BECOME AN INVESTOR
Find out how to earn a fantastic return by being an Armchair Developer and investing in an Alpha Squared Property project.
When it comes to making money from property, being a real estate developer is by far the best way to make large chunks of it. Just take a look at the BRW or Forbes rich lists and see how many property developers there are. However not everyone has the time, knowledge or confidence to do this themselves or worse they have little knowledge with no experience then mistakes are made which cost them dearly. You can however benefit hugely by investing in a project conducted by property development experts like us at Alpha Squared.
By investing in a project you can become an "Armchair Developer" where you reap the financial rewards with no time or effort required. There are two types of Armchair Developers: Equity Partners and Loan Partners.
After the property has been identified as a viable project it is purchased with a regular bank loan after paying a small deposit and purchase costs. There are holding costs along the way to be paid to the bank while the developer gets the Development Approval and Building Approval. After it is approved, commercial finance is sourced from a commercial bank to fund the construction. So to put it simply we inject the smaller portion of the funds into the project first then the bank steps in and tips in the bulk of the funds. Typically the bank will supply around 70% of the required funds which leaves 30% to be covered by the developer or an investor(s). The investor's funds could come from their savings account, equity in their home/investment property by way of a Line of Credit (LOC) or redrawn facility or even a Self Managed Super Fund.
The roll of the Armchair Developer is to supply the required cash/equity which buys them a position in the development to reap a reward. They have a passive role by injecting capital and the developer has an active role by developing the project.
An Equity Partner supplies the required equity or cash for the project. They may be on the land title and the development loan of the bank. Their reward is usually by way of a percentage of the project profit.
A Loan Partner supplies the required equity usually by way of cash in the form of a loan to the developer. They are not on title and not on the bank loan. They take little financial risk in the project. Their reward is usually by way of an interest rate on the funds loaned.
There are a few variables to consider when becoming an investor which change slightly depending on whether you would like to be an Equity Partner or a Loan Partner so click below to learn more.