assetz Exchange Sign Up Offer

Currently there is a great sign-up offer for Assetz Exchange: £15 investment credits for opening an account. There is no minimum deposit required or any code to avail yourself of this offer, just visit the site and open an account.

Is Assetz Exchange profitable?

Assetz Exchange is a trading name of Assetz Exchange Limited. Their maiden accounts were filed on 22 Feb 2021 and cover the period to 31 October 2020. There is not much detail in the accounts aside from that there was a c.£300k loss, covered by issue of shares. Most of the reporting period contained the pandemic.

Of more interest is the relationship to Assetz Capital and what happens in the event of a business failure. The wind-down plan mentions that Assetz Capital will take control of the business if it fails.

This is has its good points in that Assetz are already in the sector; it is far better than handing over to administrators which charge a hefty bunch of fees. On the downside, keeping it in-house may have some disadvantages, as poorly-performing loans can be continued to be kicked down the road.

It is important to know that the two businesses are separate and liabilities run up by Exchange (if any) are nothing to do with the Capital side.

Assetz Exchange Operating Model 

Assetz Exchange operates in a different way to Assetz Capital and the interface has very few similarities. In addition, the platform operates separately, so even if you have an Assetz Capital account you’ll have to register again. Cash held in your Assetz Capital account cannot be transferred to your Exchange account, and vice versa.

Signing up is pretty straightforward though and requires you to provide personal details and classify your investor type. You will now also have to pass the common investor quiz which helps you understand the risks entailed in this product.

Depositing works in much the same way as the Assetz site. You make a bank transfer, and the amount should show up in your account within 24 hours. Once this happens, you can then invest in the available properties, which are seen in the ‘Properties’ Screen. Details of the properties are far more thorough than the Assetz site, with a wealth of information provided. The type of property varies but in general the properties you are purchasing are held on long-term rental contracts and you are paid your share of this every month.

Available shares in property are termed as ‘lots’, and available lots can be purchased in any number subject to them being available.

On this note, taxation is slightly complicated. You can hold investments within an ISA/SIPP which shields you from tax. Investments are usually made into a SPV (special purpose vehicle) specifically set up for that property. Due to the different types of property on the Assetz Exchange website, taxation treatment can vary. Here is a quote:

If the income produced by the property is variable (i.e. determined by the performance of the underlying asset such as under an assured shorthold tenancy (AST)), then the interest for the company is not deemed tax deductible by HMRC for corporation tax purposes. Distributions are therefore taxable as dividend income for the investor.

If the income produced by the property is fixed (such as income produced from a long term repair and maintenance lease) then HMRC declares the interest as tax deductible for the company for corporation tax purposes. Distributions are therefore taxable as interest for the investor.

Clearly this may have ramifications for investors depending on your tax position. Seek further advice if you are unsure.

Much like Property Partner, a distribution assumes that there is a tenant there to pay it. If the property is vacant, or for some reason they do not pay their rent, then you will not receive any money.

Although many investments have a long-term horizon, you can sell your investments early on the secondary market. Pricing in this market is fully variable, so you can buy and sell at different prices. In the event that a property gets revalued, this may be substantially different from the original purchase price.

Assetz Exchange Fees

Fees are an important part of the consideration. We have seen with Property Partner that the proposition has quickly shifted to unviable. Weak prospects for house price growth, an assets under management charge and a monthly charge has seen returns dwindle for investors and even turn negative.

Assetz Exchange has no monthly fees, but there are plenty of fees to be wary of. A 3% loan arrangement fee is charged, and this is paid indirectly by the owners as it is debited to the SPV of the investment property. Monthly rental incomes are also subject to a 12.5% fee, although this is common in the industry and covers routine maintenance. If the property is sold, you are also charged a 2% transaction fee.

How are funds protected?

Investments within specific SPVs have some limited protections. A contingency balance is held within each SPV which acts similar to a provision fund, covering unexpected short-term cash flow disruptions. It is topped up from receipts and no distributions are made if it falls under a certain amount.

SPVs also benefit from indemnity insurance which covers non-payments from tenants. This in theory also covers disruption to cash flow, but it does not cover voids (periods where the property does not have a paying tenant in).

Aside from this, there is no protection for funds, and Assetz Exchange does not fall under the FSCS scheme.

Assetz Exchange Review: Pros

Reputable Tenants: The target tenants for Assetz properties are housing associations and charities: this should provide a greater stability of rent, with longer contracts signed.
New Markets: Eco homes and modular housing offer investors exposure into a slightly different type of property market and potentially one that is beneficial for the environment.
Variable Returns: Ownership of properties can give rise to much greater returns than loans if the underlying property increases in value.
No monthly fees: Unlike other platforms, there are no monthly portfolio charges and only transaction-based charges to pay.

Assetz Exchange Review: Cons

Low Deal Flow: Currently there are not too many properties available for investment. Further, the majority are of the private residence type and not of the types that may give investors some diversification. This may continue into the future as private homes would be the easiest to procure.
Potential Voids: You are not covered for voids, so income streams may be interrupted while your property remains unlet.
Variable Returns: The valuation of investment can vary with the greater market trends and also the ease of letting. This can have a large effect on valuations.
Taxation: Some income is classed as interest, some as dividends depending on the investment. This may influence the choice of some investors.

Conclusion of Assetz Exchange Review:

The rental market is often a difficult place for P2P investors. Paying for the upkeep of properties and the platforms profit margin is expensive, and investors also take the downside of having no payments in the event of voids. Whilst Assetz Exchange is not immune from these factors, the introduction of different types of property may give investors some diversification in this field. The platform is still young, so it remains to be seen how successful it will be from an investment point of view.

Disclaimer: This Assetz Exchange review represents my own opinions and should not be substituted for investment advice. Please research before you invest with any firm. Typically P2P investments are not covered by the Financial Services Compensation Scheme (FSCS) in the way bank deposits are, and there are no guarantees that you will receive the returns advertised (or even a return at all).

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