Frequently Asked Questions
Our stable economy, and democratic government, makes UK property the number one choice for investors the world over. Of course, as everyone knows, property prices fluctuate with economic conditions. We factor this into the evaluation of our deals, and reject those which will fail in the event of significant economic downturn.
Investments start at £25K, but most of our clients invest more. Our Joint Venture investors receive the highest returns because they have chosen to partner with us (a higher risk option) rather than investing for guaranteed returns. Projected returns increase with levels of investment, with larger amounts generating the best returns.
The new buy-to-let taxation rules have made buying property with high loan to value mortgages a riskier choice than in the past. Most landlords will lack the leverage to buy below market value, nor the expertise to create genuine added value. So if your goal is to leverage your funds effectively, investment into professional development projects can offer a more profitable alternative.
For more information on current buy to let tax changes please visit InvestDevelop Capital Partners Facebook page.
The maximum uplift in property development deals can be gained through obtaining planning permission before building. Some of our projects involve this strategy.
A few come with existing planning in place so will be ‘build only’. Others will be purchased with a ‘planning flip’ in mind, i.e. they will be sold to build-only developers who lack planning expertise. Obtaining planning permission is not guaranteed, which is why you hear the phrase ‘planning risk’. However: we only purchase deals that work with and without planning, or those where our planning assessment reveals that the risk is low.
Every investment carries risk. However professional property development is a lower risk investment than stocks and shares, as legal security exists against the land or bricks and mortar value. In the event of a major economic downturn, a development may need to be rented instead of sold. The investor shares will be unchanged and rental income will be received until the asset has recovered the forecast value and can be sold.
IFA’s are qualified with regard to the regulated products they advise on. Accountants are knowledgeable regarding the Inland Revenue and reporting on income and expenditure. Lawyers are experts in brokering legal deals. Many offer complementary services e.g. tax and estate planning that are invaluable to investors.
However unless they have personal experience of investing in property development, or have spent time with us to understand how we work, professional advisers may not recommend our services because they do not understand them.
No-one can advise accurately on the risk of property development deals unless they have experience in this field. Therefore we need to explain the risks and merits of our deals to you personally, before sharing this information with your other advisors.
If you are introduced to us via a broker/IFA/accountant/lawyer the investor will sometimes pay a fee which is then deducted from the development profits at the end of a project. All project costs including fees are discussed and agreed with the investor from the outset.
Our core offer to you is our expertise in property development and investment. All the ‘due diligence’, offers and analyses we do will be backed up by professional RICS valuations and accepted by the commercial bank who we have appointed as the ‘senior debt lender’. There is therefore no need for you to do additional due diligence. Unless you are an experienced and professional property developer yourself, you will not know where to start, and this is exactly how it should be. Your role is to relax and let us do the ‘heavy lifting’ on your behalf.
As well as being the preferred asset class of the bank, property is also the favourite money laundering vehicle of criminals the world over. We have to ensure that your funds are legitimate and that your temperament and risk profile are suited to the demands of property projects. We also need to complete checks to fulfil the requirements of FCA PS13/3 on sophisticated and HNW investors. We need to explain to you the risks and responsibilities of becoming an investor. Above all, we want you to enjoy the process of working with us, which is only possible once you’re assured of our ethics, professionalism and character.
Generally you will need to commit to the lifecycle of a deal, which will typically be between 12-24 months. Most of our investors are happy to do this as we will have clarified their criteria and preferences beforehand.
Your funds will never be placed in our personal accounts, but will be transferred either to a solicitor’s Escrow (holding) account or directly to the bank account set up for the SPV (Special Purpose Vehicle - the limited company that holds the asset). The majority shareholders of the SPV have to give security in the form of a personal guarantee to the senior debt lender, so we have ‘skin in the game’ too. If we don’t deliver project returns we risk losing everything we have worked for.
Every document, contract and financial statement is kept on shared Dropbox files which will be accessible to you 24/7. We also schedule monthly meetings to review every aspect of a project face to face and to provide a mentoring and education service. We also make ourselves available for ad hoc meetings and telephone calls and commit to responding to email and text communication within 24 hours.
The most significant risk associated with property investment is working with the wrong people. Sadly, there are unethical conmen who have preyed upon investors in the property world. There are also inexperienced investors who don’t know what they’re doing but will take your money anyway. It is critical to get to know the team you are working with, and if alarm bells ring walk away. When investors take the time to know us they realise that our expertise is hard won and real. Minimising risk and maximising profit, transparently, is what we aim to do - every time.
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