As a property developer, managing multiple tasks simultaneously is a part of daily life. It can be difficult to keep your focus on tasks that may seem less important (until they become urgent!), such as ensuring you never run out of investors’ money. Despite its importance, many developers get their priorities wrong. As a result, they fail to secure the funding they need for their property deals or they make it A LOT harder for themselves…
Raising investor finance is an important aspect of succeeding in property, and it requires careful planning and execution. Here are 5 essential actions you must take to avoid running out of investors’ money:
#1 Focus on keeping your existing investors
One of the common mistakes we see property developers make is that they focus too much on acquiring new investors rather than keeping the ones they already have happy. While acquiring new investors may seem like a great way to expand your investor list, it is much more difficult than retaining existing investors.
Retaining existing investors has numerous benefits. Existing investors are already familiar with your business, your values, and what it’s like to be an investor in a project of yours. This makes it easier to convince them to invest in your future projects. Moreover, satisfied existing investors can provide you with positive word-of-mouth advertising that can attract new investors to your business.
#2 Returning funds is not enough
Simply returning an investor’s funds, and the expected returns, is not enough. A number of investors have told us that despite receiving their funds and the expected returns from the developer, they will never invest with them again because of how they were made to feel throughout the process. To secure future investment, you must make your investors feel valued and appreciated throughout the investment process.
#3 Communication is key
Good communication is key to keeping investors happy. You must maintain regular contact with your investors throughout the investment process. Keep your investors informed of the project’s progress, challenges, and any other significant developments. When investors are kept in the loop, they feel more involved and are less likely to worry about their investment. Regular communication will help to build trust between you and your investors. Plus, don’t forget that old adage that a problem shared is a problem halved. Your investors may have property experience they can bring to bear on your challenges. Tap into their expertise.
#4 Silence is NOT golden
This is the biggest mistake we see property developers make. No news is still news!
Silence is a property developer’s worst enemy. It can be perceived as indifference or a lack of transparency, which can lead to anxiety and dissatisfaction among your investors. When investors do not hear from you for an extended period of time, they may start to wonder what is going on behind the scenes. They may begin to worry that something is wrong or that their investment is not being handled properly. Never let their imaginations run wild!
Even when there is no significant news to share, it is important to communicate this with your investors to avoid leaving them in the dark. Regular updates are essential to assure your investors that the project is still making progress and build their confidence in you.
#5 Addressing investor concerns
You must be responsive to your investors’ questions and concerns and provide them with clear and concise answers. Investors shouldn’t have to worry about their funds at any point in the investment process. If investors feel uncertain about the progress of the project or if they have any questions, it’s vital that you address these concerns promptly. Ignoring these concerns will only make investors anxious, and they may choose not to reinvest in future projects.
In summary
Securing reinvestment from investors is crucial for the success of any property development business. Focusing on retaining existing investors, making investors feel valued and appreciated, communicating effectively, avoiding silence, and addressing investor concerns, are key to ensure the success of your future projects.
By avoiding common mistakes and carrying out these essential actions, you can build trust and confidence with your investors, secure funding for your projects, and achieve long-term success in property development. Remember, securing investor finance is a process that requires effort, patience, persistence, and most importantly, compliance with the Financial Conduct Authority rules, but the rewards are well worth it.
Caryn Yuen and Antoine Dufresne
Private investors, fundraising consultants, and the co-founders of The Investables – the only community helping you get £100k+ investors for your property deals in a professional way.
For more info, check out their website: theinvestables.com
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