FAQ
Is this a Collective Investment Scheme or an Investment Fund?
Neither. A Collective Investment Scheme is an unregulated investment Fund. Many International Financial regulators are clamping down on unregulated investment Funds and certainly such Funds cannot be openly sold in most First World jurisdictions. This is a Corporate Bond with a fixed term, fixed returns and clearly defined start and end dates.
What is the difference between a “Fund” and a “Bond Issue”
A Fund is a vehicle managed independently of any particular entity, whereas a Bond is for the raising of funds specifically targeted at a Body Corporate, for the purposes of a specifically defined activity.
What about security?
A UK based Trustee administers the Bonds and as such is carrying out a regulated activity of safeguarding, distributing and administrating the Bonds within this structure. Citadel, the Trustee, is an FSA regulated firm.
Pension Investing
All three Bonds are approved for SIPP (Self Invested Personal Pension) investing by SIPP Providers in the UK that have undertaken their own due diligence on the Bond structures. Investing with pension funds can be achieved by either creating a new SIPP, or transferring an existing one. Some SIPP Providers will accept direct enquiries from investors for simple arrangements and others require an IFA introduction. If in doubt, we can suggest an Independent Financial Advisor who is registered with one of the SIPP Providers that have approved the Bonds. Click here for more information about SIPPs.
How are the Bonds able to deliver such high returns?
The Bond Issuers acquire stock at foreclosure, not retail prices. Even retail property is currently generating high yields. However, the collective buying power of the Bond Issuers enables purchases well below current retail prices and thus ensures adequate built-in margin for current yield and future disposal. The Bond Issuers also trade properties as well as renting them, in order to ‘churn the portfolio’ and ensure further acceleration of the returns. The portfolios can also be ‘traded up’ where appropriate, as the market rebalances. These high returns are already being achieved purely because of the unique position of the US housing market at this time - low purchase prices and a robust rental market.
What about buying a US property outright?
We have numerous properties available for outright purchase . Please see our Properties Section for a list of properties for sale. The same properties from the same suppliers and managed in the same management structure - everything is the same. The Bond issue is simply for investors who don't want the responsibilities of direct ownership or maybe can't afford the full purchase price of a property or maybe investors who want to invest with Pension funds. There are significant differences in the investment proposition between investing in a Corporate Debenture (Bond) and purchasing property outright, but in these cases underlying business models of property purchase and management are the same.
Can private investors also easily buy at auction?
Yes they can – and whilst it is not impossible for individuals to match these discounts when buying ‘one off’ properties, if they were to invest instead in Fulton Bonds, they would get the benefit of tax exemptions and be freed from the costs and responsibilities that come with direct property ownership. This is an arms-length approach to International property investing with a defined exit time and returns which would be impossible to predict with individual direct property ownership.
What are the risks?
The Bond Issuers are purchasing foreclosed (bank repossessed) housing stock in locations which have co-incidentally been earmarked by fortune Magazine as the best places to invest in the USA. Locations include (but are not limited to), various cities in Florida, the city of Atlanta and others.
The consensus is that the US property market is either at, or close to, rock bottom and buying at foreclosure provides a further hedge, or margin on price, however, there is a risk that property prices may fall still further. The Bond Issuers can mitigate that risk by accelerating its acquisitions through the downward trend and slowing-up through the recovery (a process known as ‘price averaging’). Furthermore, being part of a broad based property investment portfolio, greatly reduces the impact of periodic, isolated events such as rental voids, maintenance and other issues that can significantly affect the return on a single dwelling. If the slump in the housing market continues and the freeze on consumer credit persists, this will only serve to further strengthen rental yields (as people still need a roof over their heads). Conversely, if the market recovers, asset (and therefore portfolio) value will rise accordingly.
Is it possible to withdraw from a Bond before the full term?
No, the Bonds must run for the full term but transfer of interest to another person may be possible in some circumstances.
What if the Bondholder dies?
The Bond will continue to maturity and interest payments as well as the returning principal sum will be paid to the nominated beneficiary.
What about currency fluctuations?
This is a $US investment delivering $US returns. We therefore recommend that Property Bond owners open a $US account to receive the funds in order to have control over best timings for the transfer of funds to other currencies. We can suggest a reputable Third Party Organisation very experienced in this field. Moneycorp (www.moneycorp.com) have an on line facility linked to the Bond Administrator thereby negating the requirement to open a third party $US account and enabling efficient payments of the original invested sum and interest payments back to you via your own on line trading account with Moneycorp. Setting up the account is fast, simple and free.
What about tax?
As a non-resident of the USA, you will NOT be required to register for tax with the Internal Revenue Service (IRS). All funds paid out to Bond owners will also be clean and clear of any US tax liabilities. Bond owners must however remain responsible for their own domestic tax affairs in their own State of residency. Please note that for this reason, the Bond offerings are not available to residents of the USA.
What is the Admin/Trustee Fee?
There is a one-off administration fee payable with the Application which is US $200 for up to three Bonds and US $50 for each Bond purchased in excess of three Bonds up to a maximum of $750. The Admin Fee is payable to the Trustee and is partially refundable until the time that the Investment Agreement is signed with a $200 Trustee admin fee being retained in the event of cancellation.
How do I proceed to invest in a Bond?
STEP 1
Satisfy yourself that this kind of investment is appropriate for you and decide how much you want to invest and over what term. We are always happy to discuss these options with you, please feel free to give us a call on + 44 (0) 208 150 8167/65
To register your interest & reserve your Bond allocation, you need to complete a 'Bond Application Form' as well as a W-8 BEN form and remit these documents plus the appropriate Trustee Administration Fee which is payable to the Trustee’s Client Account.
The W-8BEN form exempts non-US residents from having to pay US tax on dividends paid out on the Property Bonds. This would be an appropriate time to open a Moneycorp trading $US trading account if you have not already done so.
STEP 2
Within 10 days of completing the Bond Application Form in STEP 1 the completed 'Investment Agreement' together with a cheque or transfer for the full invested sum must be sent to the Trustee. Please ensure that the correct Agreement relating to your chosen Bond is returned:
STEP 3
We acknowledge :
• Receipt of signed documents
• Receipt of funds
STEP 4
Your Bonds are issued and your investment is in force (with interest accruing 12 weeks from receipt of cleared funds).
STEP 5
Yield income is payable twice yearly on the 31st December and 30th June (with any start dates falling between those periods being payable ‘pro rata’)