For many potential property investors, finance can be a real headache and in some cases extremely difficult, if not impossible, to obtain. Changes to the mortgage sector have seen reductions in the loan to value ratio as well as increased deposits. However, there are a number of ways in which you can invest in property without the need for a mortgage at all.
Joint ventures with friends, family and acquaintances are becoming more popular as a means of raising funds for property investment. This type of structure tends to revolve around two specific types of party, those with an idea or relevant skill but a lack of funding and those with money to invest (whether this is savings or access to finance), but no time to manage a hands-on project. You will need to ensure that all the parties involved in your property investment are trustworthy and have access to the finance required.
While the specific details of any joint venture will vary from deal to deal, in essence there will be an agreed split of income/profit which will depend upon the input from all parties. There is no hard and fast rule for a split of income/profit, but there will need to be an acceptable level of potential return for all parties involved. Even if you are dealing with friends and family, it is imperative that you have an official legal document in place detailing the structure of the joint venture, the role of each party and the split of income/profit to avoid any disagreements and protect any investment from both sides.
Use development finance
Structured correctly, any viable property investment should be able to create an income stream or a capital return, greater than the cost of finance. This is where development finance comes in with a number of companies out there focusing specifically on lending for property development, making obtaining short, medium and long-term finance possible. To access this type of funding you will need to put together a detailed business plan and show a clear path to profitability, highlight income flows and there may also be a need for added security.
If you deal with a focused property development finance company, the likelihood is they may have a number of flexible options available to suit your specific scenario. For example, where a new property is being developed they may be able to provide short-term loans to complete the property. At this point many properties may be eligible for mortgage finance which can replace the short term loans and leave additional finance for the future. This is just one example of how a flexible approach to development finance can help you get your property portfolio off the ground without the initial need for a mortgage.
Try property crowdfunding
As with all investments, there are risks involved. Your capital may be at risk if you invest. You ought to rely on your own due diligence before investing, and be aware that property prices can go down as well as up. All figures, rates and yields are only projections and should not be relied on.
Property crowdfunding has changed the way people can invest in property and has truly diversified the property investment sector. There are many potential benefits to the property crowdfunding model which allows individuals without cash savings or access to finance, to begin their journey in the world of property investment from as little as £10.
As investments on crowdfunding platforms are carried out on a cash transaction basis this ensures there is no need for mortgage arrangements. When individual fundraisings have been completed, all assets are moved into a stand-alone company in which all investors receive a share which reflects their investment. For those starting out with relatively little capital, the opportunity to invest as little as £10 per investment offers the chance to create a diverse portfolio, which would be impossible in traditional property investment markets. For many would-be property investors, property crowdfunding could offer the perfect stepping stone from zero exposure to a long-term property portfolio.
The fact that crowdfunding companies are “only as good as their last deal” can ensure only high quality and fully researched investments make it onto their platforms and each element of a property investment opportunity is listed in great detail. Over the years we have seen an array of companies joining the property crowdfunding arena, but Property Moose (a pioneer of property crowdfunding within Europe) have stood the test of time as the market leader. You can learn more about Property Crowdfunding and view live investments from Property Moose here.
Investment in hands-off property
While there are many people who like to take a hands-on approach to their property portfolios there are also many who prefer a hands-off approach leaving the day-to-day management to more experienced parties. Thankfully there are opportunities aplenty for those not interested in the day-to-day management of property developments.
The chance to buy a fraction of (for example) a hotel room or other similar developments has caught the attention of a growing number of investors. Many of these schemes allow participation for as little as £15,000 with the opportunity of a percentage income (typically 7 – 12%) and day-to-day management taken away from individual investors. Even though this type of investment opportunity will incur management charges it still offers the chance to build a quality diverse property portfolio with minimal hands-on exposure.
We do not provide any advice in relation to investments and you must rely on your own due diligence before investing. Please remember that property prices can go down as well as up and that all figures, rates and yields are projections only and should not be relied on. If in doubt, please seek the advice of a financial adviser. Your capital is at risk if you invest.