Real estate bonds offer savers a higher, predetermined return and access to the property market without having to purchase a property themselves, but they do involve maturity and issuer risk.
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Why investing in real estate bonds is a smart alternative to keeping cash in savings

Savings under pressure: low rates, high inflation

For cautious savers, today’s environment is challenging:

  • Savings account interest rates are very low
  • Inflation reduces the real value of your money over time
  • You still bear certain risks (bank risk, policy changes), while the reward is minimal

Many people therefore look for a way to earn higher returns without:

  • Daily volatility on the stock market
  • The workload and complexity of owning rental property

This is where real estate bonds can play an important role.

What are real estate bonds?

Real estate bonds are debt instruments issued by property developers or real estate companies. In practice:

  • You lend money to the issuer
  • The issuer uses the funds to finance one or more property projects
  • In return, you receive:
    • A fixed interest payment (coupon)
    • Repayment of your principal at the bond’s maturity date

Compared to buying an apartment or house directly:

  • You don’t need to take out a mortgage
  • You don’t deal with tenants, maintenance or vacancy
  • The minimum investment amount is often much lower than purchasing a property

Why real estate bonds can be a smart alternative to savings

Potentially higher returns than a savings account

While savings accounts often pay close to zero, real estate bonds typically offer a significantly higher coupon. The level of interest depends on:

  • The nature and risk profile of the project
  • The duration of the bond
  • The security offered to investors

Importantly, the expected yield is usually defined in advance, enabling you to compare it directly with the interest on your savings account.

Access to the property market without owning a property

Direct property investment requires:

  • A large initial outlay (purchase price, transaction costs, taxes)
  • Knowledge of rental law, taxation and local markets
  • Time and energy for active management

By using real estate bonds, you can still benefit from value creation in real estate (development, rental income, sale), but:

  • Without becoming the legal owner of the building
  • Without having to find tenants or manage contracts
  • Without dealing with repairs, renovations or disputes

For many savers, this is an efficient way to diversify into real estate with fewer practical obstacles.

More visibility and predictability

Real estate bonds normally specify in advance:

  • The interest rate you will receive
  • How often interest is paid out (annually, semi‑annually, quarterly)
  • When your capital will be repaid

This level of predictability can be attractive, especially compared to equity investments whose market value can fluctuate sharply from day to day.

Key risks and points to assess before investing

Real estate bonds are not the same as a savings account, and they do involve risk. A careful assessment is essential.

Credit risk and financial strength of the issuer

Your income and capital repayment depend on the issuer’s ability to meet its obligations. Before investing, look closely at:

  • The financial health and track record of the developer
  • The type of projects being financed (residential, offices, logistics, healthcare, etc.)
  • The location and demand in the target markets
  • The history of completed projects and how they performed

Professional issuers will provide clear, detailed documentation on these topics. Lack of transparency is a red flag.

Security, ranking and legal protections

Not all real estate bonds are structured in the same way. You should understand:

  • Whether the bond is secured (e.g. by a mortgage on the property)
  • Your ranking compared to other creditors (senior vs. subordinated debt)
  • Any covenants or protections written into the bond terms

Stronger security and better ranking generally mean a higher probability of repayment in adverse scenarios, and may justify a lower coupon compared to riskier structures.

Investment horizon and liquidity

Real estate bonds typically have a fixed term, such as 3, 5 or 7 years. During this period:

  • It may be difficult or impossible to sell your bond early
  • There is usually no active secondary market

You should therefore only invest money that you can commit for the full term, and keep an adequate cash buffer on your savings account for emergencies.

Positioning real estate bonds within a diversified portfolio

Sound wealth management is based on diversification:

  • Across different asset classes: cash, bonds, shares, real estate
  • Across several issuers and projects within the real estate bond space
  • In line with your risk tolerance, time horizon and financial goals

For conservative investors heavily concentrated in cash, real estate bonds can serve as an intermediate step:

  • More return potential than savings
  • Typically less volatility than equities
  • Exposure to a tangible, underlying asset class

Conclusion: a considered move beyond the traditional savings account

Real estate bonds can allow you to:

  • Give your savings a more attractive return potential
  • Benefit from the long‑term strengths of property
  • Avoid the burden of direct ownership and management

In exchange, you accept investment risk and a fixed commitment period. Thorough due diligence on the issuer, the properties and the contractual terms is crucial.

For those ready to look beyond the simple savings account, real estate bonds can be a smart alternative and a valuable component of a balanced, long‑term investment strategy.