There Must be an Angel: How to Find Early-Stage Funding for Your UK Property Ventures
In the inimitable words of Annie Lenox, there is indeed an angel, and they might just want to invest in your property business. So, how do you go about talking to an angel? Let’s start by explaining what angel investment is and get to the good stuff later.
Generally, angels tend to be affluent individuals with a keen interest in investing in entrepreneurs, such as you, with promising opportunities in the UK property market. Property can be a lucrative venture that offers the potential for significant returns for angels, especially where more ambitious projects are concerned.
According to the UK Business Angels Association (UKBAA), the trade body for angel and early-stage investment in the UK, there is a healthy community of over 18,000 angel investors in Britain alone. The UK angel investment market is second only to the US in terms of development, and that is only accounting for the ones registered with an established association.
Whether you have just found your first investment property or are looking to expand your portfolio, there are several strategies and steps you can use to find your angel investor. However, do not expect them to hand over their wallets at your initial meeting, these are business professionals who will want a good yield for their input. Apart from financial support, angels can provide a wealth of experience and knowledge, strategic advice and business acumen, skills, and market contacts, enabling them to offer support and introductions where needed.
Now, the good stuff, let’s look at a plan of action to increase your chances of attracting this early-stage funding. To start with it’s essential to understand your business funding requirements clearly.
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Finding angel investors for your property ventures needs a proactive and strategic approach.
Expressing your needs clearly and concisely helps the angels understand what they are getting into. It is important to remember when you are trying to build new business relationships, especially with potential investors, transparency is key. Be open to discussing your business progress, plans, any challenges you may be facing, and what your plans are for the future.
It is critical to have a strong pitch in place if you want to attract angel investment. Clarify your growth strategy, market potential and financial projections, for the next three years, if possible. Outline a budget that will enable you to achieve your initial milestones and scale your portfolio. This early research can help secure early-stage funding by proving you know your product. This plan can take many shapes but at the very least it should include the following:
- Business model.
- Target market analysis.
- Details about the competitive landscape.
- Any growth strategies and projections.
- Financial forecasts.
It is also important to tailor your plan to the UK property market, unless of course, you are buying abroad, ensuring you reflect your understanding of local trends and behaviour. From this you should be able to craft an engaging and compelling pitch, to persuade the investors what the value of your proposition and potential growth in the market is. Understanding your funding requirements when pitching your business plan is essential when exploring avenues of investment, whether through family, friends, networking events or online platforms.
You Never Get a Second Chance to Make a First Impression
Not sure we agree with this statement but let’s run with it. Networking is a necessary evil that many entrepreneurs looking for investment dread. But it doesn’t have to be this way, not if you’re prepared. These events offer excellent opportunities to meet a broad audience of investors where you can showcase your business investment potential and capture the imagination of as many networking opportunities as you want.
For many, face-to-face networking and meet-ups are still the best way to make good business connections. However, according to Forbes.com, it takes only 7 seconds for someone to gain an impression of you, we all make snap judgments of the people we meet in day-to-day life. Dr Marcia Sirota suggests, “We make a guess based on our imagination, past experiences or wishful thinking.” What then, can we do about it? We are glad you asked.
- Dress accordingly for the event – smart casual is usually best.
- Smile in those first few seconds – smiling makes you appear more approachable and can help create a stronger connection.
- Don’t babble – speaking clearly and slowly, without trying to cram everything you know into the first couple of minutes, will make you appear articulate and knowledgeable without overwhelming them with information.
- Finally, watch your posture – head high, shoulders back and you will project confidence and strength. If you have confidence in yourself, they are more likely to too.
Network, Network, Network
You’ve got the look, now let’s network. Networking and meet-ups are a great way to meet like-minded people, investor conferences and pitching events can be found just about everywhere. Try to engage with as many networking opportunities as you can so you can build trusting relationships with investors, even if they don’t initially invest. Cultivating strong relationships with potential investors can lead to long-term connections and future investment opportunities.
Events where entrepreneurs pitch their business propositions to several investors at the same time are perfect places to increase the likelihood of finding an investor. This works well for both entrepreneurs and angels as by using these platforms, investors can find entrepreneurs who are aligned with their own investment criteria, making it a match made in heaven.
This is where your ‘elevator’ pitch comes in handy. An abridged version of your full pitch, communicating in a clear and succinct manner what you do, and how you are different to other pitches, usually given during the first few minutes of meeting your new acquaintance. Don’t forget to smile.
Attending business banking events and local meet and greets can be another way to connect with potential investors. Quite often your business bank manager will be able to point you in the right direction of some great networking opportunities.
Online network platforms like LinkedIn can also help you expand your network of contacts. Why not set up a social media profile where you can post stories about your recent property deals, flips, and renovations?
Now, before you rush out looking for the elusive angel investor, how about looking closer to home and taking advantage of your existing network of contacts, including friends, family, work colleagues and mentors? Quite often, there will be an un-tapped bank of funding right on your doorstep if you just ask the right people and is one of the easiest places to start looking for the elusive angel investor.
Mentioning your latest property investment in casual conversation, over coffee or a meal, can yield surprising results. Who knew Uncle Clive had a nest egg he was looking to invest? Offering him a fixed rate of return on his investment amount of, say 6%, paid back monthly, will sound very appealing if he is currently only receiving a fraction of that from his usual savings provider. Alternatively, if Uncle Clive can wait a year for his return, you can offer a higher percentage, perhaps 8%, paid out at the end of the year. This enables you to reinvest the money throughout the year.
Finally, ask for feedback on your investment documents from people in your wider circle, for example, ex-work colleagues. While reading your investment plans, they may become interested in what you are doing and want to invest some money or time to help you.
Questions, Questions, Questions
You understand your funding requirements inside out, that’s a given. You have researched the markets fully, and you should have worked out by now how much you would like your angel to invest, and when you need it. You have several networking events under your belt and your phone is busting at the seams with great contacts. So, where is the money? Well, angels do like to ask questions, and preparation is everything. Here is a heads up of some questions, with example answers you may want to use, that might be asked during these events:
Q: What if you buy at the peak of the market and house prices crash?
A: We look to buy and hold for the long term, so prices remain largely unaffected by fluctuations in the short term. We always follow market trends closely to safeguard investors' capital, while always buying to a qualified demand and ROI. Finally, we don’t take on properties with an LTV over 75%, stress testing to withstand sudden/large interest rate increases.
Q: Is it complicated?
A: By leveraging our trusted network of qualified people we can source deals, manage renovations and re-value/re-sell without any input needed from you.
Q: Are you flexible with investments?
A: We offer basic tiered returns from x% depending on the length of investment and repayment method. We usually target a minimum investment of £x but aim to agree on the right investment package for investors, this means we can consider lower amounts on request.
Q: How reliable are you?
A: We only buy to qualified demand, aiming at a minimum of x% below market value (BMV), using an experienced and trusted team.
Q: What is the risk if a Covid-19 event happens again?
A: By investing at a low ratio, we don’t manage hundreds of property investments at once, meaning retained profits and rental protection insurance will cover projects. Plus, investments are stress-tested at an x% interest rate.
Q: What if you can’t release equity to pay me back?
A: We retain capital reserves to ensure liquidity. Keeping in touch ensures maximum transparency in case of extenuating circumstances.
Q: What security can you offer on my investment?
A: We offer tiered levels of security subject to the loan amount and term.
Q: What are your rental areas?
A: Our investment areas are [enter area] in the UK, where high rental yields and qualified rental demand ensure monthly cash flow. We target a minimum x% ROI and x% rental yield.
Q: Will I get my investment back if the deal falls through?
A: In short – yes. Details will be agreed within the loan agreement.
If no contract was in place for the purchase of the property, then no capital has been committed and can be easily repaid.
If other deals are running in parallel, we may be able to invest the money in those but would always work with you offering options should the deal not proceed.
Q: How do I know you will use the money for a property deal only?
A: We pride ourselves on transparency and share regular progress reports throughout the process. It is also written into the loan agreement to ensure you are always protected.
Q: Who pays the legal fees for the agreement?
A: The investment agreement has been drafted by one of Manchester’s leading firms of commercial solicitors. We do, however, suggest our investors take independent legal advice on all agreements. The investor will bear the costs of this.
Securing early-stage funding for your UK property ventures from angel investors requires a proactive approach. Develop a clear business plan, tailor it to the UK property market, and outline your growth strategy and financial projections. Network effectively, engage in meetups, and build relationships with potential investors. Tap into your existing network and be prepared to answer investor questions. Offer flexible investment terms and stay transparent throughout the process. With a compelling pitch and effective networking, you can attract the right angel investor to support your property ventures. Good luck!
The information provided in this article is for general informational purposes only and should not be considered financial advice or a recommendation to invest in any specific property ventures or investment opportunities. The article's content is based on the author's opinions and research, and the financial landscape may have changed since its writing. Investing in property ventures involves inherent risks, and potential investors should conduct their due diligence and seek professional financial advice before making any investment decisions. The value of investments can go up or down, and past performance is not indicative of future results. Additionally, individual investment goals, risk tolerance, and financial circumstances vary, and there is no guarantee of any particular investment outcome. Readers are urged to carefully assess the risks and rewards associated with property investments and to consider their financial situation and objectives before committing any funds. The author, publisher, and any affiliated parties are not responsible for any investment decisions made based on the information presented in this article. Always consult with qualified professionals for personalised financial advice tailored to your specific needs and circumstances.