Unfortunately, the UK has witnessed a period of relative stagnation, with a median full-time employee earnings increasing by 0.9% between April 2018 and April 2019.
Combine the historical stagnation of wages with increased living expenses. There is no doubt that we all wish we earnt that bit more money to make ourselves feel more financially confident. From providing a security blanket if something unexpected happens to be able to afford a new car or the holiday you have always wanted, having that bit of extra finances to hand is an attractive prospect for many.
But what options are available to us?
Investing in the property market is often a popular direction taken, either through the buy-to-let property (becoming a landlord) or through secondary investment opportunities such as property investment bonds. With no definitive answer to what is the best option, this piece will explore the options the property market provides people looking to add to their annual earnings
Property Investment Bonds
For those looking to invest in the property market, property investment bonds are becoming an increasingly popular option. In comparison direct property investment options such as buy-to-let property, property investment bonds allow investors to provide capital for developers in the form of a loan. But what exactly is a Property Bond?
As mentioned, property bonds are a means for develops to raise capital from investors in the form of a temporary loan. The idea of a property bond is they provide the investment for the early stages, before any revenue is created, from property developments. Depending on the terms of the bond, the investor will be paid a rate of interest on the original bond after which the bond matures.
Investors are drawn to investing in property bonds for a multitude of reasons, but often the most cited explanation is due to the fixed interest rates which are attached to the original investment and asset-backed investment, providing protection to their investment. Due to the fixed rates of annual interest over a defined term, the interest payments the investor receives replicates regular income payments or a fixed sum at the end of the term of the investment.
Although investing in a property bond will require an initial one-off investment to start, the regular fixed interest payments the investor will receive will allow the investor to use these payments like a normal salary. What the investor does with the interest payments is solely up to them, but it does provide the safety of not using their salary or simply topping up the available money each year.
Although property bonds are relatively protected, due to asset back investment, this is not to say there isn’t risk associated. The main risk associated is with the provider you chose to invest with.
It is always recommended you choose a reputable investment provider to secure the protection of your investment, but also to ensure you receive the greatest amount from your investment.
How do Property Bonds differ from direct property investment?
The similarity between the two is they are both forms of property investment, but from there they take two different paths. This piece has already explored what a property bond consists of, and how it can provide regular interest payments to the investor. But how does direct investment in property differ?
Direct property investment can take shape in a variety of ways, but the most common is often a buy-to-let investment. With considerable positive performance of the buy-to-let market in recent years, investing in this form of property has become more attractive, with great potential for considerable returns in investment.
Buy-to-let property can be an excellent business decision if it is done properly. Through considerable research into the performance of the market, the most attractive property for your target market and the correct location, the potential returns can be great. While this is the case, there is greater risk involved, with a buy-to-let property you are reliant on finding tenants for your property to make sure your investment is financially viable. To invest in a buy-to-let property, it is imperative that the correct research is undertaken to receive the greatest return possible.