Property is just one of many types of investment, and property loan notes are one of several in the property asset classes. But what are they, and are they a safe way of investing for property investors?
A property loan note is, in short, a loan agreement made between an individual or business and, typically, a property developer. The developer will raise finance through a series of loan notes for a development in return for a fixed rate of interest over a set period of time, typically one or two years. Interest rates and the frequency with which interest is paid out vary from provider to provider.
The Purpose of Loan Notes
It is important to understand that property loan notes are for specific purposes, rather than to raise general funds for a developer. They are likely to be used to raise finance for a specific project or to raise initial capital for land purchase before more conventional financing is available.
Considering the Risks of Investing in Property Loan Notes
Like any investment, there are risks to consider with loan notes. The loan is placed with a property developer to invest in their development. The risk will depend on the financial position of the developer, the risk associated with the particular development, and the likely return on the investment.
Our Guide to Adding Value to Property Investment as an Asset Class
To add value to the Hawkhurst Invest property investment proposition we have looked at the marketplace for products that we believe represent strong return on investment while providing a product that is designed with the investor in mind.
We have looked for and found a product that meets these requirements, as well as having structures in place that mitigate the risks inherent in any kind of investment. Download our property investment guide for a detailed walk-through of the property loan note concept, our offer, and how we carry out our due diligence. Download our FREE Guide to Property Loan Notes
Diversification and Different Types of Investments in Your Portfolio
Your property investment portfolio will typically be made up of rental property ranging from single occupancy apartments and houses, houses of multiple occupancy (HMOs), commercial property, and a cash reserve. Different types of investment will appeal to different property investors. Numbers of properties will vary too depending on whether a property investor has only a single property or a professional portfolio.
The Impact of Inflation on Cash
Add to this a cash reserve or residual profit that may or may not be invested alongside property investments. The returns on cash at present are not going to reach their full investment potential thanks to high inflation, and even bonds, cash, or stocks and shares ISAs may not perform at a level that outperforms the negative effects of inflation in the shorter term. In effect, the value of cash is going backward.
Of course property investing requires a cash reserve to deal with such events as renovations and maintenance, non-payment of rent, and so on, so retaining some cash is necessary for ongoing operations. But what about residual profit that may not be required for this purpose, or could be better utilised than simply drawing it from the business?
Regional Opportunities in Property Investment
The obvious option is to invest in additional properties to build your property portfolio. That’s an attractive option if the available cash is sufficient. There are many opportunities in the property market for savvy investors, particularly in the North and Midlands.
That may not be desirable, so what are the alternative investments available?
An Independent Financial Advisor can provide information on other investments, but the team here at Hawkhurst Invest firmly believes that property loan notes are a highly viable option for those people who have an interest in property and want to make the best use of the cash assets that they have available.
Returns on Investment and Interest
The return on investment from a property loan note will vary depending on the provider, the term of the loan, the amount invested, and the current market.
Unlike some other investments like bonds, the interest rate is fixed for the term of the loan(typically one or two years) and pays out the interest at specific intervals. This could be monthly, quarterly, or some other pre-agreed interval.
You can find out the rates of interest, returns, and more information about the 79th Group property loan note offer by Downloading our FREE Guide to Property Loan Notes
Our Partners and the Property Loan Note Proposition
Our aim in bringing together this package of loan notes is to present you, the property investor, with an additional opportunity to invest in the property market. To achieve this we have brought together two of the market-leading businesses in their fields.
The 79th Group
79th Group is a global, family owned and run asset management company. It is based in the UK, with offices in Gibraltar and a number of other countries all over the World. The business specialises in the acquisition and redevelopment of distressed property. This is property where the owner could be bankrupt, subject to County Court Judgements, and must raise funds to pay creditors. 79th Group is able to acquire such properties based on a 5-7 day exchange.
Typically, properties are referred by estate agents, lawyers, or accountants. The company has opted for this approach of purchasing portfolios of assets rather than construction which avoids the developer “merry-go-round”, reducing costs and keeping the process simple.
Diligent Eye was founded by Graham Turrell to carry out due diligence on financial products and services. The aim of the company is to provide clients with the tools that they need to make pragmatic, informed decisions about their investments or other financial products and services.
Hawkhurst Invest Supports your ambition to secure your financial future through Property Investments
Hawkhurst Invest provides a range of services directly or through an extended network of preferred suppliers and professionals that are designed to support your property investment portfolio. We’ll provide you with tips and advice to help you to develop and grow your business.
And we’ll keep you in touch with the latest compliance requirements, legislation, and trends in the property investment and housing markets.