Essentially, a Loan Note is the extended form of an IOU. Investors lend their capital to a property developer, and over a set period the funds are paid back with a fixed rate of interest.
For investors, Loan Notes take away the months of research (identifying a location, finding tenants) of traditional property investment, and leave them to enjoy the profits. They give investors exposure into property markets by becoming the lender, not the landlord.
Loan Notes mean that developers can raise funds without the upfront costs and longer decision times that come with bank lending.
Keystone offer a range of Loan Notes for a period of 18 months with some of the UK’s leading property developers. While, our flexible Loan Note gave investors the opportunity to invest for terms of 12-months to 7 years, and a choice of income or growth. The income option paid interest periodically, and the growth compounded interest over the investment term and repaid it at the end.
Loan Note investments are beneficial to passive income investors, putting their money to work straight away, without complex taxation rules or extra costs.
Here’s how they work:
- The investor lends money to the property developer.
- The money is used to fund development projects, and then investors are paid a fixed return over a set time.
- The investor, like a bank, is given a secured legal charge on the property asset as protection.
- At the end of the term, the original capital is repaid, and the investor can either walk away or reinvest.