Direct Property, Residential Property

SMSF demand drives fragmented property model

SMSF fragmented property

Demand for property investments from SMSF trustees will create new models to provide fragmented access to investments for those without large fund balances.

Increased demand for property investments that are accessible to SMSF investors with lower balances will continue to drive the development of new fragmented product offerings, according to the head of a residential property investment manager.

Bricklet chief executive Darren Younger said the ongoing demand for diversified property investments from SMSF trustees had prompted his firm to look at how it could offer a range of investments at a lower entry level using a fragmented investment approach.

Younger said the Bricklet model was similar to the fractional investing model already available in the market but instead of buying into a unit trust SMSF trustees could directly purchase and hold a stake in a property offered through his firm’s platform.

Under this model, properties from developers are made available to investors via Bricklet, which in turn offers them to investors as a limited, separate, stand-alone investments typically starting at $25,000. At purchase these stakes are directly owned by the investor whose name is recorded on the title for the property.

Younger said the product is a response to the changing demographic of property investors and SMSF trustees and recognises not every investor has sufficient capital to purchase a property within their fund.

“The 35 to 55 year old demographic wants to move into property and those over 55 years old want to diversify what they have. We offer them a way to buy property directly, instead of having to leverage it, which can be hard if they have a balance under $500,000.”

“The average investment we are seeing is from $75,000 to $100,000 for the younger group and from $100,000 to $200,000 for the older group with interest being driven by the continued increase in residential property prices in Australia.”

“The other appeal to SMSFs is the access to liquid, diversified property that is valued every six months and is overseen by an asset manager,” Younger said.

He added that yields on properties offered via the platform will range from 4 to 8 per cent on average, dependent on the location of the property investments, which are restricted to residential apartments at the moment, and costs are limited to stamp duty, e-conveyancing and transfer costs at pro-rata rates linked to the size of the investment.

The firm, which recently launched, currently has six properties open to investors but Younger said a further 15 will be made available in the new year and by February around 25 properties will have been put forward to investors.

“We work with developers so we don’t have a problem with supply and are looking at higher quality residential investments as well as commercial properties in 2020 and expect demand will increase as we continue the education process with the market.”

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