How to Crowdfund Your Property Development

Why crowdfund?

If you have been a follower of East Eight for even a little while, you will have heard us shout about the success of our first ever crowdfunded property development: 101 Dalston Lane or The St. Matthias Club. We raised an incredible £1.4m in just over a week!

This was a brand new strategy for us. In the past we have JV’d with just a handful of investors or less on each project, the priority to adhere to FCA regulation concerning collective investment schemes. While this kept things relatively simple, we were limited to having a small number of investors on board for that particular project. Many investors who had approached us to invest ended up losing out.

Our contact Piragash Sivanesan at Totum Finance then introduced us to Simple Equity, a professional property crowdfunding platform fully regulated by the FCA. With their partnership, not only would we be able to invite a new, far-reaching pool of investors to experience our products but we would also have essential support to carry out the investment process efficiently.

How easy is it to set up?

This could not have been easier for us. Piragash recommended Simple Equity and following a cup of tea in central London we needed only to send them the details – the financials, property details and site images and decide on time-scales.

Are there any risks involved?

The obvious questions we had initially were – what happens if pledgers do not come through, and secondly what happens if you do not raise the equity? The answer to the first one is simple – it has not yet happened. When property projects are presented clearly and the commitment and risks sufficiently defined on the platform, there is little room for investors who are unsure, either of the investment risks or of their own finances with regards to investing. The second answer is also simple; if we do not raise the equity, all investments up to that point are returned to the pledgers.

How to make your property crowdgrabbing – our 5 P’s

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Profits. This may sound obvious but if the returns are not looking healthy, it is not going to attract investors. Full stop. If you are already struggling to gain investors without crowdfunding, this is not a last resort! It is a business strategy which has its own requirements (see below) in order to be successful. Someone with £5K to invest could be just as equipped to spot a problem project as someone with £500K. Consider whether this approach is right for you, the project and your business.

Position. How does this property feature in the surrounding block or area? What else is offered in the area? Make sure to research all the added values of this project to include anything which will attract sales or lettings. It’s no secret that a stunning new development miles from any transport links could fall well behind a basic refurbishment near shops and Crossrail stations. Investors will be looking for these details.

Proportions. What value are you bringing to the property? Sqft is ever the most attractive one but what about the finish? What other features can you boast? East Eight and partners London Central Developments always use high-end brand appliances to add the cherry on top to our beautiful architectural designs. What can you show off about the property so that investors know this is a quality build project?

Pictures. After all the financial data are clearly presented, complete the picture with, well, a picture. Get investors excited and help them to visualise the transformation. We use CGIs (see above) to sell our properties off-plan before construction works have even begun. CGIs are a fantastic tool and will promote the project to investors and agents or sales partners.

Partners. We saw eye-to-eye with Simple Equity immediately. They saw our vision, understood the limitations we were experiencing and were immediately ready to take action. It is very much about building a relationship with a crowdfunding platform which can last over several projects and through changes in the offering or your business strategy.

And lastly…tell the story. Every building has a story and to us property entrepreneurs and certainly to investors, it will be an interesting one. The Dalston Lane project was an exciting situation in property where we JV’d with both investors and also the existing tenants, who are a Youth Club organisation and hugely important to the E8 area community. We wanted our investors to know that they are supporting an important community establishment, but also that our attitude is collaborative and inclusive.

Our next crowdfunded property on Simple Equity

Following the success of Dalston Lane we decided to place one of our next projects on Simple Equity – our Harrington Gardens 4-bed flat development. A different project in a different area and managed by our sister development company London Central Developments, this one boasts a luxury finish in one of the most sought-after areas of London, South Kensington, SW7.

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Marina Conway-Gordon

 

 

2017-03-20T14:21:20+00:00