As we so often say, property investment is a game of finance. And the flow of finance has a massive impact on the scale and speed of which a property investor can growth wealth.
While KnowHow Property specialises in helping investors optimise finance to growth their property portfolios and wealth, some investors with reduced capacity or ambitious growth goals may also look to explore alternative finance solutions.
Godfrey Dinh’s company Futurerent provides an innovative opportunity.
Godfrey is an experienced property investor with over 15 years in the game, working both personally and for companies such as Deutsche Bank and Investec.
Now as the founder of Futurerent, Godfrey gives property investors their rent in advance in order to invest in another property, renovate, or buy into businesses or shares.
How does this work? Some options allow property investors to receive up to $100,000, while others allow someone to get a year’s worth of rent upfront, which is paid back over three years from a third of the rental income. This allows the landlord to get two thirds of the rent (less Futurerent’s cost of 6% of the rent) so that they’re still receiving over 60% of the rental income.
Godfrey spoke to KnowHow founder Bushy Martin on the Get Invested podcast about how Futurerent was inspired by the difficulty property investors faced when accessing finance. He said that despite this major issue, there was no one providing easy access and support for investors to grow their wealth.
“One of the things that frustrated me as a young property investor was not being able to access the capital that I needed to grow my wealth,” he said.
“Generally, property investors have been deprioritized by the banks and access to finance is the biggest issue. And really, there are three problems with it. It’s complex, it’s painful, and it’s not fit for purpose.
“So generally the banks have made borrowing money harder and harder. So they’ve been laying contingency on contingency, and a lot of these are inappropriate in the short term. So for instance, even recently, there was the increase from 2.5% to 3% buffer, which isn’t actually about responsible lending. It’s actually about artificially trying to restrict prices. But it comes at a cost, and that cost is people’s ability to borrow money that they can actually afford. So the banks have really made borrowing money a terrible experience with paperwork, wait times, and the impact on credit.
“But property investors just haven’t really had a choice. When you’re in a position like I was, your only option generally is to refinance or take out a personal loan or otherwise sell to get access to the capital you need. And often those things are just painful or impractical. So we really wanted to provide a better funding solution to help property investors grow their wealth.”
Godfrey went on to break down the quick, easy and efficient process of Futurerent.
“So the basic process is someone applies online and it’ll be two to three minutes. It’s really basic info and we get everything else we need from the property manager and we can do that because you’re not borrowing money when you deal with Futurerent. So as a result, we’re not assessing you as an individual. So a lot of people think that it depends on how long is left on the lease, but it actually doesn’t matter if it is vacant or month-to-month, you can still get a full year’s worth of rent upfront for any reason.
“And then if the reason is actually to help you find a property, you can actually access two years rent upfront. So that can be really significant and powerful in terms of giving people that access to capital.
“So really, all we need is a professional property manager to be in place. We do a credit check, but we do as a soft check, which doesn’t leave any footprint on file. Then we’re checking that the people we’re dealing with are currently sort of meeting their repayments and they’re not in any financial difficulty. But otherwise it’s a really seamless process.”
Futurerent takes away a number of risks, and is also boosted by several tax and cost benefits.
“So for example, if your tenant moves out midway through the tenancy, if you were borrowing the money, you’d still need to make payments. With Futurerent, the repayments actually pause. So we’re giving you rent upfront and we’re repaid from that rent as in when it comes back in. So that’s a big one. And then you’re not borrowing money, you’re just accessing your rent upfront. And that means you don’t put people through any of the the usual rigmarole,” Godfrey said.
“Then, the cost is effectively tax deductible in the sense that you’re receiving less rent, which reduces your rental income and then reduces your declarable income by 6%. But what it allows people to do is gives them the equity need so they can make the next move and they can work that rental even harder.”
But with many offers like this, one question will always arise – what’s the catch? But Godfrey said Futurerent is designed to help without the hidden fees, interest or credit impact.
“It’s just one fixed cost, which is basically just 6% of the amount advanced each year. I think people have almost become accustomed in financial services to expect the catch because there are all of these fees and different charges and crazy terms and conditions. And we’ve tried to design something that’s completely the opposite of that, where we’re giving people simple access to the money they need in the form of rent that they can use for whatever they want,” he said.
Listen to the full interview here.
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