How to build an opportunity that attracts investors. Mini-series Part 1: The property deal

Investor, deal and you. These are the 3 things that create an opportunity.

In part 1 we focus on the deal:

- What makes a deal an opportunity for you and the investor 
- The importance of knowing your area
- How to become more knowledgable than most property developers by using this free resource
- The importance of understanding the value of a deal
- How do you know what to expect from a project?
- Preparation practice is vital
- How to get accurate and up to date build costs 

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Transcript

Sam: 0:02

Hi, everyone, and welcome to episode three. This episode is the first in a three part miniseries we're going to do on how to build an opportunity, an opportunity is made up of the investor, you and the deal. And in this first episode, we're going to focus on the deal. Before we do that, I just wanted to let you know that in the show notes, there's a link to our free resource on how to attract investors. It's a six page document, and it includes a lots of really valuable information, and also some text templates to help you send those initial messages out to investors.

Al: 0:39

Hey, guys, you're listening to raising finance talks with Sam UNAL, we're on an absolute mission to help developers raise their first million from investors. So they can go on and do deals with six figure profits.

Sam: 0:51

So if you're not moving forward with your property business, for a lack of cash than this podcast is for you, we're going to deep dive into all aspects of raising private finance. So thanks for listening, and let's dive in.

Al: 1:09

So the first element of building an opportunity for investors is the deal. And you know, we're all aware of that we're all aware, you need a good deal with the old phrase, a deal that stacks is really key. So Sam, why don't you talk a little bit about you know, what makes a deal an opportunity? What what what do you need to have in that mix, impart for it to be something of value to an investor.

Sam: 1:37

So first things first, it has to be good margins, really, you know, there is no deal with the margins don't stack really. So and that's gonna be relative to the deal, because you're not saying any of these things aren't possible. But if you're going out and looking for, you know, 40% returns on flipping a one bed flat with by doing a quick refurb, you might be able to find one of those in your lifetime lifetime vesting of property, but probably can't find two or three of those to do every year. So yeah, good margins that are relative to the deal, you know, the smaller deal and the quicker and easy it is, then the likelihood is that will be the low return. Obviously, if you're taking a bit of land with no planning, and then you're getting planning permission and building out, then obviously, you're going to be expecting a lot higher returns on your money. And the second point ready for the deal is knowing your local area. So a big, big part of any deal is knowing the location when that can comes down to how easy it's going to be to sell. And actually getting the gdv. Right in terms of where you're actually at in terms of the location because, you know, an example for me would be you know, there's on the I live in southwest London, if you walk out of my tube station, you know, there's there's four, four different roads, you can go down away from the tube station, or if you walk half a mile in each direction, as a different price of five to 8%. In though between those areas depends on which way you walk, if it's just a one bedroom, flat half a mile from the station in each direction, then they're very different prices. So that's really key to knowing your local area. And being really dialled into that.

Al: 3:18

Yeah, I mean, I can imagine, like I said, just what you said there about, like, the difference could be huge, you know, in terms of the impact of what that does to the deal. You know, just by knowing that area and being really sort of, well, really clear of which roads work and which words don't just saves you a lot of hassle. And what does that mean to an investor in terms of, you know, you have a great amount of knowledge on your area, and I know, you particularly have a great amount of knowledge on your area. But what what does that give to an investor?

Sam: 3:52

Yeah, so when you're able to communicate the kind of when you're speaking through the deal, and you're able to communicate the differences between the different areas, on in your patch, where you're looking at, you know, different roads, different prices, you know, when you're communicating that to an investor, they can be pretty confident that you know, your shit in your area. So, you know, you've got you've got everything covered, which is, you know, it's vital for an investor to think that really,

Al: 4:17

yeah, no, that makes sense. Because, again, I imagine, you know, when you know, your area, and you're sort of really confident around, you know, just just having total clarity on that stuff, the amount of conviction you can speak with and stuff like that. It's really evident, I think, when you are able to communicate in that way, it does put people at ease a little bit. Whereas if you're kind of going well, I've got a deal in this area in London, I also do North London and I do West London, and it basically screams out hey, you know, so you basically do anything you can get your hands on then yeah, you're not specific. You're not targeted, and that can set alarm bells off with investors. I know that's the case for me. So yeah, it's it's really important.

Sam: 4:59

Yeah. Definitely, I'd say alongside that is when you are deciding on what you are going to build in your area and what stacks within the deal is making sure there's the demand for what you're building as well. So I know in my area, if I convert a house into flats, and there might be two one beds, a two bed and a three bed on the ground floor, then there's a good chance that three bed will be the last thing to sell, because three bed flats, you know, there's a, there's a pretty small market for them. Really, yeah, it tends to be, you know, people that are maybe they're a young couple, but they are not ready for their first house yet. It can be two friends buying together, and they're going to have a spare room as an office. Or it can just be a single person who wants that extra space and can afford it. But all those like those sets of people, you know, that's quite a small section really that people that fit that criteria. So yeah, you know, it will sell. But just, you know, if you're working out your what you're going to build in the area and what works in your deal, then just making sure there is a demand for it. You know, that's clear.

Al: 6:11

Now again, and again, like on that topic, if you're in a conversation with an investor, and you're talking about the deal you have or you know, something that you're looking at as a potential deal. And you start talking about, you know, well, we're going to do X amount of two beds in this plot, or whatever it might be. And we're only doing one three bed, or we're not doing three beds. And then the investor asked you the question, why aren't you doing three beds, and you're able to give a really confident answer back as to why you're not doing them. That just again, builds that huge amount of credibility with them. Because there's no hesitation in what you're saying. There's there's total clarity, and what you're saying is conviction is confidence. And that will then transcend across to the investor. And again, like create that, that comfort for them that that knowing that you know your shit effectively. And that's really quite valuable and really, really important thing for sort of maybe people that might be listening to, to understand as well. Yeah, exactly.

Sam: 7:10

And again, it just feeds into all three areas that deal the investor and you, every one of those is going to benefit from you, really knowing your shit when it comes to the demand, right, getting your own sort of knowledge of the local area, right? When it comes to the GD V and the location differences. Getting all that in places is just vital for all three of these things.

Al: 7:30

Yeah. So before we go on to the next element, the next step or the next thing in building this opportunity. Is there anything else on sort of the deal front that you would sort of, you know, you might want to throw in there or chat about?

Sam: 7:45

Yes, absolutely. One of the big things to consider before entering into any kind of project is obviously doing your sort of due diligence on on the council already, because forgot about a counsellor. Oops. Yeah. Forget about those lot. Yeah, obviously, there aren't too many councils that are meeting their targets in terms of getting decisions made in the right timescales. Yeah, loads of experience at the moment have different councils where you're going through like three Planning Officers within three months of, of one decision. And we've not even got any feedback from any officer with it within the three months before they've left. And there's another one, come on to the application. So yeah, really knowing your know, local council and how they operate can do that by going through all the policy guidance, the local plan, you know, have they got a specific policy document in place for say, doing small developments in back gardens? Have they got restrictions on building HMOs? In the area? Is there a minimum square metres for houses, they're prepared to let you turn into flats? You know, all that kind of stuff. It's all there online. And I see that a lot with people actually, a lot of people I speak to there's all this free information on planning out there. Yeah. A lot of people just don't do you know, I got most of my planning knowledge through just sifting through hundreds and hundreds of planning applications online and learning what the offices are all the kind of language they use, which was just foreign to me when I started but looking at the applications and seeing why things are refused. And that's one of the easiest, and obviously the cheapest way you can do things

Al: 9:32

this weird, though, isn't it? Because that stuff that you're talking about? It's like someone will have already blazed the trail for you in a way because there's always someone that's done a development that might be similar to yours in the area that you're looking at. So, you know, with all that free information, you can really sort of gain quite a lot of experience and knowledge and expertise. Just by like you said sifting through that and the knock on for that is like when you really out to an investor who may have very little knowledge on planning, you know, your authority level and credibility just by by having gone through that process of sifting through the applications, learning, looking at all the things that have been done already, and being able to relay that in a conversation of a few words or a couple of sentences, just layers, again, that amount of credibility that some people just won't have in a marketplace. And you will having done that.

Sam: 10:29

Yeah, exactly. And it's, it's the kind of thing that can lead on to getting new amazing deals as well. It's one of my projects. I must be about three years ago, now I picked up I wasn't actually looking for any projects at the time. Not actively anyway. And, and I was using a local commercial agent to sell a site that I've got planning for. And at the time, I exchanged a couple of emails with him, and were put it on the market. And then he said, Oh, you must be looking for something else. Now then I said, well, not really, I've got a couple of other projects. But he forward me forwarded me a couple of things. And I went to look at a park, it was an old post office, and that had been on the market for six or seven months. I think I remember that one. Yeah. And it was a it was a large shop with a flat above and some kind of crappy area and a little kind of coachhouse out the back of it. And I know a lot of people went went to look at this, and no one could make the figure stack on it. But because I've been looking through tonnes and tonnes of information on Wandsworth Council's website, I managed to find out through their through one of their approvals. And the recommendation for approval that I read through, showed that they would allow shops to be reduced to a certain square metre edge. And no one else knew that and everyone thought you had to keep the shots sharp the same size as it was. So I was able to create three flats on the ground floor whilst retaining the sharp keep the flat on the first floor. And then I also created another flat within the loft space. And that made it an incredible deal. Yeah, no, actually, I tried to that on actually I was at the start of when COVID was happening. So I tried to that on with planning. That was a six figure deal for me worked out brilliantly. And all of that came from, you know, I knew how to reduce that shop. So he had an extra flatten. So I made the deal stack really well. And that was all from just sifting through all that free information on the Council's website.

Al: 12:50

Yeah, no, I mean, I do remember that deal. And I do remember when you told me about it, and we talked about it and chatted about it. And you told me all of this stuff that you're saying now, and it was quite quite cool at the time, because it's like, wow, loads of people looked at it, but nobody can see the opportunity there. And you could find the angle, because you had the knowledge and the understanding of that. But I really want to keep bringing it back to the investor again, and sort of, then, you know, say you had have taken that on, and you were so that, you know, you were looking to get it funded and stuff like that, you know, that's that's really big, isn't it to be able to explain to someone, you know, how you're doing something and why you're doing it and why you're able to do it and, and why it's on the market for so long. And possibly cheaper than, you know, it should be all of these different things because people don't have this knowledge that I have their, again, their level of credit, credibility that that creates that authority, and you're building that up with the investor. You imagine on the flip side, how that feels to the investor, that really reassures them in the way that it's like other people just can't, you know, people that don't have that knowledge people that don't, you know, or aren't able to sort of factor that into a deal. They just, they just can't create that reassurance that you can and and I think this is something really big for people that are listening is to understand this, if you can really sort of start to understand it from the investor standpoint and what that means to them. Yeah, it's really, really huge, you know, and you start to, like nitpick into these small sort of nuances of a deal. And, you know, you start to then okay, now you're drawing out the opportunity here. Okay, now we're drawing out a little bit more sort of opportunity in just this deal more than okay, it's a deal. It stacks and you're getting a return. You've got just a little bit more substance there. You know, so I think that's really, really key to just point out. Yeah,

Sam: 14:48

exactly. And interestingly enough, when I when I did get that deal over the line, I was speaking to an investor about it, and they'd been approached by someone else. Last month before and who looked at the deal, but it didn't quite stack and the investor didn't think it stacked either. Okay, so we had a bit of a chat about it. And yeah, it was a little bit surprised to see that, to see my fingers and that they all stacked and how it was going to do it planning wise. So yeah, just thing, but that does,

Al: 15:21

and it puts you head and shoulders above everyone else immediately, within a very short space of time, you know, you are now above anyone else in terms of, okay, if he's going to invest in something, he's going to be investing with you. Not in the person that said it couldn't stack. It. It's just a fact of life, like you can create that opportunity in something that somebody else can't see. You now have value.

Sam: 15:46

You know, 100% That was it. Yeah, he was literally scratching his head thinking, How was how have you managed to get this work? He was like, really? What's, what's the policy there? Sam? How do you know this? Like? Yeah, no, definitely. Yeah. It's like, well, I've done my research on I must have. So here it is. So yeah, like you say, just, you know, puts you in a bit of a different league when it comes to, you know, knowledge about your deal?

Al: 16:09

Yeah, no, absolutely. I know, one other thing we mentioned, I know, we're going to move on. But one other thing we did mention was, you know, and we've kind of talked about it here in terms of how people can get that planning knowledge and stuff like that. But you know, if someone is listening to this right now, and thinking, Shit, I don't have all of this experience, I kind of don't know, everything that you're talking about yet. What can we sort of, say to them? How can we sort of help them in terms of, you know, what, what can they do? Like, what what is it that they can do to sort of change that? I

Sam: 16:45

guess? Yeah. So I think really, it's just about putting continued and sustained effort into it. You just assume that you

Al: 16:52

know, the answer everyone. You meet, I have to do something God damn.

Sam: 16:58

Sorry, everyone, apologies for that it will take effort. workhorse you. But yeah, for for planning is, like I said, just getting on the online portals, having a look, seeing what's been developed, recently seen what's been refused. And then that's how you learn really, once that one thing I like to do once I'd been through plenty of applications, and then understood the reasons for refusal. And once I looked through everything, I then start looking at a development before I'd read the decision, notice, I'll just have a look through the drawings and the development. And then I would give it my reasons for why I said, I think it would have got planning or why it's been refused. So it's like play that play that kind of game and can make it interesting for myself. And I think that's a really good way you can learn on planning.

Al: 17:52

Yeah, that goes down. I mean, you know, me, I'm sort of like jumping up and down right now, as Sam is talking about this. Because, you know, for me, being an X, like golf professional, the whole preparation practice and making that really deliberate. So you can build your your confidence around what you do, is is vital, and like what you're describing right now is just, it's deliberate practice down to a tee, you know, how can you further your confidence and sort of further your knowledge by sort of really practising hard and what you do and preparing, you know, and by doing that, you know, you're effectively having that conversation with with an investor, but just on your own, and it's really, really good sort of exercise to do.

Sam: 18:34

Yeah, exactly. And in terms of getting out there and known your local area in terms of locate location differences. Well, that's just going on. Right, move sold, getting out there and talking with the agents talking to local people, about the different areas. There's a lot you can learn from just walking around, you'll get a good feel, even if you're looking at working in in a new area, or you've just moved to a new area. You get a vibe, don't you when you're walking down the street? Yeah, definitely. You can feel what it's all about. And if it's anything, oh, this this feels a little bit more dodgy here or there. There's a few more chicken shops, and then there is kind of nice cafes down there shop. You know that prices have probably changed a little bit. Yeah, one thing I've done with with builders was to actually go out and chat to them when I was when I started to do developments. You know, I knew a lot myself as an ex builder, but I hadn't done, you know, quite large projects that I was looking at doing. Yeah. So I needed to really go and understand a lot of the costs, you know, some of the projects I was looking at, were doing basements and things like that. So, for me, I was speaking to builders that were doing developments in my area

Al: 19:44

when you like literally walking into people's houses if they were doing them out or something. I remember you telling me a story about that, like you'd go into a house that was being built or sort of refurbed or something and start talking to the actual builders that were doing In a job, is that something you actually did? I can't remember if

Sam: 20:03

I've, I've always just was walking around locally, just, you'll end up chatting with a builder outside and you just think, oh, you know, you say, is the boss around? And they say, oh, no, but the owners around or you might chat to the owner who's outside, you know, wasn't sure maybe if they were the owner occupier, maybe it's a developer, I'm not sure. So just start, just ask a couple of questions. How's your bill going, you just start chatting away. And before you know, you're inside, you might meet the builder, or, you know, one of the lads on site saying, oh, you know, the boss will be around in another hour or so if you want to come back and have a chat with him. So just start building up your contact list by, as usual, going out telling people who you are what you do. Yeah. And then you just start to get a really good understanding for what things are being built for in your area. Like the best

Al: 20:46

thing about that situation there. Again, you know, the amount of preparation that's going into, you know, you know, creating a deal, if you want to call it that, or creating the opportunity of the deal. It's, you can ask a builder in that scenario. Any question you want? And you're gonna get probably a pretty honest answer. That isn't a sales salesy answer.

Sam: 21:09

Yeah, he won't. He's not pricing for me. So actually,

Al: 21:12

I absolutely. So you're like, you're literally being a, it's a free pass to ask questions about, oh, how much does a build like this cost? How long does this kind of thing take? Or what kind of problems if you add here? Literally, you could reel off a million questions, you could probably answer them, because he's guarded down. You know, he's, he's pretty relaxed. He's probably just sort of, you know, seasoned, inquisitive guy who's, you know, whatever. And, yeah, it's just a great, great way and a really good example of how you can sort of start to build knowledge and understanding around something, right.

Sam: 21:42

Yeah, exactly. Right. So we're going to leave it there for this week's episode on how to build an opportunity. We'll see you next week for part two. If you want to attract investors without asking for money, check out raising finance club.com for our free resources. And you can also follow us on Instagram and Facebook at raising finance club