Whilst the definition of a “good” investment is dependent on a number of factors for each investor, the attractive target returns, exposure to the property market and opportunities to invest for impact can make property bonds a good investment consideration for some experienced investors.
When investing into a residential property bond, experienced investors are helping small and medium-sized housebuilders to provide homes at a time they’re needed most, after decades of undersupplied demand.
This chronic undersupplied demand has resulted in a continuous need for the alternative finance provided by property bonds.
With a property bond, experienced investors can target potential returns of between 4% and 8% over a fixed-term period (often two to four years). These inflation-beating target returns can be particularly attractive at a time when interest rates are at an all-time low – though it’s important to remember that unlike cash savings accounts, property bonds are an investment product and capital is at risk.
Most property bonds also offer the ability to realise returns on a quarterly basis or upon maturity, resulting in the potential of a regular income stream or a single sum, whichever would best suit your portfolio requirements.
For example, an investor utilising property bonds as part of their retirement plan may choose to have interest paid quarterly to provide a level of income throughout later life. Conversely, an investor looking to maximise capital growth by reinvesting total returns into future bonds may find interest paid on maturity the more beneficial option.
And on the topic of adding property bonds to a retirement plan, it’s often possible to hold the asset in a Self-Invested Personal Pension (SIPP) or Small Self Administered Scheme (SSAS). Alternatively, property bonds can be Innovative Finance ISA (IFISA)-eligible, and for experienced investors, the property-backed IFISA can often be a valuable supplement to a pension.
Utilising these vehicles to invest into property bonds means that on top of the attractive potential returns and opportunities to invest for impact, they can also be a tax-efficient investment option.
CARLTON Bonds are an IFISA provider specialising in fixed-term property bonds.
Against a backdrop of low interest rates and a volatile stock market, the IFISA can provide an attractive investment opportunity for experienced investors.
The property-backed IFISA has the potential to generate higher rates of return than more traditional investment routes for investors with a greater appetite for risk.
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