I was waiting to receive the interest from my 55% guaranteed return investment before explaining all the details of this deal to you. Because just like you, it seemed really impossible or a scam at first ;)
But that's it, I received the total of CHF 16,500 in interest for my investment of CHF 30,000 over one year!
What's the secret then?!
I've told you this many times before, and it's the "simplest" advice you can imagine, but it works.
Tell as many people around you as possible about your desire to invest, and do it relentlessly. Your baker, your hairdresser (oh no, we Mustachians cut our own hair), your small village shopkeeper, your cousin's friend who is an electrician, or your uncle who knows a lot of people in the construction industry. In short, you understand, at every opportunity, you talk about your desire to invest.
To increase your chances, you specify the amount such as "I have 10-30kCHF to invest, would you know someone in real estate, or with serious good plans?"
And at the same time, you are patient. And you don't rush into the first project that feels like a scam or costs too much, but you analyze the proposals in a purely rational way.
As proof that it works, I just used it successfully again last August, and signed another investment at 7% annualized return contractually guaranteed (it's not 55%, but it's not that bad either ^^).
The details of the story
In the early winter of 2020, I got to know a reader who works in real estate in the canton of Vaud. We exchanged as with many of you about the FIRE movement, investments, etc.
And he saw one of my articles where I said I was interested in investing in real estate in Switzerland.
What got me this email:
Potential investment possible on project in small-swiss-town-xyz. 2 twin villas for sale on plan.
Either to be bought once built, or to be bought on plans.
Financing needed within 2 months.
55'000 fr. in total to block the operation. Duration approx. 1 year. Good return, 30'000 fr. at stake. You can also only lend me 30'000 fr. as it's our first collaboration, with 16'500 fr. at stake.
Is this potentially of interest to you?
If so, I can present you the project and give you all the details.
I need to position myself to reserve the land within 8 days.
Let me know!
I learned later that he was writing quickly to me from his car between two appointments, and that's why the email sounded like a jerky little ad with a bit of a scamming tendency... — from my blogger's point of view, don't take it the wrong way bro, if you're reading this :D
And I must admit that a time frame of 8 days was stressing me a lot, for someone I only knew through the Internet...
So I answered him in a direct way:
It seems too good to be true this 55% return. What's the financial set-up behind it?
Also, what kind of "contract" do we have that binds us together that assures me that you are not a scammer, and that you leave with the cash?
And can you send me your extract from the register of commerce and lawsuits of the company, and any other doc that can show that we can really trust each other? (I have a good feeling, but it's still the internet :))
He explained to me one of the keys to how it is possible to have such a return: it represented "only" 10% of return in his mind. Indeed, he was going to make about CHF 165'000 profit on the operation, and he was giving up 10% (aka CHF 16'500) to pay the investor who would bring him the missing 30kCHF.
In his opinion, without this contribution of funds, he could not position himself on the project, and without positioning himself, he'd earned CHF 0. So it is normal for him to remunerate a deal like this.
As for the contract, he was also of the opinion to go in front of a notary to settle everything. I can tell you that this point reassured me, because the notary would verify his identity dutifully.
The risks of such an investment
At the beginning, we talked about me sharing in the risks of the project.
The biggest risk being that the building permit is not accepted, and therefore that the operation would stop there. We were talking about a risk of CHF 20,000 for the costs incurred with the surveyor, the thermic engineer, etc. for the inquiry of the file. We had agreed to share this risk with a ratio to be defined. But he had checked with the town regarding the LAT (Loi sur l'Aménagement du Territoire), and it was in order so the file would pass, oppositions or not.
The other risk was that the villas would not sell, and therefore he would not have the cash flow to pay me the interest. In this case, he would rent them out. With conservative calculations, we would arrive at a return of 9.8% on my CHF 30'000 invested. There is worse as an investment ;)
In the end, in order to test a first collaboration and to reassure me — and also because he had spoken with the Syndic directly who had confirmed that it would pass, he proposed me to remove the whole "Sharing the risk" part of the contract so as not to complicate the deal. Proof that he was sure that the villas would sell without any problem with their price well aligned with the market — which is what happened in reality.
There were other elements that reassured me. Like when he answered my question about his extract from the commercial and lawsuits register (which I actually ordered myself in parallel on the website of the canton of Vaud for CHF 18):
No problem, I can bare my soul. But anyway, we have to meet to talk about it in detail and see the feeling. For the moment it was a proposal. If you are interested in a serious follow-up, we have to meet in real life**
But know that I am an independent like many architects, and a lawsuit in a professional capacity has an impact on my family. I don't have an SA/AG that buffers this, so I'm very careful about what I do. Also, I am member of several networks in the field on Vaud with banks, lawyers, notaries and company. If I do something stupid I don't plant a nail in the canton anymore :)
These two signals finally reassured me that he was serious, and not a scammer (or maybe he was a good one :D). Because someone who values the meeting in real life, and who cares more about his reputation than the money he could lose, that sets for a good foundation (according to my values).
Timeline of the deal
To give you an idea, the deal went according to the following timeline:
- January and February 2020: we got to know each other. I visited the site of the future project (with supporting plans) with Mrs. MP 1. I also visited his wife and children at his place (it reassured me, but actually, that doesn't mean anything because there are some who have no scruples to involve their families in scam stuff...)
- March 2020: we went to the notary to sign the loan contract. Here I was really confident, because you can hardly get a false identity validated by a Swiss notary (or can you? :D)
- Between March 2020 and March 2021: we became buddies, because we have the same vision of life, family, and of course, money
- End of March 2021: CHF 30'000 + CHF 16'500 arrived on our Swiss bank account
If you are going to invest in such a 1-1 mode, I can only add a "CAUTION" paragraph here, because it is really risky. And 55% is not that much, because you are putting all your money on a private person, vs. 8'000 private companies governed by trade rules when you invest in a global ETF.
As a result, here's the minimum of the minimum "due diligence" that I recommend before you try this kind of investment:
- Meet in person
- Visit his family (if there are always excuses at the last moment to cancel the meeting, it is a warning)
- Ask for an extract from the register of commerce and lawsuits to see if the person is not in trouble
- Search his name (and that of his company if he has one) on Google, LinkedIn, Facebook, etc.
- Go to the notary (one you choose yourself, even if you have to pay him) to sign your first contract with this new person
Your goal is to be your own private investigator. You want to find out anything suspicious before you sign.
If everything looks good to you, that's when you can consider taking the risk. Because ultimately, any investment never comes without risk.
Are you ready to get out there in order to find such deals?
So here's the exercise I recommend. Not complicated, and terribly effective:
- For 3 months, talk to a new person in your network every day (family, friends, colleagues, baker, contractor near you, etc.) about your desire to invest in real estate in 1-1 mode
- Conduct your own due diligence investigation for each proposal
- Come report back on your experience in 90 days via the comments section below!
So that's it for the details of this incredible human and business adventure.
Now, I have three questions for you (you can answer them in the comments or by answering me back via email):
- Have you ever experimented with private 1-1 loans? If so, is your feedback positive or negative, and why?
- Do you have this kind of need for a 1-1 loan for real estate in Switzerland, or any other serious investment project? If so, I'm interested to know more! (I apply my own method, you see :D)
- In terms of due diligence, do you have any other tips for 1-1 loans like this?
I always bring Mrs. MP on board for these kinds of investment projects from now on. On the one hand, because it's her money too. But mostly, because she can detect things that I can't see (must be a male vs. female thing), and in any case, four eyes and two instincts are better than one :) Finally, only she has the power to calm my ardor when I see the positive of an investment, while she doesn't feel the person. ↩