There are many ways of investing in property, even if you don’t have any money. Lease options and Rent to Rent are two very popular strategies. You can create a lot of cash flow by packaging and sourcing deals for other investors for a fee. However, it doesn’t mean that if you don’t have money, you can’t invest in multi-million pound projects such as developments, commercial conversions or normal BTL properties worth a lot of money.
There are people out there who are waiting with their cash to invest in your deals instead of having their money in their bank where they’re unlikely to get much return. Money loses value every single day and after paying taxes, they may just break even or make a loss. That is why they look for new opportunities. Some of those people are cash rich and time poor, meaning they don’t have the time to find deals. These investors are looking for people like you to find and negotiate deals so they can finance it and share a profit with you. You need to start hanging around with these sorts of people; tell them what you do and build a relationship with them at the networking events, exchange business cards and after the event follow up with everyone the next day via email. You can say things like: “Hi Mr Smith, it was a pleasure to meet you at the property networking event yesterday. It would be great to meet up with you to discuss further business opportunities. Please let me know when you’d be free to meet up.” Or you can say things like “There is no free lunch, but there is when I am in town.” It all depends on who you deal with. This is just a simple example. If you are good at writing emails you can develop it, but try to keep it short and to the point. Remember: dress to impress; you can never get a second chance at a first impression. Who you hang around with is who you become and your network is your net worth. If you told us how much five of your friends made annually we could predict your salary.
We will name a few places and products where you can raise money for your property investments. Even if you have a lot of money and you start investing, you will eventually run out of money one day. That is why it’s very important to raise finances and use other people’s money instead of your own. All successful people do the same – they don’t use their own money.
Joint Venture (JV)
This is a very good way of building your property portfolio quickly with minimal risk and no capital required. JV partners could be people who you meet at networking events. Some have a lot of time and will bring you good deals, whereas others are very busy but have a lot of cash to invest. If you are working with private investors they will have business experience that can help you. This will be very beneficial when analysing deals, legal issues, profit and loss etc. It is much easier and quicker to build a property business with partners than by yourself. Before entering in any JV agreement, make sure you do your due diligence on the person you are dealing with and consult with your solicitor. JVing with other people has positives and negatives so you need to analyse it before you enter such an agreement.
For a joint venture to work, you need to choose the right partners; each partner needs to bring something different to the partnership. It’s important to have clear documents that outline how the partnership will work so you know who is responsible for what. You need to be honest and open with each other.
I (Damian) experienced bad partnerships many times and lost a lot of money in business but it wasn’t their fault – it was mine. You need to take responsibility for yourself. If I had done enough due diligence on the people I was partnering with I would never have gone ahead with the deal. But I am happy that it happened as it was a good lesson and I will never make the same mistake again. It takes time to find good partners and you might be lucky and find a good one in the first place. Remember there is a golden rule in business: trust but verify! I have done many good deals with my current business partners and it would never have happened if I didn’t go to networking events. Shane and I travelled all the way from London to Florida just to network and meet new people who we can do business with. That is called sacrifice; we do whatever it takes. Do today what others don’t, to have a tomorrow that others won’t.
You can also JV with your friends and family; you provide the deal and knowledge whilst they bring the money required. Once the work is done, you share the profit 50/50. There are many different ways of structuring JV deals. For example, there might be people who are not interested in monthly income but investing money for capital appreciation. So instead of sharing the profit 50/50, you take the cash flow every month and they take the equity. The amount the house appreciates in value will benefit your JV partner, but make sure you have an exit strategy in place so you don’t have situations where they want to sell the property but you want to keep it.
Remember that 50% of the deal financed by a JV partner is better than 100% of nothing.
Crowd funding is getting more and more popular. There are a lot people with a good business plan and models but with limited finances. Raising money from banks is difficult and bridging is expensive. Many investors look for opportunities where they invest their money for a share in a company or project in return. It is very common in this day and age to start big developing projects where there are few investors that fund the project together to build apartments, and once it is sold they share a profit equivalent to the proportion of the money invested. In some crowd funding projects, anyone can invest money and get, for example, a 10% return on their investment. Quite often there are hundreds of people investing in one project. This is an extremely powerful strategy and it’s now even used to raise money for start-up businesses and movies.
Credit Cards, Loans and Overdrafts
When we started our property journey we had no money and a lot of debt. Our favourite source of investment at the time was credit cards and overdrafts as we didn’t know many people who we could raise the money from. Most of our credit cards were maxed out, so we had to increase our credit limits. Our first property investments came from none of our own money! When you have no money you must start thinking outside the box as you have little choice. These tips came from our mentors, they showed us how to do it and what to say when talking to the banks as this is very important. If you tell your bank that you need money to invest in property then you can forget about them agreeing.
From being broke, we both achieved financial freedom in just one year of investing in property. It all came from knowledge that we acquired from our mentors, books and creativity, so we managed to crush the myth that you need money in order to make money! If you want to master the property game, you need to have the knowledge to be creative. That is how winning is done. Most of the multi-millionaires and billionaires are self-made; they started from zero or debt, so anything is possible. You just have to believe it, set up a plan on what you want to achieve and how you are going to get there; for your dreams to come true you first have to wake up! You can have anything you want in life, you just have to be hungry and believe that you can have it.
Sylvester Stallone (Rocky Balboa) is a great example of a self-made millionaire. He started from humble beginnings – he was evicted from his apartment and was homeless for a while. In March 1975 Stallone saw Muhammad Ali fighting against Chuck Wepner. After that fight, he went home and started writing a script, taking inspiration from both the fight and the autobiography of Rocky Graziano to start writing Rocky Balboa. Stallone attempted to sell his script to multiple studios with the intention of playing the main role in the movie. Although receiving enormous amounts of rejections, which went on for several months, he never gave up. He was finally offered $350,000 just for the rights to the script without him playing in the movie. He refused to sell it unless he could play the main character, so after a substantial budget cut to compromise the producers agreed to have him as a star, and the rest is history. He could have just taken the $350,000 which for him at that time was a lot of money, but if he did he wouldn’t be where he is today. That shows determination. There was a time in his life where he had to sell his dog for $50 because he didn’t have any money to feed him; after his success with the Rocky Balboa script, he bought his dog back for $15,000.