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How we're helping to tackle the housing crisis with co-investment
Earlier last month we announced that our residential property development investment opportunity in Chilton, County Durham met its funding target with over 40 days left.
A joint project between Growth Capital Venture (GCV) and Carlton & Co, a development of 14 residential properties, 18 investors came together to co-invest in the opportunity to meet the £400,000 target, each taking a stake in this development, which is anticipated to take between 18 and 22 months to complete.
The first of many projects we have planned for the GrowthFunders platform, it's a perfect example of not just how co-investment works - the 18 investors consisted of investors on both a corporate and retail level, and at both ends of the investment value scale - but how we're making strong strides forward to tackle the housing crisis.
Supporting the development of homes
The UK government is keen to support smaller, regional housebuilders. Various schemes and initiatives have been launched to help SME builders gain access to the development finance they need.
In last year's Autumn Budget, details of a £15bn support package for housebuilders - with £1.5bn of this directly for SME builders - via the Home Building Fund was announced.
But whilst these opportunities are positive, they're limited. They can undoubtedly support some housebuilders, but they can't be relied on to drive forward the reported 300,000 homes we need to be building each year.
Larger developers cannot meet the demand. Smaller, regional housebuilders need to come back into the market by offering homes that match market needs with both choice and quality.
And because the demand is too great, and the £1.5bn being available simply won't fund the amount of homes needed, this is exactly why we're focusing so intently on co-investment.
Coming together as property investors
We know how successful co-investment can be in general - we've seen numerous high growth SMEs benefit from investment via multiple investors - and it clearly works for other sectors. It can be successful for property and we've showcased exactly how it happens with Chilton.
One of the key reasons behind its success is it's becoming increasingly commonplace for people to have a desire to invest not just for a financial return, but for one that delivers true impact.
Couple this with preferring to invest in opportunities where some level of knowledge already exists and there are fewer better placed opportunities than property.
Everyone knows we have an issue with housing. A major one. We don't have enough homes and we need more of them; more of the right homes, in the right locations, for the right people.
People want to invest knowing they can make a difference. When it comes to property, some will do so by purchasing a property outright and letting it out. This is arguably the most common scenario we've seen - buy-to-let landlords. But it requires a sizeable deposit, and even if you do have it, you're only investing into a single property (unless, of course, you have multiple deposits to buy multiple houses).
But by becoming involved in the co-investment model, you can invest your money into property in a way that has an even greater impact.
Take Chilton as an example. You're involved in the development of these homes - 14 of them - from the very beginning. The homes are three and four bedroom family homes, meaning your money (which could have been as little as £1,000) can directly affect the lives of at least 42 people (thinking of two adults and one child in every home). That doesn't include the positive effect new homes have on the area they're built in, often notably raising the profile and value of the surrounding locations.
Co-investment could, in theory, see your money have a positive affect on the lives of hundreds of people.
Investing in property isn't risk free (but it can be risk manageable)
Now of course, these aren't risk-free opportunities, but one of the most notable benefits of co-investment - particularly if you're a new investor, or are new to property investing - is you can benefit from the knowledge and experience of those around you.
It's important everyone completes their own due diligence before making an investment, but it's this that is a merit to co-investment. If you have a dozen or two people doing their own due diligence before investing, the level of confidence in the opportunity as a whole increases.
There are always risks that simply cannot be accounted for - be that a natural disaster or a drastic and unexpected economic downturn - but for all risks that are manageable, due diligence should showcase just what would happen in every eventuality.
The future of housebuilding
Norm Peterson, co-founder of GCV and Carlton & Co said “We’re delighted to be bringing the Carlton brand back into the North East. We are focusing on smaller schemes where we can design and build homes with quality materials and an attention to detail that makes Carlton different.
“The innovative co-investment model has been well received, with investors keen to back this residential development scheme and share in the development profits. It’s a different way of financing a development scheme and we have more opportunities in the pipeline."
With Norm's words echoing perfectly those of the company as a whole, we're excited for the future of housebuilding here in the UK, and feel confident we can play a pivotal role in solving the housing crisis with co-investment.