Expanding your property portfolio can be a difficult and daunting experience, especially when it comes to raising funds.
We caught up with Phil Saunders from Saunders Property Solutions to find out how you can get help to expand your property portfolio.
What is private investor finance and joint venture partnerships?
Whatever your financial situation, at some point you will run out of funds to invest in property. If you want to continue to grow your portfolio, what do you do then? Traditionally people wait to accrue more funds from their own means. But whether that is from their income, property sales or inheritance, that can take a long time.
However, if you know where to look, there is a huge amount of private investor finance out there waiting to be tapped into. With a little help you can utilise this unlimited resource to grow your portfolio without restriction.
There are several methods of working with private investor finance, but the method that really propelled me forwards is joint venture partnerships. This strategy allowed me to purchase over 15 properties in 2023, winning the Sykes growing portfolio award in the process. The remarkable thing is that I did this without using ANY of my own funds. But how does it all work?
What are the advantages of this type of investor strategy?
In joint venture partnerships, you and your investor go into business together. You share the risk and you share the reward. The biggest benefit to the investor is that they own the property with you. This gives a huge amount of security to the investor and is one of the reasons why it’s easier to raise large sums of money with this method. Both parties share the profits of the business and the capital appreciation of the property over time, which makes this type of investment a great solution for both short and long-term strategies.
The security to the investor lies in the fact that the majority of their funds are tied up in the bricks and mortar of the property itself. Our property market is one of the most secure in the world, which is why we see so much continuous foreign investment into the UK.
If you can find some of these contacts willing to invest in you from further afield, the opportunities are endless! We have a rapidly growing population and very limited housing stock.
On average, UK property doubles in value every 10 years, so over time the investment becomes less and less risky for your investor. There are options to extract all of their funds in the future once the property value allows this. Of course, in the meantime you will both receive amazing cashflow!
If you're considering a property as a holiday let, try using our income calculator to work out you potential earning.
What are the downsides and risks?
Joint venture partnerships work best on a long-term basis. Therefore, it’s incredibly important to get to know your new potential business partner as best as you can before getting into a legally binding relationship with them.
The best analogy is to think of the relationship like a business marriage. Despite the popular TV show, would you really marry someone at first sight? Spend time speaking to them, ideally in person before moving forwards. For this reason, most people’s first joint venture partnership is often a friend or family member who is interested in what you are working on. The reason this works is because there is already an established relationship between you and (hopefully) a high level of organic trust.
Never go into business with someone without doing your full due diligence on them. Even if it’s someone you know. Also consider that they share the same values with you. You could be working with this person for a long time so make sure it’s someone that you’re comfortable being affiliated with for a long time.
How did I begin with this strategy?
I never had any money to invest, but I knew I wanted to grow a large portfolio of luxury holiday let properties. Instead of saying I can’t do this, I asked myself how can I do this?. Using private investor finance was the only route to finding the money I needed to progress. It simply came down to finding that first amazing property deal and then reaching out to my network to see who would be interested in funding it.
Fortunately, the two came together in 2021 with my first purchase and joint venture partnership. With the credibility I gained from that first deal, I was able to reach out and find more people that wanted to work with me in a similar way. After that, the deals and investors just kept coming!
How do you select the properties for your portfolio?
Because we split the revenue between multiple parties, we need the properties to generate incredibly high incomes to justify the investment that is going into them. We target the larger luxury properties that make £100,000+ in gross revenue. The real skill is being able to acquire these for the right price.
These properties are usually stunning buildings in beautiful locations. I own several historic listed buildings which are packed with history and character, something both me and my guests love. These buildings are dream homes to own, something I’d never be able to achieve without the help of my investor partners. The added benefit is the more expensive the house, the larger the gain in capital appreciation over time and the larger the cashflow.
I pick houses in locations I want to visit and spend time in myself. Usually scenic, rural areas. I regularly stay in all of my properties when they have vacancies which is a real benefit we share with our business partners. My family and friends have created some amazing memories together in my properties over the last few years.
You will be amazed how many people in your current network are well financed. In the UK as a culture, we are very reserved about telling people our real wealth. Tell everyone what you do. Let people know what you are looking to achieve. Social media is incredibly powerful for this, but so is word of mouth. Once you find that first incredible deal, tell people about it. Word will spread and you’ll be amazed who comes out of the woodwork. Old school friends, past and current work colleagues, distant relatives. They’ll all show an interest. The rate for savings in the bank is still low.
People are actively looking for secure and ethical ways to grow their savings and property is still one of the best routes to do that. Once you gain some credibility with your first deals, you can begin reaching out to a wider audience. Ultimately property is a people business. Networking events are great places to raise finance. Show up to your local events consistently and look to build relationships with people before you need the finance.
Need help with the next steps of your holiday letting journey?
If you're thinking of buying a holiday let or just need some advice, our property experts can help answer any queries you may have.
If you're looking to get into holiday letting and not sure where to start, why not take a look at our 2024 Holiday Letting Outlook Report for some inspiration?
Phil Saunders, Property Investor at Saunders Property Solutions
