by Sarah Flynn
•
25 Oct, 2021
Raising Capital; What are the options? If you're already in property in any capacity, it's safe to say that you will be very aware that it is one of the most capital intensive businesses out there! At times. particularly in periods of rapid growth in a property business, it can quite literally feel like you may never be profitable again with the amount of money required for projects these days. There are many financial products out there that want to help us, but let's be honest, they all fall short of what we really need. We can all get a 75% Buy-To-Let mortgage with a half decent credit score, but what about the other bit? The deposit bit, or maybe the refurb money - Thats where a lot of people get stuck. The bottom line is that to sustain and grow a property portfolio, you need to get creative in coming up with ways to keep raising that cash, to ultimately enable you to keep moving forward! With that in mind, we thought we'd highlight a number of different methods that have been tried and tested to give you some ideas of how to keep that capital flowing and your business growing! 1. A Bank Loan It might seems silly, but a standard loan from a high street bank is probably the cheapest and quickest option to get lending in the current economic climate! If you're falling short of a bit cash for a project, why not try your luck with a high street bank? With interest rates as low as circa 3%, and the money potentially put into your account the same day, whats not to love! 2. Private Investor Loan Understandably, a private investor loan has become one of the most popular amongst the modern day property developer. Many believe this is a win-win scenario as the individual lending the capital gets a much better return on their hard earned cash than in any UK bank account right now, and the developer gets cash without any of the red tape involved from a commercial lender. If you know someone with some dosh lying around.... 3. Gifted Money For obvious reasons gifted money is our favourite; because its FREE! For any of you are lucky enough to have any parents, relatives, perhaps even friends that you know are planning on leaving you a hefty sum when they depart from this world, why not ask for it now? Let them see you flourish whilst they're alive! Or maybe you know someone who has so much money they are willing to just give you some anyway - either way, free money is the best type of money! 4. 100% LTV Bridging Loan We are aware that for many of you, the idea of 100% Lending seems like a made up fantasy; but trust us when we say it exists! This option is understandably more specialist, and requires an expert broker, but is definitely achievable for some people. The set up is usually that the bridging company is willing to lend around 65% of the value of the property and 100% of the development costs, and then the remainder 35% of the cost of the property can be secured against another property you already have (providing there is enough equity in it) ; such as your own residential home or another investment property. 5. Funding Groups A very modern and innovative way of raising capital is through many of the newly formed funding groups. This could be through sites such as fundingcircle.com, gofundme.com, angelinvestmentnetwork.co.uk etc. Generally you will pitch your deal on the platform and then potential private investors, or groups of private investors can contact you if they are interested in what you have to offer. 6. JV Although the set up of a JV from a legal perspective can be complex, and advice from a number of professional bodies must be sought before entering into an agreement; Joint Venture's can be incredibly powerful, especially when looking at larger projects. The wonderful thing about a JV is that the terms are entirely set by the parties involved, so the arrangement can be anything you like! For example, it could be that one party puts all the capital in, whilst the other party brings all the skills and knowledge or property, and then the profit from the project is split 50/50 at the end. If you're a property expert but have no capital, and you know someone with lots of capital but no expertise, a JV might be a perfect solution!