Skyire Homebuild Bonds Puts Safety and Investors First
Over the past decade or more, investors have been adding real estate to their portfolios for greater diversification and income potential. Tempted with promises of high returns, numerous investors have accessed development opportunities through syndicated mortgages and limited partnerships.
Riskier than you may think
Regulators have often flagged the potential risks of these types of mortgage investments and issued warnings to investors about these increasingly popular investments.
Recently, the Financial Services Commission of Ontario (FSCO) issued a warning in its document entitled, Before Investing in a Syndicated Mortgage.
“Over the past year, the Financial Services Commission of Ontario has taken considerable action in the syndicated mortgage investment (SMI) marketplace to help consumers,” wrote FSCO. While they state there are many legitimate SMI opportunities, FSCO warned consumers to be, “Wary of SMIs with advertisements promoting a high return or ‘fully secured’ investments.”
Those risks for both syndicated mortgages and limited partnerships include; no guaranteed high returns, despite promises made by providers; the fact that investors are often only paid after the lender and, if a project fails, investors may never see returns; the lack of protection insurance; and the possibility that early withdrawals may be difficult.
Development risks and how to eliminate them
A better way to invest in real estate development projects is with SKYIRE HomeBuild Bonds as they eliminate these risks and provides an investor with greater certainty.
HomeBuild Bonds are an advanced investment structure that uses bonding protection to eliminate development risk and provide an attractive and predictable return for investors. These bonds have a fixed term and provide a minimum priority rate of return. In addition, HomeBuild Bonds also participates in the profits generated by the investment.
Four cornerstones of investing
HomeBuild Bonds have been developed with a Four Cornerstone approach to investing. Collectively, the Cornerstones form a foundation, helping to ensure maximum protection and investor return.
Cornerstone 1 − Capital protection
HomeBuild Bonds utilizes a “protected” funding solution through a surety company bond, protecting the investment and the minimum interest return in the case the developer does not complete construction. The focus for maximum returns is solely based on the sale of units contracted, eliminating all development related risks.
Further protection is secured through a collateral mortgage charge registered once the occupancy permit is granted on the contracted units. This mortgage charge provides security prior to HomeBuild Bonds being paid out.
Cornerstone 2 − Management alignment
Management must invest at least 10% of the HomeBuild Bond funding amount and be subordinate to all investors. Management is not only motivated but also financially committed to returning investor capital.
Cornerstone 3 − Return predictability
The developer is required to fully fund an interest reserve, which is held in trust. This covers the minimum rate of return on the HomeBuild Bond if the project does not complete. This interest reserve is also bonded to benefit from the same protection that the principal investment capital receives.
Cornerstone 4 − Better consistent annualized returns
HomeBuild Bonds are offered with minimum overhead and administrative costs, ensuring maximum return on capital is generated for investors. As each project completes and units are sold, the first monies received are paid back to investors. This shortens the time that capital is invested into the HomeBuild Bonds and allows for early reinvestment and the potential for greater annualized return.
In a HomeBuild Bond transaction, there is a set amount of time after which the developer is required to pay a per diem rate on the bonded funds sitting in trust until the occupancy permit is ready. This helps ensure a consistent annualized return on investment.
Get your free investor resource guide
There’s a lot more to learn about HomeBuild Bonds and residential real estate investing. Order your HomeBuild Bond investor guide today. We’ll also include a copy of our recently updated book, Residential Investing. It provides great insight on what to look for in a real estate investment and why Canada is a great market for real estate investing.
We are happy to answer any questions you may have, please email us at [email protected]
This material is intended for investor marketing purposes and is only for accredited investors residing in Canada. This is not an investment recommendation. Please review all subscription material prior to investing.