For this blog post, we would like to answer common questions we have received regarding direct investment in general. Feel free to ask more questions and I’ll add them to the list below!
I buy stocks and I hold stocks. If I invest in your projects, what is the security that I’m holding?
All our investments are asset-backed and we specialise in investing in the second-hand property market. Property is a tangible asset and the UK property market is a demand-driven market. There are 1.6 million people in need of housing in the UK, and currently, there are 268,385 empty homes (according to some surveys, the number reaches up to approx. 1 million). Let alone the ever-growing popularity among students and families that are planning to relocate to the UK. Even if the value of some properties decreases a bit this year or next, the overall trend of the UK property market is moving upwards.
One more important point to note: Stock is a form of intangible assets. Its value can vanish overnight. Houses won’t disappear overnight.
Will my fund being invested in one single project?
No. We are spreading the fund across multiple projects to utilise it and generate more profit. In this way, your fund is not tied down on one single project and the risk will be further minimised.
Do I get the benefit of capital appreciation when Parotia Properties sell the property?
No. We offer a high return of interest within a short investment period. Our company makes the investment decision, and your principle will be returned to you in the agreed loan term together with any outstanding interests.
How is the interest being generated? How can we make sure that we’ll get paid?
Your interests are generated through the monthly rental income. Extensive due diligence will be carried out prior to every purchase to make sure that there is a high demand for our property product (housing that we’re providing in that area), and also the rental price can cover monthly expenses, mortgage, and investors’ interest. We make sure that property is being refurbished to a high standard so that we stand out from our competitors.
What are your exit strategies?
Most of the time we would hold the property to generate monthly income, but we would also consider selling the property, renting them to the local authorities, or work with care home providers to maximise the profit and minimise voids.
Can I compound the interest?
Yes, you can. If you choose not to take out your interest on a monthly basis and you are investing for longer than 12 months, your annual interest from the first year will be compounded to become the principle of the second year. The monthly interest you get will be based on the fixed interest rate times the new compounded principle.
Do we offer SPV investment opportunities?
No, not currently. For two reasons:
i/ The UK second-hand property market is a fast-moving market. We need to have funds ready to allow us to move forward very quickly.
ii/ We strive to provide a high return for our investors. Setting up an SPV not only requires time but there’re administrative costs involved. Having said that, if we found certain redevelopment or larger conversion projects worth doing, which require longer than 18 months of holding of investors’ funds, SPV would be an ideal structure for this kind of deal.
The direct investment allows you to invest hands-off (free from landlord headaches), bearing fairly low risks (investments are asset-backed) and at the same time earn a high, guaranteed return (verified rental demand).
