Thoughts on this 8.85% 5-Year Property Bond?

[Henry McCarthy]

I've just found this opportunity on a new fundraising platform that offers 8.85%pa for 5 years, backed by property. (Ocea bonds)

I'm new to property investing and was wondering if anyone with a bit more experience could tell me whether or not this is a good deal because it looks quite attractive to me.

Thanks in advance.

Cheers,
Henry

 

[FWL]

Sounds interesting but I would also consider:-

- I presume there is no capital appreciation?
- What are the terms of the bond?
- How secure is the 8.85% yield?

I would also take an in depth look at the reputation of the company issuing the bonds/underlying property developer.

 

[PostBrexitInvestor]

While it is naive to suggest that the rate of return is not the most important thing, you do need to know the security of the underlying companies involved. What kind of track record do they have? A simple search of the Internet for complaints against XYZ may be useful.

 

[Henry McCarthy]

Sounds interesting but I would also consider:-

- I presume there is no capital appreciation?
- What are the terms of the bond?
- How secure is the 8.85% yield?

I would also take an in depth look at the reputation of the company issuing the bonds/underlying property developer.

Thanks FWL,

I set down and took a deeper look at the offer and came up with this:

• It is a bond so there is no capital appreciation

• It is for 5 years, interest paid quarterly

• Investment by definition involves risk but the issuer has a good reputation and a history of success and the bond is backed by UK property – OCEA redevelop office buildings to provide low-cost housing (which seems a pretty key requirement of UK governments for the foreseeable future).

• Successful transaction of £100m todate

What do you think?

 

[Henry McCarthy]

While it is naive to suggest that the rate of return is not the most important thing, you do need to know the security of the underlying companies involved. What kind of track record do they have? A simple search of the Internet for complaints against XYZ may be useful.

Thanks a lot. That really helps.

 

[FWL]

From what you say there, I cannot see any major issues and an 8.85% yield is certainly attractive when you bear in mind base rates are currently 0.75% in the UK. It really is down to the quality of the properties and the property developer.

You could argue that with base rates and inflation the value of the investment is falling circa 0.75% +2.1% per annum. However, this is being offset by an 8.85% yield which indicates a net increase in relative value of 6%.