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Property Bonds

What are Property Bonds?

Property Bonds are a good way to invest in property which may not be easily accessible to you ordinarily. Typically with a property bond, you invest in a small fraction of a largescale property development. The investment is secured normally by the asset, such as the land the property will be built on. Property developers can issue multiple property bonds on a single development making the cost of the individual bonds you purchase relatively low in comparison to the cost of the overall development. There are usually minimum investment amounts, but you can generally invest as much as you wish.

Developers issue property bonds as an alternative source to finance.  Bonds are typically offered before the planning stage and investors can take advantage of the uplift in the land price with planning and once the construction is complete the development is worth considerably more.

The bonds are issued for a fixed term, which is usually three to five years although this can vary depending on how the development is structured. The fixed term is set to ensure there is enough time to allow the property developer to complete the construction and generate a return for the investor.

The expected returns you receive from a property bond investment typically come from the development company completing the construction on the land, building the property and then selling it. You may also get returns from rental income generated by the property depending on how the bond is arranged. It is also possible for developers to generate returns for property bond investors by refinancing the property.

Property bonds are suitable for small investors who don’t have access to the capital required to make a traditional property investment. In most cases property investments include buying land, gaining planning permission and then developing it. The low entry point makes property bonds a much more accessible way to invest in property. It also means you don’t need to be involved in any of the development work

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