Your money-making expert. Financial journalist, TV and radio personality.
Get 10% on your savings with a site called Blend Network.
Is that really possible? Surprisingly, it is.
When companies offer two-digit returns on investments I am always suspicious. At 10% I would expect a lot of risk and possibly even a company trying to pull the wool over my eyes!
However, when I learnt about what Blend Network actually invest in I liked the idea and thought I would give it a go myself. i haven’t put a large amount in because I consider that it’s risky, but I was impressed enough to give it a go two years ago and I’m still putting bits of cash in when a new property comes up for development.
Blend Network provides money to small developers: really small – like people who are building a house or a development of a few flats. They purposely avoid London property as there isn’t so much potential there and prices are too high. They also only invest in affordable housing, not those crazy-priced properties that get bought by rich people who never live in them.
And there’s a huge demand for this kind of property. Housing experts report that 40% of all new houses built every year need to be affordable homes, but 2016-2017 figures show that the figure was only 23%. Recent research also states that England has a backlog of 3.91 million homes, meaning that 340,000 new homes will need to be built annually until 2031.
Blend Network lends on these properties because they saw a gap in the market. Surprisingly, these small developers creating affordable housing are being ignored by the banks because they don’t want to borrow enough! This is the kind of thing that can happen in the world of borrowing. If you want to borrow millions there are quite a few organisations interested in speaking to you, but if it’s a relatively small amount (a few hundred thousand pounds) then the banks shut their doors.
Loan amounts at Blend Network recently have been £125,000 (to turn a guesthouse in Norwich into six flats), £300,000 (to help turn an empty office block in Norfolk into flats) and £450,000 (to part finance the costs of developing a site in Derrycrin, County Tyrone into 6 houses).
Blend Network has already lent £22,892,000 in 67 loans. Some projects have several loans and are marketed to lenders as tranche 1, tranche 2 etc. The projects come from across Northern Ireland, Scotland, England and Wales with zero defaults and an average fixed return of 10.14% p.a.
It’s small developers who borrow money through Blend Network. They tend to borrow it for 18-24 months but some of them pay the money back quite a lot earlier (like just after six months).
They borrow this way – at quite high rates given where the Bank of England base rate is right now – because they can’t get loans from the high street banks.
Blend Network lends the money at 2% above the rate that we the investors get. So that means that developers are borrowing at between 0-14% p.a., these days mostly at 10-12%, and they are keen to pay it back as quickly as possible!
Blend Network works on a peer-to-peer model. In other words, it puts borrowers and savers together (sort of) so that savers like you and I lend pretty much directly to individual borrowers.
It’s not that they give you the name and phone number of the borrower together with their bank details!
It’s more that they tell you on the website what development is coming up that needs cash and then you can decide if you want to be one of the people to put a bit of money into it. Some big investors put a lot of money in but many others just put in £1,000 or so.
You can either wait until Blend Network tells you about a new development coming up to invest in or you can set your money on ‘automatic’ so that as soon as a property comes up, some of your money (whatever you have set on the system) is automatically invested.
You can put into the system the minimum return you want (say 8%) and the maximum amount of time you want to invest for (say 24 months) and then when the right property comes up, your money is put into it immediately.
Actually, it’s not a bad idea to put it on automatic. Once you’ve decided you like the company and trust them you’re more likely to get a piece of the action if you set payments at ‘automatic’ as the investments get filled up very quickly when they come on line.
One good thing to know about Blend Network is that they have a healthy secondary market – in other words, there are people hanging around who would be happy to buy your loan off you if you decide that you don’t want to keep your money there for the full term.
This is helpful to know as the last thing you want is to have to take money out of an investment and then find you can’t because no one will buy it off you. It’s helpful to know that you can get out of this if you need tol
There are a few advantages of investing in Blend Network
Investing in Blend Network – and any peer-to-peer business – is risky.
It’s quite possible that it’s good for a small percentage of your money that you’re happy to take risks with.
I invest in it and have been quite happy with it so far. However, it’s not right for everyone.
If your answers to those questions are ‘yes’ then it’s likely that this could be for you.
But if you’re still building up your investments and you would have a big problem if you suddenly lost any of the money then it may be best to stick with the safer and lower-returning products.
*This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.