This post is part of our CREST investment series, explaining the 5 things investors should consider when evaluating an investment opportunity.
How do you know that the hard-earned money that you’re choosing to invest will be safe? In other words, how can you ensure that your investment is secure?
This is a crucial question for any investor.
How can you ensure that your investment is secure?
Once you have established and you have satisfied yourself that the developer is credible, legitimate and trustworthy, you should then turn your attention to the investment itself.
Developers should present investors with the relevant figures for each investment opportunity. These should include, for example, the gross development value (GDV) of the development. The GDV is the expected total market value of all the developed units when sold. Check that the GDV presented to you is realistic. If the numbers seem inflated, this is a red flag.
Check that the legal agreements presented to you are fit for purpose. A legal agreement is the bare minimum an investor should expect from the developer. After receiving any legal documents, we always recommend that our investors seek independent legal advice.
Ask yourself – what is the investment secured against? Is it backed by guarantees from:
- the company?
This may be shares in the company which owns the development property, or restrictions or charges on the property itself.
- the company directors themselves?
i.e. personal guarantees. If so, have you been provided an assets and liabilities statement or an up-to-date credit report to ensure they can meet their financial obligations if called upon to do so?
Before going ahead with an investment, make sure that you fully understand the answers to these questions.
Finally, always take your time to decide if investing is the right thing for you to do.
Contact us to learn how you can securely invest in property with us (and ask to be added to our exclusive investment opportunity email group).