How to Make Property Crowdfunding Work For You

By Nicole Bremner.
The key to successful crowdfunding is keeping your investors in the loop every step of the way – and choosing your crowdfunding platform wisely.

 

Feeling daunted at the thought of crowdfunding? Getting investors to believe in you and your venture is 100% achievable if you take all the necessary steps, especially when it comes to marketing. It also pays to put some effort into ensuring your investors are happy at every step along the way. This means crowdfunding is a lot of work. Which is why my company East Eight (www.east-eight.com) has chosen platform Simple Crowdfunding (www.SimpleCrowdfunding.co.uk) as our crowdfunding partner.

Being FCA-regulated and incredibly thorough, this company deals with a lot of the headache parts of the process like the know-your-customer checks, helping explain risk and anti-money laundering, which means I can focus my energy on creating a buzz and winning over investors through brand-building. As a result crowdfunding has turned out to be a game-changer for the way we raise equity; we can get almost instant commitments from investors, and last year believe that we beat the property world record by crowdfunding £1.624 million in 17 minutes. Our latest raise of 650k took 64 minutes for another Hackney project, making that our sixth successful crowdfund.

My approach to crowdfunding is to give people with modest funds the opportunity to invest and be in the same club as people with a million, and have a front row seat to the development itself through the process. I am passionate about this. We’ve had projects where the smallest shares were £500 each. We currently have 36 investors for one project in South Kensington whose investments range between £500 and 150k. And the great things is, big or small, they can see how their investment is going and engage in the process.
As one of the early adopters of crowdfunding in the UK property market my approach is based on brand-building. It’s an open and transparent process, building a community around a project, sharing the goal and involving investors at every step along the way, whereas most projects involve only two or three people. At East Eight we put the spotlight on the process and the funding and that’s unique to this industry.

Here is my blueprint for property crowdfunding:
1 Engage with your chosen crowdfunding platform and discuss your aims and expectations.
2 Establish the timeline to raise the money for the project in question. It’s usually a pretty small window for us so some tight planning is required.
3. Plan your marketing strategy, getting guidance from your platform. Start building your crowd by crafting your story and connecting with your purpose. Put some thought into your brand, your client and your value.
4. Choose a crowdfunding model – either equity or debt.
5. Try to line up as much of the interest as possible before the raise so you can hit the ground running. In crowdfunding there are psychological barriers – people want to see that 50% of the target has been raised before they invest.
6. Prepare your financials and investment proposal. Have a designer prepare an investor pack that looks professional. You’ll need an investment CV that demonstrates your track record as a developer.
7. Consider offering tours of the property. People like to be able to see it before committing.
8. Opening bank accounts and raising debt can be a nightmare so make sure that you plan for this before you start your raise.
9. Have a solicitor draft a tight shareholder agreement specifically for crowdfunding. Apart from looking professional, this will protect you if things go wrong. Make sure you have clauses in place so that you, the developer, cannot be voted out as a director as you have the skills and expertise – vital if you end up a minority shareholder after the raise.
10. Keep building your crowd through marketing, sharing pictures and videos of the site and telling the story online and in person. Share what you’re doing with your audience on social media. Become a micro-influencer, sharing industry content and engaging in discussions.
11. Prepare people for the raise in advance – let them know that you will be launching a crowdfund project. Work with the platform to put out information about the project before it opens, directing interested parties to the platform for information on the raise.
12. On the day of the raise be really visible, doing lots of social media around it to get people engaged and build excitement.
13. Keep updating your followers and driving traffic to the site until you’ve reached your target.
14. Once the raise is done, report on the progress to your crowd of investors every two to four weeks. Keep your crowd engaged and informed. Update them via the system that works for you, e.g. Basecamp, where investors can log in and see the management system in process. Organise tours so they can witness the project as it develops. It is crucial to look after your investors.
15. On project completion return any profits, loans or debts to investors and dissolve the company the project was incorporated under. Convey your thanks for their belief in you and hold a tour of the finished project. It’s important to wind up the accounts as quickly as possible.
16. Stay connected with your investors. Gather their feedback. What can you learn? Keep visible through social media, meetings, events and speaking engagements so you can build interest for your next project.

 

 

Nicole Bremner is a property developer, founder of East Eight (www.east-eight.com) and bestselling author of BRICKING IT: From Stay at Home Mum to Millions in Property. She is passionate about making the world of property more accessible to women, recently launching online property auction site Duomo (www.duomohq.com) in partnership with Bamboo Auction.