10:45 AM, 27th December 2010, About 11 years ago 1
I ask this question purely out of interest. I am NOT looking for JV partners.
Before Christmas I posted this question on a popular property investment forum. It sparked a very interesting debate so I thought I would share it with you.
Having been the private equity provider of a JV on six BTL deals (never again BTW so please don’t ask) this got me thinking.
Why did I do it?
If the tables were turned and I needed money, who would I ask?
WHY I DID IT
I’d just come out of the other side of a financially messy divorce. My main business had had a very good year. I’d done some clever tax planning which left me with cash. I was spending a lot of time at my holiday home in Florida, I still wanted to grow my portfolio but I wanted somebody else to deal with the day to day hassle.
WHAT WENT WRONG
The guy I JV’d with did a great job of finding good property deals. However, his attention to detail was lacking on the paperwork side so that took more management than I wanted. In fairness to him, the onset of the credit crunch did scupper the business model to some extent too. The straw that broke the camels back though was that he had convinced himself that he would be a millionaire very quickly. I’d made the fatal mistake of failing to ensure he knew there was no such thing as GRQ, ‘Get Rich Quick’. He over spent massively, contract hired a new sports car, loaded his credit card up buying smart suits and watches, visited nightclubs and spent a fortune on champagne etc, all on his credit card. When the market slowed and deals started falling out of bed as lending criteria changed he realised that he had a problem. He declared bankruptcy and I was left holding the baby.
SO WHERE WOULD I HUNT FOR JV PARTNERS TO FUND THE EQUITY
I doubt I would ask other property investors. To generalise, most are hanging onto every penny and the ones who are brave enough to invest at the moment are doing it for themselves.
I would be looking for people who are SAVERS, disappointed with the returns on their bank and building society accounts.
On the basis that leafleting worked so well to help me find good property deals I would probably try something similar. Perhaps a personalised letter, accompanied by my CV, and a picture of me, posted through all the doors in the poshest areas in town? It would have to be simple though to avoid getting caught up in financial promotions regulation. Maybe something like, ‘Sorry for the unsolicited approach but I was wondering whether you, like me, are fed up of the appalling returns on savings these days?’. Then go on to say who you are, what you do and that you are looking for partners in your business. If you do this I would strongly advise you to get an IFA (Independant Financial Adviser), accountant or solicitor to have a look at your letter to make sure you are not straying into the highly regulated world of financial promotions. By the way, forget about having to get your letter on one page. If you need to write 5 pages do it. Print on both sides of the paper. If people get fed up of reading they were never going to do business with you anyway. That’s a Direct Marketing secret far too many advertising agencies have forgotten these days.
If that didn’t work I would probably do a Companies House search and look for all the local businesses that are sitting on large cash reserves. I would then go and talk to their auditors first to tell them what I do. When I had them convinced I would then approach the owners of their clients businesses. If I had done a good enough sales pitch and mentioned that I’d been talking to their auditors they would probably go to their accountants to check what they think.
Another large group of savers is pensioners. However, I’m not sure it’s PC to approach them and it would be harder to find out which ones have money.
Social/Business Clubs might also be good. There used to be one in Norwich for Financial advisers. They called themselves the Financial Advisors Ridiculous Tie Society – FARTS for short! These guys were talking to people with cash to invest every day. They get referred by probate lawyers, accountants etc. because they are seen as professionals, despite being FARTS – LOL. I found out about them just by being in the city, popping into different venues for a quick coffee before work or at lunch, observing groups of people in suits, listening to a speaker etc. and asking the bar man or waitress who they were. You’d be amazed at how many of these groups are about and the people working in the bars and restaurants are only too happy to talk about all the other groups who meet at their establishments.
Finding these groups is a skill set of its own. Approaching them, speed networking and looking for that ‘AhHa’ moment is another skill set altogether. A chap called Will Kintish mentored me in this area.
I would be really interested to hear about your ideas for finding JV partners.
PS. My forum post and the various responses can be read here.
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