This post is part of our CREST investment series. In this series, we explore the 5 things investors should consider when evaluating an investment opportunity.
What is the return on your investment?
The ROI (return on investment) is the ‘benefit’ of an investment. This is essentially what an investor will ‘get back’. In other words, it is a way of evaluating how profitable an investment will be.
Investopedia describes ROI as ‘the percentage of invested money that’s recouped after the deduction of associated costs’.
Simply put, the formula for calculating ROI is as follows:
Risk return tradeoff
As you can imagine, return will depend to some extent on an investor’s appetite for risk. Greater risk brings greater (potential) rewards. However, it also brings the risk of greater (potential) loss. This is, therefore, a balance and a decision for each individual investor to carefully contemplate.
When investing in property development with us, there are a couple of different options to consider:
- A fixed-rate of interest expressed as a % per year
- A variable return, which will depend upon the profits at the end of a particular project
- A fixed annual return caters for conservative investors sitting towards the lower-risk/lower-return end of the spectrum. A typical interest rate would be 6+% per annum.
- Variable rates of return are offered to investors that fulfil certain criteria as described by the Financial Conduct Authority (FCA). If you meet these criteria, you are eligible to invest in our developments for a share of the profits. This investment method sits towards the higher end of the risk-reward spectrum. A typical rate of return expected by investors would be 20+% per annum. As you can imagine, the actual return may be lower, or indeed much higher.
We certainly recommend that you read testimonials from our previous successful investors here.
Look out for our upcoming video and blog post entitled ‘The Capital Stack’ to understand how developers can offer the rates of return described above. This post explains exactly how property development is financed. It also explains where every lending entity and investor sits in order of repayment, return of investment, and security.
So, which kind of investor are you?
Would you describe yourself as a conservative or risk-tolerant investor? Or are you somewhere in the middle?
Contact us to learn how you can invest in property with us. Join our exclusive investment opportunity email group.
Click here to read the rest of our CREST investment series. This explores the 5 things investors should consider when evaluating an investment opportunity. Firstly, whether a company is real. Secondly, investment exit strategy. Thirdly, investment security. Fourthly, investment timetable, or timeline. And finally (this post) investment return.