Kevin and Sarah are joined by Paul Wilson to talk about the innovative investment concept ‘Armchair Development’.
Paul is the Founder of We Find Houses Group – a national company providing a comprehensive range of property investor services for over seventeen years.
Watch the full interview here (transcript below).
In this 8-minute video, you will learn:
• What an Armchair Development is
• What an Armchair Investor is and how to become one
• The benefits of an Armchair Development
• How safe your money is, the risks and how much to invest
• What kinds of projects Paul is developing
If you want to get some more information, visit WeFindHouses.com.au or download the overview document on Armchair Development.
Kevin Turner: Hi I'm Kevin Turner from Real Estate Talk. I'm going to introduce Paul Wilson to you. Paul is the founder of a company called, We Find Houses Group. It's a national company successfully providing comprehensive range of property investor services for well over 17 years including the innovative investment concept armchair development, which is what we're going to talk about in this particular interview. By way of introduction Paul has 25+ years of experience as a successful property investor. Also, a mentor, a buyer's agent and he's also an accredited property investment advisor.
Paul, welcome to the show.
Paul Wilson: Thank you. Hello Kevin. Hello Sarah.
Kevin Turner: And joining me to talk to Paul is Sarah Megginson from Your Investment Property Magazine. G'day Sarah.
Sarah Megginson: Hi Kev. How you going?
Kevin Turner: Well, thank you my dear. Paul, first up just tell me what is an armchair development?
Paul Wilson: Armchair development is where there is a development project where the developer invites moms and dads and investors to be able to share in the development. So the developer will take on a project, they'll get traditional lending, a certain percentage of traditional lending, and they also invite investors to become part of the project so that they can share in some of the developer profits.
Sarah Megginson: So what is an armchair investor then. That kind of explains the development side but how do you become an armchair investor?
Paul Wilson: Armchair investors are the people who actually put the money in to the investment company that is associated with the project. So, all these projects have a small component of investors. The last one we only had a maximum of 11 investors that could participate in that project. So the investor who comes into it is an armchair investor. They're putting in their capital to be utilised for the development and they basically don't have to put on a hard hat or a hammer or do any of the hard work. They literally share in the developer profits at the end of the project because they put their money in as a funding\ investing into the actual investment property.
Kevin Turner: That's a really good overview Paul. But what's so great about armchair development?
Paul Wilson: It's the opportunity that it offers investors to be able to remain fairly liquid with their funding. They don't require a bank's approval. They are able to participate in the short-term projects, which are giving them way above market returns on their money, rather than sitting in a superfund or in a bank account where they're getting, the cash component is getting really low returns. So they can stay liquid, go into a short to medium length project while receiving very strong returns, typically of 20% or more.
Sarah Megginson: I think you said the magic word there Paul being liquidity. Something that investors are struggling with at the moment when all of their funds are kind of tied up in their houses and we can't get finance. So how does this process work and alleviate that?
Paul Wilson: Yeah absolutely and it's a great option for people who can even pull money out of an offset account to put it ... pay 5% on their loan and get 20% return on another project. So that certainly offers that. The simple structure of it, there's just an investment company and a development company. It's important for the investors to understand that their funds are quarantined from the developer. The developer can't touch their funds. It can only be utilised for authorised expenses on invoice directly associated with the project.
And as a preference shareholder. They're the only preference shareholders in the project and that means that they're given priority distribution when the project settles and the funds are distributed to everyone. And the developer is the last one to declare their profits. Obviously there's a lot more other complicated layers that we can explain later but in a simplistic nature it allows them to participate in developer profits with mechanisms that are in place to mitigate any of the risks that may be associated for an investor.
Kevin Turner: There's a really good overview document. We'll give you the link to that towards the end of this video as well. It'll take you into some great detail about what Paul just discussed there very briefly because it is a concept that you need to get a handle on and you'll see it on that overview document we'll tell you about later.
Just before we let you go Paul, can I just ask you about how safe my money is? What are the risks and how much do I need to invest?
Paul Wilson: Sure. Kevin, a lot of the projects the minimum investment is around the $25-30,000 mark and obviously is you're more sophisticated as an investor, you can put in larger chunks and get bigger returns. The safety of your money because it is quarantined from the development company there are ... no one can mitigate every level of risk but we are very proactive in making sure that the projects do have structures in place to minimise the risk and at the end of the day, the investor can look at the specific project and determine on the tangibility of the project and the nature of the project, just how risky it is and whether or not it fits their own risk profile.
Sarah Megginson: So Paul, what kinds of projects are you doing and what kind of projects have you been able to get involved in?
Paul Wilson: They really range. It obviously depends on ... first we got to make sure there's profit in the project but they range from anything from a very small project to a two project subdivision, all the way through to larger projects. Medium size we're just about to settle on nine townhouses. We've done six townhouses. We just had a project with only two subdivisions that have been approved. And then on the other scale, we're doing one that's about 140 townhouses. Now, for some they find that they might think that's a big project but bigger projects have more room to move to if there is a delay in time or if there's a budget blowout. They often have more profit allocated to them.
But really at the end of the day the investors get to choose. We assess all projects on their own merit and there's always going to be a variety of different options that they can invest in.
Kevin Turner: A wonderful insight, a tremendous product too and as I said earlier, if you want to get some more information there is a website to go to, which I'll give you in just a moment but if you want to contact Paul and his team at We Find Houses Group. You'll find them at the website wefindhouses.com.au. And the overview document on armchair development is available for free download here.
Paul, thank you very much for your time. It's a great product and we're very pleased to endorse it. So thank you for your time.
Paul Wilson: Thank you Kevin. Thank you Sarah.
Kevin Turner: Good on you Sarah. See you again soon.
Sarah Megginson: Thanks, bye.
With thanks to Real Estate Talk