Investors seeking regular income of 4-7.5 per cent need to ask these questions to ensure they’re taking on acceptable risk.
Income-seeking investors fed up with dismal bank rates might consider mortgage funds offering between 4 and 7.5 per cent that are used to fund residential, commercial and industrial property developments.
The annual return on a $100,000 average term deposit account is $520 . The return on the same amount in an average savings account offering 0.3 per cent, excluding bonus and no extra payments, is about $300, according to analysis by Canstar, which monitors rates. Investors considering property mortgages can choose between contributory mortgages and pooled mortgage funds offering anything from conservative residential projects to highly speculative commercial and industrial developments.
According to the Australian Securities and Investments Commission, investors should speak to their financial adviser, read the product disclosure statement and seek clarification from scheme managers on any outstanding questions.The track record of the team offering the product.
Valuation. Is there an independent valuation panel? Are the lawyers and quantity surveyors independent? “Investors have to ensure there is an arms’ length assessment of the projects,” says Prasad. “They need to ensure that those offering advice are independent.” Check whether there are procedures to deal with any conflicts of interest.
Rising interest rates. Spikes in yield may be attractive for investors in the short term but may put borrowers under pressure.
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