Investment structures for property developments: the first steps

The second in a series of blog posts about different ways to structure property developments that involve one or more private investors.

Before you can decide which investment structure is right for your development, you need to have a clear picture of what you want to achieve, what you can offer, and what you are willing to do.

There are many things you need to consider in order to fully understand a planned property development and how you would like it to work. To give just a few examples:

Objectives – what are your short, medium and long-term goals? These could be, for example, to finance a one-off project. To build long-term relationships with a small number of investors. To build a property development business with its own brand. Or to become known as a trusted asset manager.

Finance – how much equity are you willing and able to contribute? Do you also need working capital to fund your own overheads as a business (staff costs, for example), in addition to development capital?

Experience – do you already have contacts and connections with potential investors? Do you have the skills and the appetite to manage arrangements with many investors? Can you present potential investors with an attractive track record of similar projects, and a pipeline of future projects?

Tax – are prospective investors likely to be located overseas? Do you and your investors want to benefit from Business Asset Disposal Relief or Investors’ Relief, and potentially Inheritance Tax (IHT) Relief?

Risk and management – are you willing to give personal guarantees to investors and/or lenders? How much control over decision-making are you willing to give up or share?

If you would like to discuss anything with us, feel free to get in touch at info@lcnproperty.com or +44 20 3432 3269. You can also download a more detailed guide – for free – from our website here.

In the next blog post we’ll look at the first of the five structures: a mezzanine loan.

Important
Nothing in this blog constitutes legal advice. You should take independent legal advice before acting on any of the topics covered.


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