No matter what business you are planning to start, it is extremely important to find the right investor who can back up your business plans with the start up capital. This is especially critical when you are venturing into a business which is as volatile as real estate. There are several property investment companies that claim to give the right kind of seed money. However, such a property investment company is usually only interested in funding more established entrepreneurs who are planning to venture into real estate. For those, who are not yet established, but have a brilliant business plan, getting the right kind of investment for their business, can be a tough deal. From residential to commercial properties, property investment can be a great business. However, there is seldom the right range of financial investment available for such start ups.
Angel investors are usually most suited to real estate companies because not only do they offer the right kind of range of property investments required by these companies, but are also extremely flexible while doing so. In real estate, angel investors usually look to invest millions of pounds. You can therefore find investment amounting to a large sum of pounds. Angel groups or syndicates are perhaps the best people to approach for such large funding. Or alternatively, you can approach the people who can put you in touch with such investors. Alternatively, you may be able to get larger amounts of funding from angel groups or a syndicate of angels.
Why Prefer an Angel Investor over Venture Capitalists?
An asset investment company or a property investment company will typically look for businesses which can promise large returns. Most of the people that the venture capitalists end up financing, are those who are already established in any other trade. An angel investor making a property investment uses his or her own private resources and therefore takes a keener interest in the progress of the entrepreneur. With the financial backing, the individual may also receive advice from the experience of the benefactor, whereas such personalization is not present in the venture capitalist system, since they raise money from other sources for making their property investments.
Another great area where angel investors score over venture capitalists is that whereas the venture capitalist only considers the potential turnover and the perceived return on investment, the angel investor could consider numerous possibilities before deciding to back someone up with their money.
The Motivation of an Angel Investor
The angel investor could be motivated by any number of things. In order to make a real estate investment, the angel investor might simply want to test the waters. A lot of investors would make property investments simply to be able to continue using their contacts and experience in the field. Though these individuals usually do not seek the role of partners, they may want a similar role in a start up that they see potential in. There are also some investors who enjoy seeing hardworking entrepreneurs succeed. You may even be able to find people who have to money to make property investments and real estate investments, but do not have the expertise in it.
When approaching such investors, it is best to go with realistic expectations. To gain the necessary financing, you may have to give up a significant amount of control over your venture, in order to accommodate your benefactor. However, once you recognise the motivation of the investor, you can negotiate better with them. If your business is new, getting the experience of your investor can help you gain momentum.
Generally, angel investors would look for a minimum return of 20% on the asset investment, within a period of 5 years. Since very few of their investments turn fruitful, they try to find potential in each of their investments. You have to show your expertise and your interest in the venture is you want to get a good sum of investment.
Difference between Real Estate Funding and Funding for Other Industries
There are many angel networks and investors who do not believe in property investment, real estate investment or rental investment. The funding required in real estate ventures is relatively large and since the real estate market is extremely volatile, the returns may not always be according to expectations. These are some of the reasons why even venture capitalists would hesitate to fund a real estate investment. Property investments may fail over a period of time, however, if they do become a success, they usually hit it big.
With other industries, the gestational period may not be very large, but property investments depend a lot on many peripheral factors in order to grow. This is another reason why many avoid making property investments.
How to Find Angel Investors Who Specialize in Real Estate?
Unless you know someone who has some experience and interest in real estate and is in possession of large sums of money to be invested into such a venture, your only hope to look for funding is to approach the venture capitalists or property investment companies that may give you the seed money.