high yield property investment by adavo

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Step 1: Sign the Joint Venture Agreement
Example: £150,000 Joint Venture, 6 Month Cycles, 3 Year Agreement.

After completion of proof of funds and money laundering checks, the Joint Venture Agreement contract is agreed and signed by the investor and one of the partners of Adavo Property.

Step 2: Place the agreed capital on account
Example: £150,000 Joint Venture, 6 Month Cycles, 3 Year Agreement.

£150,000 is allocated by the investor for property purchases. The funds remain in your account throughout the buying process. All that we ask is that you are available to release the funds as they become due. Funds to purchase and renovate the property can only be released in accordance with the terms and conditions set out in the Joint Venture Agreement.

Step 3: Allocate a suitable property
Example: £150,000 Joint Venture, 6 Month Cycles, 3 Year Agreement.

The next suitable property available is allocated to this specific JV and its purchase is progressed. Professional fees relating to the purchase (such as RICS survey fees, searches etc) are drawn down in accordance with the terms of the JV. The property will be approximately £150,000 in value (confirmed by an independent RICS valuation) and we will aim to buy it at a 15-20% discount. This will typically mean an expected purchase price of approximately £120,000 which will leave the remaining £30,000 for renovation costs, fees and contingency.

Step 4: Complete the property purchase
Example: £150,000 Joint Venture, 6 Month Cycles, 3 Year Agreement.

Once all valuations, searches etc have been returned without issue and the conveyancing work has been carried out, we then complete the purchase in the investor’s name. The necessary funds are drawn down from the holding account and the joint venture partner's legal title to the asset is established on completion of the purchase. A legal charge is also arranged for Adavo Property's 7.5% share of the development profit. We undertake a purchase completion checklist to ensure everything is in the file and send a copy of this to the investor.

Step 5: Renovate the property
Example: £150,000 Joint Venture, 6 Month Cycles, 3 Year Agreement.

The renovation works take place over a 4 week period and typically increase the value of the property by around 10-15%. The renovation fees in this example would be expected to come in around £20,000-£25,000 ensuring that the £150,000 set out in the JV agreement will be able to cover all costs associated with the process. The renovation costs are paid on completion of works. You will recieve a full set of photos showing the property's condition on day one and then every Monday afterwards until work is completed. All JV partners are welcome to visit the property throughout the process and check up on progress.

Step 6: Sell the property
Example: £150,000 Joint Venture, 6 Month Cycles, 3 Year Agreement.

We begin to market the property during the conveyancing stage and typically have placed the property prior to purchase in line with the secured exit strategy. We will aim to progress the sale during renovation works if possible although many buyers want to see the finished article before moving forward. If for any reason the sale falls through we market the property via the open market, existing networks and partners as a first stance but will typically replace one buyer with another as a matter of course. We are currently servicing a strong demand but retain a belt and braces approach as standard. Ultimately a well presented, furnished property in show home condition that yields 7%-10%+ from net rent is expected to sell on the open market inside 4 weeks.

Step 7: Return the capital to the Joint Venture partner
Example: £150,000 Joint Venture, 6 Month Cycles, 3 Year Agreement.

On the day of legal completion of the sale the original £150,000 capital is returned to your account. The whole process is expected to take 5/6 months from start to finish. This allows two cycles/projects per year.

Step 8: Divide the profits
Example: £150,000 Joint Venture, 6 Month Cycles, 3 Year Agreement.

At the end of each cycle the profit is split and paid out. In this example of a £150,000 joint venture with a 7.5% return per project (15% annualised return assuming two cycles per year) we would pay £11,250 profit at the end of each cycle. The profit for the year would be £22,500. This is transferred from your solicitor to your designated account. The investor's return from each project is fixed at 7.5% with Adavo taking the remainder. Our share will vary depending on the profit margin in each particular deal.

For clarity; if the project has a 10% development profit then the investor would take the first 7.5% and Adavo would take the remaining 2.5% share. Conversely, if the project delivers 20% then the investor would still take the first 7.5% and Adavo would take the full remainder. The long term project average is 15.2% so the 7.5% represents a headline 50/50 profit share. Logistically a fixed return is better as it prevents investors (who may not be property professionals) trying to judge which deal is better than the next. If each deal is fixed at 7.5% then the system speeds up because there is little difference from one deal to the next.

Step 9: Repeat the cycle
Example: £150,000 Joint Venture, 6 Month Cycles, 3 Year Agreement.

Over the course of the three years we would expect to use the capital six times; once every six months. This will entail six properties with the profits paid at the end of each cycle. This limits the effect of any movement in the general UK residential market as each property value is backed by a recent valuation and is usually only held for 3 or 4 months. This prevents the value of the property being affected to any great extent by the general ebb and flow of the market.

Step 10: Repay the capital
Example: £150,000 Joint Venture, 6 Month Cycles, 3 Year Agreement.

At the end of the joint venture agreement after 3 years the capital is repaid along with the final profits due. Each joint venture lasts as long as you want it to and, if you are happy to, can entail dozens of properties over several years. In this example the original capital of £150,000 would earn the expected £22,500 per year for as long as you wished to continue.


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high yield property investment by adavo