It goes without saying that one of the most important goals of investors is to maximise the return on their investments. Traditionally, real estate has been a preferred option given the dual prospects of rental returns and capital appreciation.
However, smart investors are always looking for different ways to improve their returns. In recent years, Property Investment bonds have become one of the preferred investment options as an alternative to direct investments in real estate.
In general, Property Investment bonds offer better yields and eliminate the headaches of sole proprietorships and often outperform other real estate-related investments. In fact, recent research shows that investors would have received nearly twice as much investing in real estate bonds compared to buy-to-let real estate over the same period.
The Nao Group
The Nao Group is a commercial real estate developer with a long history of development projects in London. He has years of experience and an unparalleled track record of delivering returns to investors in a timely and timely manner. The group thus offers institutional and private investors attractive investment opportunities for investing in commercial Property Investment bonds.
What are Property Investment bonds?
Property Investment Bonds are an excellent alternative to direct Property Investments. Such bonds offer an opportunity to earn passive income and enjoy the rewards of real estate developers’ hard work without having to worry about the stress of developing or managing the property.
What is buy-to-let?
“Buy-to-let” is a term used in the property markets in London and the UK to refer to the purchase of a property that is specifically intended to be rented or leased. This is usually a residential property, but can also be used commercially. Typically, investors are able to obtain a “home purchase mortgage,” a loan that is specifically designed to purchase such real estate for home purchase.
This type of real estate investment was perhaps the most popular around 2,530 years ago, when mortgage rates to buy rental properties were relatively low and house prices rose.
But times have changed and more attractive opportunities have emerged, such as investing in real estate bonds.
The Most Important Advantages Of Investing In Property Investment Bonds
Let’s first take a look at some of the key benefits of investing in real estate bonds:
- Investing with less stress
Building an investment portfolio can be quite stressful at times. However, Property Investment bonds are one of the best and most affordable ways to benefit from the efforts, real estate experience and knowledge of others.
- Attractive interest rates
Real estate bonds offer two types of interest: fixed interest and variable interest. A fixed interest rate means that an investor receives the same interest amount for the entire life of the bond, regardless of how the national interest rates develop.
A floating rate means that the interest you get each year depends on the interest rates of the banks.
- Asset-backed investing
Some real estate bonds, such as the Nao Group bond, are asset-backed, which gives investors an extra level of security.
- “Early exit” option
Some real estate investment bonds contain an “early exit” clause. This means that a bond contract can be terminated at any time subject to certain conditions.
Advantages of Property Investment Bonds versus Buy-To-let
Let’s look at some of the main advantages of investing in Property Investment bonds versus buying buy-to-let real estate:
Real estate mutual bonds:
- Can be asset-backed, which means that there is always an underlying asset to achieve the returns that investors demand;
- Allows investors to invest with relatively small amounts of capital. You don’t have to take out a mortgage or loan or save to have enough money to pay down a property;
- Ensure that the costs and risks of ownership of the property are shared among the parties investing in the bond. Collective experience and knowledge together with shared responsibility help to significantly reduce risk;
- Allow retail investors to benefit from the returns associated with real estate without all the disadvantages of direct ownership of the property;
- Generates some of the most attractive performances available today;
- Are generally only set by developers with a proven track record;
- Offers a clear and simple investment subscription process, as well as various options regarding the amount to invest.
On the other hand:
- Recently underwent tax, legal and regulatory changes that have limited the attractiveness of such properties as an asset class;
- Are also affected by the unavailability of mortgages that support this type of investment. Many lenders have either withdrawn from this market segment or reduced their exposure. In the UK, the number of homeowners buying homes has reportedly decreased by around 120,000 over the past three years;
- Leaving all risks and costs of owning real estate with a single owner rather than spreading them among all co-investors as is the case with Property Investment bonds;
- Often result in the property owner talking to tenants about repairs, late rental payments, rental terms, etc.
Comparative Analysis of Typical Investment Returns
If we look at the typical investment returns between investing in a Property Investment bond and buying a property for sale, the difference in returns is quite pronounced.
Investors in a Property Investment bond such as Nao Group Bond will enjoy:
- A fixed interest rate of up to 25% per annum;
- A fixed term of bonds;
- A bond is a bond backed by development assets.
For example, an investor who puts £50,000 into a 5-year bond will earn £4,125 in interest per year. Since the interest rate is fixed, the interest paid remains constant over five years.
At the maturity of the bond, the issuer of the bond will also repay the original invesFtment of £50,000.
On the other hand, suppose a property was bought for rent for £300,000 and let out for £1,250 per month £15,000 per year (gross) and assume that the property remains 100% occupied. This return is made prior to any repair or maintenance. , insurance, leasing or management fees and/or loan repayments have been taken into account.
This gross return of 5% per year can easily increase to 4% or less without accounting for mortgage payments.
Compared to a no-fuss investment that yields 8.25% per year, or about 41.25% over a typical five-year life of a real estate bond, that’s about 4% (before mortgage payments) for a full-fledged property, by comparison faded.
It is clear that investing in Property Investment bonds far outstrips investing in real estate.
Property Investment bonds offer the opportunity to avoid maintenance fees, stamp duties, council taxes, insurance payments, rent issues, and everyday hassles like dealing with tenant background checks.
These bonds give the investor the freedom to invest in the UK property market without any problems related to the development or management of the property. to achieve higher yields on real estate bonds.
Do you need more information about investing in bonds? Contact us today