Investor Capital Guide

Important Legal Note

Raising capital from investors may constitute a regulated activity under the Financial Services and Markets Act 2000. Always take legal advice before approaching investors or entering into capital-raising arrangements.

Document Overview

Raising capital from private investors can accelerate portfolio growth. Done correctly, it is a powerful tool. Done incorrectly, it carries significant legal and financial risk.

Types of Investor Capital:

Loan finance: investor lends money at a fixed interest rate; no equity stake
Equity investment: investor takes a share of the property or company in exchange for capital
Joint venture: investor and operator share profits and risks on a deal-by-deal basis
Pension-backed lending: some investors use SSAS or SIPP funds to lend to property companies

What Investors Typically Expect:

Loan finance: 6–12% per annum interest, secured against property
Equity investment: 20–40% of profit depending on capital contribution
Clear documentation: loan agreement or shareholders' agreement
Regular reporting: monthly or quarterly updates on the investment
A clear exit: defined term or buyout mechanism

Legal Framework:

Raising capital from the public is regulated by the FCA — seek legal advice
Private arrangements between individuals are generally unregulated
Always use a solicitor to draft loan agreements and shareholders' agreements
Register any charge over property at Companies House and Land Registry

Risk Management:

Never take investor capital without a signed agreement
Be conservative with return projections — overpromising destroys relationships
Ensure the deal stacks without the investor capital (stress-test independently)
Have a clear plan for what happens if the deal underperforms