Posted: Thursday 20th December 2018
As profitable and attractive as investing is, one of its biggest burdens for newbies is that it does require initial capital to start with. Especially if you have oriented yourself towards investing in more expensive assets such as property, for instance, chance are that you will have had to save up for a certain amount of time or have access to the capital that your investment will require.
Of course, this is not valid only for starting investors. Experienced investors are also in constant need of capital but the likelihood is that they have curated a certain amount of profit from previous investments that they can re-invest in new projects. If you just entering the world of investment and you are wondering how to access the necessary capital, you can think of yourself as an entrepreneur that is about to start their own company for the first time. Where to start?
Let’s take a look at the different avenues in which you can access capital. Some of these may be a complete eye-opener as you may not have thought about them as potential areas to use the money for investment.
Before diving in the list of capital avenues, we would like to take a pause to go back to the investment project itself. Investing is a complex but rewarding activity and it requires a thorough knowledge of the market, your individual capabilities, your end goal, financial expectations, and more, in order to be successful. Professional investment consultants can be of great help in guiding you in your decisions and pointing out which projects are according to your desires and which is a bit too risky for your portfolio.
We have already looked at the different investment types and have opened up a territory of diverse investment methods to choose from. We have also touched upon the area of risk appetite and risk tolerance as factors to consider when estimating the potential risk involved in the investment.
In other words, thinking about the capital required for your investment is among the next stages of investing and should follow a detailed brainstorming and research of other factors, such as those mentioned above.
Let’s imagine that you have now set your eyes on the perfect investment project. You have found a brilliant property in London that you have plans for. These plans may include converting it into an HMO, renting it out to tenants, reconstructing and renovating it completely to sell, or others. The opportunities are endless. But where will the money for the investment come from?
There are a number of sources of capital available for your investment but prior to discussing them, we would like to list a few questions that are important to ask yourself before considering ways to secure capital.
Now that you have answered these questions and have a general overview of your willingness to take certain actions in the name of the investment, let’s take a look at the different sources of capital that you can access and use!
Have you ever thought about your pension as a source of capital for investments? If you haven’t – don’t worry, not a lot of people have.
The truth is that the majority of people will get to retirement hoping that their pension will sustain their lifestyle and help them maintain a decent standard at an older age. However, there are some, who would like to use their funds to invest in property, for instance. But the main question is – how do you access your pension funds?
Our experienced consultants at Seed Property Group can show you how you can access your current pension funds and use them for your next investment in addition to the bonus of leveraging the available amount. What’s most important in this scenario is that you invest your funds in the best commercial project to ensure a positive outcome of the investment.
At Seed, we can help you find the right commercial project and assist with accessing your pension funds to financially back it up. Let us help you convert your pension into a suitable vehicle that can help you place funds into a commercial development with an objective of receiving higher returns than those that your pension can offer.
The chances are that as an investor you will be someone with some level of experience and investing will not be your first endeavor. Not to say that all investors have spent years of working or developing another business, but most successful investors have the experience of running a business or being part of one.
One method of using capital for an investment project is to save up from a side business or using your main business as a source of profit to invest elsewhere. Of course, it is important that this does not pose a threat to the normal operation and activity of the business and will not harm financially your employees or reputation. This method may require a longer time period to collect the necessary capital and is suitable if you have a long-term plan prepared for your investments.
Let’s take for example a scenario, where you have spotted an old, rusted building that is perfectly positioned in an area with a lot of potential for future development. The building is big enough to host a large number of business offices if reconstructed and renovated and its location will is certain to attract some of the most prestigious firms in the area to rent or buy parts of the building for office space.
However, the sum required for the investment exceeds your capital capabilities and you are in need of help. You can partner with another investor or number of investors in order to make this good cause successful and provide mutual benefit both for you, the investors, and society. In this scenario, professionals will be extremely helpful in arranging the conditions of the deal and establishing the boundaries between you and the other investors.
If you have heard of crowdfunding as a source of generating financial backup, you will know that it is mainly oriented towards startup companies or interesting ideas that people from society are willing to financially support in order to see the idea become reality or benefit from the products or services that the organization aims to create.
Similarly, crowdfunding can be used for certain investments, as long as they manage to show the added value to society. Taking the example of renovating an older space to turn into a business center or any other space such as kindergarten or even HMO (House of Multiple Occupancy) that will host a larger number of families or become a second home to young children, crowdfunding may be a realistic option to secure the capital you are after.
There are a number of crowdfunding sites and platforms available on the web. Make sure you have carefully read the conditions of posting your investment idea on the different platforms and try to explain your cause as thoroughly as possible.
Loans from financial institutions are the quickest way to gain access to a large amount of capital. This is also one of the more popular ways to secure financial backup as the nature of investing is often quite dynamic and requires an immediate response. Especially if you are hoping to add an attractive property into your investment portfolio, chances are that a number of other investors are always considering the move. This puts pressure on smaller investors with limited financial capabilities as they are aware that failing to react at the moment can lead to the property being sold to another investor.
In the world of investing, it is not rare that the quickest investor wins!
This is where banks and other financial institutions come to the rescue. There are a number of lending options that you can take advantage of and it is best to arrange meetings with your financial consultant or professional property investment consultant to discuss which options are best for you and your objectives.
For example, examples of available lending options include using credit cards, taking out personal loans, mortgages, home equity loans, leases, and more. Every option will come along with its separate set of conditions that may or not be intact with the factors that you are looking for in order to secure your investment. It is essential to fully understand the nature of the financial product and read carefully any provided documentation, especially contract agreements. Ensure that you are 100% sure about the expectations both ways to avoid unexpected situations that may damage your stability or investment in the future.
Buying on margin is a method used by investors who borrow capital from their investments companies to make their investment reality. Typically used in investing in shares, this method represents a way of using leverage and is often characterized by higher return levels. However, don’t be too quick to make this your favorite source of receiving money for your investment as this method is among the more risky ones as it may lead to more money loss for you than the amount that you initially used to invest.
If you do decide to use this way of securing money, you will be required to open a margin account and you will be given a minimum deposit that will be required to be input in your account in order for it to be valid. There is also a certain barrier on the amount that you are able to borrow and it will depend on the price of the stocks you are looking to buy. In other words, this maximum is known as the maximum loan value.
There are certain interest charges that go along with the taken amount but there are certain deductions on the interest depending on what you will be investing in. It is important to note that you must constantly keep a certain amount of assets in your account that is able to cover the loan value.
If you have tried starting a business in the past of you currently run one or more organizations that you have seen a start from the bottom, you are probably already familiar with the difficulty of this task. Securing financial backup or capital to start your idea or make your investment reality is probably one of the most difficult tasks of the journey. However, this should not be a reason for you to give up!
There are a number of ways to gain access to capital that these methods have been specifically designed with the aim of helping investors grow their portfolios. The above list outlines only a few capital sources but we ensure you –there are more! If you are looking to enter the world of investors and start building your portfolio, get in touch with a consultant from Seed Group and let us help you make the right decisions. We can orient you towards the best ways of finding capital for your investment and discuss potential investment projects depending on your investment preferences and goals! Let us help you make your money work harder for you!