Can we talk risky language? 👀😯
I know what I made that sound like, I’ll keep it strictly PG today 😂
Wait, did I say PG?? Well, exactly.
The ‘Personal Guarantee’ aka PG.
One of the things so many investors trip up on is the VAGUE, NOT ALWAYS BINDING and THEREFORE NON RISK-MITIGATING language which is sometimes used by those raising capital for their property projects.
Unfortunately a PG does not GUARANTEE you against loss…although it does sound reassuring 😂😂😂
👉 It doesn’t save you from losing money (the project would need to be asset-backed to be in with a chance of doing that, accompanied by tight terms)
👉 For it to work it would have to legally bind the developer’s personal assets into the deal. Personal assets however could include things under co-ownership and therefore not 100% in their control or carrying their own risk issues 😅
PGs are more like a statement of positive intention to care about your capital.
Which I’m not against 🙏
But let’s not present it as more than that.
💥 Ask more questions, don’t stop until you’re satisfied, and check, check, check those KEYWORDS and terms in the shareholders' agreement.
I’m going to look at this more in my March #propertyinvestornews article later this month so stay tuned!