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strategic planning Apr 20, 2019

Most investors think that the only way to finance deals, when their bank account hasn’t got enough in it, is to joint venture (JV).  To maximise your return on investment there is a JV Pro-Fit Retainer strategy.

Stop giving away 50% of your deal’s profits when you joint venture and, if you do decide to set up a joint venture stay on the right side of the FCA.

  • PRO = Professional – the way you approach your joint ventures
  • FIT – Fit for purpose – ensuring your JV agreements are legal and can’t come back to bite you.

The key thing to remember is that the Financial Conduct Authority (FCA) states that you must only joint venture with someone who is categorised as a sophisticated investor.  That means you need to know about PS13/3 and what constitutes a sophisticated investor and there are seven main criteria for these.

  1. An annual salary of £100K+
  2. Independent assets of £250K+ (not including equity in their main residence)
  3. Employed in an investment capacity in financial service industry i.e. a professional investor.
  4. Director of £1M+ turnover per annum company
  5. A bona fide angel investor in business start-ups
  6. A family member
  7. A friend of long standing i.e. several years.

The downside of a JV partner is that they will usually want up to 50% of the profits – regardless of who does all the work.  No bridger wants 50% of your profits, so why give your profit away needlessly?

There are a number of situations where your experience to date falls short of the criteria lenders demand you meet before they will lend to you

  • The first-time borrower who owns no property, but wants to buy an investment property as their first purchase
  • The first-time landlord who wants to get a mortgage on a significant HMO
  • The investor who wants a mortgage on a short-term let, i.e. serviced accommodation, but has no track record in this area
  • The investor who wants to buy a portfolio of properties, but cannot prove they have handled a deal of this magnitude previously
  • The investor who wants to do a new build development, but cannot prove they have successfully built out a new build previously
  • The investor who wants to do a multi-unit (say 10) new build when their only new build experience is a single unit build
  • The investor who lacks sufficient cash to get the deal to stack, even using the Ninja Investor strategies contained in Section 5, which substantially shrink the deposits needed to make deals stack

If you really can’t get funding for any of these reasons find someone who has the experience you lack, bring them on the deal with you this one time.  From then on you can legitimately claim to have this level of experience with a project that you were part of to prove it.

With bridging as your means of finance you can be independent, make decisions without consultation and - best of all - keep all your profits!


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