The Progressive Property Podcast Ask me Anything on Property, Commercial, Serviced Accommodation & Rising Finance
Kevin answers burning questions from the Progressive Property Community in a Live Q&A. Discover how to secure commercial development, the most effective way to rent out your SA units and how to structure your very first JV partnership. Tune in today to hear the expert answers.
KEY TAKEAWAYS
Kevin offers his knowledge to the public in a facebook live, here's the questions he was asked.
Q: What is the best way to go about securing commercial development funding?
A: The best way to secure commercial development funding, and avoid risk is to do joint venture (JV). On a commercial funding you can possibly borrow up to 60-70% of the purchase price and then borrow up to 100% of the development money. The challenge is finding the 30-40 percent deposit. Often the money is already tied within the building. A good idea is entering into a joint venture with the building owner. This way you could work together with the owner and not have to put in any of your own money. You would then approach a development lender who would lend you 100% of the development against the building, allowing you to do the development together. This could allow you to make a profit without putting in any money. You could also try actively searching for commercial developers or joint venture investors on social media platforms. A key bit of advice is don’t find the deal before having the money ready!
Q: I’m thinking of rent to SA (serviced accommodation) in flats most seem to be leasehold in your experience is there any success with agreeing this with the leaseholder?
A: Most people when they are doing rent to SA (serviced accommodation) think to do it on flats. However, please remember not to rule out other options such as, semi detached houses, terraced houses and larger properties. However, if you are doing them on a flat your challenge is getting permission. Whilst you may gain permission from the letting agent, and then from the landlord. You need to ensure you also get permission from the freeholder if the property has one. These are the people that can have the final say on whether or not they are allowed in that particular building. They may simply give you permission, or they may give you permission with some terms and conditions such as a yearly fee. Alternative options, are houses that have been split up into separate flats or rooms, as they do not have a freeholder, the lease usually does not mention not being able to short term lease the property.
Q: I am looking to buy a business we are thinking about asking the vendor to finance us in some capacity. How do we broach this subject with them? Would putting the business into a limited company and them having shares be a good option?
A: Yes, that is one good way of doing it. You could get the person to leave some shares in their company, so they keep their shares and then pay them out at a later date. A good idea would be to find out what the seller is going to do with the money they will earn from the sale of their business. If they have no plans other than to place it in the bank then you could suggest they leave the money in the business and you come to some agreement with what they will gain from that. Perhaps they keep a large portion of the money in the company, and you give them monthly interest on their money and then a balloon payment of the remainder in a few years time. This option, along with having the seller keep some shares in their company are the best legal options.
Q: How do you approach a JV partnership when looking for JV partner with money? How do you the partnership and the structure the contact? I am starting out and I am looking for partners with the cash, what are the next steps?
A: Some key advice here, is to go after investors with larger money to spend, The key fact here is not to pedestalize the investors money. Investors with large amounts of money to lend to you will end up pedestalizing their time and not their money. If you keep the focus on how much you need their money, you run the risk of coming across as desperate and this could deter potential investors. They are investing in you as a person and not just a developer. Show them you have the knowledge and credibility to be able to turn their investment into a profit by showing them how committed and trustworthy. Your job should be focusing on showing them how they can save a huge amount of time by investing with you, show them your skill set and everything you have to offer for them.
Secondly, do what is best for your investor. Ask them “what is most important to you with working with me?” If you’re able to solve the answer to that question, then they will want to work with you. Tailor your expertise to what they want to do with their money. If the client would like you to focus on HMO (house of multiple occupancy) for example, then keep that as your main focus.
Q: What is the best no money down strategy to start with?
A: The best no money down strategy should be marketing. You cannot do anything, unless you are marketing yourself and have people contacting you with leads that will potentially turn into a deal. When you pick up these deals, it is then about using the right no money down tool to make the right decision on the use for that building and securing the profit for that building.
Q: What are your top tips for finding your goldmine area please?
A: Your goldmine area, is where you live. People I meet that don’t succeed in property always think the grass is greener somewhere else, they try to succeed in parts of the country they do not know enough about. They end up travelling up and down the country to find another area.
The whole point of being in business for yourself is to get your time back and stop living someone else's dream. Spending time up and down the country looking for other property investment opportunities will create less free time for yourself trying to create a property dream that could have been done on your own doorstep. We ignore our own doorstep. Find what works in your local area, and do it well. An example of this, is knowing the lower socioeconomic area of your town. This could have a potentially bigger profit margin if the people in that area are usually in the mindset of being tennents for life. The way they treat the property and the regular source of income they provide for you could be more suitable than investing in an area with a higher socioeconomic background, as the people in this area could potentially be using your home as a stop gap. Therefore the reliance of occupancy may not be as high. To summarise, do some research on your own local areas, find out which options best suit you and what you’re looking for and use this research to create your goldmine.
Q: Where do you find investors?
A: They are everywhere. Look around you, you need to put yourself out there and make yourself at risk for people lending you money. If you are at home and not telling people you’re looking for investors it will never happen. Attend business networking events as well as property networking events. Make sure you have your property beacon on everywhere. Update your social media profiles, let people know that you are looking for investment.
BEST MOMENTS
“Your goldmine area, is where you live”
“what is most important to you with working with me?”
“Make sure you have your property beacon on everywhere”
ABOUT THE HOST
Kevin McDonnell is a Speaker, Author, Mentor & Professional Property Investor. He is an expert when it comes to creative property investment strategies. His book No Money Down: Property Invest talks about how to control and cash flow other people’s property to create financial freedom.
CONTACT METHOD
- https://www.facebook.com/kevinMcDonnellProperty/
- https://kevinmcdonnell.co.uk/
- http://progressiveproperty.co.uk/