Fractional property investment

Fractional property investment helps you get on the property ladder through platforms like BrickX and Domacom, starting with just $100.

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Property investment is an expensive way to make money. And with property prices high, the entry costs continue to rise. Fractional property investment platforms like BrickX and Domacom could offer an alternative, cheaper solution. Instead of buying an entire property, why not buy a small part of one?

What is fractional property investment?

With fractional property investment, a company purchases a property it believes will grow in value. Then it divides the cost of the property into shares. These shares are then sold to investors. Investors receive income from rent charged on the property and can also get capital returns on the property when it is sold or they sell their shares. The cost of the shares will rise (or possibly fall) as the property's value grows.

Unlike traditional property investment, fractional property investment offers liquidity. This means investors can cash out their investment at any time by selling their shares to other people using the fractional property company or platform. This offers more flexibility than traditional investment.

Investing through a fractional investment platform

Here's a simple example of how fractional investment works.

  • You sign up to a fractional investment platform like Domacom or BrickX.
  • You view the properties available on the platform.
  • You select a property (or properties) and choose an amount to invest.
  • Once selected you can monitor the performance of your property shares.
  • You receive a portion of rental income based on how much of the property you own.
  • You can keep your shares or sell them as the value grows.

What are the benefits of fractional property investment?

Fractional investment has a number of advantages over traditional property investment.

  • Lower entry costs. By splitting the cost of a property into shares, investors can gain exposure to residential property for a small initial outlay. You won't need to save a large deposit and take out an investment loan.
  • Cash out faster. Fractional property investment is a liquid investment. Fractional property investors can sell their shares whenever they want and receive a return proportionate to the increase in value of the property.
  • Property selection. It's not easy to pick winners in property investment. Fractional platforms have analytical tools and experts helping them choose investments these companies believe will outperform the average.
  • Diversification. Fractional property investment allows investors to diversify their funds across a wide portfolio of properties. While it might be challenging, or even downright impossible, for the average person to buy a large portfolio of residential properties, fractional investment allows investors to buy shares across a wide range of properties for a relatively small initial investment.

What are the drawbacks of fractional property investment?

  • Smaller returns. The primary drawback of fractional property investment is that the eventual returns are not as significant as the returns in traditional property investment since the initial investment in fractional property investments is so much smaller.
  • No actual ownership. Another potential drawback is that investors own shares of property rather than a tangible asset. A traditional property investor has the option to become an owner-occupier in their property should the need arise. They can also add value by renovating the property. This option isn’t available for fractional investors.

How can I get started?

Fractional property investment is a relatively new concept in Australia, and as such there are only a few platforms available. The two main fractional investment platforms in Australia are BRICKX and DomaCom.

BrickX

BrickX finds properties with positive rental returns and the potential for strong capital growth. The platform purchases these properties and divides the cost into 10,000 shares, or "Bricks". Investors can buy and sell Bricks on the platform and receive monthly rent payments proportional to the size of their investment.

The only fees are charged when you buy and sell your bricks. BrickX charges a purchase fee that is 0.5% of the cost of the bricks you purchase. The company charges another 0.5% fee when you sell (based on the price at the time of sale).

Domacom

DomaCom pools investor funds to purchase properties, and allows users to commit funds along with other like-minded investors toward a property for sale. The DomaCom Fund is a managed investment fund that allows investors to select from a range of properties that they would like to invest in.

DomaCom currently offers investors the option to invest in residential, commercial, rural, retail, industrial and resort property lists. You can create your own portfolio by selecting the properties yourself or you can choose one of the Model Portfolios, which have been pre-selected based on different investment strategies. Some Model Portfolios may have a minimum investment amount, and DomaCom also offers a platform to sell your units or purchase other investors' units.

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2 Responses

    Default Gravatar
    DiApril 22, 2018

    How do I get started

      Avatarfinder Customer Care
      MayApril 22, 2018Staff

      Hi Di,

      Thanks for getting in touch with Finder.

      If you want to go for fractional property investment, you may like to start with an investment platform. At this time of writing, you can compare BRICKX and DomaCom investment platforms.

      You can press the link above to be redirected to our review page to know how they work, benefits, and fees. You can also visit the main websites of the two platforms to get more details, then decide which of the two may be suitable for you to start the investment with.

      Cheers,
      May

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