Dear BP members,

Let me share idea, or actually my business model, with you. Before I start, my background must be mentioned.

I've worked for forex broker for couple of years as head of key account management which helped me to build my network and expertise in regulated business. I also used to finance small start-ups and when I ran out of cash I was looking for bigger investors to fund a deal and I kept some reward.

I liked this model for some time. Till I was left with no money and no passive income. Therefore I decided that I want to have a business that generates cash-flow.

I bought a first apartment and started to rent it. It has been two years of my real estate education together with books and BP podcasts.

Please note that I operate in European Union. I'm from Slovakia and live in Czech Republic (Prague is the Capital)

I decided that I want to make real estate business big because it is a beautiful business that brings value to all parties. So my question was: How to fund this business and buy as many deals as possible.

Real estates are more expensive than those in US and banks are pretty strict. With bank financing I could grow not as fast as I'd like to.

So we (with my business partner, he is CEO of an regulated investment firm) made a decision to raise money from investors. We have a lot of experience and a huge network. So it all made sense.

Our first deal, financing and other ideas how to move forward

In June, last year, I met with John (my business partner) in Cyprus and we discussed that we would love to build 3 apartment houses (22 apartments) and we discussed how to do it.
First step, plan what you want and find money.

I started to meet people back in Czech Republic and after 3 months I called John that we have a strategic partner. We discussed terms and conditions and how it should be built, contractors, lawyers, taxes, which land to buy, sales, profit shares and so on. All preparation took months and months.

The project cost is more than 3M EUR. Our strategic partner is a developer that builds houses in Spain and Slovakia so they knew how to mitigate risks and save some money. If we didn’t build all apartments at once we could make some money from selling few apartments (not paying all money down at once) and increase return on investment. So we needed much less money. I think it was about 1.5M or even less.

At the moment we are discussing conditions with banks and getting 50% bank financing. Hopefully we start building soon.

There is good money on the table but no income flowing to our bank accounts so we wanted to buy residential apartments and make profit on rents. Again, months of studying, meeting developers, property managers and getting best people on board. I believe that great success can be made only with great people in your team.

In preparation phase, we have found a small problem. Getting money from investors is easy when you make one deal. But what to do if you want to make huge amount of deals?

You hire a great lawyer that is in the business. I’ll make long story short. We started an alternative investment fund. These way we could get money from investors while their money is safe. Fund is the owner of apartments and investors are owners of the fund.

This way we can raise money from investors, find deals that we can fund, we can get better financing from banks, increase slightly the ROI and at the same time make better deals.

It is very elegant way how to fund your deals, grow fast and do what you love. It is probably not very convenient for people who have no experience with regulated business but might be great for those who have experience and want to grow fast.

I hope this model is applicable in US too. 

Best regards, 
Adam