SMSFs pursuing high yield on property P2P

Peer-to-peer platform for real estate debt Peer Estate has identified its SMSF users are showing a strong preference for opportunities that offer higher returns.

Peer Estate chief executive Adam Broder revealed the company’s SMSF activity has been much more focused and was being well-received by SMSFs from the investor side, rather than the borrower side.

“There are a number of reasons for that and the main one is the hunt for yield, and what’s been frustrating everyone is the lack of yield on cash, so a lot of SMSFs are questioning how they can earn more than 1 per cent to 2 per cent, whatever it is at the moment, but not take on too much risk,” Broder told selfmanagedsuper.

“We generally offer shorter terms of six to 24 months and what I am noticing in terms of SMSF trends is the preference for high yield.

“We’re finding we’re having much more demand on higher-yield than our lower-yield returns, which range from 7 per cent to 12 per cent or 13 per cent, based on risk, and most of our investors understand that just because the rate is high doesn’t necessarily mean that it’s ridiculously risky.

“I’m not shocked, but I am pleasantly surprised that our investors understand what the risk pricing model is.”

While many SMSFs bought residential property to include in their portfolios, many were less concerned about the underlying real estate itself, which was a continuing issue from a diversification viewpoint, he warned.

“The point I’m trying to make is that if you can afford to buy one piece of residential real estate for your portfolio, it means you’re not very well diversified, which is quite high risk if something happens to that property or that suburban market,” he said.

“But there are ways to spread or diversify that risk, whether that be through fractional property ownership or something similar to what we do, which is on the debt perspective where you can have a small piece of a number of mortgages that provide you with exposure across different real estate and across different suburbs without having to have all your eggs in one basket.”

He added SMSFs continued to be attracted to the Peer Estate proposition.

“One of the key reasons behind setting up our business is to provide the ability to self-curate your own portfolio – to pick and choose your risk appetite and your portfolio from a smaller perspective,” he said.

“There are a lot of people out there that might have the desire to have this kind of exposure but either don’t know it’s available or don’t have the cheque size to play at the so-called big end of town. So access is key and education also plays a big part.

“I think generally those who set up an SMSF already have some form of education and literacy, so from our perspective, the SMSF investor doesn’t need to be educated around investments, per se, but needs to be shown that there is an ability to think and invest outside the traditional paths.”

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