Making Yourself Investable
Making yourself investable can be difficult because you’re trying to convince someone to take a leap of faith with large sums of money. If they don’t understand property, if they don’t understand you, or if they don’t know you well it can be very, very difficult and it’s all about building up that trust.
The first bit is to identify the key people who you can go to who will look to invest with you. You could always start off with family since a relationship has already been established, however, it’s understandable that some people aren’t comfortable with going to family for money. Nevertheless, it all comes down to mindset. It’s very different when you’re going to family and saying, “Can I borrow £100,000?” to going to a family member and saying, “Would you like to invest in £100,000? I’ll give you a 10% return.” What you’re doing in the latter is creating a win-win situation for you and them, where you are able to offer them a rather lucrative return on their investment.
For example, a family member might possess £100,000 in a savings account and chances are it’s making minimal interest per year. To then be able to offer them 10% return (or more) is going to help you to convince them that the investment will be worth it. So I think it’s very important when trying to make yourself investable to believe in yourself - and believe in what you’re offering to people. Because if you don’t believe in yourself, if you don’t believe in the asset that you’re offering, if you don’t believe in the return that you’re offering, people are going to see right through you and they’re not going to want to invest.
The second part of making yourself investable is to make yourself a safe investment. This means providing the person investing in you multiple ways of getting their money back and helping them believe that there is no way that they are going to lose. Some ways to add additional security may involve:
A second charge over the property
A charge over your own personal house
Offer them a Personal Guarantee (Check out our blog post on Personal Guarantees at www.thepropertyfinancecollective.co.uk/post/what-is-a-personal-guarantee)
Shares in a company
The third and final part of making yourself investable is the offering. The worst thing to do when approaching an investor is either offer too much or offer too little. Don’t be too stingy, don’t be too greedy, it’s all about finding that sweet spot of what is a good offering to an investor which ultimately is what you can afford to pay. You can tend to find the sweet spot somewhere between 6%-16%, which most people will see as quite an appealing investment.
One part of the offering is to realise that not every investor you approach is going to understand property and it’s important to be an educator at the same time. This doesn’t mean selling training courses, but rather in regards to educating the investors on the actual deal, what they’re investing in, the strategies and how it all works. They might suddenly take a huge interest and potentially an investment may turn into a JV, Joint Venture (Find our podcast on Joint Ventures at www.thepropertyfinancecollective.co.uk/podcast)
Identify the key people who will invest in you, build a trusting relationship
Have a good mindset, create a win-win for both you and the investor
Make safe investments, help the investor believe they can’t lose
Know what you’re offering, find that sweet spot
Be an educator, consider a Joint Venture
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Written by Michael Primrose & Christopher Yong