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Are you thinking about investing in UK property, without wanting the hassle of managing the property yourself? Property loan notes can be an attractive option to consider. They can be particularly useful for individual investors who want to invest in larger-scale projects, alongside institutional investors (who might otherwise have had sole access to them). For businesses looking to raise funding for a development project, loan notes can be a great source of funding for their property plans.
Here at Bure Valley Group, we help successful investors gain access to a wide range of exciting, exclusive investment opportunities such as these – not only including loan notes but also EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme) projects as well. If you are interested in finding out more about our exclusive network, please see our project portfolio or feel free to contact us on:
+44 160 334 0827
How do property loan notes work?
Property loan notes have been around for thousands of years, dating at least as far back as ancient Rome. They work similarly to a bank which lends a loan to an individual; except in these cases, you are the one lender and the property developer is the borrower. As such, a property loan note is a type of fixed-interest security; it offers a set, regular rate of return (e.g. 12% per annum) and the eventual return of the principle.
The types of projects involved with loan notes might include converting commercial properties into residential ones, within areas of growing prosperity in the UK. The property loans might renew at different times, depending on the nature of the projects (e.g. 2 years). Property loan notes are classed as “alternative investments”, and offer some of the highest interest rates currently available to UK investors in 2019-20.
Do you pay taxes on property loan notes?
Under UK law, property loan notes are considered either to be “qualifying corporate bonds” (QCB) or “non-qualifying corporate bond” (non-QCB). Depending on this status of the property loan note, its tax treatment will vary. A QCB will be able to claim an exemption for capital gains tax (CGT) whilst a non-QCB cannot do this. For more information, we recommend that you check out Section 117 of the Taxation of Chargeable Gains Act and consult a reputable and qualified tax adviser.
What about the regulation status of property loan notes?
In the UK, investment opportunities are generally classed as either “regulated” by the Financial Conduct Authority (FCA) or “non-regulated”. Property loan notes are classes as non-regulated investment vehicles, but the companies offering them will often need to have their property loan note approved by a company is regulated by the FCA. It’s usually in the interests of the company to seek this approval as well, since it gives investors more confidence that the property loan note has been carefully examined before its issue. Here at Bure Valley Group, we always ensure that our property loan notes have gone through this important step beforehand.
Are there any risks involved with property loan notes?
As with any investment, property loan notes do come with certain risks. Most investments have the potential to go up or down in value, and you may get back less than you initially invested. Property loan notes are unregulated investments, which means that they are typically regarded as “higher-risk”; yet the benefit is that they also hold out the potential for higher investment returns. Property developers might also not pay you necessarily on time, if their project takes longer than scheduled to complete.
However, many of these risks can be mitigated with careful planning – particularly if you work with an experienced investment brokerage, who can help you vet the different property loan note opportunities in front of you. Late payment from the property developer, for instance, can be alleviated by ensuring a penalty clause is included in the loan note agreement. This helps ensure you will be compensated if the project runs over. Many property loan notes are also asset-backed, which means that if the borrower (i.e. property developer) fails in the project then their assets can be sold to repay their debts to you.
Who can invest in property loan notes?
Generally speaking, property loan notes are intended for people who are knowledgeable, interested and experienced when it comes to judging the merits and pitfalls of a property investment. Those who qualify as “Sophisticated Investors” will also usually meet the necessary requirements to invest in property loan notes, as well as High Net Worth individuals (i.e. those on incomes exceeding £100,000 pa and/or hold £250,000+ in assets). If you are unsure whether you meet the necessary qualifications to invest in property loan notes, please get in touch to speak with one of our specialist staff who will be able to assist you.
If you are a successful investor and would like to know more about the exclusive property loan note opportunities we offer here at Bure Valley Group, then we’d love to hear from you. Get in touch today to start a conversation with a member of our friendly team, and to discuss some of the great investment memorandums we have available:
+44 160 334 0827