JaeVee VS Going Direct To Developers
Last updated 9th April 2020 • Lois Arcari • JaeVee
We love the property industry.
That's why we're committed to making it better. Everyone's turned on their TV or browsed through the internet and heard of some horror stories about developers.
While they represent a tiny fraction of the market, they can still scare off budding property investors.
This scenario is why JaeVee was founded.
We are the safeguard that allows you as an investor to invest into a joint venture with an experienced property developer in comfort knowing that, should the developer not perform or become unwell, we can activate our step-in rights to take over and finish the project.
What can JaeVee protect you from?
When investing equity into a joint venture with a property developer, there's quite a few things that can go wrong:
1. Paying too much for the site.
Some property developers think they've struck gold whenever they've found a potential development site.
When you invest through our joint venture equity platform, you won't have to take their word for it. We've done all the due diligence to ensure we're not overpaying for the land or that the targeted GDV is based on sold comparables (within the last 6 months) rather than what properties could be worth in the future.
Thanks to our thorough risk mitigation methods, we make sure the profits are based on conservative numbers - and you're not 'allured' by any 'pie in the sky' profits that the developers can't actually prove.
We also have a set threshold for how much we'll pay for a development, so that we protect all parties involved - ensuring the developer meets or exceeds their predicted profits and that we generate a great return on investment for all of our property investors.
We have a vested interest in making the development work - unlike unscrupulous individuals, we have a responsibility to developers, investors and ourselves to get the development completed because we only get paid when exits are achieved.
As such, we are a highly selective company - providing a lower number of high quality, highly secured investments.
2. Funding with too much leverage
Debt will always be necessary with property development, but there are many potential problems you can run into by taking on too much leverage.
New development companies could easily underestimate how much debt they're taking on, and overestimate their abilities to pay it back in a timely manner.
Companies will also always have the obligation to pay their banks and lenders before anyone else.
This means that the banks could repossess everything when a property developer fails - without ever reimbursing you.
We ensure our property development investment opportunities are not over fully leveraged with the ability to refinance onto a buy to let or commercial mortgage should sales not be achieved.
3. Misunderstanding of sales & marketing periods
It's impossible to forget that we're living in a time where demand for property vastly outstrips supply.
But that hasn't changed the fundamentals - you still need to supply the market with a great development and provide property investors with realistically projected returns.
Plenty of property profiteers see the headlines and assume that their development will be snapped up immediately - but the reality is different.
With property prices at an all time high, you'll have to put in a lot more work to convince potential buyers that your development is the one they want.
While we'll work hard to generate buzz and buyers for the development you've invested in, all good things take time.
That's why we at JaeVee build in conservation sales & marketing periods which are dictated by the number of units we need to sell.
For example, selling between 4-25 units could be achieved within 6 months of the development achieving practical completion, whilst increased units to sell will result in 12 month sales periods being applied to the investment turnaround periods detailed within our investment memorandums.
4. Setting end values against 'frothy' price gains
When we determine a GDV, we base it on comparable properties that have sold within the last 6-12 months.
We don't consider property price forecasts because there's no guarantee those forecasts can be achieved when taking into account the volatilities associated with macro and micro economics.
This, combined with our 6-12 months sales and marketing periods, and thorough market sensitivity analysis for each development, mean that we're uniquely well placed to weather any storms in the market.
That means that we can focus on getting you the best ROI without scrambling to get developments sold or rented.
With the JaeVee model, your investment is protected.
JaeVee provides the ultimate investment safeguard.
- All investment monies are under our control, the developer doesn't receive a penny - until they achieve the exit.
- If the developer doesn't perform, we can activate our step-in rights to take over and complete the project; thus protecting your capital.
- We analyse every investment opportunity using traditional risk mitigation methods ensuring the developer doesn't pay too much for the site and that sufficient construction contingencies are in place for any cost overruns.
We thoroughly vet every developer who wants to be a joint venture partner with us, looking at their industry experience and track record and always asking for a Developer CV.
You can have the peace of mind that, if a property developer is on our platform, they're proven to have a great track record.
We act as both the project manager and employers agent, therefore we work closely with the senior debt lender's monitoring surveyor to ensure the valuation certificates (drawdowns) are correct whilst leaving a sufficient budget to complete the remaining construction works.
We're in control of all funds - and make sure it's all put towards the specific costs of the property development, rather than funding the lavish lifestyle of a property developer.
For further protection for your investment, we have step in rights which mean we can take over the development to ensure it gets completed if for any reason the original developer can't complete it.
So with JaeVee, your hard earned investment will never end up sitting empty.
Our developers are also at the heart of our business, so it's only fair that we outline the benefits of our joint equity funding partnership for you as well.
We'll have more on that in our developer specific article later this week, but some of the most enticing benefits to using us are:
- We do all the hard work for you. Due diligence, finance, admin - all those things that can eat up your time. We've got them all covered, and we'll tell you the real facts and stats so that you're not caught out by anyone unscrupulous. We can effectively stop you from losing money.
- Similarly, we bring our contacts to you. You don't need to go searching for committed property investors in your area - we'll provide them for you when we put your development on site. We also cut costs on other unnecessary personnel like overinflated professional fees.
- Unlike other joint venture partners, we have a team with over 100 collective years of property and construction industry, thus meaning there isn't a question we can't answer.
Whether you're a property investor, developer or an introducer, let us know what brought you to JaeVee - do you think our joint venture equity funding platform can transform the property industry for the better?
Please note this blog post is not to be considered as investment advice. We recommend you seek independent financial advice and conduct your own due diligence before making any investment.