How to invest in property with no money of your own

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