Build assets bit by bit

Fractional investing allows people to buy into property without outlaying megabucks, writes Anthony Keane

A NEW breed of property investing in Australia is expanding into other money-making areas, including offshore.

Fractional investing, which allows people to buy slices of real estate without having to stump up hundreds of thousands of dollars, is growing rapidly as investors search for ways to benefit from rising property prices.

The sector’s two main players, DomaCom and BRICKX, are both on steep growth paths and say demand from investors is strong. “It’s a global phenomenon and is disrupting the current markets,” said DomaCom managing director Arthur Naoumidis.

DomaCom’s fractional investing platform has so far bought 39 properties worth about $24 million in all Australian states.

It listed on the Australian Securities Exchange last November, and this month announced a distribution deal with the world’s largest property crowd-funder, Prodigy Network, which lets investors buy slices of prime New York real estate.

“You don’t have to be Donald Trump to own a piece of Manhattan,” Mr Naoumidis said. He said DomaCom would soon allow investors to buy slices of mortgages attached to its properties, and was also eyeing corporate bonds.

“We have eliminated the bank,” he said.

Other potential investments include gold bullion and collectables – fancy part of an Elvis Presley jacket? – while marketplace lenders such as SocietyOne, RateSetter and DirectMoney are already operating in the personal loan space.

BRICKX officially launched last September and its CEO, Anthony Millet, said it already had 2500 investors and $9 million of Sydney and Melbourne property on its platform. It divides each property into 10,000 “bricks”, so a $700,000 house is divided into $70 bricks that each gives investors a share of the property’s growth and income. “Investor s are typically investing in 2½ properties on average,” Mr Millet said. “At some point we will likely look at commercial property, and add-on renovation projects.” Mr Millet said he was amazed that there were not more fractional investing businesses in Australia, given the $6.5 trillion residential property sector dwarfed the $1.8 trillion share market.

“There’s an insatiable appetite for investing in property in this country,” he said.

A concern about fractional investing has been that investors might have trouble selling out when they needed to.

Mr Millet said that had not been an issue and during the last three months of 2016 the average time for its “bricks” to sell was 26 hours. That was much faster than a traditional real estate sale,

he said.