JANE SLADE meets the father and son behind Reap, a new ethical annuity plan that offers a fixed income from property without the headache of being a landlord
Reap is a property-based financing arrangement where people lend money to an affordable housing provider which renovates derelict properties. In return, lenders receive a fixed income at a rate above all the current traditional insurance or pension-based annuity plans.
Launched by the Equfund Group, Reap, which stands for Real Estate Annuity Plan, offers investors a fixed income without the hassle, responsibilities and risk of being a landlord.
There are no fees and investors receive a flat interest rate of seven per cent a year on the money they lend for an initial five year period.
The smallest amount you can invest is £15,000, which makes Reap an attractive alternative for individuals who are nervous of taking a buy-to-let mortgage but want to invest in an ethical plan that provides affordable housing for those on low incomes.
Left is a property before it was renovated by Reap and right, is after.
“I was attracted to the ethical side of Reap and liked its simplicity,” says London-based Clare Corry, 57, who has invested £45,000 in Reap.
“I don’t have to stress about Gas Safety Certificates, rental void periods or damages to my property and I’m no longer at the mercy of unscrupulous letting agents.
“I like to feel that I have contributed to bring empty properties back into use and that these are let to young families.
“When I looked at other options available it was not easy to get answers to simple questions: where does my money go? How is my money used? I don’t want to fund the next Wonga, or find that my money has gone to any arms companies.
“An awful lot of financial products appear intentionally opaque in this regard, when what I wanted was good ethics and transparency.
“Plus, Reap helps me fund my life-long passion, travel: its interest now pays for my annual holiday.”
Danny Mahon, founder of Reap and the Equfund Group, has more than 35 years in property, financial services and insurance industries.
“We believe that everyone should have a decent, affordable home to live in”
In 1986 he co-founded The Homebuyers Advice Centre, the first financial services franchisor in the UK and in 1996 led the acquisition of Portman Home Loans, part of the Portman Building Society group, which became Equfund (RTB) Limited; a local authority-registered provider of mortgages under the Government’s Right-to-Buy legislation. During 1996 to 2000 Equfund transacted over £700 million of new mortgage business.
In 2000, he established Equfund (IPS) Limited, an Industrial & Provident mutual society for the benefit of the community. “We believe that everyone should have a decent, affordable home to live in,” he says. “Our core business is to bring empty properties back into habitable use in order to provide affordable homes for people in housing need.”
Among his proudest accomplishments was assisting to establish The Homesavers Charity, which aims to provide accommodation for people in housing need. Danny sponsored the start-up costs of the charity and sits on its advisory board. Each Christmas the charity distributes 1,000 survival packs to rough sleepers.
“Reap is a plan for those who would like to invest in something that can really help others”
In 2012 he was recognised by the Empty Homes Network for his work in bringing back long-term empty properties into habitable use.
“We buy and renovate properties in deprived and not so deprived areas all over the country,” he explained. “Reap is a plan for those who would like to invest in something that can really help others. Everything is totally transparent; there are no upfront fees. All we ask is for the investor to keep their money in the fund for five years in exchange for seven per cent interest per annum.”
Following the pension reforms which came into effect on 5 April, some 200,000 people are expected to withdraw their pensions to invest directly in a buy-to-let property. But Daniel’s co-director son Andrew warns that buy-to-let is not the get-rich-quick scheme it once was and fears that retirees may not have considered the pitfalls.
“I worry that people who are looking to use their pension pot to invest in buy-to-let property might not have the required knowledge,” he says.
“There are currently over 100 different pieces of legislation affecting landlords. Also unless retired people have a great deal of pension money to deploy into their investment, they will usually need to take on a buy-to-let mortgage. A retiree will often not have a regular salary to fall back on if the investment goes wrong, therefore there may be dangers in tying up all of your capital in property.
“Many people assume that you simply buy properties in the same way that you buy your own home. However, buy-to-let mortgages require much heftier deposits; the average buy-to-let loan requires a 25 per cent deposit compared to the standard 10 per cent a purchaser will pay for their own home. If you invest your pension in this way, you could use up most, if not all, of your savings.
“While property undoubtedly offers the security of savings, it requires significantly more effort and there is a great danger that retirees hard-earned pension money is at risk. We are the ones who take on all the headaches and risk in our annuity plan Reap, helping to provide housing for those who can least afford it.”
For more information visit www.myreap.co.uk