There are numerous different entry-points to the UK property market, many of which are regarded as safe havens for investors due to the proven record of profit generation.
All property investments however carry a certain level of risk, which cannot be fully eradicated and must be carefully considered before making any major financial decisions.
Over recent years, traditional “Buy to Let” property investment has become a more complex and costly venture, with no guarantees of a viable return on investment (ROI). Outright property purchases can still be popular for investors with extensive capital but are out of reach for many. Consequently, the popularity of property bonds (also known as loan notes) has gathered pace. Bonds are an affordable entry point to the real estate market, where risk can be reduced through due diligence. These investments appeal to a highly dynamic audience of prospective investors.
What is a Property Bond or Loan Note?
A property bond is essentially an IOU, where the investor loans money for an individual project directly to the bond issuer i.e. a construction company or developer. Umbrella companies such as UK Best Investments will also issue property bonds but to spread the investor’s risk, the loan will be used to part-fund multiple projects, and as such, the bond will be issued over multiple security assets of the company. The investment is agreed for a specific term, after which the loan is repaid in full. A fixed-rate of interest is payable by the recipient to the investor monthly, quarterly, annually, or in a lump sum at the end of the term.
The appeal of property bonds from UK Best Investments lies in their potential to deliver a regular and guaranteed high fixed ROI that is often tax-free. The bonds also offer a low minimum investment amount of just £5,000, a simple, and quick sign-up procedure, no middlemen or brokers fees, and investment spread amongst multiple diverse projects throughout the country.
With a property bond, the investor knows exactly how much they will receive in interest when it will be paid and the exact date the investment will be returned. In addition, the property bonds from UK Best Investments are secured against the physical assets shown on the balance sheet of the company. This effectively eliminates most of the investor’s risks in the event of company failure or insolvency the assets can potentially be seized and sold to repay and losses.
Property bonds are exclusively available for Self-Certified Sophisticated Investors, Certified Sophisticated Investors, or Self-Certified High Net Worth Individuals.
For more information, visit the Financial Conduct Authority website:
Main Features of property Bonds from UK Best Investments:
- A property bond is a formal IOU issued by the borrower to the lender.
- The interest payable is typically higher than other similar investments.
- Interest payments are made monthly, quarterly, annually, or in a lump sum at the end of the loan term.
- Property bonds are usually issued for between 1 and 5 years.
- Bonds are secured against the multiple assets listed on the balance sheet of UK Best Investments and are a form of insurance policy against non-payment.
- The full outstanding loan amount is repaid in full at the end of the agreed loan term, along with any outstanding interest payments.
- The investor deals directly with the bond issuer so middlemen or unnecessary fees.
- Highly experienced team with an impeccable track record.
- Simple sign-up process.
- Investment spread amongst multiple, diverse, projects.
A property bond is essentially a bespoke legally binding contract drawn up between the investor and the borrower. There is therefore some scope for flexibility to ensure an amicable agreement is reached that is acceptable for both parties.
How to Find the Best Property Bond Investment Opportunities
The quality and safety of a property bond investment opportunity will be determined almost entirely by the credibility and status of the issuer and their business model.
Due diligence is essential to ensure that the recipient of the loan has an established and provable track record, a history of promptly repaying investors, and a suitable security portfolio.
There is a level of risk with all investments, however due diligence on the company that is offering the property bond or loan note is key to finding the best fixed-rate product.
Review the terms and conditions offered by the issuer to ensure they are acceptable.
Additional Security with Asset-Backed Investments
Asset-backed property bonds are those that are secured against tangible or intangible assets of value. This provides the investor with an additional layer of security if the issuer is unable to repay the loan.
In the unlikely event of insolvency or project failure, the investor takes ownership of the assets specified in the agreement and can potentially sell to recoup any losses. An asset-backed property bond carries a much lower level of risk, typically accompanied by a slightly lower annual rate of interest.
High-risk unsecured property bonds are usually issued at higher rates of interest, though carry more risk of capital loss if the loan is not repaid.
Determining the Right Type of Property Investment for You
The UK’s real estate investment landscape is diverse enough to accommodate most investors and risk appetites. Fixed-rate property bonds can represent an affordable entry-point to what is often considered a prohibitively expensive sector.
At UK Best Investments, we provide independent expert advice on all types of property investment options for new and experienced investors at all levels. Whether you are considering your first investment or looking to expand your current portfolio, call the team at UK Best Investments today or contact us by email. We would be delighted to participate in an obligation-free consultation to discuss the available options. Alternatively, please complete the “Instant Quotation” form on our website.