Property developer Blackmore Group is offering a fixed return of 9.9 per cent a year (this rate is for a 5 year investment) to investors who lend it money to build new homes and renovate existing ones.
You can invest across their portfolio of properties but with none of the hassle of ownership.
In the last 25 years, the value of the average UK property has more than quadrupled from £54,026 to £232,797, Land Registry figures show.
This is an incredible growth rate, but it means prices are so high most people cannot afford the deposit required to invest in property themselves.
The popularity of buy-to-let has also waned following the Treasury’s tax and regulatory crackdown on amateur landlords.
Many are now exiting the market, offloading 3,800 buy-to-let properties every single month, Ministry of Housing figures show.
Now Blackmore is offering an easier way to invest in property that may be just as rewarding.
Instead of buying a property yourself you lend money to Blackmore, which it uses to build new homes and convert period properties into apartments to sell on at a profit.
In return, it is offering a three-year fixed rate bond paying 7.9% a year, and a five-year bond paying 9.9%.
That income is paid quarterly, direct into your bank account, and somebody who invested the minimum £5,000 in the five-year bond should get £495 a year.
After five years the total return would be £2,475, plus the return of your original £5,000 capital.*
For a limited time, Blackmore are offering £150 cashback for all new investors. This can increase your return in the first year to a minimum of £645.
Under HM Revenue & Customs rules, this interest is paid after 20% basic rate has been deducted, although non-taxpayers may claim it back. The investment is also offered tax free as an ISA.
Risk and rewards
Blackmore believes the UK property market will continue to grow as demand outstrips supply. The government have stated their commitment to supporting the building of new houses in an effort to overcome the UK housing shortage.
However, the market value of the properties it buys can go down as well as up, and it may not get back the sums it invests.
To mitigate this, Blackmore has an experienced credit committee which undertakes extensive due diligence on every potential development. The team have minimum criteria to uphold. For example, only sites with a minimum potential 20% profit margin are considered.
Currently, the property portfolio being developed has an estimated completion value of £80m, with 40% of the units being reserved for sale before completion.
To invest, you must lock away your capital for the full three or five-year term and cannot access it in that time. Bonds are not listed on any stock exchange and cannot be sold on.
Blackmore is a private limited company which is not regulated by the Financial Conduct Authority. This means that your capital and income are not protected by the Financial Services Compensation Scheme if Blackmore fails.
However, Blackmore does offer its own protection for investors. The Capital Protection Scheme, which acts like an insurance policy, protects bondholder’s capital in full in the event of insolvency. This scheme, arranged by a Lloyds of London broker, is overseen by an independent Security Trustee who acts for the bondholders.
Investing in property involves risks from unanticipated situations, such as indecent weather or unforeseen ground conditions. This can increase costs or cause delays or even cause a project to fail.
The market value of properties can go down as well as up, and the company may not get back the sum invested. Past performance is not a reliable indicator of future performance. Before making any investment decisions, please seek the advice of an independent financial adviser.