- If you are a property investor, then a syndicate or SPV structure can help you to multiply your spending power by enabling other people you know to co-invest with you.
- If you are a property agent, then a syndicate or SPV structure can help you to generate additional property-related fees, by unlocking additional capital from your existing clients and contacts.
Whatever your position, you need a tried-and-tested structure that you can clearly communicate to prospective investors. You’ll also want clarity on the costs of establishing and running the structure, so that you can put together a fully costed plan for your investors to approve.
Regulatory risks you need to be aware of
It’s never a good idea to get on the wrong side of regulators, such as the UK’s Financial Conduct Authority. This could happen if, for example, you inadvertently establish or operate a “collective investment scheme” without the relevant permissions (which is a criminal offence). Usually, you will also want to avoid your structure constituting an “Alternative Investment Fund” – which would require the relevant manager to be registered with the Financial Conduct Authority, and may also entail other additional costs.
Fees you can charge
In case you’re wondering, it is perfectly possible to set up a legally compliant structure which allows you to charge fees to reflect the value you are bringing to a syndicate of investors. This may include finders’ fees, property management fees, administration fees, other transactional fees and performance-related fees or profit-sharing elements.
Investment and trading strategies
From a practical point of view, as well as from a tax perspective, it is important to be clear on the strategy of the syndicate or vehicle concerned. The legal form and the tax status of your investment vehicle will generally depend on whether you are adopting an investment strategy (buy and hold) or a trading strategy (buy, redevelop and sell). We can help you to get clear on this, and to make sure you get suitable tax advice.
Access bank debt to gear up your project
Many private investors prefer to avoid bank debt, so that they have complete control over each project. However, syndicate structures can allow you to raise senior debt (e.g. from a commercial bank), so that you and your co-investors get the benefit of leverage. The actual availability of that debt will obviously depend on the project and the amounts involved, and of course completing the lender’s usual client identification procedures. It is generally easier to arrange that kind of debt if there are no more than four investors involved.
Benefit from the know-how of recognised experts on investment structures
Our team at LCN Legal are specialists in the legal implementation of investment structures. We regularly publish articles on this subject, including materials for specialist publishers such as LexisNexis who provide resources for other law firms and professional advisers. If you want to learn more about the legal issues relating to self-managed property investment syndicates, you may find these links useful – they will take you to some of the more popular articles we have published on this subject.
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In a survey of our clients, we have been rated an average of 4.94 out of 5 for speed and efficiency.
Through the course of my career in establishing funds, restructuring funds and raising capital, I have dealt with well over 30 law firms, from the smaller niche firms as well as the magic and silver circle firms, and can say that there’re just a few firms I would recommend without hesitation. LCN is one of those few firms. Paul Sutton provides my firm a service, which goes way beyond the norm. His advice is invaluable, guiding my business through the challenging issues it faces as a result of the shifting regulatory landscape we operate in. His entrepreneurial attitude, his work ethic and his friendly fee structure has made it an exceptionally good experience, I cannot speak more highly of him.
Because we specialise in this area, we can lead you through the process of communicating with your investors to make sure they are on board, choosing an appropriate structure, and getting the legal documents in place. Unlike many other lawyers, we do not charge you by the hour – we charge fixed fees for specific projects.
If you would like legal help on your project, please email us at firstname.lastname@example.org or click here to use our online enquiry form. We will get back to you within five business days. We give priority to existing clients, so we are unfortunately rarely available to work on new projects at short notice.