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A Short Guide to Private Equity Investing

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What is private equity investing, and how does it work? In short, a private equity firm (or General Partner; GP) is typically an investment fund with a fixed lifespan of 5-10 years, which raises money from institutional investors such as family offices and pension funds. This fund is structured as a limited partnership, and the capital is used to invest for an equity stake in companies which are not publicly traded.

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How do Property Loan Notes Compare to other Investment Classes?

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Bure Valley Group is an investment brokerage business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.

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
[email protected]

 

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.

 

Invitation

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
[email protected]

 

8 Questions to Ask Yourself Before Investing in Property Loan Notes

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Bure Valley Group is an investment brokerage business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.

Investing is never a lighthearted decision. Regardless of whether you are considering a property loan note, bond or stock it’s important to ask yourself some important questions about the opportunity in front of you before committing hard-earned capital to it.

In this short checklist, our investment team here at Bure Valley Group have offered 8 questions for investors to ask themselves before delving into a property loan note. We hope you find this content useful, and if you’d like to request more information about our property loan note opportunities after reading this you can reach us via:

+44 160 334 0827
[email protected]

 

#1 Do I have the capital?

Property loan notes make property investments much more accessible to individual investors, which might otherwise just be open to companies. However, there is usually a minimum bar to entry set in the four-figure mark. Before investing in property loan notes, therefore, it is worth checking that you have the money at hand. Never go into debt to invest in a property loan note.

 

#2 What are my investment goals?

It’s important to constantly keep in mind why you originally started investing, and what your goals are. Remember, for most people the ultimate goal is something personal such as achieving a desired lifestyle in retirement or financial independence. Make sure you invest in a property loan note because it helps you move towards your objectives.

 

#3 What is my risk tolerance?

Everyone has a different attitude to investment risk. Some people have more stomach for a high range of market volatility, for instance, and have the time ahead of them to make up for short-term investment underperformance. Others are much more cautious and would rather invest in opportunities which do not fluctuate too much. Property loan notes can be an attractive option for both types of investor, since they can offer high returns (e.g. up to 24%) whilst also offering a high degree of security if it is asset-backed.

 

#4 Is the property loan note asset-backed?

Regardless of the investment in question, you should always ask yourself what happens if things go wrong. With a bond, for instance, the company you are lending to could default, or interest rates could rise and eat into the attractiveness of your bond. Equities might decline in value during a stock market fall. Property loan notes, moreover, might not work out as planned if the property developer defaults or makes late repayment. To mitigate this, consider restricting your choice of property loan notes to those which are asset-backed. This is what we do here at Bure Valley Group, and it helps to ensure the investor always gets something back.

 

#5 How much time am I looking to invest for?

Property loan notes come with a minimum commitment period. This gives time to the property developer so they can pay you back, and opens the possibility for higher investment returns by allowing more time for interest to accrue. At Bure Valley Group, for instance, a common time period commitment for a property loan note is two years. Whatever the time frame, make sure this fits into your wider investment goals and strategy.

 

#6 Who is the property developer and are they credible?

Of course, you shouldn’t just lend your hard-earned money to any so-called property developer who asks for it. It’s crucial to check their credentials ahead of time to ensure that their project, financials and wider business model are all robust. Here, an experienced broker such as Bure Valley Group can help you sift through the different options to find the most promising ones.

 

#7 Do I understand the property loan note?

There is a golden rule in the investment management world, and it says: “Never invest in anything you do not understand.” Naturally, you don’t need to understand the intricate workings of every asset or company you invest in. However, it’s important to feel confident that you have a strong grasp of what the developer is trying to do by issuing the property loan note. Never be afraid to ask for clarification if you are being spoken to with words you do not understand. Make sure you are completely comfortable before committing your capital.

 

#8 How does the loan note fit within my wider portfolio?

No matter what the investment is, it’s a good idea to make sure you have a properly diversified portfolio and not rely on any single stock, bond or other asset. Make sure you consider your overall asset allocation when deliberating over a particular property loan note opportunity. Quite often it can be worthwhile seeking independent financial advice for full peace of mind.

 

Invitation

Whilst the above can go a long way to helping you make wiser investment decisions, many people find value in coming alongside a professional investment broker who has experience analysing different property loan note opportunities. Here at Bure Valley Group, for instance, we not only offer our own set of pre-vetted property loan notes to our exclusive investor network, but also act as a guide to help ensure that investors ask themselves these sorts of questions.

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
[email protected]