Given the cost of buying an investment property in Australia, many potential investors simply cannot afford to go it alone. However, with new investment approaches, like fragmented investing, you no longer need to foot the bill by yourself. Here we explore how these programs work and take a look at one of the leading fragment trading platforms – Bricklet.
What is fragmented property investment?
Property investing has traditionally been a largely solo experience. A single investor buys a single property and is responsible for paying all the purchase, management, and maintenance costs. As a reward, they receive all returns from the property, including both rental income and capital growth.
Fragmented property investing takes a more collaborative approach, enabling multiple investors to buy a share in a single property. This spreads out the cost, significantly lowering the amount you need to get into the market. It also splits the returns, with each co-investor receiving their share of the rental income and capital growth.
How do you invest with Bricklet?
Bricklet is essentially a technology platform that facilitates the buying and selling of shares in investment properties, or “bricklets”. It’s used by developers, who list their projects; agents, who manage the properties; and legal professionals, who support the sales process.
As an investor, the Bricklet platform allows you to search for, and buy, shares, usually in new residential developments. After creating your account and verifying your identity, you can browse the database of available bricklets. Then if you see a development you like, you can deposit funds into your account and buy a share.
Bricklet owners enjoy many of the same benefits as investors who own whole investment properties. Your name will be listed on the title, and you will receive regular rental income when the property is tenanted. If the property increases in value, you can also experience capital growth, which you can realise by selling your share.
If you want to sell your share in a development, this will be managed through the same platform. The price will be set by Brickletand reflect your share of the property’s current market value.
How much does investing with Brickletcost?
As each bricklet is a fraction of an investment property, they cost a fraction of an investment property’s price. While the exact price of a bricklet varies from development to development, they generally cost around $20,000 - $25,000.
If you choose to sell your bricklet, an administration fee of 1% of the sale price will be charged. This covers the conveyancing costs associated with transferring ownership of the share.
How does Bricklet compare to Investn?
Fundamentally, Bricklet’s fragmented investment approach and Investn’s co-investment approach are designed to achieve the same thing. They both aim to make it easier to get into property investing by lowering the cost of entry. As such, both approaches are well suited to investorsthat are new to the market or only have limited savings.
That said, in practice, these two approaches differon several key points:
· The amount needed to invest: While both programs require significantly less capital than atraditional property investment, Bricklet’s buy in price is still notably higher.When you partner with Investn, you can get into the property market withas little as $15,000. By contrast, to buy a Bricklet, you will usually need a minimum of $20,000.
· The returns you can expect: As a Bricklet is only a small share in an investment property, you only receive a small share of the returns. However, when you work with Investn, you own 90% of the property, so receive almost all the returns. While this will be partially offset by the need to make mortgage payments, the capital growth should be significantly more.
· The ability to diversify your portfolio:The Bricklet platform is really geared toward investors who want to minimise their risk by owning shares in multiple properties. By contrast, Investn is focused on helping investors get into the market and quickly build a high-performing property portfolio. So, while both approaches allow you to diversify your investments, the end goal for each is distinctly different.
With all this in mind, we believe Investn is better positioned to help new investors break into the property market. If you would like more information on our co-investment approach and how it can help kick start your investment journey, call 02 9060 3730.
Please note: This overview is based on publicly available information (e.g.Bricklet’s website) and Investn takes no responsibility for its accuracy or completeness. As always, we recommend seeking independent financial advice on the suitability of any property investment program you are considering.