When discussing Avantis Wealth investments, I am often asked the same questions – “What about Brexit?” or, “How might Brexit impact this?” and with the B word in mind, what better time than now to shed some light on the topic?
A crucial element of all Avantis Wealth fixed investment opportunities is just that – they are fixed.
What we do, of course, is not like the stock market where there is considerable uncertainty, perhaps more now than at any other time in the last decade. Nor does what we do come with some of the burden associated with buy-to-lets and HMOs. What we do in fact do, is offer investments with a fixed and predetermined outcome. The interest rate established upfront is unchanging. The investment providers that we work with work backwards, factoring in worst case scenario market conditions, as well as thinking carefully in regards to investor returns and, of course, their own overall project profitability.
In our loan note contracts, there is no ‘Brexit’ clause. Nothing contractually breaks the provider to investor agreement. This means that there is no ‘get out’ for the developer, and they must pay the required amount of interest in the predetermined investment period. They are bound to do so by the laws of contract.
The deals that pass our strict due diligence requirements are typically short term, at a maximum of two years. This makes market conditions less difficult to assess when considering project deliverability. Furthermore, we look to secure investor capital by attaching tangible security (in most cases this is the investment property itself) in the unlikely event of total investment failure.
In this way, what we do bears similarity to a mortgage agreement, only that investors are not the mortgagee, but are collectively in the stronger position of being the bank. Just as the bank can exercise a legal charge over property should the borrower default on payments, so too do our investors have fixed and floating charges over assets, (the properties invested in) amounting to a minimum of the investment raise.
We are finding that Brexit is offering many an opportunity, not least in terms of the exciting new developers that we are in discussion with, but are also comforted that you, reading this column, are not alone. Since the referendum on Brexit in 2016 and the election of the Twitter President, Donald Trump, clients from all around the world have grown weary of uncertainty.
Investors everywhere want a fixed and reliable return, and in most instances, a passive income.
With that said…Brexit, Smexit.
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