Prices are rising at their fastest rate since November 2006, overseas investmet is rapacious and UK mortgage lending is at a 5 year high, up more than 30% year on year. Healthy times for the property investor!
But let’s face it, property investment is certainly not without its risks and when any boom comes to an end it can leave many an unprepared investor with burnt fingers.
Since the liquidity crisis from 2008 onwards, not only has it become more difficult and costly to purchase property, but also to build it in the first place. Regardless of the asset class and the size of the developer, the criteria under which the banks will lend have tightened dramatically, which has created unique and time-sensitive investment opportunities.
The Secure Exit Strategy from IPIN Global is one such example. It helps major developers unlock construction finance by providing them with the volume of pre-sales demanded by the banks.
In response for such a valuable commodity – i.e equity – in difficult times, the strategy targets high returns for the investor whilst protecting them from project failure at the vendor’s expense, regardless of market conditions.
If you understand leverage – basically using someone else’s money to generate profit – you’ll understand how profits of 15% per year invested are generated. In the case of the Secure Exit Strategy, you invest just a deposit into a unit of property, and at a discounted rate, but you generate returns on the full unit value. Just a small increase in the total unit value represents a much larger return on the original deposit invested.
Effectively, the developer is using a segment of his future profit to buy the equity needed to build. This is often achieved elsewhere by selling a number of units at pre-launch prices, but the developer loses much more of his profits in doing so. The Secure Exit Strategy presents a win-win situation for both investor and developer.
The new breed of property investment opportunities often carries with it considerable advantages over traditional alternatives. No need to source reliable tenants and no worrying about ongoing maintenance costs are some of the more obvious examples, but it’s also possible to benefit from investment protection should the development in question run into any difficulties.
Are such investments really a viable alternative to buy-to-let? Well, the returns are certainly more appealing, the entry levels are typically significantly lower and there is a defined exit strategy that isn’t dependant on market conditions. And with the option to complete on the original investment or not, you can still come away owning physical bricks and mortar.
Certainly, these kinds of investment strategy are not for everybody, but they should at least be understood and, for those that like what they see, considered as part of a balanced investment portfolio.
Article Supplied By: IPIN Global