Anyone in property investment would look for angel investment sooner or later. Either they would run out of their money or start investment with no money but prepared to put in their time.
We have been investing in property for some time now, and we have worked with investors along the journey. We have created a win-win situation for both ourselves as well as our angel investors in the process.
Often people have a stigma around asking money for investing.
In this post, I will share our experiences and learnings along with a few tips that we picked up from our education few years ago.
Now:
Two topics that are most relevant to current day when it comes to people requesting angel funding are
- Mindset towards asking for money
- Misuse or not using Social Media as a means of securing angel investors
I have seen many posts on social media with the caption “We beat the banks”.
Question is, so what?
The answers that the above caption fails to provide to the angel investor are
- Who are you and why should I trust you with my money?
- Why should I invest in you?
- How do I know my money is safe?
- What are the legalities?
Here is the deal:
Let’s start digging into what are the things that you can do to raise angel investment and what are the legalities around it.
Before we continue:
I am not a financial advisor, and I would highly recommend checking your angel investment with your solicitor and financial advisor to make sure your legalities are covered.
Mindset:
At Limitless Monks we believe that wealth creation is “INSIDE OUT” process. If you don’t believe from within you don’t manifest it in your life.
Negative mindset is one of the biggest blockers of many investors.
They find it difficult to ask for money.
Reason:
There is a scarcity mindset instead of an abundance mindset.
Investors who keep a mindset thinking they are begging for money are not comfortable to ask money from other people to invest in their projects.
What can you do?
If you flip the script from scarcity to abundance mindset, it will become much easier to ask.
How about you present an opportunity to angel Investors and how they can benefit from the opportunity in front of them? This will help angels to compete to invest in the opportunity you are presenting.
Social Media:
People invest in people. Even if you ask for investment from friends and family, if they don’t trust you, they don’t invest in you.
It is that simple.
Now think about asking for angel investment from a stranger on social media or otherwise.
Have you given enough reason for them to trust you to invest in you?
Social media, Facebook, Instagram, twitter, linked in and others are free marketing platforms to market who you are and what you have been doing in your property business.
Social media in itself is a whole new blog post but here are few tips:
Never fake it. Building trust takes a long time. You can break it in seconds with one fake representation of yourself.
Don’t be who you are not; it is not sustainable. It will break you from within.
Building trust takes time. Rebuilding..hmm even longer or at times never.
Be consistent on social media. These days there are algorithms to show or suppress your posts based on your presence on social media.
If not for anyone, it will be a fantastic documentation tool to showcase your journey, struggles and achievements. It will become your online resume.
Social media will be the best tool you have if you use it in the right way.
Once we have covered the basic requirements of Mindset and Social media let’s understand the next simple steps of raising angel investment.
Let’s continue with the rest of the angel investment cycle:
- Finding investors
- Preparing and Presenting your angel investment proposal
- Precautions
Finding investors:
Networking meetings:
There are quite a few networking meetings both property based and non-property based, where other entrepreneurs are present, e.g. BNI. We all collect business cards, then what?
It helps to create an investor group for yourself, whom you will be in touch regularly and updating your progress. This will make you someone whom they would want to invest in.
Family and Friends:
In the current scenario of low bank interest levels where people are getting next to nothing from bank, it will help if they get the opportunity of making better returns by investing with you.
This is a good way of using your knowledge and help them and in the process, helping yourself.
Warm leads:
These are people who know you from your work or customers who knows your business.
Now, it is time to showcase your property investment journey and present them with the opportunity to invest with you.
Showcasing your journey can be via social media channels showing your growth or regular sharing of your deals with potential angel investors and how they are progressing.
Vendor finance:
This was one of the best experience that we had during our mentorship with our mentor Neil Stewart. We watched masterclass on negotiating vendor finance by Neil with the vendor and how to raise vendor finance.
You will need to discuss with your solicitors on how this can be implemented for you, but it is a good tool to have in your arsenal for raising angel investment.
So:
What is Vendor Finance?
In simple terms, it is about the possibility of seller being able to invest the equity funds he receive back with us as an angel investor, subject to necessary legalities.
In our case, the vendor was OK to invest the money back since he did not have any immediate need for the money. He just wanted to sell the property.
Neil pitched in and asked if you don’t require the money, how about giving some money back and lock it for a couple of years with lucrative interest rate.
That way, we would not have to put a penny of ours but get cash flow from the property except for few days of putting our money towards the deposit.
In this day of changing regulations and Section 24, where landlords are making loss if they hold properties, they are selling them. Motive behind the sale is not to get money but to sell the property so that they don’t make loss due to taxation.
In such scenarios it is a good question to ask, “what are you planning to do with the money after sale?”.
Pensions And Savings:
Now is a good opportunity for people with good pension funds or savings to invest in something that gives more than traditional returns. This is further supported by the regulation change where 25% of pension funds can be taken out at age of 55+.
We have an angel investor who works with us, investing from his pension and growing his pot.
Preparing and Presenting Angel Investment Proposal
Few other things that will help solidify your angel investments:
Elevator Pitch:
You never know where you would meet your next angel investor. Create a killer elevator pitch and be prepared when you go to networking meetings or social gatherings.
“What do you do?”, “What do you offer?” – next time, make the most of these questions.
Follow-ups:
It is not enough just pitch or collecting business cards. It is very important to follow up with people whom you can work. Take the next step to send a detailed plan or information that helps the investor decide on the opportunity.
Being Mindful Of Investment Proposal
When presenting your investment proposal, don’t try to create one document and think it is OK. Yes it is easy job for you but it may not be of much use to the investor, on the other hand it may have negative impact. They may not want to work with you because they didn’t understand your angel investment proposal.
There are different formats of proposals that would suit different investors. There are more chances of getting the angel investment, if investors understand easily.
Single Page Document:
This is something you can create and put it at your workplace to raise curiosity among colleagues or to customers who visits your small business.
Detailed Angel Investment Proposal:
This is a bit more detailed than just raising curiosity. This would include more details about investment area, property deal, your CV and current portfolio, current cash/cashflow you are earning etc. to give that much needed confidence to the angle investor.
You can get a template along with other useful templates by registering yourself at free resources.
Above are just two pointers to show how you could market yourself to people who know you, and who are warm leads, who will invest with you.
It is just a beginning:
Now it is for you to think about what other creative ways you can market your property investment opportunity.
It is always best, to present information in the investment plan based on who you are presenting it to.
Some people like pictures, some people like data, some people like details and some people like videos.
Please don’t make a 100-page document which will end up in the bin. Have a master copy with all details but modify with necessary information that the specific investor may be interested to look.
Questions To Expect
When asking for funding in most cases, investor may have few questions. Be prepared, you never know when you will be asked…
Be prepared to answer following questions:
- How much capital do you want?
- How long do you want it for?
- How much interest or returns are you prepared to give back?
- If there are any assumptions, it is always good to put it out clearly.
- What guarantees will be in place so that investors money is safe?
If anyone is giving money without asking above questions, I would be worried 😊. In that case, be ethical and explain them relevant answers for above questions, so that both of you are on the same page.
Precautions
When people are ready to take up on the opportunity what should you do?
Few Points To Consider:
If the angel investor is a friend or family, chat and understand their financial situation before finalising on the amount and duration of the finance.
I would suggest agreeing only for 50% of their available finance so that they don’t end up with an emergency and ask for funds back, before the completion of the agreed loan duration.
People Invest In People:
It is very important that people who invest with you, buys into you first and what you actually do.
At the same time, it is very important for you to take investment from people who you are aligned with. Understanding your CORE VALUES will help you identify who you can work with.
Partnerships can change nasty very quickly if you are not careful. This will put project and yourself at risk. Ensure to meet with your investors or at least chat before going ahead with the investment.
Be mindful of any negative words or feelings that come out during the chat. Don’t just take investment, just because it is available. Always make sure it is a win-win situation both for the investor and yourself.
Backup Plan:
With property investment always have a second option. You never know how situations would have changed in investors life. If investor pulls out at the last minute atleast you have a back up option.
Worst case, there is no harm exploring bridging and keeping options open in case the deal is really good and if the cost of money works.
You could also think of sourcing the property as another option.
At the end of the day the one who keeps exploring options is the one who will become successful in anything
Legalities:
Always have an agreement with how much is being invested, what is the return on investment, for how long is the investment for and so on.
Get the document reviewed by a solicitor to ensure that both parties are covered.
Do your due diligence to ensure that the source of money that is being invested is legal. Check out the money laundering responsibilities at https://www.gov.uk/guidance/money-laundering-regulations-your-responsibilities
Check with your solicitor and financial adviser to ensure that you are always on the legal side.
Conclusion:
Start with an abundance mindset and take action with the belief that money is available for your project. Keep working with your community and investors. Use the free marketing platforms of social media effectively.
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