Many have heard of stock market investors making a killing from pre-IPOs (investing before a company lists on the Stock Market). However, few have heard of investors doing it with real estate.
It is a far less common strategy, although one to be considered if you’re fortunate enough to be invited to access it.
Of course, we would have all liked to have been an early stage investor in Facebook, Google, Amazon or even Uber or Airbnb amongst others. However, those investments are usually reserved for much larger investors with key contacts and willing to speculate well before they are likely to succeed. With real estate, some developers do utilise creative ways of financing exotic or unique property projects.
One example is, international developers raising funding for some property projects by allowing some early stage investors to invest into a property project for as little as $100,000 USD and access $500,000 USD worth of property and equity.
Some may question how and why developers would offer such lucrative returns and also afford to do so in the first place.
Basically, they are losing money on some initial villas or apartments (as $100,000 is generally well below their cost price to build). But, it enables them to raise funding to ensure the projects go ahead. Therefore, they make it up on the balance of the properties they develop and sell.
Others had various forms of offerings in a similar vein, but this one by far was the most lucrative on offer for such a small outlay that also offered real estate security in case the project didn’t go ahead.
Although, it’s not without risk. However, as we have seen with early stage investors in Facebook and other companies, the returns can be astronomical.
They can also be almost impossible to access as developers generally take capital from much larger investors that are investing millions. These certainly aren’t available for retail investors either and are primarily for sophisticated investors.
For Australians, it’s often even harder due to Australia’s over the top strict regulations, especially since many international developers are reluctant to even accept Australian investors unless they can prove they qualify as Sophisticated Investors (which generally consists of those with $1m net assets outside of their home or $250,000 plus annual income).