Fixed Returns Property Investment

The meaning of a fixed return investment is included in the name - it is an investment designed to guarantee fixed returns. This type of investment is sometimes called a fixed income investment and although it may provide lower yields than common stocks and similar investment strategies, it is considered a very safe tactic when you’re looking to make your money go further.

Some examples of an investment with a fixed return include government bonds, which pay periodic coupons representing a certain interest rate, as well as mortgage backed securities.

There are several benefits to opting in for fixed return investments which include diversification from stock market risk, protecting the absolute value of your investment via assets that have a stated objective of return of principal, a steady source of income and a potential of generating great returns over time.

A good rate of return on investment (ROI) depends on several factors. A big factor that would determine a good return on investment is the investors’ financial needs. If you’re thinking of investing now in order to secure your retirement in about 20 years time, your financial need for the ROI will not be as high as someone who is following the same investment strategy but is retiring in 5 years time. Therefore, what is considered a good return on investment is subject to the investors’ circumstances.

Furthermore, the type of investment and the risk involved affects the rate of return. In general, the higher the risk of investment, the higher the potential yield. Someone who is investing in stocks and shares shows willingness to take on a higher risk and may therefore enjoy a higher annual return on investment when compared to an investor who opts in for government bonds, which are considered a very safe choice. According to data on the compound annual growth rates (CAGR) collected in the last 80 years, an average return on investment with fixed return investments such as government bonds is 5.5% whereas for stocks and shares this figure falls between 10.2% and 11.9%. If you’re a property investor specialising in Buy-to-Let houses, a good rental yield is considered to be around 5-8%.

Property bonds are also known as property investment bonds and are a way for developers to raise funds from investors in the form of a loan. This initial investment allows them to fund the first stages of development. The property bond acts as a legally binding agreement between the investor and the property developer, and details the terms and conditions of the loan, how the money is to be used and when it is meant to be repaid.

As an investor offering the loan, the advantage is a higher-rate annual interest backed by a certificate and security over the property you are helping to fund. Additionally, investors have the ability to exit early from the investment, if they ever need to. Generally, a property bond investment is a much easier way to invest in property as it doesn’t involve any of the admin and extra costs of traditional property investment methods. By offering property bonds you are able to invest in property without worrying about council tax, estate agent fees or stamp duty tax.

Real estate bonds are also called property bonds and are a way for developers to raise funds from investors in the form of a loan. To fund the early stages of the development, property developers or construction companies issue bonds which are secured against the property, or land with a legal charge. This is registered on the property title at the Land Registry Office and offers security for the investors’ capital. The terms of the agreement vary but typically last 2-5 years, during which the investor is paid an interest rate on their initial investment. Once the agreement period comes to an end, the bond is said to mature and the loan amount is returned.

Property bonds can be a great way to generate regular passive income from an investment that is backed by an asset, and often comes with a legal charge, too. This guarantees that, as the investor, the capital supplied by you, will be returned, even if the development company that issues the bonds isn’t able to follow through on their obligations. With this additional security level in place, even in the worst-case scenario where the borrower defaults on their loans, your capital can be returned by selling off the asset against which the loan was secured.

However, as an investment product, property bonds put your capital at risk and do not guarantee returns. In an event of an economic downturn, it is possible that the development company will be unable to sell the properties which may affect their ability to make repayments to their investors. Additionally, property bonds are not covered by the Financial Services Compensation Scheme (FSCS) which increases the risk.

If you’re considering investing in property bonds, it is essential that you carry out your due diligence and seek professional financial advice before you make your final decision.