Europa Investment Property

Grafy - Investice do nemovitostí s výnosem 8% p.a.

We are expanding our portfolio. Why real estate bonds? And what to choose?

In today’s turbulent times, there may be concerns about further developments in the area of investment. Conservative government bonds today bear virtually no yield. Thus, real estate bonds are gaining in popularity, which also suit more conservatively based investors, and especially in the long run they bring an average stable yield of between five and twelve percent per year.

In developed countries, bond issuance is a completely standard form of raising funds for corporate and public sector projects. Mezzanine financing is becoming increasingly popular in the world and in the Czech Republic. And even big real estate players set out on this path. It has many advantages over a bank loan. It is primarily a simpler form of financing, which usually has fixed annual interest rates for a fixed period. The fact that investments in development projects are and will be more financially advantageous is also indicated by the combination of high interest income and lower income tax for investors. Take a look at our bond offer.

Safety first

The main factor for safe investing is the credibility of the conditions and history of the company that offers the bonds. In the case of investments, it is also necessary to know the owner of the real estate fund, the composition of management, fees and returns – if it is too high, the investor should wonder why. At the same time, risk milestones include whether bonds are publicly traded and their rating. It is important to invest money in proven projects of companies that already have a certain prestige and credit in the market. Investors should also receive regular information on the development of the financial situation. It is the transparent conduct and clear structure of the company that should be among the main criteria in the investor’s decision-making.

Wider investor base

Real estate bonds allow developers to gain access to a wider investor base and use other resources – other than those available in the banking market, that could supplement or replace bank financing. For example, the loan value ratio of bank loans to financed real estate can be around 70/30 or 60/40. For the bank, the key tenant is the real estate, its stability and sustainability in the market, and these factors play a role in the amount of the loan that the bank will provide. The use of private capital for development projects thus provides companies with access to more financial resources, which means that they can implement more ambitious projects and thus ensure a higher return for investors as well.

Low risk even in times of housing crisis

In general, real estate bonds have a much lower risk. Building materials, such as brick or blocks, still have a certain value, which may differ slightly, but not fundamentally. Real estate investments do not get rich quick, but can provide a stable income in the order of percentage points per year, because they are less sensitive to fluctuations in value and rate of return than in the case of stocks. Real estate usually also overcomes a significant rise in the price level. The slowdown in the real estate economy can have a positive effect for investors, where developers can build at prices in crisis, or cheaper, and hand over for use to tenants or owners after the crisis. Real estate bonds thus allow investors to easily invest capital and secure long-term – often indexed – stable returns with low risk. Luxury real estate usually holds its value even during a crisis.

Portfolio diversification

Real estate investments can enable the investor to diversify the portfolio. Diversification across industries or asset classes can protect the investor from loss if a product loses value. In the case of real estate, it is good to spread investments into various areas such as accommodation facilities, hotels, offices, etc. It is appropriate to diversify not only in type, but also in time and geography. The benefits of such an investment and business setting are always most evident in difficult times, when portfolio diversification is one of the most effective ways to manage volatility.