Property bonds are a lucrative option for investors in the UK and around the world. It allows the ordinary saves to invest their money in the real estate industry in a much more manageable way as there in requirement for any expert knowledge when it comes to land development. Property bonds are asset backed which makes the investment worthwhile.

Being an asset-backed investment, it means that investors would be able to contribute to both the land and housing development. There are many benefits of investing in property bonds. Keep in mind that when property bonds are invested in by UK residents, it doesn’t mean that one would obtain any type of equity in the development company which offered them. In order for that to occur, one would need to buy shares directly from the business.

Developers issue property bonds in order to raise funds that are needed for acquiring the land, purchasing the building materials and others. It is due to this reason that property investment bonds are often referred to as loans to the developers. They are a preferable option when it comes to financing. Another term which the property investment bonds are called in the industry, are loan notes.


Asset Backed Security on Capital

Before moving on to the reasons behind why one must invest in property bonds; it is important to know what is meant by asset backed security on capital. Investors are not allowed to pull out from their selected scheme just like other corporate bond and take their investment back early on. In case where withdrawals are actually allowed from the property bond, the investors will have to expect that they would end up losing all of the return which they would have received, if they had let their bonds mature.

Once, the term ends, the property bond holders should expect that their investment would be paid out in full. During this point, they would be able to take back from their investment, including the interest that is accrued. There are different types of property bonds out there which can then be reinvested if desired.

When investing in secured property bonds, the funds must be secured against the property that is being developed with the title of that property that is being registered with the Land Registry office. What this means is that, the loan which is the bond would be secured. However, in case something was to go wrong with the said development, for instance, the permission of use was not granted or the planning permission has been denied, then the bond holder has an interest on the land. This steps help ensures that one is provided with collateral and in case the planned developed is not able to take place, and then the land would still hold value.

In order to allow more housing stock to be made in the UK, many of the property bond investors prefer to put their money in them. It is due to this reason and others reasons that the demand for housing is high. Businesses with extensive track records that have managing developments successfully provide property bonds. The market has potential for solid development potential.

However, it is common to wonder why developers do not obtain all of the investments from bands or any other traditional source. The main reason for this is that the lending criteria for such property development, is quire strict and single financers are not capable of funding the entire development project on their own. Hence, developers need to seek financing through other sources.

Now, that one understands the reason why property bonds are financed through such a model, the reasons for investing in the, can be better explained. Without further ado, here are the 10 main reasons why one should invest in property bond.

  1. Delivers High Fixed Returns

Perhaps, one of the main attractions of investing in a property bond is that it offers high fixed returns which range from anywhere between 9 percent and 14 percent each year. Most of the bonds of this type are normally sold for settled terms which could be either 12 months or up to 3 years depending on the development. Even though the terms are fixed, and one would have to see the period out in order for them to actually realize the full potential of this type of investment, the interest is normally added on either     bi-annual or quarterly basis.

When it comes to investing, there are many options to choose from and it can quickly become overwhelming having to choose a single type of investment. Hence, it is a good idea to invest in property bonds. Furthermore, despite there being many options, most options do not offer such a high level of fixed return. Even if one considers other fixed return investments such as saving houses or others, they can only expect to get up to 7 percent and 8 percent, but up to 14 percent of returns, is highly unlikely. If one is looking for fixed returns and can wait it out, then they should seriously consider investing in property bonds.

  1. There Is Always a Demand for Property

One of the reasons why it is a good idea to invest in property bonds is due to the reason that there is always a demand for property. As the world population grows and the one in the UK, there would be countless development projects that would take root. There are always investors and buyers that want a piece of property and don’t mind paying thousands of pounds just to own a property of their own.

Furthermore, people from all over Europe and the world invest in the UK in order to live in the country and one of the requirements for investment is real estate investment. It is due to the reason that there is always an inflow of foreign investment in the UK and the real estate industry is one of the benefactors of the investment, as is the case in Canada with the Transit city. There is no other industry out there which has such a high demand as the real estate industry. Therefore, if anyone wants to ensure that they the investment they make would be worth it should invest in property bonds.

  1. Low Risk

As mentioned above, since there is always a demand for property, this means that investing in property bonds is low risk. In addition to this reason, proper bond investors would actually invest towards asset ownership indirectly. Since, the land would be bought with the money, investors face a low risk. When one looks at property bonds, they would quickly come to realize that it is a low risk and high return investment type.

Despite Brexit, the real estate industry continues to perform well and is less volatile as compared to the financial industry which has faced some difficulties. If a UK resident is looking for a post-Brexit investment then they need to give property bonds a try as it offers low risk and a high fixed return.

  1. No Expert Knowledge is Needed

Unlike other financial products or types of investments which require some degree of expert knowledge, property bonds on the other hand do not require investors to possess any type of expert knowledge. The investors can speak with the development company to get an idea of the investment and since the terms of the investment are clear, it is easy to understand by anyone, even if they have never invested before.

Property bonds are a rather straightforward option and simple to invest in.

  1. Easy to Invest In

If one wants to invest in property on their own, they know that it would take time, cost a significant amount of money and on top of that, it would be extremely stressful. There are also various considerations which need to be taken into account such as legal costs, insurance payments, tenancy issues, maintenance fees, stamp duty and others. With a property bond on the hand, you would not have to be involved in the daily development issues as they would be taken care of by the developing company. The only thing that one needs to do is invest their money and have returns generated.

  1. You Exercise the Control

When it comes to property bonds, as an investor in the property, you would be able to exercise the most control, especially in case you have the highest amount of share, while everyone does the work. It is an ideal situation if one comes to think of it. If you become a property investor, then you would have the ultimate control over the property, while the management of the property would be done by the managing agency.

Property bonds allow you to handle take advantage from all of the ownership rights of the property without even having to do any of the leg-work. Instead, one would simply call in the professionals to have the daily management of the property as well as the tenants handled and reap the investment returns.

  1. Rental Income Pays the Most

As compared to investment returns from stocks, cash accounts, government bonds or any other option, property is known to offer far higher investment returns. Other investments on the other hand force one to leave their cash in the bank and wait for it to gain interest. However, property bond investors get to profit from the property’s rental income.

Besides, everyone know just how expensive of an alternative renting is as compared to buying their own property, yet people still do pay high rents. Hence, it offers a very easy way for you to make a quick profit. In case you hold a high enough share in the property, you would be able to make quite the sizeable annual return.

  1. Possibility of Early Exit Options

Although, it is not advised to consider early exit options, however, property bonds do have an exit clause which allows the investor to discontinue their agreement by providing a notice prior to each of the anniversary dates from on which the initial investment had been made. Some companies require a month’s prior notice while others require a much shorter period notice. It varies among companies.

The main reason why property bonds are a good investment is due to the fact that investors have the ability to access their cash if needed. However, if one decides to leave early on from the investment, they would have to forego the interest on the remaining years of the bond and it makes perfect sense. But, one would receive the interest that is already accrued along with the initial investment.

  1. Secured Against Physical Assets

One of the best reasons why one should invest in property bonds is due to the fact that the use of physical assets is a great alternative. They are many responsible developers out there and they take measures to ensure that the money of investors is secure.

Sometimes, the development agency managing the development would even have an independent security trustee that would be administered to properly benefit the investors. In case that something were to happen to the developer, then the trustee would quickly step in and seize the assets available and ensure that they are distributed to the investors accordingly.

Another step which is taken to secure the funds of the investors is one which involves the site being regularly revalued by an independent valuer.  This helps ensure that the developer never has to borrow more than the actual value of the development.

  1. Property Bonds Offer Diversification

One of the cliché phrases which just about every investor has heard of is that of not putting one’s eggs in just one basket. Although, it is a cliché, it is still a time-tested wisdom and is perfect when it comes to investing in property bonds as they allow investors to diversify and minimize their level of risk. Better risk-adjusted returns are vital in today’s day of age.

Furthermore, bonds help reduce volatility and help preserve the capital.