Thinking of starting up a property development company

[jahangir18590]

I am thinking of starting a business where my company manage and develop properties both residential and commercial by pooling together all the funds from experienced investors and the general public to purchase a property that has potential to make a substantial profit. Our fees would be cut from the profits made and the rest would be distributed amongst the investors based on how much they invested. Is there any regulations and licenses I would need to have to start this business up. What are the main things I will need to do to get this business up and running. The business will be mainly done via a social network.
The problem will many companies is that they are only after investors that have £50,000+ at their disposal and target them. There are many people that want to get into the property market but dont have the financial muscle like the big players. I am in that same situation. The company would offer the little guys the chance to make not high life changing amount of money but good consisent amount that is pretty much risk free. The properties at the moment would be only around London. The social network will also have a builders and handyman section to rival hammer.com. This would allow the company and the public to find the best tradesmen based on reviews and ratings.
At this moment I just wanted some information and advice
Thank You

 

[JRAD]

Jahangir,
Whilst your plan might well be looking to take advantage of a gap in the market my first concern would be your idea that development might be 'pretty much risk free'. What happens if just one of the properties in question has a defect or structural fault that costs a significant sum to put right ? Will the investors share the losses too ? Or worse still interest rates might rise causing the property market to take a turn for the worse with a steep fall in selling prices.
Whilst you may well convince some investors to part with their money how will you hold these funds and what protection would investors have against default ?
As a professional in the property management and surveying business with over 30 years experience perhaps I am overcautious however these are the types of questions you may be faced with when trying to attract prospective investors.
Good luck with your plan which I hope goes well however there is much ground to be covered to close out the risks.

 

[jahangir18590]

Jahangir,
Whilst your plan might well be looking to take advantage of a gap in the market my first concern would be your idea that development might be 'pretty much risk free'. What happens if just one of the properties in question has a defect or structural fault that costs a significant sum to put right ? Will the investors share the losses too ? Or worse still interest rates might rise causing the property market to take a turn for the worse with a steep fall in selling prices.
Whilst you may well convince some investors to part with their money how will you hold these funds and what protection would investors have against default ?
As a professional in the property management and surveying business with over 30 years experience perhaps I am overcautious however these are the types of questions you may be faced with when trying to attract prospective investors.
Good luck with your plan which I hope goes well however there is much ground to be covered to close out the risks.

I do understand what you are saying, but JRAD we will always do our research properly, we will never put a property on our network blindly. Everthing will be checked before purchase. As we will be making money from the profits generated from the sale of the renovated property. As a professional in property management JRAD may I ask is there licenses and regulations that need to be followed.

 

[benb]

In addition to the above, what if the market takes a down turn and you can't resell for a profit?

 

[alang23]

Hi
We’ve done property development and investment for 30+ years.
The idea of having multiple investors with us on a project would be sufficient for us not to do the project at all. The problem is that everyone thinks they are a property developer BUT everyone of your investors will have a different idea of how you do the jobs.
Although it is harder, (but not impossible), you are much better doing it yourself with Bank finance (or similar). Once you have completed a few projects you are then in a strong enough financial position to do it all yourself.
Regards

 

[Cromulent]

Nothing in business is "pretty much risk free". If it were everyone would be doing it.

 

[Vectis]

Nothing in business is "pretty much risk free". If it were everyone would be doing it.

Yep, just that phrase alone would start alarm bells ringing!

My first question to the op would be, do you have any experience of buying and developing properties? Or would you be going into this, and using investors money, as a complete novice?

 

[JRAD]

With regards your specific query re regulations and red tape I would highlight your reference to 'pooling together all the funds from experienced investors and the general public to purchase a property'.
Dependent on how this done you may be subject to regulation and constraints however this may possibly be avoided by setting up individual investment vehicles for each company. As a chartered quantity surveyor and professional property management agent I believe there are a number of options to investigate here which are not for general consumption however I may be interested in discussing directly should you wish. I am unsure if I can link directly to my QS or Property Management websites in a post however I am sure you can look up my London contact details on my profile.

 

[PaulThompson]

I'd like to echo the comments above, if developing was risk free there wouldn't have been so many experienced developers going to the wall
Assuming you have relevant experience then there are lenders out there who will fund fairly good levels towards a development, if you don't then I'd suggest you pal up with a professional (like JRad) and work together to build your own capital & experience until you can do it yourself

 

[Maxwell83]

I do understand what you are saying, but JRAD we will always do our research properly, we will never put a property on our network blindly. Everthing will be checked before purchase.

Sorry but if you think that you can guarantee you will never make a loss like this then you should not be taking people's money.

Even the most diligent experienced developers in the world have taken hits because of the unforeseen. You can minimise risk but you can not write it out completely.

And so the question remains, how will potential losses be shared?