WHY LANDLORDS SHOULD MAKE THE MOVE TO THE ALTERNATIVE PROPERTY INVESTMENT SECTOR IN 2020

Reece Mennie, CEO of leading UK investment introducing firm, Hunter Jones 

 

The new decade is expected to bring with it a number of important changes to the property industry that could have a direct impact on landlords and their livelihoods.

With factors such as new legislation, increasing tax and costs, and ongoing political uncertainty posing a threat, these individuals are moving in increasing numbers away from traditional buy-to-let mortgages and towards alternative, more profitable forms of investment, such as property bonds.

For those new to the term, ‘Property Bonds’ are corporate bonds issued by developers that enable investors to reap the rewards of investing in bricks and mortar without dealing with issues associated with tenants and ownership.

A bond is purchased by the investor, who receives a certificate and security in return for the property they are helping to fund. They are then paid a fixed annual interest lasting typically between two and five years, after which the bond matures, and the principle is returned to them.

Crash course complete, why exactly should Landlords consider switching from buy-to-let to the alternative property investment sector?

 

Reece Mennie

THE FORECAST

Landlords can expect to see the cost of running their rental property increase this year, with 71% agreeing that expenses will rise over the next 12 months, according to a survey conducted by Monmouthshire Building Society.

What’s more, landlords should be prepared to see their tax bill grow following a phased reduction in the tax relief they can claim on mortgage interest, while legal changes are due to continue, with one piece of legislation around Energy Performance Certificates having already been introduced.

Brexit remains at the top of the political agenda and is sure to have a profound effect on landlords and the ways in which they operate for years to come, though it is hoped by many within the sector that the Government will place greater emphasis on increasing supply for tenants and take the opportunity to make the market more attractive.

 

REASONS TO SWITCH

Bearing this forecast in mind, there are many reasons why property bonds are becoming more appealing to many investors than conventional buy-to-lets.

Firstly, property bonds can be asset-backed, meaning there are always underlying assets to generate the returns required by investors, and they allow them to begin investing with relatively low amounts of capital.

There is no need to obtain a mortgage or loan, or save up to pay a deposit, and property bonds offer some of the most attractive returns currently available, with many returning around 10%.

In densely populated student areas, they are also helping landlords to generate considerably higher yields than would otherwise be possible through buy-to-let, whilst completely eliminating problems with tenants such as repairs, late payment and lease terms.

 

CONCLUSION

Taking these factors into account, it is clear that investing in property bonds offers a smarter alternative to buy-to-let.

With property bonds, landlords can avoid maintenance fees, Stamp Duty, council tax, insurance payments, tenancy issues, alongside all the laborious issues involved with managing tenants, whilst generating considerably higher returns.

What’s more, these bonds give the investor freedom to invest in the property market without the hassles associated with development or property management, which is one of the most crucial reasons why this type of investment has gained such traction in recent times, with growth forecast to continue throughout 2020 and beyond.

Osborne Baldwin Limited, trading as Hunter Jones, is an Appointed Representative (FRN: 808287) of Equity For Growth (Securities) Limited (FRN: 475953) which is authorised and regulated by the Financial Conduct Authority.

 

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