When it comes to raising money, you got to establish trust first.
Trust in property is everything. You must secure your investors. It is not about how much money you can make them. It is all about how you can secure their risk in investing with you or in your property projects.
It does not matter if it is a bank, bridging company or even a private lender. Establishing trust means that your investor’s money is safe. You want to make sure their money would be safer than if it was your parents money. You must have great communication and be available…Without exaggerating the communication….but once a week update should suffice. If there are any issues that come up….a simple email or whatsup to inform your colleague the status of an issue.
Firstly you go about this by making sure the property deal or HMO deal stacks up. If the deal stacks up….there is less risk & greater potential profits. This is the biggest one step that needs to be addressed.
One example was a professional HMO that we are working as a JV partner in Doncaster. The gents there found a property 40kish below the 2010 sales price. It was a no brainer deal. We had to fight to get it but with joint efforts we got lucky. We tried this one project as a test and the builder as a test. In both cases mutual trust is being generated. We own the property…we have a JV agreement. The property is cash flowing as it was fully tenanted immediately after refurbishment….It is going through conveyance now to a buyer as they know article 4 is coming in & the value should only increase.
Another example we are in the process of buying 2 blocks of flats. The first block is 4 one bed flats that will generate after refurbishment 85 a week or 17,680 a year gross. We are buying this building for 80k and will invest another 20k in refurbishment. We have several options…we can refurbish…tenant and sell ourselves….Offer to an investor, in which would buy the building, own the building, we refurbish, we manage it….and we tenant it. There after it will cash flow while it is up for sale in the 150k range. There are investors with no time or knowledge yet money. The idea is we are offering an opportunity.
We can not buy everything and yes our money can run out. But deals like this are opportunities. We have another deal in which it is a block of 3 two bed flats. The property needs to go through planning permission plus needs total refurbishment. The purchase price is a joke at 45k. Architect and planning survey another 5-7k….Refurbishment is approx 90k. These flats should rent for 110 per week and as per the surveyor who did the structural survey thought approx 75k a flat. Again this is an opportunity.
This liquidity is the fuel that enables you to utilise the skills you have developed over your property career. For the investors who lend you the money….it gives them a wealth building tool. You are not looking to them to ask or beg for money….Rather you are offering them opportunities. No matter how much you have yourselves…you can run out of money. Raising money allows you to access the deals that you personally would not have liquidity for.
The investor is protected by either lending money directly on a first charge…..or owning the property themselves registered in the land registry & having a JV agreement in place. We handle all aspects and split 50/50. The idea is to do one small deal initially with your potential investor then if both parties are happy wash and repeat.
We have sat on both sides of the fence. We used to own a bridging company….had numerous JV partnerships….as well as we have brought on investors to our property projects. We offered opportunities and made sure the investor was secure by the deal.
Buying good deals….creating value by the refurbishment…managing the refurbishment…managing the tenants….finding the buyers for the properties. We have created value and solid returns on the 50 properties we have completed on in Manchester.
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