So you’ve sourced a property ideal for refurbishment at a bargain below market price, considering its current state. You even have an investor in mind. But how do you go about getting that investor equally as enthusiastic about this great deal as you are?
The best way is to show him or her, in a professional manner, how much they stand to gain financially from the deal i.e. quote them an estimated Return on Investment (ROI). You’ll also need to prove how credible you are as an individual – especially if you’ve never met them before and they don’t know you from Adam. Why should they trust you?
Present evidence of due diligence
By professional, we mean present the deal in written form, with details of all the due diligence you carried out, such as how you reached the ROI estimate, and evidence of what similar properties in the same area were selling for. If your plan is to rent the property out once it’s been refurbished, then make a note of rental prices for the area too. Also, attach relevant documents from the vendor’s solicitor and anything else pertinent to the sale.
The main document your investor will want to look at, is your estimated profit analysis. This should show how much he or she stands to gain in terms of cash flow, appreciation and mortgage pay down, as well as tax savings.
Include your own property ‘CV’
Include information about why the investor should trust you. That means details of any previous similar property deals you’ve done - and indeed any property deals at all. If you have a property mentor and work with a property team (such as Sourced), then certainly mention this too. Include testimonials from relevant property professionals you’ve worked with or who know you as part of their property network.
The investor meeting
First though, you have to let that investor know the deal exists. Do this by calling them and arranging a meet-up, where you’ll take them to the property and show them around.
Before you meet up, make a list of any questions you believe the investor may ask and have the answers prepared in your head so that you don’t sound vague or unsure. On that note, be firm about exactly how much money you’re looking for from him or her in order to go ahead with the refurbishment and complete the deal.
It’s also good to have a deadline (exit strategy) for the deal i.e. the project should be wrapped up within 12 months (if it’s to sell). It could be three to five years for a rental (if you want to continue after that, you can draw up another agreement). The key is to be decisive. You come across as much more credible that way.
This is especially the case when it comes to your offer i.e. the money for the mortgage, then you’ll split the profits 50/50. Or are you offering a long-term share in a rental property?
Let the investor know how long the deal is on the table for; a deadline always helps focus the mind…
Speak to Dorka Horvath who specialises in investment property.
Call 0333 123 1330