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Any experienced investor will know that there are multiple types of assets which can comprise a successful portfolio. Property loan notes, whilst we argue these are strong investments, are not the only game in town. Less well known, however, is how property loan notes compare with equities, cash and other commonly-known asset types.
In this article, therefore, our team here at Bure Valley Group will be sharing some of the pros and cons of some of these popular assets. In particular, we will be drawing attention to how property loan notes can draw from many of the strengths of these assets, whilst mitigating many important weaknesses.
Please note that this content does not constitute investment or financial advice. We hope you find this article helpful when forming your thoughts about your portfolio. If you’d like to request more information about our latest property loan note opportunities please contact us via:
+44 160 334 0827
Property Loan Notes vs. Equities
Equities are commonly known also as stocks or shares. You can invest in them directly by buying shares in a particular company. Or, you can invest in multiple companies at once by combining your capital with that of the investors in a mutual fund.
This type of investment works somewhat differently to property loan notes, which involve you (the investor) committing money to a borrower, such as a property development company, with the promise that they will pay you back with interest.
The advantage of investing in the stock market is that, historically, equities have often provided strong investment returns. In 1985, for instance, the FTSE All-Share-Index stood at 682, yet by 2019 it had grown to 4196. However, the notable disadvantage of equities is that the stock market is often volatile, and in the worst cases your investments might fail and lose money.
Property loan notes, however, do not follow the ups-and-downs of the stock markets. The risk to your money is generally deemed to be lower, since as a “debt investment” it takes priority over equity investors when investment is being returned. Moreover, property loan notes often match the returns of many equities and can even dramatically beat them. Here at Bure Valley Group, for example, some of our property loan notes have made returns of up to 24%.
Property Loan Notes vs. Bonds
A bond is very similar to a property loan note in that both involve lending money to an entity, with the promise of repayment of the principal with interest. However, a bond can be issued by a government or a company, and the capital raised from investors can be used for a wider range of purposes outside of property development.
One of the advantages of bonds is that they are widely regarded as lower-risk compared to equities. Whilst the latter fluctuates in value with the movement of the stock market, your bond investments will not be directly affected by this volatility.
Where property loan notes have an advantage, however, is with regards to investment returns. Bonds typically provide far lower returns compared with equities due to the lower risk involved. As mentioned above, property loan notes can often beat the returns of equities but they also provide a high degree of risk mitigation by securing your loan note against an asset belonging to the property developer.
Property Loan Notes vs. Cash
Cash is widely seen as one of the safest investments. Money in your regular savings account, for instance, will not lose value in the face of stock market decline, and up to £85,000 in 2019-20 is protected by the government under the Financial Services Compensation Scheme (FSCS) should your bank suddenly collapse. You also have the added advantage of high liquidity; easy access to your money which can quickly be converted to another asset.
Where cash investments struggle, however, is with regards to rates of return. Since 2016, average interest rates on regular savings accounts have barely approached 1.5%. Inflation, however, has sometimes been as high as 2.7% during the same period, and the Bank of England aims to deliver a 2% target of inflation. In effect, this means that for most people their cash savings are losing money over time.
A property loan note, however, can provide far better returns (up to 24%) which beat inflation considerably. The drawback, of course, is that the money committed to your property loan note is locked away for a period of time (e.g. 2 years), and you need a minimum capital sum at the beginning to be able to invest. Here at Bure Valley Group, however, we offer a range of property loan note opportunities to make this great investment more available to investors across the UK.
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