Cashless deposits used to incentivise sales

Homebuilders are looking for new ways to incentivise sales, by using the Exchange Bond, a form of cashless deposit to offer new benefits for both buyer and seller.

While many entrepreneurs were tightening their belts amid the deepening credit crunch, 39 year old Nathaniel Plange was taking his first steps into property investment under his new enterprise, Launay 2. Against the backcloth of general financial gloom, however, Nathaniel saw an opportunity in long term property investing. In March 2008, he cut short his training to be a barrister and took the plunge into property.

The three investment apartments he had chosen were located in London’s desirable Victoria, and Nathaniel’s confidence was bolstered further by his discovery of the Exchange Bond. He was certain that he could make a solid return on his investment and was delighted to be able to do so without parting with large sums of money until completion – expected in August 2009 at the earliest.

Nathaniel, who also runs a social services consultancy, explains: “If you’re prepared to take the risk, you can make money through property in any climate and the Exchange Bond is a financial tool that all savvy investors should know about. The properties I bought in Victoria, totalled £2.5 million in value so the deposit would have been substantial. Had I parted with the large cash deposit, I would probably be feeling a little nervous about my investments now – especially with completion over a year away and increasingly negative UK property news. However, the Exchange Bond enabled me to secure the apartments in return for a small premium instead, totally removing any concerns I might have had.”

Nathaniel intends to expand his property portfolio to £5m over the next eight months and will be using the Exchange Bond again in the future. He is working closely with his financial broker to ensure every investment is well made and benefits from strong links with Hampton International.

Justin Camm of Hamptons International comments: “The Exchange Bond is becoming an increasingly interesting prospect to developers. Now that the UK is no longer in a rising market, homebuilders are looking for new ways to incentivise sales and the Exchange Bond offers benefits for both buyer and seller.”

Frank Speight, joint CEO of Exchange Insurance Company – the company which pioneered the Exchange Bond in the UK – agrees: “The Exchange Bond was born out of conversations with a colleague about how to overcome difficulties in expanding our property portfolios. As investors, it was important to delay or avoid liquidating existing assets wherever possible. The Exchange Bond allows property buyers to do just that while insuring the developer against a buyer defaulting at completion. We’re delighted to see Nathaniel benefiting from the Exchange Bond. Like him, we’re convinced there is still money to be made in property but it is vital to be smart about where and how you make those investments.”