Offer a pot of gold! That is, an opportunity to make money.
Having spoken to many investors and property landlords in Guildford one challenge that they all face is that, from time to time, one will always runs out of money. Nobody has a bottomless money pit from which to extract more money for further investments however wealthy they might be. So rather than stop investing and do nothing, how does one deal with this issue so that you can continue to profit from future property purchases? Believe it or not, there are many people who do have funds to invest but their challenge is either a lack of time or insufficient knowledge to invest in property successfully. In that case how do we locate these individuals and what do we do to enable them to invest in us instead? The answer is to form a joint venture. This may set up to fund investments or to leverage other people's skills and time. There are a number of ways in which you can operate a joint venture. For example, you could work with a vendor to help sell their property in return for a fee or share of the profit that you generate for them. You could acquire funds in return for paying a fixed percentage interest rate over a period of time (like a loan); you could share a profit 50:50; or form a company to purchase a property, having a shares in the business. In the instance where the investor offers a loan they are unlikely to have an interest in the property as they are using it only as a vehicle to enable them to earn a higher rate of interest on their money than they would otherwise do by leaving it in the bank. They have little risk as their loan interest will be paid whatever profits are made from the property venture. They would receive the loan amount back upon the property investor selling or refinancing the property. If the investor becomes a joint venture partner they would have a shared risk and profit so are dependent upon the property investment being successful. Typically a Deed of Trust is taken out to protect their financial interest. The share percentage offered is subject to negotiation. When setting up a joint venture it is wise to have a business plan to agree the deal with your jv partner. This will cover the nature of the project, the funds required and for how long, a cashflow and profit statement plus details of the exit routes available to the investor. The business plan should show examples of projects that you have successfully completed in the past, including photos and video plus the figures to show how you made money, to demonstrate your experience. This document should be submitted to a number of investors so you can attract several funding options so you can proceed with your project without delay and more importantly, without running out of money. It is always wise to have a contingency fund too. So how do you find your investors? Well, as stated above, there are many people looking for a profitable home for their savings, inheritance, redundancy, windfall and even funds borrowed on the basis of equity in their own home. Firstly, you need to speak with as many people as is possible, even if this is outside your comfort zone. Having acquired your business cards you should network in property and business groups. in addition to approaching everybody in your family and on your contact list. When meeting with professionals, including accountants, architects and solicitors ask if they have clients keen to invest in profitable ventures too. The most important question you can ask is "Who do you know who wants a better return on their money?". Do not enter a venture unless you like and trust the person involved. A legal agreement should always be written up by a solicitor. There should be a Heads of Terms to detail both party's requirements and responsibilities. There may be a Deed of Trust to protect the investor too. This puts their name of the property registration to provide them with further protection. As stated above an investor could have shares in the company through which the property is purchased and if not, possibly a first charge on the property to provide them with total security. Finally one should always complete due diligence, including taking out references, on the other party to satisfy the investor that their money will be invested wisely. By having access to an investor's funds in advance of a project you are ready to go as soon as required. Finally, some deals will face challenges. If so, it is always wise to be open and honest with the investor, keeping them updated at all times especially if an issue does need to be flagged up so that both parties can work on a solution to the problem. Very often, if you have sourced sufficient funds, there may be another investor waiting in the wings ready to take over the funding of your project, in the event the initial investor has to be paid off early. Please note that I am offering my own opinion and not financial advice. Secondly, when looking for a joint venture partner you should always ensure that when promoting any offer for an investment you are always talking with a person of high net worth, as defined under PS13/3 to comply with FCA regulations. So if you are looking for a golden opportunity to invest for a higher rate of return please call 01483 320 207 or email richard@guildfordpropertyblog.co.uk
The "price of the bedroom" represents the capital gain to he achieved when creating an additional bedroom. This may be created by splitting an existing large room; converting a garage into a bedroom; using the loft area to accommodate a bedroom; or by building an extension to include another bedroom. So why is this figure so important and what does it represent? In simple terms an investor acquires a property, then adds the bedroom as suggested above, allowing them to resell the property for a higher price. The aim is to therefore make a profit once all legal and building costs required to complete this task, have been deducted. Realising that there is a substantial demand for family houses in our investment area, especially in certain high performing school catchment areas, research was carried out to review the average price for both 3 and 4 bedroom houses in the area, to determine how much an additional bedroom could add to the price of a typical 3 bedroom house. The average asking price for a typical 3 bedroom property is currently £334,950 and £440,950 for a 4 bedroom house, therefore providing a difference of up to £106,000. This is the potential price of a bedroom. The trick is to purchase a property that is in pristine condition and can therefore be moved into right away. Why spend on a house "in need of modernisation" if there is limited capital gain to be achieved even though a considerable sum of money has been spent on it? It is far better to invest in a project to increase value. If a large room with two windows is not available to split into two separate rooms then a loft extension is an economical way to add an ensuite bedroom to provide the price uplift required. This is our preferred option especially as properties in our investment area do lend themselves towards loft extensions as the roofs tend to have steep pitches with excellent headroom. Once the property has been revalued we are able to mortgage it, having first used a bridge to fund the initial purchase. This then leaves two options - to sell to make a quick, capital gain; or to hold and therefore generate an income from the property. The decision on which approach we take will very much depend upon our financial priority at the time. If we do decide to hold, this offers another opportunity. It enables us to offer the property to a family unable to afford a deposit or to obtain a mortgage but who will be able to do so sometime during the next 5-7 years. How do we do this? Well read our next blog article to discover how.
People often come to me concerned that the return on their savings is so small now that interest rates are at an all-time low. They are therefore challenged to find a home for their money where they will attract a higher rate of interest.
When I ask, "Well, have you considered 'property' as the home for your money?" they tend to retort, "Does that only work when you have lots of money?" This is because we are all brought up to believe that you need a 20% deposit to buy a house and then a mortgage to fund the remainder of the purchase price. Yes, this does apply when buying your own residential property. However investment properties are different. Firstly, the mortgage on your own home is considered to be "bad" debt. This means that you have to pay the amount owed on the mortgage out of your own hard-earned income over a period of (say) 25 years when hopefully your finances will be in order at all times. Sadly, many property owners will go through a period of their life when times will not always be financially sound for them. For example, it's a sad fact but at least one in three people get divorced. Many people will be made redundant at some point in their working life too. So unless, there is a safety net there may not always be sufficient income to cover mortgage payments every month for the 25 year term. When debt is used to fund property investments it is considered to be "good" debt. "Why is that?", do I hear you ask. If your property investment is a rental property, your tenants are paying for your mortgage. This debt is called "good" debt because you are investing in an income-producing asset. Once your tenants have paid their rent to cover the cost of your monthly mortgage payment plus utility and Council tax bills (if you pay for these) any remaining money is profit, having allowed a percentage of this income to cover professional fees, maintenance, insurance and tax. Investment property is therefore an income-producing asset, while the purchase of a residential property provides accommodation but no profit (unless you rent out a spare room). The second concern that people often have is that you need vast sums of money to be able to invest in property. The answer to this is two-fold. In the first instance you should not invest too much cash in one property but use this investment to afford a number of properties in order to spread your risk and secondly, to make your money work harder for you. The second answer is that few people will have hundreds of thousands of pounds lying around in their bank account and if they do, they are surely not receiving sufficient interest at today's rates to make this a practical thing to do. This means that all property investors, however wealthy they may have been, will eventually run out of personal funds to invest unless they are educated, professional investors who therefore know how to work round this challenge. I am developing my expertise in property investment. I have done this by becoming a student on a 12 month Property Mastermind course to become educated and to grow my network of property investors and specialists. This experience has enabled me to offer both friends and personal contacts golden opportunities to produce an effective means to enable them to achieve their goal to generate a higher rate of return without necessarily having to become educated in property investment themselves. These returns have far-outweighed those earned by leaving their money in the bank and they have had the pleasure of sharing in the success of a number of property ventures. Want to achieve the same? Then watch this video No money, No problem.
Still excited? Call me to arrange a chat over a cuppa coffee to see what I can achieve for you.
