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How does British Pearl manage the risks of each of your property investments?

6 June 2019 • James Newbery

Investing in any asset involves risk. One key thing investors need to understand, consider, and decide upon is whether the return that they are taking adequately compensates them for that risk.

At British Pearl we aim to help our investors answer that question in two crucial ways - both of them focus on a core belief of ours. That is: transparency.

Why is transparency so important?

It sounds obvious, but before any money is exchanged potential investors should make sure they really understand what they are investing in. This is the first place where transparency comes in: everything they need to know should be clear and publicly available.

Our approach to transparency is to make sure we’re equipping people with the right information at the right time. So we provide detailed information on our investment process and complete clarity on each investment. This means that our investors are best positioned to be able to understand each individual investment and assess if it’s right for them.

Transparency in our investment process

British Pearl is an asset manager not an intermediary, unlike the vast majority of P2P platforms. We act as the Investment Manager for each property in our capacity as an Alternative Investment Fund Manager ('AIFM'). This means that we manage the entire process from property sourcing and acquisition through to exit.

Our Investment Team draws on a wealth of experience in property investing to identify the best opportunities on your behalf. All decisions are made against a detailed macro and micro backdrop, comprising economic outlook, interest rate expectations, ongoing management costs, regional supply and other localised considerations, e.g. proximity to local amenities in order to identify areas most likely to offer superior returns for investors.

Our expert team sources all properties and carries out a thorough due diligence process in terms of deal structure, legals, and investment analysis. If the investment fulfills all of our criteria, then it will be acquired in a way that ensures we build in as much capital protection for investors as possible. We work hard on the following three areas:

  1. Buying well with cash in order to negotiate strong discounts to open market values (as reflected in the difference between our purchase prices versus the individual RICS valuations provided for each property). By doing this, investors know that we have approved the investment as we have already taken on the risk. It also means that our investors know that all properties on our site have been vetted, that they will earn returns from day one and there is no chance that the deal will fall through, as can happen on many other platforms.
  2. Carrying out any specific works to maximise the property value. This may be minimal redecoration, extensive refurbishment for an older property or anywhere in between.
  3. Structuring each specific investment in a way that we believe is most appropriate to allow investors to build customised portfolios. By offering both share and loan investments with varying investment terms and varying LTV levels we give investors the flexibility to make choices and customise their portfolios in terms of income and capital risks. See more on LTV here.

If you would like to review our process in more detail then please take a look at our blog here.

Helping investors make decisions

As well as the transparency in our investment process, we're also transparent in our financial modeling. We carry out detailed modeling for each investment over the entirety of each investment term. This means that we model both the annual profit and loss statement along with the balance sheet (or capital) valuations. We tend towards the more cautious side with this modeling process and focus on the longer-term which aligns with our approach to property investment. We believe that making general property forecasts is very much an inexact science and therefore we look to the wider property market to provide guidance and independent input before deciding on broader growth prospects across regions.

The inputs to the model also include other assumptions together with all fees in place and combined with the leverage that is applied as a result of the investments being partially funded through debt (our loan offering) to produce net average capital gains for each year.

Summary

Every step of the investment process and ultimate property purchase is an opportunity for us to reduce investor risks. At British Pearl we want our investors to be able to make informed investment decisions. We believe that the best way to do this is through transparency at each and every step of our process.

James Newbery is Investment Director at British Pearl

When you invest with British Pearl, your capital is at risk and invested sums are not covered by the Financial Services Compensation Scheme (FSCS). Forecasts are not guarantees and performance may vary. Tax treatment depends on individual circumstances and may change. Read our key risk statement.

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Your capital is at risk Investing in property involves risk. The value of your investment can go down as well as up and historic performance is not a guide for future performance. Any projections of future performance are based on all information known at the time of share investment or loan, and internal calculations and opinions of British Pearl. These are subject to change and are not guarantees and should not be relied upon as such. Risks include the total loss of your share investment or loan, variable rental income due to property not being rented or a depressed rental market, and inability to sell your share investment or loan due to lack of a buyer. Investing with British Pearl falls outside the remit of the Financial Services Compensation Scheme. Please refer to the Key Risks section of this site for a more comprehensive description of the risks involved.

British Pearl ® is the trading name of British Pearl Limited (Company No. 7151774), a company authorised and regulated by the Financial Conduct Authority (Register No. 674693) and British Pearl Finance Limited (Company No. 10575280 and Register No. 770867), which is an appointed representative of British Pearl Limited. Both companies are wholly owned subsidiaries of British Pearl Group Limited (Company No. 9701436) and all are registered in England and Wales at 4th Floor, 7-10 Chandos Street, Cavendish Square, London, W1G 9DQ