Many people I speak to would like to get involved in property, undertake projects, work on adding value to properties or scale up to property development. I have spoken to quite a few investors recently, who are keen to learn about property development. The are three basic ways to learn about property investment & development and there is usually a price of some description to pay for that learning, as you will see here…
1. Go it alone – you can learn on the job so-to-speak and run your own project. No problem, there are lots of people who actually prefer to do that and get their hands dirty in amongst the muck and bullets of a real-life property development.
The price: is usually the cost of mistakes and a lack of experience leading to errors in judgement. Again, no problem as long as you expect the returns to be lower than when you are on your twentieth or fiftieth project.
Pros: practical, hands on learning where you get to retain all the profits.
Cons: more mistakes, higher risk and lower returns.
2. Get some training or mentoring – here you will still learn but usually before you undertake a project (training) or during a live project (mentoring). You will probably also get to run your own project thereafter and so some of the benefits of going it alone could still apply.
The price: is usually the cost of the education (training or mentoring) you will receive, although there is likely to still be an element of ‘apprentice error’ even with that learning support, especially if it is training rather than on-the-project mentoring.
Pros: some formal guidance from those with more experience, still practical, hands on and you get to keep most of the project profit (after the cost of the learning).
Cons: training won’t cover all possibilities, for example, last weekend a contractor threatened to break in to one of our projects and reclaim their materials! This was because they abandoned site, failed to respond to messages and so we had to get someone else to finish their work…deducting this from their bill…so things like this happen all the time on development projects. It’s hard to train for every eventuality, so mentoring is better as at least you can deal with an live issue in real time, but both of these also come at a price…the cost of the education itself.
3. Look over the shoulder of an experienced developer and shadow invest – here you get to watch what goes on on a real project but won’t have to deal with the issues arising yourself. It is more observational, but based on real world projects of course. For example, how to deal with TPO orders, a planning pre-app, how to cost out a conversion project and how this different to a new build or refurb project, how to contract with trades so you are protected, how to find a viable project and work out it’s Gross Development Value (GDV) and so on. If you are starting out, more used to standard or smaller projects or have limited funds to get involved in larger property developments, it also allows you to dip your toe into the water before you are ready to dive right into the deep end! The price here could be for some of the mentoring mentioned in 2) above. However, we have started offering win-win shadow investing, where an investor can invest funds and get a return on their money at the same time as learning by looking over our shoulder as we work on a project of our own.
The price: well, there isn’t one! OK, so I like to be transparent and open as you probably know…so there is potentially a price really…a slightly lower return than if you didn’t have the learning element in the investment. But, if you compare a mentor-ship costing anything between £3,000 and £20,000, a couple of percentage points on your return is going to be great value and you will still keep a very decent return as you learn.
Pros: learn from experienced developers on projects further up the development food-chain as it were, reduced risk by co-investing with other more experienced developers and get paid a return on your funds as you learn.
Cons: it is not your project, so it will be less practical and technically you could give up a few % if you were to invest somewhere else instead.
You might know by now that my business partner and I, Damien Fogg, undertake all sorts of property projects on a regular basis. We are currently shadowing a couple of people to help guide them through the potentially choppy waters of property investment on their own deals. However, we also have an opportunity for people to shadow us on a project of ours, or look over our shoulder too if you like.
We have a limited capacity for people to work with us, be that as mentors on one of your projects, or as an ‘over-the-shoulder’ shadow investors on one of our projects. So, if that sounds like a good way for you to de-risk your property investment and learn as you invest, then just drop us a line and we can share a little more. At the time of writing, we are closing the doors on our Cambridge development project very shortly and after a recent pre-planning meeting, have been actively encourage to submit plans for our full conversion and development scheme. We are also looking at converting a large house into a licensed HMO after planning permission for a few more rooms. Finally, we are completing on 3 rent-to-rent multi-lets as well, so lots of variety as you can see. So if you have at least £25,000 you could potentially shadow us and join a few other shadow investors on one of these projects or another we have on the go to ‘earn as you learn’ whilst you do!
Just drop us a note firstname.lastname@example.org to book in a chat for Richard to discuss our ‘over-the-shoulder shadow investing‘ in a little more detail with you personally.