Armchair Property Development allows you to pre-purchase a residential property at a significantly lower price by investing in an ASIC compliant fund that the developer will use as a deposit to secure finance and build the property. Once construction is complete, you’ll receive the capital you invested as well as a share of the profit.
Investors have the choice of either retaining a property on completion at a significant discount to market value or taking a targeted return of 20%+ on funds invested without electing to retain a property.
A Property Development Fund is an easy investment for our clients and requires as little as a $10k investment. Development is the process of adding value to a property by maximising it’s potential, which generates profits, thereby delivering attractive investor returns.
Up to $5million
$10,000 depending on the project/offer.
All legal entities and individuals can invest.
The impact of the development taking longer is that any profit made by investors is calculated over a longer period of time which reduces the effective annual return.
If the investors has a preference share that gives them a priority share of the profit then a drop in actual profits might not affect their returns. Please read the particular offer document to check if this feature of the offer applies.
In some cases the developer may guarantee the costs which means there is no impact if the project goes over budget.
There are some providers that promote the value of having no bank debt. This is great in extreme circumstances like the GFC when the value of end properties plummeted and the banks called in their loans. Projects without bank debt would have still made a loss but the underlying property would still be an asset to the investors that the bank would not foreclose on.
On the other hand, if a bank will not lend money to a developer then why would you provide the money instead? Banks are by nature conservative and if they are prepared to lend significant sums of money (as much as 70% of the total costs) then they have satisfied themselves that the project is viable in the hands of the developer.
Bank debt can also inflate the investor returns through leverage. Depending on market conditions, the amount of bank debt employed may be reduced or increased to reflect market risk.
Either they're replaced by the project manager or by the bank through a tripartite agreement.
Not to be confused with a guaranteed return.
Whatever profit remains after paying the banks is paid to you before profits are distributed to the developer and other classes of investors if applicable.
This contrasts with a joint venture structure, for example, where profits and risks are generally shared equally between the developer and the join venture partners.
You money is managed by the responsible entity (AFSL holder) and used to pay project costs as outlined in the product disclosure document or project specific ASIC compliant offer documents. This oversight creates separation between the Developer and the use of your money. We also provide regular monthly updates with photographs and video so you are kept appraised of the projects progress throughout the development. This transparency is important
It's really simple. Fill out our e-application form which gives you all the instructions.
90% of our investors invested after watching the webinar and scheduling a call online to clarify any subsequent questions.
Our investors either choose to get a profit share on their equity invested or take a property in the completed project at a discount. The discount is dependent on the actual profits and not guaranteed. A recent example is an investor retained a property at cost or 21.7% less than the bank valuation. Their profit on cash invested equated to a 57% return on equity (cash-on-cash return).
Hotspotcentral has been providing access to off-market armchair developments since 2009. Our research technology that underpins the decision to back a project has been around longer and has featured extensively in property media publications.
Our artificial intelligence enables us to analyse huge amounts of data about both the location and the project that is benchmarked against previous successes. This process is impossible to do manually. Any property expert not using this technology as part of their research and due diligence is only examining a small portion of the facts and is therefore prone to personal bias in the investment selection process.
Michael invests his family money in any project he sponsors ie. raises capital for and therefore takes his research to the next level.
The responsible entity (AFL holder) will return your funds plus interest.
This is project dependent but mostly we make our money on a fee for service basis.
Our fees are fully disclosed in the relevant ASIC prescribed offer documents.
A financial services guide is an ASIC prescribed document issued by the fund manager. It provides information about the company providing the financial services (that's us) including the fees charged. This full disclosure means their are no hidden costs and your returns are net of all costs
Our investors benefit from our relationships and our independent research. Developers compete for our business and your capital. In return we're able to secure off-market opportunities on terms that individuals are unlikely to secure on their own. But mostly it is our high tech research and risk mitigation that makes a big difference. We're also a boutique business with fewer mouths to feed and use technology to keep costs down so we can get better returns for ourselves and our fellow investors.
Our investors are time-poor people from all walks off life. Both local and international.
Most spend a bit of time getting to understand our research methodologies and technology so that when an offer is presented, they feel comfortable that few stones have been left unturned and that they can rely on the data and hard facts to back their decision.
We're located in QLD which means we have built our relationships here mostly. Fortunately, there are 15,000 micro-markets (suburbs) that we can quickly evaluate using our DSR BoomScore™ location analysis and comparison technology. We would be able to offer great projects in any State and in any market cycle due to this ability to zoom into local markets with disproportionate potential.
That said, we are currently also looking at projects in NSW.
If the project assumptions around build cost and end sale prices are met and you were offered a 25% fixed return then you would be paid you capital of $50,000 PLUS your profit of $12,500 (25% x $50,000) for a total of $62,500.
If the offer is a preference return then you would get paid first out of the profit pool before the remaining profit is distributed to everyone else.
Your profits are impacted by the overall costs so we mandate that our developer partners engage a builder they know well (important) on a fixed price contract. These costs are verified by both the lender and the AFS licensee and managed on a weekly basis by the developer in conjunction with the bank.
In some cases the developer has guaranteed the costs.
Investor updates are an important part of the whole process. We use technology to make this easy for both the developer and the investor to access updates in a timely manner using jargon free and multi-media formats like video and written updates. We rate our developers on the quality of these updates before we accept them onto subsequent offers.
Most importantly though, it's about you feeling part of the process both when things go wrong (and they do) and when things go great. Keeping you full appraised is important.