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What I Think Of Assetz Capital’s Property Secured Investment Account
At first glance, Assetz Capital's* Property Secured Investment Account looks pretty much like what I always thought its Great British Business Account was really meant to be.
Its British business account describes itself as lending in loans that are “usually” backed by land and property, which Assetz capital could usually repossess and sell if the borrower is unable to repay. Provided it continues to be able to contain bad debts, that account pays 7% interest to lenders.
Assetz's relatively new property account says it “only” includes loans backed by land and property.
There is one large difference
That distinction between “usually” and “only” just partially explains why the property lending account pays less than the business lending account, at 5.5% per year.
Firstly, for property loans to be included in the property lending account, Assetz has to believe that none of them will incur losses even if it goes bad. This means that Assetz believes the property backing the loan can be repossessed and sold and that the sale of the property will cover the loan amount.
If you contrast this with more normal property and business lending, you usually expect some loans to lose you money and pay higher interest rates to compensate for that risk.
In this Assetz property account, for loans backed by properties that are receiving rent, the maximum loan is 67% of the property valuation, which is excellent. At most, borrowers could borrow £67,000 for if the property is worth £100,000. (Come on, there must be some properties still worth only £100,000!)
Assetz is even stricter if the borrower already has existing debts, typically setting a limit of £57,000 per £100,000 of property value.
Assetz Capital might also be able to claim and sell other items off the property borrower, such as machinery or equipment. However, Assetz does not take this into account when deciding whether to include the loan in this property lending account.
You can't always win
Under difficult conditions, such as a serious property crash and a quick sale at distressed prices, some individual loans could lose money, however. This is normal for all property lending.
One thing that needs to be very clear about this account, as in all Assetz' lending accounts, is that a good portion of the property loans are developments or bridging loans. These are intrinsically higher risk, meaning they require greater skill and experience to get right.
So far, however, Assetz has demonstrated the skill required to do that and kept bad debts low compared to interest rates and the reserve funds it has set aside to pay for expected losses.
That combination of a reserve fund and being property backed is potent, especially if you lend across lots of loans.
The usual bag of goodies
The account comes with all Assetz Capital's usual features:
- Minimum lending amount of just £1.
- Your money is spread automatically across all available loans, whether that's five or 50 loans. You could stagger your initial lending pot to increase your chances of lending in more loans.
- Automatically lend and re-lend repayments and interest you receive, if you want. Re-lending also helps to spread your money across a lot more loans.
- Sell your loans to other lenders for free before the borrower repays the debt. You can only do this if there are other lenders available and waiting to lend. Usually the wait is not very long, if at all.
- A reserve fund. Usually, Assetz Capital targets a reserve fund that is four times the expected losses. Since it expects zero losses with its property lending account, it merely says it aims to have enough funds to pay the costs of recovering bad debts, such as court costs. In addition, Assetz accepts that rare events can happen:
“For a loss to occur it would require property prices to fall more than they did in the last recession (the worst fall in 100 years). However, because the falls reported in 2009 were average figures it means that some properties fell by a larger value. There will always be cases where larger falls occur but they will be small in number.”
Visit Assetz Capital or read our article (written prior to the property account) called Difference Between Assetz Capital Products Finally Explained.
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