In order to sustainably build and scale your property investment business, you will need access to a ready supply of capital.
This capital typically exists in two forms, public and private.
Public finance includes institutional finance, which is publicly advertised and available on the open market. Things such as mortgages, bridging loans, personal loans and credit cards. Public finance is an essential piece of the puzzle but it is not the focus of this article.
Private finance, as the name implies, tends not to be publicly advertised or readily available on the open market. Accordingly, you need to work harder to find and gain access to this form of capital.
In the course of this article, we will explore 5 top tips for attracting private investors.
Full disclaimer from the outset. I am not offering financial advice but simply sharing some ideas, which you may wish to explore.
If people don't know you're actively investing in property and that raising private finance, is a key part of your business strategy, you're going to have a much harder job of attracting private investors.
It is essential that you consistently build your personal brand and raise awareness for what you're doing, along with the value you can offer people.
If you're uncomfortable posting online and sharing information about what you're up to, you need to adjust your mindset and get out of your comfort zone.
Property Investment is an incredible asset class, which people are familiar with and believe in. There are almost certainly a number of people in your network of contacts, who have the means to invest in property, but not the time or knowledge of how to do so effectively. They will have busy lives and many demands on their limited stores of time and energy. They are suffering as a result, because their savings are likely diminishing in real terms, as the costs of inflation continue to rise and the rates of return in the bank remain very low.
By not telling everyone what you're doing, you're depriving them of the opportunity to generate better returns on their money.
Starting now, you should form the habit of posting updates to social media every day, so that people are aware of the great work you're doing in building your property investment business.
By the time you come to approach them, they will already have a fair grasp of what you're doing and the beginnings of an interest to get involved. Done effectively, you will also have people starting to approach you, as you will have educated and inspired them, through the high value content you've been posting
It takes time to build strong relations, which are underpinned by a very high degree of trust.
You will need to prove that you're a person of the utmost integrity, who knows what you're doing and can be relied upon to step up when challenges inevitably arise.
You will need to showcase your ability to communicate effectively and with absolute transparency. Likewise that you're someone who takes extreme ownership to ensure favourable outcomes.
When endeavouring to build this trust, the absolute worst thing you can do, is to pressure someone into parting with their hard earned cash, before they're 100% comfortable doing so. To this end, don't wait until you have a live deal, before starting to engage with private investors.
Once you have buy in from your investors, at least in principle, it will be far easier for you to go out and find deals, safe in the knowledge that you have a bank of investors who are ready, willing and able to provide the capital needed to get them over the line.
You will also have a good understanding of what they will expect from you, in terms of communication and shared risk e.g. having some of your own skin in the game.
As alluded to above, this is all about taking the time to build great relationships.
The fundamental ingredient of all great relationships is trust. This is the essential currency of all business relationships. It takes a long time to build and just seconds to destroy.
The absolute best way to build trust, is to exercise complete transparency in all your communication and dealings with people. This isn't limited to sharing the good news but far more importantly, it is about pro-actively sharing updates on all the challenges you're facing and the steps you're taking to overcome them.
This is not an exercise in bothering your private investors with every tiny detail and problem that you're facing. Rather it is about sharing important updates transparently and pro-actively before your investors need to come asking you the tough questions, because you've left them in the dark and made them feel uncomfortable.
This is about taking absolute responsibility for everything that happens within your property investment business.
If one of your team members makes a mistakes, which could cost your investors money, you need to take complete responsibility for that mistake and communicate with your investors, in terms of the problem that has arisen and the steps you're taking to resolve it.
You're the captain of the ship. The buck stops with you. If someone in your team makes a mistake, it's your fault, because you've invited them into your team and it's your responsibility to ensure they have all the support they need to do their job properly.
When seeking to work with private investors, it is essential for you to understand your compliance obligations, as set out by the Financial Conduct Authority.
The compliance landscape is evolving all the time, so it is important that you keep up to date with the latest rules and regulations.
It is particularly important that you have a comprehensive understanding of these rules before sharing any kind of financial promotion or investment opportunity with a prospective investor, especially if you have not taken steps to verify them, as being either a High Net Worth Individual or Sophisticated Investor.
At the time of writing, the government is consulting on proposals to amend the financial promotion exemptions for high net worth individuals and sophisticated investors - https://www.gov.uk/government/consultations/financial-promotion-exemptions-for-high-net-worth-individuals-and-sophisticated-investors-a-consultation
Accordingly, it is more important than ever, for you to stay up to date with the regulations and ensure compliance with them.
Here at Stacked - we're committed to supporting your efforts to Build & Scale your property business.
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