There are many types of investments to do with property that might seem attractive. The property market has been booming all across the UK, meaning more people are looking to get involved in property investment.
The past year has been full of uncertainty across nearly all financial markets. Investors are looking for more safe and reliable places to invest their money.
Property bonds are another type of investment that produces good returns for you to enjoy as an investor!
But you must know what they are and how they work before you get involved.
Property bonds are methods that property developers use to raise funds for their projects. Developers look for these mainly in the early stages of development to get things going.
From an investors perspective, it’s a loan that you give to a property developer.
So how can you profit from this?
When you invest in bonds, you agree on how long the bond will last; this is usually around 2-5 years. You are paid a return on your loan for this period, depending on the interest rate or agreed return rate. After this period, the bond matures, and you are given your loaned money back.
In most cases, you agree on a fixed rate of return that is not dependent on the interest rate. These figures are often around 10-12% per year.
The return on your loan is typically paid every month or sometimes annually. Nearly all bonds are very safe, so you will be sure to receive your money every month without fail.
It’s quite an easy way of investing. All you have to do is agree on the terms of the bond, sit back, and watch your returns roll in!
You’re not worrying about the maintenance costs and extra fees involved with traditional property investment.
You will know the exact date your bond will mature and when you’ll receive your initial loan.
The biggest worry about any loan is not getting your money. The idea of a bond sounds foolproof on paper. You receive all your money back plus a return on top of that money.
But in real life, there are risks involved. It’s possible that you can agree with a shady development company or the company goes bust before your bond matures. If this happens, you risk losing your original money used to invest.
They are also not currently regulated by authorities. If it fails, you risk not receiving any compensation or your total money back.
So how can you avoid this?
When investing in bonds with properties, the bond will often be asset-backed with a legal charge. Asset-backed bonds add a lot more security to your investment. Even if something goes wrong with the developer, the developer must sell the asset to make sure you get your money back.
Make sure to do your homework and research the developer. You don’t want to agree to the terms of a bond and then discover the developer has failed on three other property developments!
You need to make sure you’re working with a reputable developer with a trustworthy history with previous investors. A trustworthy history means they have paid all their previous investors the total amount and on time.
If you take all these steps before investing, your investment should be very secure.
If you have a lot of money sitting in savings or your bank account, property bonds could be perfect for you. They allow you to make a passive income from extra money if your willing to loan it out for a few years.
If you feel like you don’t have enough time to commit to an investment, property bonds could also be an excellent fit for you. You don’t have to spend a lot of time monitoring the investment or maintaining it.
It’s a great way of making extra money on the side with minimal effort.
Very high total returns make property bonds attractive to high profile investors. If you invest in asset-backed bonds from reputable developers, your investment is incredibly safe. A safe investment is perfect for any investor– high profile or just starting!