Spotlight: Matrix Securities Newcastle Trust

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Indy Lifestyle Online
The product: The Matrix Securities Newcastle Trust.

The deal: Take pounds 5,000, or borrow at least pounds 22,000, and invest it for at least seven years. The investment buys units in an Enterprise Zone Property Trust which builds and develops part of Hadrian's Business Park, east of Newcastle upon Tyne. The units benefit from tax relief of 37.6 per cent if you are a higher-rate taxpayer. Investors will receive a rental income of 7.5 per cent - plus a share of the property's value if and when it is sold.

Plus points: Because of the tax reliefs, it is possible to invest in the trust with no cash outlay. An investment of pounds 100,000 could be made up of pounds 62,400 plus pounds 37,600 in higher rate tax reliefs.

Matrix can arrange a loan of up to 70 per cent of the total investment - or pounds 70,000, leaving an effective cash surplus of pounds 7,600. The rental income should then pay off the interest on this loan - and some.

The company developing the trust puts down a deposit which pays the rent for up to seven years or until a tenant is found. Sometimes, returns in similar trusts have been very high - equivalent to interest of 19 per cent.

Drawbacks and risks: The trusts got a bad name because of the late 1980s property debacle, Canary Wharf. Tenants could not be found and investors were left with massive losses.

Industry observers believe the commercial property market in the North- east may be somewhat artificial. Investors need to be confident that tenants are thoroughly reliable.

Verdict: Attractive to a higher-rate taxpayer willing to tie up money for at least seven years - and take a risk.

Marks out of five: Two and a half.