Property bonds now three times more profitable than buy-to-let
New research by investment introducing firm, Hunter Jones, has revealed that individuals could have received almost 3 times as much by investing in property bonds, compared to buy-to-let properties.
The city-based firm, which is a specialist in UK and European property-backed interest-bearing loan notes, has compiled a white paper outlining its findings, which compares the purchase, operating cost and return of a buy-to-let property with a property bond investment opportunity.
To ensure a fair assessment, the analysis has been conducted using historical data and compares the purchase of an average property in Yorkshire, with an equivalent investment in a two-year Property Bond Loan Note raised by Yorkshire-based developer, Empire Property Holdings, which encompassed five residential developments in Pontefract, Wakefield, Bolton and Blackburn.
Where the buy-to-let property would have provided a return of 4.6% per annum – assuming 100% occupancy – the property bond delivered a return of 27.2% over two years, breaking down to circa 13% per annum, therefore demonstrating a clear difference of over 8% per annum.
Reece Mennie, CEO of Hunter Jones, confirmed: “Recent tax, legislative and regulatory changes have restricted both the appeal of buy-to-let as an asset class, together with the availability of the mortgages which support them, meaning the number of landlords has now fallen by an estimated 120,000 over the last three years alone.”
“In comparing the return of investing in a buy-to-let property with a property bond, this comes as no real surprise. Aside from receiving a far greater return, investing into a property development fund through a property bond enables individual investors to benefit from the profitability associated with the property sector, without all the downsides of direct property ownership.”
In recent years, the alternative investments sector has experienced exponential growth, as more sophisticated and self-certified investors realise the potential for greater returns from property bonds compared to directly investing in bricks and mortar through buy-to-let.
Mennie added: “Property bonds can generate some of the most impressive returns currently available, and at relatively low risk. However, it’s extremely important that investors take the time to source and research viable opportunities, which is where experienced, specialist Introducers, like Hunter Jones, can help.”