Property Fund idea

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splasher

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Hi has anyone on here looked at or invested in an unquoted property fund ie one run as a pooled fund via an LLP for example.
I am currently looking at an idea floated past me by a couple of seasoned property investors who are looking to set one up.
Essentially they are putting in their cash and other investors can also invest; the founders will run the fund and evryone else will be a limited partner ie make no decisions but share the returns.
Benefits are their experience and the fact that it is actively run and managed by them so less fees etc than into a big quoted fund.
They will take a management fee based on success like on a hedge fund structure; eg if they yield more than 8% they take x% and over a 3 year period if they achieve more than x% capital growth they take x%

Any views/experiences welcome

Splasher
 
I can't believe that none of the seasoned pros on here have no experiences of this!

In all seriousness any views welcome. Essentially the scheme looks very interesting:

Buying properties that if actively managed could be producing around 10% and are below market value

Actively managing to increase value and bring in the rents as indicated above

Refinancing the deals within 6 months with funding at around 4.5% for 70% of new market value

If everything stacks up you could be producing annual returns of around 25% on the net investments

Obviously the problems are:

Can you secure these deals
Can you produce 10% from these properties
Can you get funding on teh basis above etc

As i say any views/experiences very welcome

Splasher
 
I think most people would (quite rightly) be very VERY wary about the concept of going into business with someone they met on t'internet.

Unfortunately not everyone is that careful, which is why the internet is so rife with scammers that sometimes it's just not worth the time effort and risk sorting out who's who and what's what.

You for example could easily be either (and I have no firm view either way). But on that basis, as the dragons would say, I'm out. ;)

That's what I think. Not to say it wouldn't work, but I wouldn't invest a bean on the back of internet forum members' suggestions just like I wouldn't on the back of being cold called.

So if you're proposing that anyone on this site join you I wouldn't hold your breath (for the reasons I just mentioned). If you're asking for advice / constructive criticism because you yourself are considering this then aside from the scam angle I'd say there are at east three other things to consider;

1) Illiquidity - can you get your cash out if you need it. Houses are large, discrete investments not liquid, not quick to dispose of and not something tat can be hedged against particularly well.

2) Risk of government legislation aimed at boosting slow steady growth but preventing another bubble. That would possibly hurt the buy to let crowd the most, as that was a huge part of the problem last time imho

3) Rental yield. With rates at all time lows, surely the only thing stopping rental yields from cratering is the lack of mortgage funding. Once that changes and people can get a mortgage with sensible levels of deposit, there will be a sea change again.

I don't know a ton about housing at all - I own one, but thats about it. So take my views with a whole box of the finest imported trendy salt if you like and I won't be offended in the slightest. Just my $0.02

GJ
 
GammaJammer said:
I think most people would (quite rightly) be very VERY wary about the concept of going into business with someone they met on t'internet.

Unfortunately not everyone is that careful, which is why the internet is so rife with scammers that sometimes it's just not worth the time effort and risk sorting out who's who and what's what.

You for example could easily be either (and I have no firm view either way). But on that basis, as the dragons would say, I'm out. ;)

That's what I think. Not to say it wouldn't work, but I wouldn't invest a bean on the back of internet forum members' suggestions just like I wouldn't on the back of being cold called.

So if you're proposing that anyone on this site join you I wouldn't hold your breath (for the reasons I just mentioned). If you're asking for advice / constructive criticism because you yourself are considering this then aside from the scam angle I'd say there are at east three other things to consider;

1) Illiquidity - can you get your cash out if you need it. Houses are large, discrete investments not liquid, not quick to dispose of and not something tat can be hedged against particularly well.

2) Risk of government legislation aimed at boosting slow steady growth but preventing another bubble. That would possibly hurt the buy to let crowd the most, as that was a huge part of the problem last time imho

3) Rental yield. With rates at all time lows, surely the only thing stopping rental yields from cratering is the lack of mortgage funding. Once that changes and people can get a mortgage with sensible levels of deposit, there will be a sea change again.

I don't know a ton about housing at all - I own one, but thats about it. So take my views with a whole box of the finest imported trendy salt if you like and I won't be offended in the slightest. Just my $0.02

GJ
Click to expand...

Excellent post!
 
splasher said:
In all seriousness any views welcome. Essentially the scheme looks very interesting:
Click to expand...

It is only interesting to those who will use it as a compensation scheme at the risk and expense of their investors.

Investors cannot control the hidden costs of these type of investments.
 
Hi Splasher,

I own my own Financial and Overseas Property Company and we have exactly the same set up as you describe. I will not plug my company here, instead i will give you some free advice to consider.

Gamma_Jammers post is also spot on!

You don't mention in your post if the plan is for UK or Overseas Property?

We have currently stopped investing in Overseas Property (Mainly Euro zone) due to the currency issues just now.

If the fund is Euro zone then you MUST consider the negative effect of currency fluctuations on your return - e.g. if and when the properties are sold at the end of the term expect poor returns even if you manage to get capital appreciation on the properties within the fund.

On the security side i would suggest only going into business where the company has a long standing history and is well known, look for membership of a RECOGNISED Property Regulatory Body and check their credentials before parting with a single penny.

There are much smarter ways to achieve a return just now for example Hotel room rentals ok not as glamourous but less risky with smaller returns.

I would be more than happy to look over any documentation for you and provide honest feedback as if it were my money being invested. What you decide to do with that advice is up to you. PM me i will give you my personal details and you can check out my background and decide if you want me to advise you free of charge.

I will stress what Gamma_Jamma wrote about liquidity - There must be an exit strategy for you should you wish to bail out of the fund e.g. change of circumstances etc do not be fooled into believing that they will help in this. You must get assurances that their is a support network to assist AFTER the purchase!
 
One of my colleagues is in a commercial property fund like you describe, but he's doing it with long-time friends and colleagues. One of them is also there to manage the fund full-time, as it requires a lot of baby-sitting. GJ and Scott are right...
 
Thanks all for the postings and be assured I was not touting for business just looking for any potential problems! I too would be a tad wary of investing in something pushed over this medium. I have had a couple of good ideas coming my way from Nigeria though................
The liquidity does seem to be the main problem but the idea is to go in for a specific time period of between 3 and 5 years with an exit plan agreed.
The rental yield cratering would only happen if the price of the asset goes up and so the potential capital gain would offset the loss in income is my view.
Property is only UK and very specific in terms of area and target demographic.

Thanks for all comments and any future ones
 
A property manager is a person or firm charged with operating a real estate property for a fee, when the owner is unable to personally attend to such details, or is not interested in doing so. Typical jobs include finding/evicting and generally dealing with tenants, home repair, home improvement, cleaning, garden maintenance, landscaping and snow removal, to be coordinated with the owner's wishes. Such arrangements may require the property manager to collect rents, and pay necessary expenses and taxes, making periodic reports to the owner, or the owner may simply delegate specific tasks and deal with others directly.
 
Laeeque Ahmed is a fraudster and he is famous for selling at asking price, if not for all the other scams. Maybe next do some research on people before you deal with them. Thank god for forums and blogs. Here are some of his contact information.

Remax Active Realty Inc., Brokerage. Independently owned and operated.
200 Matheson Blvd. West Suite 202, Mississauga, ON L5R 3L7

Cell: 416-457-8664
Office: 905-290-6777, Toronto: 416-292-6777
Direct Fax: 905-824-6115, Off. Fax: 905-290-6799
Email: [email protected], [email protected]
Website: www.laeeque.com
 
i ever invested in an unquoted property fund via an LLP .it ia a pity that the time was not long only 4months .i loss my money
 
I live in Turkey where land speculation is our national sport. There is a legal entity similar to Market-rate housing cooperatives which are founded by at least 7 members and members can have multiple shares. When a group of investors decide to buy some land which will pass through zoning, they set up a cooperative, cooperative purchases the land. Individuals can sell their shares in open market anytime. When the land is "zoned", owners either hire a building company or exchange the land with some percentage of homes to be built.
There is also one more great advantage. The purchased land typically has a very little value in cooperative's books. When one member dies, his/her inheritors pay inheritance tax based on those low values.
 
Property fund idea looks to me very interesting. With few modifications and agreed rules and regulations can make this a new business which will enable the participants to invest their money to get property in the future.
 
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