Forums Home › Starting Up › What to do about over-enthusiastic investors?
This topic has 3 voices, contains 2 replies, and was last updated by 
292 days ago.
| Author | Posts |
|---|---|
| Author | Posts |
| May 14, 2012 at 9:18 pm #61749 | |
 jane |
When something appears to be too good to be true, it usually is, right? I was working with an associate of mine who is investing in brown site development in New Jersey. He’s turning old office buildings into inner-city apartments and retail outlets. It’s a great idea, the project has been beautifully conceived to retain the old world character of the brownstones, and it offers downtown living to people who don’t wish to live in the ‘burbs. We thought it would be a good idea and as it turns out, everyone agrees! In order to kickstart this development, my friend had to find investors. He has more than 15 years experience as a property developer, and knows all the pitfalls and risks involved in a project of this size. As it turned out, people were only too keen to throw their money at the development, but there’s been a hitch. Although my friend’s investors are ready to part with their cash in return for a huge dividend (the property market is alive and kicking in NJ), they lack any experience in property development. So far, a number of big money investors have expressed a strong interest in playing a role in the development process, from architectural design, to marketing and interior fittings. So here’s where this is going. How does my friend keep the investors sweet while at the same time prohibiting them from getting physically involved in the project? My friend (and yes, he is real but just doesn’t want me to disclose his name!) is more than happy for the investors to make a mint off his efforts, but how does he keep them at arm’s length?The development is a winner, but any inexperienced interference could jeopardize the project. This situation could happen to anyone, especially someone developing something cutting edge in any field. So, is anyone out there familiar with this dilemma and how should my friend deal with it? |
| May 24, 2012 at 3:15 pm #80771 | |
 Josh Patel |
Hi – I think I can help. I was in a similar situation a few years back – another property development – but this time in CA. I bought some old office buildings in the downtown area of Santa Rosa and started looking for a substantial cash injection to get the project off the ground. Like your friend, I was bombarded with people eager to invest their money, but in return they wanted a say in everything. And I mean EVERYTHING, the kitchen sink included – literally! In a bid to hold onto their money and keep them at arm’s length, I produced a business plan that highlighted all the pluses, but which also outlined all the potential pitfalls if the project wasn’t left up to experts. That seemed to work. Most (90%) of investors put money into the development, but scared that they could lose their cash, they stayed away. We reached an agreement whereby I kept them updated of all the progress at the site and allowed them occasional ‘visitation rights’ for want of a better expression. Some still tried to change things, but there was nothing they could do about it. This was some three years ago and I’m happy to report that we’ve all done rather well off the deal! I wish your friend luck! |
| August 3, 2012 at 5:44 am #97918 | |
|
Matt Rogerss |
The matter seems complicated. Now someone who is investing a huge amount would like to know what’s going on, and on the other hand he is a novice in the field to understand and suggest any plans or changes.Its up-to Your friend to convince them with development plan and explain pitfalls and all. Rest see what follows. |
You must be logged in to reply to this topic.