Co-investing a good alternative to limited finance: DomaCom
If finance is limiting your property investment ambitions or the idea of investing in a pooled managed fund where someone else chooses the asset doesn’t appeal, then why not create your own investment syndicate with family and friends and choose the property you want or engage a property adviser to help.
The beauty of creating your own syndicate, or joining a crowdfunding campaign with like-minded investors in specific properties or projects that interest you, is that everyone can contribute as much as they can afford, or an amount that fits into your portfolio asset allocation strategy. In this way no-one has to feel self-conscious as their name and the amount they contribute is private. Only the total amount is shown in the campaign as people contribute.
By creating your own syndicate, you can set a target and invite people to participate. The entire process is done online. You don’t even need to choose a property to get started, simply invite those you want to open an account, deposit the funds they want to invest and when your target is reached you can then go about selecting the property you want. Family members and friends is a good place to start.
It will pay to have a plan in place as to the type of property you’re looking for before launching a campaign. For example, “our objective is to acquire a residential property in one of Melbourne’s growth corridors”, or “to acquire agricultural farm land in the Western District of Victoria”. In this way you may avoid unnecessary disagreement on the type of property from the outset.
You can literally choose from any property for sale in Australia; residential, commercial, industrial, rural farmland, or from a range of development projects that are listed on the website www.domacom.com.au.
DomaCom is an online property platform that lists crowdfunding campaigns for a range of properties. Some are set up as private campaigns by financial advisers exclusively for their clients or by individuals for family and friends to participate. Some are set up as public campaigns that anyone can join.
DomaCom also offer development projects in areas like renewable energy, affordable housing, hotels, aged care and child care centres to offer investors the ability to diversify their portfolio.
If you think going into an investment with family or friends might end in tears, the DomaCom Fund structure is an ASIC registered managed fund that handles the due diligence and ongoing management process, distributing rental income and providing tax, income and expense reports.
Having a Fund do this removes you from the process by making all the decisions and managing the investment on your behalf. You choose the property, DomaCom manage the acquisition process tenancy and ongoing management.
Each property crowdfunded by DomaCom or acquired for private syndicates is segregated, meaning your investment is only in the specific property you have chosen. DomaCom calls these sub-funds and each sub-fund has a specific term to expiry so guaranteeing an exit strategy. For early exits (most are 5 years) DomaCom operate an online liquidity facility enabling you to sell your units to a buyer without affecting the other investors.
Funds on deposit awaiting a suitable property attract an interest rate – currently 2.06%.
After a property has been identified and acquired investors receive a proportional share of the rent and the ongoing capital value. No entry or exit fees.
Investing in property inevitably involves more than just the price of the property. There are acquisition and due diligence costs such as conveyancing, property inspection and a formal valuation – because you want to know that the seller has legal entitlement to sell and there are no encumbrances on the property. Also, you don’t want to buy a lemon or pay too much for it. On top of the due diligence of course there is stamp duty to be paid.
Once acquired you will want a tenant to pay rent so DomaCom arranges a property manager to do that and carry out regular inspections property.
Whilst care must be taken when buying a property and there are processes to observe a platform like DomaCom can take the worry and effort away.
General Advice Warning
This information is general information only and does not take into account your personal objectives, financial situation or needs. Accordingly, before acting on the information provided you must consider the appropriateness of the information, in the light of your own objectives, financial situation or needs. If you wish to acquire a financial product within the DomaCom Fund offering, you should first obtain a copy of, read and consider, the PDS before making any decision. A copy of that PDS is available at on the DomaCom Ltd website, www.domacom.com.au or by calling your financial adviser. We also recommend that you obtain legal and financial advice before investing with DomaCom.
Warren Gibson is the head of marketing and business development at DomaCom.
