Shared Property Investment
When I was first at University the UK was in a housing boom and I remember one of my fatherˇ¦s neighbours had a niece who desperately wanted to get on to the housing ladder but couldnˇ¦t afford to. She ended up buying a place with 2 of her colleagues and between them they all made enough money to put down a deposit on an individual place each.
This is great if you have some close friends or family that you can do this with and have a minimum of fuss, or a great deal of trust. What if there was an organisation that would put you together with other similar investors, put together a standardised contract to protect your interests and generally simplify the process? These organisations exist, have a look at www.signatureoverseasproperties.com/site/sharedinvestment.php or www.sharedspaces.co.uk to get more details.
If you are interested in this as a business then the first thing you should do is sit down with some lawyers and work on a standardised legal contract for your customers. Offering strong legal protection will be the key to building trust, you need to look at exit options in particular as this is where people will want to understand how they can get their money back and any profits that they are entitled to. You may also want to put together a deal or two which include your own investment, as this will show potential customers that you a) can execute these kind of deals, and b) believe enough in the process to invest yourself.
It is up to you whether you also provide property listings, insurance services or broke mortgages. Each activity has incremental revenue streams but also additional work. If this is to be a part time business then I would look to work locally with real estate agents, and mortgage brokers until you understand one part of the business. You can take on additional activities as your business grows.
In terms of finding customers you can take the following approaches: -
Networking
Party Planning
Presentation Events
Affiliate marketing
Website
If you can afford to get involved in at least one deal then take the opportunity to tell everyone you meet about it. Many people will be intrigued as they will not have thought of investing in property in this manner. You should get some interesting conversations going and will build your credibility when you do start this as a business.
Once you start putting deals together then you need to start telling everyone about the deal that you are doing, how many investors you have and if you need additional investors then how much money you need, how many investors you are looking for, what the property is like etc. You donˇ¦t need to pitch this as a potential deal, simply be enthusiastic and tell people what you are doing. You will be amazed at the people who want to get involved, often people have spare money that you are not aware of and/or have relatives or friends looking for investment opportunities.
You can take this further and push your network by joining golf clubs, business clubs, investors clubs etc. Choose things that interest you but whilst you are there take the opportunity to tell people what you are doing, and remember to be enthusiastic. They don't need to know if you are having trouble with your current deal, just that this makes sense as a way of investing in property without taking on the risk of a whole property.
Party Planning takes the social aspect of this business idea a little further. You would invite people for drinks and/or food with the understanding that you are going to talk about property investing and in particular shared ownership schemes. The event should be casual and you should not speak for too long. Try to have some materials ready for people to read and pass around like deals that you have done, and deals that you are currently working on. Show rental yields, profits that have been made or profit forecasts. Get them talking and at the end pass around a piece of paper and ask for names of those that are interested in details of your next deal(s). Read the information on party planning in our "finding customers" pages for additional ideas on how to run these events.
Once you are confident and have a number of deals under your belt you may want to go to the next step. Hire a hall, or a meeting room at a hotel or other prominent local venue, and advertise your event in appropriate publications. These should definitely include the local newspaper, but may also include investment publications or asking local real estate agents to refer their customers. By broadening the number of people in the area who can afford to invest in property you should help to push up prices and generate more business for the real estate agents, so they should be happy to help.
Affiliate marketing means working with other organisations to generate business for each other. For example you may tie yourself to one or two real estate agents, so that they earn commission from every deal you put together, equally you may want to work with one or two mortgage brokers for those deals that require finance. In return you can ask for a fee for each deal that you pass to them, for referrals back from them when they get customers who would fit your client profile or a combination of the two. This generates a win:win situation where you all get more business. When you start out you may want to offer a small incentive $50-$100 for each new customer that does a deal with you so that the individuals see more clearly what is in it for them.
Putting together a website for this kind of business is great in as much as it will provide information for your clients and prospective clients but do not expect to generate much business from it. You should of course include your contact details in case web browsers find you and are interested in your service but think of this primarily as a servicing tool that will ultimately help you to close deals. Property investing is very much a people business and you will put deals together because you show people that you understand the business and are looking out for them.
Real estate agents will be happy to provide you with housing lists, or you can find them online. Try to work in your local area, or an area that you know well. For example I live in Taiwan but could put together this kind of deal for people who are interested in buying UK property but might normally be priced out of the market.
The key to this is finding customers who are interested in the concept and providing them with a small number of properties that meet their requirements as well as the other investors to complete the deal.
There will be a lot of paperwork, and headaches particularly as groups get bigger. "Signature" the company in our introduction above tries to keep the number of investors under 10. I would recommend no more than 3 or 4 when you start out, as the more people involved in each deal, the more likely that a deal will fall apart.
This is not an expensive business to get into. Putting together the initial contract will require an investment possibly as high as a couple of thousand dollars but finding properties and mortgages (if required) are essentially just leg work.
If you move into real estate listings, or mortgage broking you may require licenses. Simply putting together groups of individuals to invest in a property should not, but you may want to check with your lawyer on money laundering regulations and any other issues which may arise from your business model.
Some clients may try to do this themselves, if they do congratulate them. They will need to put together their own contracts, find their own investors etc. This is your value add, and any other successful deals outside of your network will simply add to your status as providing a valuable service.