protecting your investors money in a property deal

Protecting your investors money in a property deal

Many people in the property world seek investment from private individuals instead of major financial institutions such as banks

In the last few years people have taken to social media sites such as Facebook, Instagram and Linkedin to raise funds

Quite often people will approach their friends and family for investment

It is a well known principle of wealth building that using leverage can help you achieve wealth quicker then if you only used your own funds

But using private funds places a serious obligation on the developer

It’s not the same as borrowing money from the bank who are prepared to write of vast amounts of debt as the price of being in business

The worst the bank will do is to apply for a CCJ against you and pass your account on to a debt collection agency. Then they will move on

But if you lose a private investors capital you may be losing their life savings

Or you may be losing an inheritance that they got from a loved one

When you are approaching people for investment, you are presenting yourself as someone who knows what they are doing

Is property developing a safe guaranteed investment?

Everyone knows there can be large profits made in property developing and refurbishment

But that is when things go well. And that’s not always the case

Property deals can go wrong

And when they do it can happen very quickly

Many developers in the past have seen projects go wrong and have been unable to turn it around. In many cases they have lost everything, including their investors capital

If you end up running around shouting help my builder’s gone bust , your investor wont care, they will just want their money back

All Project Managers know that before a project starts they have to do everything possible to derisk their project

Risk is one of the 6 key areas of project management

2 other key areas are finance and resources

There have been a sharp rise in property build cost rises in 2021

If you are not aware of these rises or the reasons why they are happening how will you be able to be in control of a project finances or resources?

And if you are not in control of the finances, how can you say you are protecting your investors money in a property deal?

It goes without saying that there is no point being involved in property if you cant make money

Each deal needs to be set up for maximum tax efficiency. Careful thought should be given to cashflow and tax planning. The involvement of a good Accountant can be essential in maximising profit in a deal

If you are not considering these things are you doing your best to protect your investors money?

Safety of the workers means safety of the investment

But the number 1 priority of any developer MUST be safety before profit

An accident on site can cause delays and delays will cost you money.

In a worst case scenario it could see you ending up in prison

Depending on the severity it may attract the attention of the Health and Safety Executive

HSE improvement and prohibition notices are not things you want on your project

Anyone thinking of undertaking a refurbishment project must make it a priority to educate themselves in the subject of the HSE CDM Regulations 2015

And if you are planning on overseeing the work yourself then its essential that you know how to run a safe construction site

What do you need to know before undertaking a property development?

If you are thinking of getting involved in property development just knowing property strategies and how to stack a deal is not enough

You must have a solid understanding in how to execute the project from conception to delivery

If you don’t have this knowledge then you need to JV with or employ someone who does

Otherwise how can you in all good faith ask someone for investment and assure them that you are capable of protecting their investment?

 

If you need help with any of the issues discussed above please contact us

We have a vast amount of experience and offer many services

 

 

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