January 17, 2022

DomaCom: Our Complete Overview

DomaCom: Our Complete Overview

At Investn, we love learning about other approaches to property investment and are always looking out for new models. That’s how we come across DomaCom, a Management Investment Scheme that allows investors to get into property with as little as $1,000. They claim that, using their unique approach, almost any investor can build a low-risk, high-performing, and highly diverse property portfolio.

Here we take a look at what the DomaCom investment model is and how it all works. As part of this, we explore their process and the potential benefits it can provide. We also consider how DomaCom’s investment model compares to Investn’s.

What is DomaCom?

At its core, DomaCom is a platform that supports the formation and ongoing administration of investment syndicates. These syndicates come together with the specific intent of buying and managing an investment property. And through DomaCom, individual investors can buy into everything from residential and commercial developments to rural and agricultural properties.

A key feature of the DomaCom model is its accessibility – you can buy into a syndicate for as little as $1,000. This is achieved through fractional investing, which allows investors to share both the costs of, and income produced by, a property. By bringing multiple investors together, this approach also allows you to invest in assets that would usually be beyond your budget.

What is fractional investing?

While not a new concept, fractional investment has become increasingly popular over the last few years. Enabled by easy-to-use digital platforms, it takes a communal approach to raising funds for investments and purchases. Because of its effectiveness, it’s now used by a variety of organisations, ranging from small charities to large investment funds.

Put simply, fractional investing allows you to join forces with other likeminded people to secure high-value assets. By pooling your resources with others, you increase your buying power and, potentially, open up other investment opportunities. Not being solely responsible for a property also helps minimise the associated risk and potential losses.

How do you invest with DomaCom?

The process of investing with DomaCom is fairly straightforward:

   1. Set up your DomaCom account: To do this, you’ll need to speak to a DomaCom-accredited financial adviser, who’ll assess your situation and submit your application. They’ll also help you set up an account for your investment funds (your “cash account”).

   2. Choose the property you want to invest in: DomaCom offers a range of public crowdfunding campaigns that you can easily join. Or you can work with your financial adviser to create a private crowdfunding campaign with people you – or they – know.

   3. Due diligence is completed: Once a campaign is 30 – 50% sold, DomaCom will arrange the required inspections and reports. This will include checks on the stability of the property and its potential as an investment.

   4. The property is acquired: Once enough capital has been raised to cover the costs of the purchase, the campaign closes, and the property is bought. A “sub-fund” is then created to administer the property and you are assigned your shares based on the amount you invested.

   5. You receive your share of the returns: Depending on the type of property you invest in, you could be entitled to a share of the regular income it produces. This will be paid periodically (usually monthly) and the amount will be based on the size of your share.

   6. You cash out your investment: There are several ways to end your interest in a property and realise any capital growth. The two key ones are:

       ◦ You can trade your share: If you no longer want to be involved with a property, you may be able to sell your stake. This will be at the discretion of your fund manager who’ll need to find another buyer for your share.

       ◦ The investment’s term can end: Each sub-fund will be established for a set term, which will be outlined in the initial documentation. At the end of this period, the investors can agree to extend the term, or the fund can be terminated. If it’s the latter, the property will be sold, and you’ll be paid out your share (including any capital growth).

Who chooses the properties?

The properties offered for investment through DomaCom come from a couple of sources. Most are identified by financial advisers or individual investors and offered “by invitation”. However, there are also public campaigns that are put together by DomaCom in consultation with buyer’s agents and other industry professionals.

As an investor, you get to choose which projects and properties you want to be a part of. If you see a campaign that interests you, you can work with your financial adviser to put together a bid. Alternatively, if you can’t find anything that interests you, you could put together your own private campaign – again, with your adviser’s help.

It’s also worth noting that a property acquired through DomaCom is formally owned by DomaCom. As there could be literally thousands of investors, it’s not practical to list them all on the title documents. As such, it’s only fair that ownership is centrally held by the appropriate sub-fund.

How much does it cost?

When deciding whether the DomaCom investment method is right for you, there are a couple of ongoing expenses to consider. Specifically, you should be aware that you'll pay your share of 0.44% - 0.88% of the property’s value in management fees. You’ll also pay 0.22% in management fees for any money held in your cash account.

On top of this, you’ll also need to pay the costs associated with DomaCom completing due diligence on a property. This will be calculated once the required checks have been completed and the cost will be apportioned to each investor involved.

How does DomaCom compare to Investn?

In many ways, the DomaCom and Investn models are similar. Both use a shared investment structure, and both aim to provide investors with capital growth and ongoing income. Both also allow you, as the investor, to choose the specific properties you invest in. However, there are a few key differences, including:

   • Cost of entry: Where Investn allows you to get into property investment with as little as $15,000, many DomaCom campaigns have a minimum investment of just $1,000. Also, the DomaCom model doesn’t require you to take out a mortgage, which is a key element of Investn’s process. As such, there are fewer barriers to entry when investing in property through DomaCom.

   • Diversification of portfolio: A big selling point for the DomaCom model is that it allows you to diversify your investments. Because minimum investment amounts are smaller, you can reduce your risk by splitting your capital across multiple properties. By contrast, the Investn approach is more focused on building a portfolio one property at a time.

   • Ownership of properties: Where DomaCom gives you a share in an investment opportunity, Investn allows you to buy the whole property. This means that you actually own the asset and that your name is on the title documents. It also means you can leverage the property to secure additional finance to continue growing your portfolio.

   • Potential returns: With DomaCom, the income and capital growth you can achieve is based on the size of your share in the property. However, with Investn, as you own the whole property, your returns are based on its overall performance and total value. You’re also building additional equity over the term of your investment as the rental income pays down the mortgage.

With all this in mind, we believe Investn is the better option for those looking to build a high-performing property portfolio. For information on our approach, including how it can help you achieve your investment goals, contact us on 1300 446 445.

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