Property Syndicate - who's in? ;)

[Returningmember]

I've been playing around with some figures and ideas for over a year and am keen to start a property syndicate.

The basics are;

Sell shares to investors
Each shareholder is named as such, and all shareholders are equal
First purchase for cash. Possibly at auction, or post brexit if there are any deals to be had.
Use the rental income over 24-36 months, then remortgage property #1 to finance purchases 2 & 3.
Any purchases would need to get the backing of 75% of shareholders
P1 would have a small mortgage, P2 & P3 around 75% mortgage

I have a fair bit of experience having been investing in property since 2001.
I've also got a lot of numbers jotted down as part of a business plan.

The idea is to steadily grow the portfolio over 20-25 years as a pension or something to leave the kids!!

I've already got about 8-10 people very interested working on £20-£25k per share.

If anyone has any advice or has been part of a syndicate in the past, your tips would be most welcome....

Cheers!!

[anonymous-user]

Spend a lot of time on getting the shareholder agreement right

[Mr Pointy]

How would I get my money out if I suddenly needed it? That's often the problem with these arrangements.

[Groat]

Just to be clear, is this a scheme which will generate ZERO INCOME for stakeholders, and is aimed at gaining them a share of an increasing amount of property stock over a quarter of a century, with this property to be mostly obtained by rental income paying down mortgages (plus, of course, the £20/25k stakes)?

Edited by Groat on Wednesday 13th November 17:53

[Returningmember]

JPJPJP said:

Spend a lot of time on getting the shareholder agreement right

This is one of the points I need to look (need help with) at in very fine detail.
But for sure, solicitors will be involved in writing up any agreements, contracts, etc

[Returningmember]

Mr Pointy said:

How would I get my money out if I suddenly needed it? That's often the problem with these arrangements.

Good point. My initial idea was based around putting your stake in, and it staying in until 20xx, whichever is decided.

[Returningmember]

Groat said:

Just to be clear, is this a scheme which will generate ZERO INCOME for stakeholders, and is aimed at gaining them a share of an increasing amount of property stock over a quarter of a century, with this property to be mostly obtained by rental income paying down mortgages (plus, of course, the £20/25k stakes)?

Edited by Groat on Wednesday 13th November 17:53

Yep, that's about the gist of it. ALL income generated through rentals will be kept in the bank until there is sufficient to use as a deposit on the next properties (along with releasing equity from the other houses.

I've told all potential investors that;

A) their stake will be in for the long haul
B) there will be no income

[Returningmember]

My current portfolio has been built up over 18 years and are all on BTL mortgages in my name, and let to families on AST's.

I should add that no one in the syndicate (me included) will have more say than anyone else.. i.e. all equals

[JapanRed]

Can you PM me more info please OP?

[Groat]

Returningmember said:

I should add that no one in the syndicate (me included) will have more say than anyone else.. i.e. all equals

I have no interest in this - primarily because I'll be dead before it bears fruit .

But I have a question. Were this to succeed, and gather, say, 50 (or 50000) investors, who's going to do the work? For example, sourcing the properties, organising the stakeholder agreements, raising the cash, organising the legals, managing the tenancies, managing the accounts, managing the compliances, managing the changes(members dying, wanting out, wanting alterations to their stake) etc etc etc. Masses of decisions to make too. What properties? What type? What location? How much to pay for them?

Would it be some of the stakeholders (for free) , or entirely outsourced? And if it's some of the stakeholders, how are they going to feel about the equal shares of the others who're doing nothing?

Edited by Groat on Wednesday 13th November 19:16

[Returningmember]

JapanRed said:

Can you PM me more info please OP?

Sure JR, I'll fire you across my initial numbers in the morning

[Returningmember]

Groat said:

I have no interest in this - primarily because I'll be dead before it bears fruit .

But I have a question. Were this to succeed, and gather, say, 50 (or 50000) investors, who's going to do the work? For example, sourcing the properties, organising the stakeholder agreements, raising the cash, organising the legals, managing the tenancies, managing the accounts, managing the compliances, managing the changes(members dying, wanting out, wanting alterations to their stake) etc etc etc. Masses of decisions to make too. What properties? What type? What location? How much to pay for them?

Would it be some of the stakeholders (for free) , or entirely outsourced? And if it's some of the stakeholders, how are they going to feel about the equal shares of the others who're doing nothing?

Edited by Groat on Wednesday 13th November 19:16

Good questions Groat ,and I should've made it clear at the start - I'm looking to limit numbers to 10-12 shareholders.
Mainly because I read online that syndicates should be capped around those numbers. But I guess if more people wanted in, more than one syndacite could be formed?

I'm a very keen investor already so am happy to help with sourcing deals. I have a lot of good contacts in my home town (estate agents, portfolio owners, etc...)
I was hoping to involve different trades people too, in the hope that everyone would chip in to keep overheads down. Be it chippies, decorators, or someone to collect rent each month. I manage my current portfolio, so would have no problem taking on the management of any new properties that the syndacite purchase. Obviously we'd would need the help of an accountant as these would be held in a different limited company.

I also manage a "hedge fund" so I have quite a bit of spare time on my hands. A few of my investors there are keen on this idea too.

To be honest the idea initially came from thinking of ways to help others get a foot in property and a decent pension.

I live on the south coast. Huge market for student lets. They would probably offer the best yield, but then you'd need to factor in high turnover, holiday times etc....so maybe aim for family homes, some of which I already have in my portfolio....they offer a good yield too.

Another guideline I read on the internet was every decision needs 75% backing, which I like the idea of.

[Groat]

Returningmember said:

Good questions Groat ,and I should've made it clear at the start - I'm looking to limit numbers to 10-12 shareholders.
Mainly because I read online that syndicates should be capped around those numbers. But I guess if more people wanted in, more than one syndacite could be formed?

I'm a very keen investor already so am happy to help with sourcing deals. I have a lot of good contacts in my home town (estate agents, portfolio owners, etc...)
I was hoping to involve different trades people too, in the hope that everyone would chip in to keep overheads down. Be it chippies, decorators, or someone to collect rent each month. I manage my current portfolio, so would have no problem taking on the management of any new properties that the syndacite purchase. Obviously we'd would need the help of an accountant as these would be held in a different limited company.

I also manage a "hedge fund" so I have quite a bit of spare time on my hands. A few of my investors there are keen on this idea too.

To be honest the idea initially came from thinking of ways to help others get a foot in property and a decent pension.

I live on the south coast. Huge market for student lets. They would probably offer the best yield, but then you'd need to factor in high turnover, holiday times etc....so maybe aim for family homes, some of which I already have in my portfolio....they offer a good yield too.

Another guideline I read on the internet was every decision needs 75% backing, which I like the idea of.

Well I'd disagree with quite a lot of what you've said, but the idea of the smaller and limited group you've mentioned I'd definitely agree with.

I've never done what you've planned but I've worked with a smaller group of 4 in a very tight unit and without any formal partnership or corporate arrangement. One sourcer, one renovator, one lettings manager and one salesman. RBS' Corporate Office provided the funding. Including the 4 key men, at its peak there were about 50 other people from cleaners to lawyers who made regular wages from the operation.

This was sourcing potential letting concerns which were then fully renovated and passed to a letting/management system and then sold on to portfolio building landlords. It was hugely successful, but came to an end in 2009 when it became very much more difficult to do for several different reasons, and would be impossible to replicate now.

It was entirely aimed at generating income, although 3 of us also considerably added to our portfolios (the sourcer had 600+ units at one point) and the 4th became the part owner of a large and successful letting agency which he currently solely owns and which still manages many (100's) of the properties we bought, sorted and flipped.

Edited by Groat on Wednesday 13th November 23:21

[Simpo Two]

Hopefully you can do better than Aviva whose property fund is a donkey!

[Returningmember]

Groat said:

Well I'd disagree with quite a lot of what you've said, but the idea of the smaller and limited group you've mentioned I'd definitely agree with.

I've never done what you've planned but I've worked with a smaller group of 4 in a very tight unit and without any formal partnership or corporate arrangement. One sourcer, one renovator, one lettings manager and one salesman. RBS' Corporate Office provided the funding. Including the 4 key men, at its peak there were about 50 other people from cleaners to lawyers who made regular wages from the operation.

This was sourcing potential letting concerns which were then fully renovated and passed to a letting/management system and then sold on to portfolio building landlords. It was hugely successful, but came to an end in 2009 when it became very much more difficult to do for several different reasons, and would be impossible to replicate now.

It was entirely aimed at generating income, although 3 of us also considerably added to our portfolios (the sourcer had 600+ units at one point) and the 4th became the part owner of a large and successful letting agency which he currently solely owns and which still manages many (100's) of the properties we bought, sorted and flipped.

Edited by Groat on Wednesday 13th November 23:21

I totally see where the potential is to make a wage from this, but that's not the intention. The intention is to have something grow steadily alongside mine and the others investors's day jobs.

I probably see why your model wouldn't quite work now too.

[Returningmember]

Simpo Two said:

Hopefully you can do better than Aviva whose property fund is a donkey!

I'll ask google about Aviva's one....

[Returningmember]

JapanRed said:

Can you PM me more info please OP?

Just emailed you JR

[Returningmember]

Groat said:

Well I'd disagree with quite a lot of what you've said, but the idea of the smaller and limited group you've mentioned I'd definitely agree with.

I've never done what you've planned but I've worked with a smaller group of 4 in a very tight unit and without any formal partnership or corporate arrangement. One sourcer, one renovator, one lettings manager and one salesman. RBS' Corporate Office provided the funding. Including the 4 key men, at its peak there were about 50 other people from cleaners to lawyers who made regular wages from the operation.

This was sourcing potential letting concerns which were then fully renovated and passed to a letting/management system and then sold on to portfolio building landlords. It was hugely successful, but came to an end in 2009 when it became very much more difficult to do for several different reasons, and would be impossible to replicate now.

It was entirely aimed at generating income, although 3 of us also considerably added to our portfolios (the sourcer had 600+ units at one point) and the 4th became the part owner of a large and successful letting agency which he currently solely owns and which still manages many (100's) of the properties we bought, sorted and flipped.

Edited by Groat on Wednesday 13th November 23:21

Afternoon Groat - you obviously have a lot of experience in this area so out of interest, which parts do you disagree with? Any help or advice would be massively appreciated.. TIA

[Groat]

Returningmember said:

Afternoon Groat - you obviously have a lot of experience in this area so out of interest, which parts do you disagree with? Any help or advice would be massively appreciated.. TIA

I have NEVER been part of the type of thing you're proposing. But what I COULD tell you is why, based on such detail as you've given, I wouldn't be interested in investing in it. And that would be pointless and quite possibly counter productive.

Allow me to say this, tho. The timing of it's not right. The plan to build and retain an expanding portfolio of letting concerns should wait until a massive amount of social, political and economic volatility settles down if indeed it ever does.

As just ONE example (and there are many) have a read at this:

https://labour.org.uk/wp-content/uploads/2019/06/1...

If Mr McDonnell gets into power in under a month's time (as he may well do in coalition etc) that's the direction property owning will be going in. Much of that type of land/property thinking is shared by Greens. And some of it is shared across the political spectrum.

If Mr McDonnell DOESN'T get into power, it isn't going to go away. It'll just continue to be promoted and promoted and promoted on and on and on like the Nationalist Socialists do with 'independence' in Scotland.

So to me, for the above (and many other) reasons, the future for an expanding property portfolio is way way too uncertain to get excited about. Personally, if Labour gets empowered and/or if Scotland does become independent I'll probably be selling - and selling cheap - so right now and for the forseeable your plan is of no appeal to me.

In more detail, I asked you previously who is going to OPERATE the many many aspects your business plan will require. But the answer you gave also turned me off. If I've got it right you, essentially, (along with other volunteers from the syndicate membership) will be doing everything as some kind of side-gig to normal income earning activities. I assume, therefore, that all the activity will be confined to your area and the skill and success of the operation will be limited to what can be achieved part time. Take a look at private sector letting in Scotland. It's pretty well over for self-management. And as more and more regulation comes in and enforcement of regulation increases, self-management will become less and less possible and possibly even unlawful at some stage. It's already a criminal offence to operate as a letting agent here without registration, which requires certification, which requires qualification etc etc etc.

There are many more pitfalls than these I've mentioned, but please don't let my opinions either dishearten you or prevent you from going ahead with your plan. I think there's the germ of a very good plan in there (a syndicate based property thing) but, to me, just not the one you're proposing.

[Returningmember]

Groat said:

I have NEVER been part of the type of thing you're proposing. But what I COULD tell you is why, based on such detail as you've given, I wouldn't be interested in investing in it. And that would be pointless and quite possibly counter productive.

Allow me to say this, tho. The timing of it's not right. The plan to build and retain an expanding portfolio of letting concerns should wait until a massive amount of social, political and economic volatility settles down if indeed it ever does.

As just ONE example (and there are many) have a read at this:

https://labour.org.uk/wp-content/uploads/2019/06/1...

If Mr McDonnell gets into power in under a month's time (as he may well do in coalition etc) that's the direction property owning will be going in. Much of that type of land/property thinking is shared by Greens. And some of it is shared across the political spectrum.

If Mr McDonnell DOESN'T get into power, it isn't going to go away. It'll just continue to be promoted and promoted and promoted on and on and on like the Nationalist Socialists do with 'independence' in Scotland.

So to me, for the above (and many other) reasons, the future for an expanding property portfolio is way way too uncertain to get excited about. Personally, if Labour gets empowered and/or if Scotland does become independent I'll probably be selling - and selling cheap - so right now and for the forseeable your plan is of no appeal to me.

In more detail, I asked you previously who is going to OPERATE the many many aspects your business plan will require. But the answer you gave also turned me off. If I've got it right you, essentially, (along with other volunteers from the syndicate membership) will be doing everything as some kind of side-gig to normal income earning activities. I assume, therefore, that all the activity will be confined to your area and the skill and success of the operation will be limited to what can be achieved part time. Take a look at private sector letting in Scotland. It's pretty well over for self-management. And as more and more regulation comes in and enforcement of regulation increases, self-management will become less and less possible and possibly even unlawful at some stage. It's already a criminal offence to operate as a letting agent here without registration, which requires certification, which requires qualification etc etc etc.

There are many more pitfalls than these I've mentioned, but please don't let my opinions either dishearten you or prevent you from going ahead with your plan. I think there's the germ of a very good plan in there (a syndicate based property thing) but, to me, just not the one you're proposing.

Thanks for the detailed reply Groat, I'll check out that link over the weekend. I'll also come back with some finer points of my plan.
I'll add now though that in my town, the need for good quality lets isn't going anywhere.