Skip to content
The content of this promotion has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. Reliance on this promotion for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested.
Whatsapp Linkedin Instagram Envelope

Creating Capital Value

Big Opportunities with Small Capital Commitments

Linkedin Instagram Whatsapp Envelope
Back to Blogs

Summary

Utilising inflextion points to build an empire

Below outlines how Wealth Capital works with our high-net-worth investors, highlighting how projects are structured and what financial and security instruments we use.

Figure 1: Capital Value Inflexion Points in the RIBA Stages

  • Navigating the RIBA Stages for Wealth Creation

The Property Investment Lifecycle

RIBA Stages

The property development lifecycle follows a systematic and structured approach, often aligned with the seven RIBA (Royal Institute of British Architects) stages.

These stages guide the development process from inception to completion, ensuring a comprehensive and well-managed progression.

Our Investment Strategy

At wealth capital we have grouped the 7 RIBA stages into three specific project types, these are:
  • Planning
  • Construction and
  • Asset Management
These project types also align with the capital value inflexion points in the RIBA stages, shown in figure 1 above.
  • Planning Gain Investments

Joint Ventures

Generally, a planning gain project will be done via an exchange and delayed completion. This means we will pay the vender a deposit to legally exchange contracts on the asset. We will then use working capital to put the asset through the planning process. Once planning is in place, we then complete the purchase of the asset.

RIBA Stages:

Below gives an overview of the work undertaken at each RIBA stage of a planning gain project

Wealth Capital identify a project that meets our investment model.

Professional Team

Our Development Manager initiates the process by conducting preliminary due diligence on the potential project. If viable, a project brief and objectives are crafted, and negotiations commence with the vendor or sales agency. The Architect and Planning Consultant contribute their professional insights on the feasibility of meeting the project's brief and objectives.

Subsequently, our Development Manager compiles a comprehensive package, including a development appraisal, finance plan, cashflow forecast, and an internal Redbook Valuation. This valuation determines our optimal purchase price and anticipated exit value once planning is secured. This meticulous process enables us to furnish our investors with an accurate projection of their expected return on investment.

Securing the Project

We typically conclude discussions with the vendor or their sales representative, often aiming for an exchange and delayed completion subject to obtaining planning approval.

Securing the Investor

We would set up the project SPV and complete a joint venture contract and shareholders agreement with our investment partners.

Upon securing the project, we commence the allocation of working capital to the project.

Professional Team

The Architect conducts an initial feasibility study encompassing layouts, massing, material selection, and more. Simultaneously, the Planning Consultant contributes to the design narrative, preparing for the pre-planning application meeting with city council planning officers.

City Council Planning Office

The concept design evolves with input from the planning officer to align with the city's planning policy and guidance documents. The objective is to reach a stage where planning officers provide a ‘recommendation for approval’ at the biweekly planning committee meeting.

Wealth Capital

We revisit our financial documents, ensuring costs remain on track and haven't exceeded the budget. This ongoing financial oversight is crucial to maintaining project viability and success.

Professional Team

In response to planning officer requests during the pre-application meetings, surveys such as those related to transport, heritage, or ecology are conducted. The Architect takes charge of the design aspect fully developing the design and access statement whilst providing an array of planning drawings, layouts, elevations, and material selections etc. The CGI artist then breathe life into the drawings through 3D visualisations. The Quantity Surveyor consults on building composition and material costs, delivering a high-level bill of quantities.

City Council Planning Office

The planning application and associated documentation is submitted, accompanied by a recommendation for approval from the Planning Officer to the Planning Committee. Our Architect and Planning Consultant subsequently present our case to the Planning Committee, where a vote determines the approval status of the application.

Wealth Capital

The Development Manager ensures the project remains both profitable and achievable, whilst most of our efforts shift towards successfully exiting the project.

Inflexion Point

Upon receiving planning approval, the Redbook valuation of the asset experiences a notable upswing. This increase in value stems from the asset having a new Gross Development Value, representing the end value of the residential project upon completion. The determination of this new Redbook valuation involves subtracting the total project cost, inclusive of finance, sales, and margin, resulting in the market value for the asset.

Risk Management - Planning:

We engage a Professional Team to assist with the planning application process.

Our focus is on acquiring commercial buildings located within residential areas that would seamlessly integrate into the urban environment as residential conversion.

To support our planning applications, we diligently search for precedents and relevant planning laws. Ensuring alignment with the city council’s unified development policy documents and strategic plans is a key priority.

Our team possesses in-depth knowledge of the investment area, with positive relationships with the city council and a clear understanding of their expectations.

Collaboratively, the team leverages its collective expertise, working towards positioning the project optimally to receive planning approval from the City Council Planning Committee.

Investment Overview:

  • Project Type: Planning Gain
  • Financial Instrument: Joint Venture Contract
  • Investment Security: Shareholding
  • Return: Profit Share - Paid on maturity
  • Time frames: Short term investment - 12 to 15 months

Links

Learn more about our:
Planning gain investments

Contact us to discuss:
Return on Investment  
  • Development Projects

Loan Notes

Generally, a development project will be structured as an asset purchase. We look to purchase projects with planning in place or with permitted development rights. This allows us to add value via refurbishment or conversion into apartments quickly. We look for up to 25 units per project as we find these projects are also easier to exit quickly.

RIBA Stages:

Below gives an overview of the work undertaken at each RIBA stage of a development project

We generally purchase the asset with planning in place. Then appoint a full technical team and consultants to work up the planning drawings into a fully developed technical design.

 

The Technical Team:

Architect: Who oversee the development of the technical design and specification packages  

Geotechnical Engineers: Provide ground condition surveys that feed into the foundation design.

Structural Engineer: Design the structural elements of the building such as beams, columns, and foundations.

Civil Engineers:  design the infrastructure to the building, such as roads, parking, drainage, and landscaping.

M&E Engineer: Design the electrical and mechanical systems, such as power, data, and ventilation strategies.

 

Professional Team:

We also appoint additional members to the professional team…

Project Manager: Oversees the technical design and tender process allowing us to put a construction main contractor into a JCT design and build contract.

Security Trustee: Functions as the trustee overseeing security instruments for all our loan note holders, which involves securing a debenture over the loan note SPV and placing a charge on all assets within our portfolio.

 

Investor Security

The security trustee acts in the best interest of the loan note holders, having similar powers as the bank holding a mortgage over the asset.

 

Wealth Capital

The Development Manager takes charge of the legal acquisition of the asset. Then ensures that all members of the professional and technical team are bound by legal contracts for the design and management works.

They make sure that the technical design team appropriately specifies systems without unnecessary complexity.

Collaborating closely with the project manager and quantity surveyor, they develop a technical design and specification packages aligning with budget expectations.

The Development Manager also engages with investment sales agents, working alongside marketing teams to formulate the sales narrative for the apartment sales.

Their multifaceted role involves orchestrating legal processes, streamlining technical design, and contributing to the strategic aspects of sales narratives to ensure a comprehensive and successful development process.

The construction phase is where most physical work takes place; projects can have 20 or more men onsite at one time that all require co-ordination.

The Professional Team

Following the completion of the tender process, the main contractor is engaged in a Joint Contracts Tribunal (JCT) design and build contract and starts work on site mobilisation.

The project manager oversees the construction works, whilst the quantity surveyor manages the invoicing process, together ensuring invoicing align with the completed works.

Throughout the construction phase, the technical team conducts regular site visits to verify the correct installation of all systems according to specifications.

Wealth Capital

The Development Manager conducts regular site meetings with the professional team, ensuring adherence to schedules and addressing any issues promptly. At RIBA Stage 5, the project may secure additional funding from a principal lender to cover construction costs, enabling a diversified investment portfolio into similar projects.

Contracts for the apartment sales are developed, and the marketing of the unit sales begins. The Development Manager uses their project management skill set to keep the project on track and efficiently resolves any challenges that may arise.

Inflexion Point

The asset experiences a substantial increase in value throughout the construction phase, attributed to the extensive work and costs invested in the project. Our objective is to achieve a minimum 20% profit on cost by the conclusion of the construction phase. This strategic approach ensures substantial funds are generated, facilitating the provision of a fixed Return on Investment to our loan note holders.

As the project nears practical completion, the main contractor diligently addresses all snagging works identified by the development and project manager. Comprehensive testing and certification of all systems are underway in preparation for the handover phase.

Upon receiving final sign-off from building control, the apartments are ready for handover to the purchasing clients. These clients are then notified to complete their purchase via our Solicitors.

This meticulous process ensures that the properties are not only completed to the highest standards but also ready for our buying clients to enjoy the benefits of their investment.

Risk Management - Development:

We’ve put together a proficient and organised professional and technical team. Our approach involves completing a full technical design and tendering on a measured contract, resulting in a more stringent JCT contract.

Typically, our projects involve the conversion of existing commercial buildings into residential spaces, with a deliberate focus on conversions over new builds.

To optimize diversification, we cap the number of apartments in each project at 25. This strategy allows us to spread our investments across multiple projects rather than concentrating on a single large project.

Additionally, we’ve found that smaller projects facilitate smoother exits, while larger projects often require more extensive sales teams for a successful exit.

Investment Overview:

  • Project Type: Development
  • Financial Instrument: Loan Note
  • Investment Security: Debenture and Charge
  • Return: Fixed - Paid quarterly or on maturity
  • Time frames: Short term - 24 months

Links

Learn more about our:
Loan note investments

Contact us to discuss:
Return on Investment  
  • Asset Management

Loan Notes

Generally, an asset management project will be structured as an asset purchase. We look to purchase completed projects, that will need little maintenance over the 10-year term of the loan note. Therefore, providing a less management intensive strategy and better investment yield.

RIBA Stages:

Below gives an overview of the work undertaken at the RIBA stage of an asset management project…

The asset management of single-family home typically involves various tasks, including tenant acquisition, rent collection, prompt resolution of tenant issues, and efficient handling of maintenance problems. It also involves ensuring that the property generates a sensible rental yield and is maintained to a high standard, facilitating its appreciation over time. This comprehensive approach aims to optimise the property's performance, both in terms of financial returns and long-term value.

Risk Management - In use:

Wealth Capital only purchasing properties that have undergone a high-quality refurbishment program, complete with new boilers, kitchens, and bathrooms. Whilst investing in prosperous areas, particularly those with an upper working-class demographic, where there is robust tenant demand. We conduct thorough tenant screenings to ensure our residents meet our suitability requirements. Ensuring that once our tenants have settled in, they have no desire to move again.

Investment Overview:

  • Project Type: Management
  • Financial Instrument: Loan Note
  • Investment Security: Company Debenture
  • Return: Fixed - Monthly
  • Time frames: Long term - 10 years

Links

Learn ore about our:
Loan note investments

Contact us to discuss:
Return on Investment  
  • Our Investment Model

Utilising inflextion points to build an empire

Our goal, like the game of Monopoly, is to own unencumbered assets.

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”

--Franklin D. Roosevelt

These assets yield rental income, a key component for providing cashflow stability. Profits from ‘planning’ and ‘construction’ projects presently fuel our acquisition of unencumbered assets focusing on single-family homes.

While this strategy may not offer the highest yields on paper when compared to homes of multiple occupancy (HMO) or serviced accommodation (SA) it provides a more light touch asset management experience.

Presently, we prefer property over a pension, utilising rental income now rather than waiting for pensionable age. Our property portfolio sees approximately 5% annual capital appreciation and a 6% rental yield, resulting in an overall 11% return on investment.

In the future, we may opt to sell part of our portfolio to purchase an annuity as part of a diversified pension plan. As well as setting up a family trust to provide tax efficient generational wealth though property ownership.

  • Your Investment Model

Can we help you build your empire?

Everyone’s plan is different, but if your plan involves investing in property its likely we can help you on your journey!

  • 1. Set your financial goals
Prior to investing in property, first it is necessary to outline your financial goals and what ultimately you looking to achieve?

Are you saving for:
  • A deposit on your first home
  • To purchase your first investment property
  • An income to help top up your pension
  • Funds to launch a new business
  • Or to firmly establish yourself as a property mogul
    • First define how much money you need to achieve your goal, and the timeframe in which you want to achieve it.

 

    • Second, assess the amount you can save each month and your initial investment capacity.

 

    • And lastly, create your strategic framework and risk tolerance that guides your investment decisions, whilst aligning them with your broader financial ambitions.
  • 2. Choose your investment strategy
After setting your financial goals, the next step is selecting an investment strategy tailored to your personality, lifestyle, and objectives.

A. Your Investor Type

Would you prefer to be an active or passive investor. This generally depends on your motivation and ability to dedicate time and effort to your portfolio. Active investing involves being hands-on with your investments, while a passive investor takes a more hands-off approach.

B. Investment Product

There are plenty of other investment products to choose from, including stocks, bonds, mutual funds, ETFs, commodities, and more. But our focus is Real Estate.

Each investment type boasts distinct advantages, disadvantages, risks, and rewards.

C. Investment Objectives

The two main investment objectives are cash-flow or capital appreciation.
  • Capital Growth: Your investment is working harder for you, over the short term.
  • Cashflow: A regular monthly income, over the long term from your investments.

In our perspective, it is advisable to maintain a balanced percentage of both, with a preference for capital growth when actively growing your investment portfolio. As you transition to a more relaxed approach, consider shifting towards a bias for cash flow. This strategic adjustment allows for flexibility, optimising your investment strategy based on the specific stage of your financial journey.

Figure 2: Investor Centric Model for Building Wealth Through Property

  • 3. Consider your Risk Profile

There are many factors that should be considered when deciding on your risk profile.

Some of the general factors to consider are:

  • Your age
  • Appetite for risk
  • Your investment goals
  • Available investment funds
  • The time horizon you have to achieve your goals

As the saying suggests, “without risk, this is no reward,” and this holds true when investing in property. Projects categorised as higher-risk investments come with the potential for bigger returns, but they also hold a higher possibility of lose.

Figure 3: What's your tolerance for risk

  • Risk Analysis
  • A. Planning Gain Investments
The risk associated with planning gains is twofold.
  • You might not achieve the planning objectives you set out to achieve
  • If planning is not granted the working capital used for planning doesn’t provide the expected gain

We go into our Risk Management Strategy for planning investment ‘here’

Wealth Capital have put over 500 units through planning, across 11 planning investment projects, and we have always achieved an acceptable planning result. But our first designs are not usually the end results.

As the planning officers will always want to stamp their mark on the project.

Our Risk Mitigation and Control Measures:

  • Be sensible with your expectations
  • Build your development model based on modest expectations
  • Consider these conservative expectations as a starting point to exceed
  • Have people around you will provide a balanced perspective
  • Always have a plan B
With a well-rounded approach and a planning application supported by a robust business case aligned with planning law, it becomes challenging for a planning committee to reject our submission. However, it’s essential to acknowledge that decisions on applications may occasionally be driven by political considerations rather than strict adherence to the law. Fortunately, to date, we have not encountered the need to appeal a planning application decision.  
  • B. Development Projects

The two main risks associated with construction are:

  • The main contractor may take on too much work or get into trouble elsewhere
  • Economic factors may affect material prices

We go into our Risk Management Strategy for planning investment ‘here’

Wealth Capital has successfully built and sold more than 100 apartments over 10 construction projects, consistently attaining a satisfactory practical completion. Throughout these endeavours, we recognise that issues inevitably arise, and that resolving problems swiftly onsite is an essential part of a construction project success.

Our Risk Mitigation and Control Measures:

  • Make sure your QS and PM are observant and diligent
  • Make sure as much as possible is covered off during the contract signing phase
  • Make sure your contractor has professional as well as technical skills
  • Diversify everything to eliminate dependence on any single point of failure
  • Have risk management and mitigation strategies

In construction, the objective is to avoid complacency even with the most straightforward tasks. As a wise (albeit somewhat introverted) acquaintance once remarked, “construction is easy, people are the challenge”. Continuous communication is paramount. We also engage with several contractors across our project portfolio, creating a network that can provide support in case of unforeseen issues. We only collaborate with contractors that have a proven track record, either through past successful collaborations or recommendations from trusted colleagues who have had a successful experience with them.

  • C. Asset Management

The two main risks associated with asset management are:

  • Tenant issues: moving out, lose of rent, damage to property etc.
  • Maintenance Issues: boilers, kitchen appliances, leaks, etc.

We go into our Risk Management Strategy for the management of assets ‘here’

The secret to good asset management is timely intervention, hence we have developed rigorous planned maintenance program which allow us to visit each property at least twice a year and provides a report on the property condition and follow up maintenance requirements.

Our Risk Mitigation and Control Measures:

  • Buy in the right location
  • Make sure the property in refurbished to a high standard
  • Do stringent check on incoming tenants
  • Make sure the property is maintained periodically to maintain standards
  • Act swifty to resolve tenant or maintenance issues that may occur

With over two decades of experience, Wealth Capital is actively engaged in asset management, having a strong foundation in property refurbishment and maintenance. Drawing from our extensive expertise, we’ve found that acquiring properties in an appealing location, renovated to a high standard, and occupied by responsible tenants simplifies the asset management process. This straightforward approach is maintained, requiring minimal intervention, except for occasional maintenance matters.

  • Do we have synergies

Wealth Capital

Whether you are seeking short-term capital growth, or prefer long-term cash-flowing strategies. Or if you fall somewhere in between and would like to diversify your investment across our portfolio…

  • Capital Growth: Planning Investments
  • Capital Growth: Development Projects
  • Cashflow: Asset Management

We can help you if you are looking to take a passive role in property investing, looking for either capital growth or a monthly cash-flow. No matter what your risk profile.

  • Do you have further questions

It’s great to do some reading in your own time, and congratulations for getting to the bottom of this blog as it turned out to be rather long winded in the end. However, sometime there is nothing better than to chat your ideas through, if this is the case…

Take Our Investor Quiz
It takes just 3 minutes!

Take the Quiz

WHERE TO NEXT?

Home - Blog
Home - Starfortis AM

WHATSAPP GROUP:

Join our investment community WhatsApp Group for High Net Worth and Sophisticated Investors.

WhatsApp

OUR LATEST FRACTIONAL LOAN:

Existing building to be converted in to 21 apartments… see more

TAKE OUR INVESTOR PROFILE QUIZ:

Take The Test

LETS CONNECT SOCIALLY:

Whatsapp Linkedin Instagram Envelope

DOWNLOAD OUR COMPANY BROCHURE...

Download

MESSAGE US:

INVESTMENT INSIGHTS

Sign up for our Newsletter

Never miss our exclusive joint venture projects, active market commentary and general investment information. Join our newsletter today.

INDUSTRY NEWS, VIEWS & REVIEWS

What's New in Alternative Investments?

Contact Us

Professional Investors

  • +44(0)20 3004 1716
  • inquire@starfortis.co.uk
  • Starfortis Asset Management, SAS House, Chipperfield Road, Hertfordshire, WD4 9JB

Subscribe to our newsletter

Copyrights © 2024 Starfortis Asset Management. All rights reserved.

Whatsapp Linkedin Instagram Envelope