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Due to the potential loss of invested capital, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
1. You could be exposed to a loss of capital
- It is important to remember that you could be exposed to losses associated with the property market. This means that you could receive less money back than you originally invested.
2. There are limited protections if something goes wrong
- Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Read more on the FSCS investment protection checker here.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, the FOS may be able to consider it. Learn more about FOS protection here.
- In the event that London House Exchange ran into difficulty, PricewaterhouseCoopers LLP has been pre-engaged to manage the sale of the property portfolio which may result in losses - read more about our Investment Safeguards here.
3. You may not get your money back quickly
- London House Exchange has created liquidity in a traditionally illiquid asset class, via the Exchange that is hosted on the London House Exchange platform, both website and app; however liquidity is subject to supply and demand, and the price you could sell your shares at might be lower than the price they were originally purchased for.
- With some properties, in a worst case scenario, it could take several years to get your money back (e.g. in the case of a block with a large number of units, selling individual units sequentially to maximise their value).
- Dividends are not guaranteed. They are paid at the discretion of the Directors of the company that holds the property, based on the financial position of the property. In the worst case scenario, dividends may be suspended.
4. Don’t put all your eggs in one basket
- Putting all your money into a single platform or type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well. In a similar vein, we also recommend that investors diversify their investment(s) across multiple properties on the platform.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
5. The value of your investment can be reduced
- Property values are subject to broader market conditions as well as specific risks - you can read more about this in our Key Risks section. Your investment is linked to the underlying value of property in your portfolio and as such, the value of your investment can go down as well as up.
- In certain situations, properties may require additional capital, raised through the issuing of further shares. The ownership share of the property that you invested in will decrease if more shares are issued. This could mean that the value of your investment reduces, depending on how much future fundraising is required.
- These new shares could have additional rights that your shares don’t have or may be available at a lower price than you purchased them for, which could further reduce your chances of getting a return on your investment.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here.