A property bond (also known as a property investment bond) is a way for property companies and developers to raise money from investors in the form of a loan.
Property bonds are an alternative investment product, and they have the potential to provide attractive returns - for experienced investors in particular - which are uncorrelated to traditional equity and bond markets.
Often, property bonds can be held in an Innovative Finance ISA (IFISA), making any potential returns tax-free.
The IFISA was introduced in 2016, and the investment product has rapidly grown in popularity - with over £1 billion invested to date.
The UK government recognised the importance of the alternative finance sector - in particular, peer-to-peer (P2P) lending - and presented the IFISA to allow investors to enjoy tax-free returns from P2P loans, mini-bonds and property bonds.
However, the IFISA isn't the only way you can invest into fixed term property bonds. Direct investment, or investment through your SIPP or SSAS are also options.
All property bond providers will have their own rules, so check the ways you’re eligible to invest on a provider-to-provider basis.
You can also invest into property bonds through a Limited Company, however, when doing so, you will not benefit from the tax reliefs that are available when investing via an IFISA, SIPP or SSAS.
Property bonds are most suitable for experienced investors (sophisticated, high-net-worth or professional) who understand the risks involved, and are happy to take those risks in the search of higher returns.
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.
To find out more about property bonds, .