New Property fund - need help with specifics

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DJ85

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Hello T2W members!

Basically I'm a new to trading and hedge funds HOWEVER I've come across an opportunity and I just wanted to know how I can carry out the task and what I would need to do. Really would appreciate your help!

I want to build a property hedge fund. I have access to stock worth around £1.5m and can purchase it at around £1m. The property is RICS (Royal Institute of Chartered Surveyors) certified meaning the values are pretty solid. There's very little chance of the property values going down anymore in this market on properties below the price of £100k but nonetheless the values has been certified.

Now I am pretty confident I can raise investment and am looking to raise between £1m to buy the stock. We're looking at minimum investment of £10k per investor with a GUARANTEED return of 10% return on investment.

So that's the stock sorted, and like I said, I believe I can raise the finance as well. I can get KPMG to be the accountants and can get Natwest on board as well. Now for the tricky bit, what would I need to do/consider to arrange this hedge fund? I appreciate some of you will answer 'Call a solcitor or account' but I just want to get an idea of what I need to do before I call these people. Don't want to be easy prey :eek: What would be a rough cost to set this up and how quickly could I set this up?

Any constructive suggestions would be welcomed :)
 
How are you able to GUARANTEE the return? And is this 10% per annum or over the life of the project?

As to the legal structure, why do you want a hedge fund for this? Wouldn't it be better to use a unit trust type of structure? As to how it's done, there's lots of info out there, including stuff published by the HMT.
 
This is 10% per annum which would be guaranteed through the selling of properties and through rents achieved.

Perhaps hedge fund was the wrong term to describe what it is we're doing. Is HMT the treasury site?
 
DJ85 said:
This is 10% per annum which would be guaranteed through the selling of properties and through rents achieved.

Perhaps hedge fund was the wrong term to describe what it is we're doing. Is HMT the treasury site?
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OKI, so it's not "guaranteed", as a principal-protected note would be. If I were you, I would stop using the term "guaranteed", as it's quite misleading.

And yes, the HMT has guides to registering these sorts of investment vehicles, as does the FSA. Generally, if I had to hazard a guess, a solicitor would probably advise you to register the vehicle in a jurisdiction that would be more tax-friendly than the UK, so you might not be interested in the FSA at the inception stage. At any rate, I am not qualified to give you any sort of advice, so I'll stop and inevitably, just as you feared, refer you to a solicitor.
 
Thanks for your advice. While I can certainly guarantee 10% p/annum will be paid, I understand other terms may be more suitable.

No problems with going to a solicitor, but I just wanted a few pointers before I head down there. Yes, I was also told that registering in a more tax-friendly location such as the Cayman Islands would be more suitable. In any case, I will check out the HMT and then meet with a solicitor. Thanks.

If anyone has any other tips please feel free to share :)
 
DJ85 said:
Hello T2W members!

Basically I'm a new to trading and hedge funds HOWEVER I've come across an opportunity and I just wanted to know how I can carry out the task and what I would need to do. Really would appreciate your help!

I want to build a property hedge fund. I have access to stock worth around £1.5m and can purchase it at around £1m. The property is RICS (Royal Institute of Chartered Surveyors) certified meaning the values are pretty solid. There's very little chance of the property values going down anymore in this market on properties below the price of £100k but nonetheless the values has been certified.

Now I am pretty confident I can raise investment and am looking to raise between £1m to buy the stock. We're looking at minimum investment of £10k per investor with a GUARANTEED return of 10% return on investment.

So that's the stock sorted, and like I said, I believe I can raise the finance as well. I can get KPMG to be the accountants and can get Natwest on board as well. Now for the tricky bit, what would I need to do/consider to arrange this hedge fund? I appreciate some of you will answer 'Call a solcitor or account' but I just want to get an idea of what I need to do before I call these people. Don't want to be easy prey :eek: What would be a rough cost to set this up and how quickly could I set this up?

Any constructive suggestions would be welcomed :)
Click to expand...

Good god, where to begin to shoot holes in this nonsense...er OK just buy it and stfu..hope that helps.
 
Well, as you can guarantee it, then you can put it in the contract.
 
hedge fund? no clue wtf you are on about...

raise the money

buy the property for 1M

sell it for 1.5M

profit.

Alternatively, if no-one else agrees with your obviously correct 1.5M valuation you could make some sort of long term tranch based system with 'guaranteed' returns..
 
BlackBison said:
hedge fund? no clue wtf you are on about...

raise the money

buy the property for 1M

sell it for 1.5M

profit.

Alternatively, if no-one else agrees with your obviously correct 1.5M valuation you could make some sort of long term tranch based system with 'guaranteed' returns..
Click to expand...
Black Bison, I can't raise the £1m by myself alone so the aim would be to raise it through investors. Through the renting of the properties - 20 in total - along with selling even two properties at full market value, we can guarantee a return back of 10% each year. These are distressed sellers so hence they can be purchased at such discount - up to 40% discount, so selling at market value will bring good profits.

I'd appreciate if you could you sum up what a tranche based system is? I'm going through google but I'm getting 20 different definitions.

Once again, I'm aware these are basic questions I'm asking but like this is something I have come across and just need to get around the basics.
 
Martinghoul said:
How are you able to GUARANTEE the return? And is this 10% per annum or over the life of the project?

As to the legal structure, why do you want a hedge fund for this? Wouldn't it be better to use a unit trust type of structure? As to how it's done, there's lots of info out there, including stuff published by the HMT.
Click to expand...

Took the words right out of my mouth... errr... fingers...
 
DJ85 said:
There's very little chance of the property values going down anymore in this market on properties below the price of £100k but nonetheless the values has been certified.
Click to expand...

This statement would get me running a mile from this deal. Valuations are not permanent and have you not seen what is happening in the housing market at the moment?

Imagine a scenario where house prices DO go down - I think the risk of this is NOT negligible - it may not happen, but it is possible if not probable under current market conditions. HOW are you going to protect the investment capital under such conditions?

Selling houses out of the fund to pay the guaranteed returns sounds like a ponzi scheme to me. It won't be long before you need more capital injection if the houses and rent do not generate your expected rental return.

What sort of properties are we talking about - flats?
 
the hare said:
FFS that ridiculous statement alone should raise some very serious concerns.
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As in I can't raise £1m out of my own pocket. To be fair, you would be hard pressed to find many fund managers raising amounts required from their own pockets alone.
 
DJ85 said:
As in I can't raise £1m out of my own pocket. To be fair, you would be hard pressed to find many fund managers raising amounts required from their own pockets alone.
Click to expand...

You're not a fund manager, you're not a 'properdee developer', you've got nothing to offer, you're just a very stupid boy..now go away, please.
 
Hoggums said:
This statement would get me running a mile from this deal. Valuations are not permanent and have you not seen what is happening in the housing market at the moment?

Imagine a scenario where house prices DO go down - I think the risk of this is NOT negligible - it may not happen, but it is possible if not probable under current market conditions. HOW are you going to protect the investment capital under such conditions?

Selling houses out of the fund to pay the guaranteed returns sounds like a ponzi scheme to me. It won't be long before you need more capital injection if the houses and rent do not generate your expected rental return.

What sort of properties are we talking about - flats?
Click to expand...
I have seen the property market, and looking past the hype, the fact is properties below £100k remain largely unaffected. It's properties priced £150k and over that have experienced a dip. Properties in the long term are always going to go up and we're buying the properties AFTER the major hit has taken place and still buying them at 40% below their value NOW so imagine in 3-5 years how the values will be when the market is stablisised?

I am talking proper bricks and mortar houses already rented NOT flats or new builds. Selling the properties to raise funds is not essential at all. The combined rents alone would be enough to pay 10% per annum to each investor of what they put in.
 
Black Swan said:
You're not a fund manager, you're not a 'properdee developer', you've got nothing to offer, you're just a very stupid boy..now go away, please.
Click to expand...
FYI I'm 25 years old and I've own seven properties, but thats besides the point. I made it clear from the start I am a beginner on the funds side and I asked for some help. Not exactly the crime of the century. The FACT is I do have something to offer and I'm trying to find out the best way to go about it. I thought one of the uses for forums is to ask for help and suggestions. Leave the name calling out of this.

If you don't have anything positive to say, then don't. Now be gone, please.
 
DJ85 said:
I have seen the property market, and looking past the hype, the fact is properties below £100k remain largely unaffected. It's properties priced £150k and over that have experienced a dip. Properties in the long term are always going to go up and we're buying the properties AFTER the major hit has taken place and still buying them at 40% below their value NOW so imagine in 3-5 years how the values will be when the market is stablisised?

I am talking proper bricks and mortar houses already rented NOT flats or new builds. Selling the properties to raise funds is not essential at all. The combined rents alone would be enough to pay 10% per annum to each investor of what they put in.
Click to expand...

Have you any idea how late you are to this bmv nonsense? Have you any idea how lack of housing benefit is going to decimate the low end of the rental property world, twinned with the fact that over 2 million more unemployed will hit the dole queues in the next 4 years? The only reason we havn't seen a biblical collpase is due to interest rates being historically low. Transaction levels and mortgage approvals are now at 1970-80's levels, the game is up. Now how do you think all this will affect house prices which are still 30% over valued by historical (medium term) metrics.?

You havn't got a clue, you've got no money, I'l bet you havn't even prepared the bare bones of a biz. plan to sit down and discuss this with a lender have you? You register here and waste folks' time. Now stop it, take your plan to a bank, borrow the money at 5%, rent the properdee porftfolio out at 10%, pay the tax, put up with the grief, and sit back and watch how stagflation kills the market further..No one will invest in you, the clever money hasnt been buying property, the real smart guys bought the distressed debt for cents in the dollar..why own property when you can own the debt and the property?
 
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