Peer Estate, a unique peer-to-real-estate lender for property debt, believes it has a compelling proposition for SMSFs, with a high number already invested.
The real estate loans marketplace opens up access to a new channel of property investing, previously only available to institutions or the ultra-wealthy, via an online-only technology model to democratise financing for major and residential housing projects.
Peer Estate has experienced a strong start, providing debt funding into property deals with an end value of about $230 million since its beta launch in August.
Company co-founder and chief executive Adam Broder said while the firm’s licence was limited to wholesale investors only, many SMSFs met the criteria to participate.
“We have been pleasantly surprised with the high number of SMSF investors who have already invested via our platform,” Broder told selfmanagedsuper.
“Many of these investors have developed strong asset and cash backing over many years and are looking to continue growing this wealth.
“We think in the early days SMSFs will most likely act as an investor/lender, with the main reasons being that we can accept investments from as low as $5000 and we are targeting average returns of 8 per cent to 12 per cent, which we believe provides the right risk/return profile.
“Also many SMSF property borrowers are quite passively geared and would be seeking lower rates, that is, from the major banks, than we could provide in order to meet our return hurdles. There’s a strong story as to why investment in someone else’s debt may make more sense to certain investors rather than owning directly.”
He said the key features of the peer-to-real-estate platform that appealed to SMSFs were yield, flexibility, property, backing and management.
“SMSFs are looking for higher-yield returns that provide security in the investment – cash rates are low and this provides a fixed income investment, ultimately backed by real estate, with higher yield than cash,” he noted.
“This is not a fund but rather single investment opportunities, therefore each investor can curate and tailor their investments to meet their own risk appetite.
“[In terms of transparency] investors are provided information to make an informed decision. We also provide a significant amount of education.”
When it came to providing a distinctive property opportunity, he noted Australian investors understood property and mortgages, however, the Peer Estate proposition instead allowed investor access to property debt in, generally, a first mortgage position.
He added another compelling feature was that the firm was seed-funded and was backed by real estate investment management firm Qualitas.
“Institutional investors as well as ultra-high net worth investors have been using the Qualitas group for access to this kind of technology for many years,” he said.
“Via technology, we can bring this same opportunity to SMSF investors.
“[Finally] for an SMSF that invests directly into property, they need to manage a range of items, including real estate agents, property management, vacancy, maintenance, stamp duty, et cetera, and not only that, any capital growth is subject to the movement of market property prices.
“Yields on these smaller properties can range from 3 per cent to 6 per cent, but via our investment platform these investors can access yields on similar properties of well above 6 per cent with someone else looking after all those issues.”
He added he was happy with the positive feedback from Peer Estate’s initial database of investors during the successful beta phase, which proved the technology and concept not only worked, but showed positive signs for growth.