3 reasons to invest in property bonds
You don’t need to take out big loans or spend boatloads of money to invest in property. Many property companies and estate agents will issue bonds that are a viable alternative to investing in property the old-fashioned way.
In some places, property bonds are very quickly taking over the professional landlord. With the right investment strategy, it is very easy to diversify your property portfolio and benefit from fixed interest returns, which are spread across a vast range of properties. The best thing about property bonds is that they often have a short-term return rate, with your interests being paid as little as every six months.
With the right property bond, you could embark upon a very profitable journey and very quickly grow your finances, all without having to be a landlord and carry the weight of the various obligations and risks that come with that title. Property bonds are the stress-free alternative to holding an interest in a property – you no longer have to own second, third, or fourth properties to benefit from them in the same way landlords do.
Two of the classic problems which come with being a landlord include:
• Problem tenants – despite the landlord exercising all possible foresight when leasing out his or her property. Problem tenants can sometimes be the most unlikely of people and are more trouble than they are worth. Problem tenants can completely ruin a landlord’s life and it is a very big risk to take.
• Inconsistent returns because landlords have to maintain their properties and fix problems for tenants as soon as they arise. A broken fridge, a washing machine which is playing up, or a burst water pipe are all very expensive to fix.
With property bonds, you can avoid these problems and many more. Here are some more reasons why you should be considering investing in property bonds over being a landlord and owning extra property. Here are three reasons to invest in them –
#1: You Exercise the Control
As an investor in property, you exercise the most control – especially if you have the highest share – and everybody else does the work. Being a property investor provides you with ultimate control over that property, and the management of the property itself is in the hands of the landlord or managing agency.
A property investment allows you to benefit from all the ownership rights of a property without having to actually do the leg-work. Instead, you call in the professionals to handle the day-to-day management of the property and its tenants whilst still reaping the rewards – investment returns.
#2: Rental Income Pays the Most
In comparison to investment returns on government bonds, cash accounts, stocks, or anything else, property always has far higher investment returns. With other investments, you are often forced to just leave your cash in the bank and let it gain interest. However, with a property bond, you can profit from the property’s rental income.
Everybody knows that renting is a very expensive alternative to buying your own property, yet many people are still willing to pay high rents – this is a very easy way to make a quick profit, should you hold a high enough share in a property, and this could make for quite the sizeable annual return.
#3: Higher Potential Yields
Certain parts of the world are providing landlords with yields spanning into double figures.
It is easy to see why areas with a high student population generate these higher yields for landlords; a three-bedroom house can easily be converted into a five-bedroom student dwelling, and these are virtually guaranteed to be leased out by students and remain occupied for 9-11 months of the year. Plus, with student loans covering students’ rent, there aren’t typically many problems associated with students when it comes to having their rent paid.
So long as you can cope with the house not always being in the best shape at the end of the year, bonds in student housing can be a very attractive investment opportunity.
#4: So, How Do Property Bonds Work?
Developers will issue property bonds for developments which are yet to be built – generally – to raise the capital for construction work. More often than not, property bonds are an alternative source of funding for a new development. This is not always the case, though, but it is typical.
Property bonds are issued for a fixed term (usually up to five years) and are set for a period of time, which allows the developer of the property to finish the construction aspect of the property and generate a profit.
The returns you get from a property bond will come from the developer, who finishes constructing the property and then sells it. Your main property bond returns are generated by the sale price, but you also usually get additional returns from any rental income generated by the property.
Another less popular way for returns to be generated is through the refinancing of a property.
#5: Who Should Consider Property Bonds?
Property bonds are best-suited for two distinct groups of investors:
• Small Investors
Small investors are people who do not have access to the capital or means to invest in property through the usual route – buying land or property – but still want to hold an interest in some property.
• Hands-Off Investors
Hands-off investors are people who have the capital to invest in property but choose to invest in property bonds because they do not want to be involved to the same extent as a landlord would be.
In many cases, hands-off investors have enough money to buy property or fund an entire development but opt instead for an easier and less stressful investment opportunity, which will see returns without all the headache.
#6: What Are the Risks?
As with any investment, there are certain risks involved, even if you are not investing in property in the traditional sense. Any risks which apply to investing in property in the traditional sense apply to investing through bonds, and whether an investment in property bonds is right for you largely depends on your individual circumstances.
There are lots of places you can go for advice if you are considering investing in property bonds, and you should always consult a legal professional before taking the plunge.
Property is largely recognized as being the most profitable and lucrative way to make large returns on an investment. Many people are interested in investing in property, but not everybody has the money to do it. Buying property is expensive and there are many risks which come with being a landlord.
By investing in a property bond instead, you can still benefit from all the bells and whistles which come with property ownership and avoid all the negatives at the same time. Property bonds are a cheaper way to invest in property, too, and you can get started with a fraction of the capital you would need to buy property. Yes, your returns will be smaller if you invest smaller amounts of money, however, they are a great way to get into property investment and you could use your returns to save towards the bigger picture.