Feature: Now is the right time to be a real estate entrepreneur but navigating the financial landscape is key

By Marcus Perry, partner at Charles Irvine

The big resignation will undoubtedly contribute to the next generation of real estate entrepreneurs. These rising stars who have decided to quit corporate life and branch out on their own are tech savvy, socially responsible and have gained valuable property experience. The innovation these people will bring can only benefit our industry.

However, even with experience in real estate transaction and development, long-term success for an entrepreneurial property developer will be dependent on navigating the financial landscape and not only obtaining the right capital, for what is essentially a personal project, but through a vehicle that will create the most return.

Cyclically, this drive for young real estate entrepreneurs to leave the workplace has come at the right time. There are a number of sectors, such as secondary office, retail and BtR, that are early in their recovery / growth trajectory and are set to develop over the next five years. The next generation is in a position to capitalise on this strong cycle, but they need to get the foundations of their business right from the outset.

Build up a track record – it is difficult to develop a property business without track record, though it is possible with the right partners / collaborators.  Equity investors will almost always want to see evidence of outperformance in sourcing, managing developments and exiting for profits. If this just is not possible…

Demonstrate ambition and commitment – there are instances where start-ups have convinced growing lenders to finance their first project without existing capital or a track record. These are rare, but investors are attracted to people with ambition. A successful entrepreneur must believe in their plan and come across as credible and as someone who has the drive to create success and return.

Have an extensive network – and not just with investors. Consultants like rainmakers and so an entrepreneur should build their network with agents, architects, planning and cost consultants, contractors and solicitors. A wide network of partners and collaborators will complement any core proposition of a property business plan.

Be creative – a key component. Think collaboratively and work with partners who can add complementary skills to your offer and strike up quality relationships with the best consultants affordable. A leading, global prop developer went to live in the Middle East to be close to their key investor; several property developers we know are developing fintech platforms which are complementary to their main businesses and will help with brand perception and defining a USP. Sharing an office with complementary businesses incubates ideas. This level of creativity – and commitment – can make the difference to the capital obtained and the return achieved.

Get to know how equity funding works – equity financing will always be the greatest challenge. An entrepreneur must use any money he or she does have, efficiently. The most direct way to making outsized returns is by investing small amounts of capital alongside other investors and agree a favourable return.  A residential market long labelled by the government as ‘too big to fail’ has enticed lots of funding solutions to enter the market so there are more vehicle options than there have ever been. Debt is also regularly offered in place of what would have been much of the equity part of the capital stack in years gone by.

Engaging with an expert advisor who understands the different type of vehicles to use to fund a project and who has access to investors ready to deploy capital, will prove invaluable to the journey. However, those entrepreneurs who have the patience to build up strong relationships and show themselves to be relentlessly improving, adapting, reliable and ambitious may one day attract the attention of the institutional investors. Initially it takes nerve and the talk of a good game to get off the ground, eventually when the track record evolves, an entrepreneur’s history will speak for itself.

With cyclically attractive timing, a number of areas of disruption and deep liquidity in the finance market it has never been a better time to be a real estate entrepreneur.