Building home equity one BrickX at a time
Young home buyers who want to put a toe into the booming Sydney property market are turning to an innovative trading platform that offers part ownership.
The BrickX investment scheme allows for the online purchase and sale of ‘Bricks’ starting from as little as $67 in residential properties.
Young couple Steven Farrer (30 yrs old) and Holly Bozier (24 yrs old) are among the early stakeholders who've bought a small stake in a Mosman flat where the so-called bricks are selling for $140 each.
They didn't want to be over-committed, but nor locked out of the property market. And are happy to learn about the property market through their outlay.
They own eight - costing $1040 - of the 10,000 so-called bricks in the two bedroom Parriwi Road flat which was bought by the fractional ownership company for $1.2 million in 2015 with its tenants now paying $990 a week.
"The BrickX website offerings have been like looking at a real estate office website, however this time we can afford to invest in the property we see," Steven said.
"We have been to heaps of open homes however everything is being sold way over the buyers' guide price and is just out of our price range.
"We wish we has bought something two to three years ago," said the couple who have their finances pre-approved to buy their first home.
"But we don’t want to spend $750,000 on a property today and find it's worth $600,000 or less tomorrow if the market crashes."
Like shareholders in publicly listed companies, first home buyers and investors can also also buy into their Enmore apartment at $67 per investment or an Annandale house at $98 a brick.
Steven Farrer and Holly Bozier say knowing that experts - including CoreLogic head of research Tim Lawless and Nerida Conisbee, chief economist at the REA Group - are doing all the hard work prompted their decision.
BrickX chief executive Anthony Millet said they were working towards having 100 properties.
BridgeLane Group's Markus Kahlbetzer is the co-founder of BrickX having devised what he envisages as an easy route into investing in residential property across Australia with transparency.
Until this month it was licensed only for wholesale investors under the Corporations Act, but the offering is now available to regular mum and dad type retail investors who will derive dividend incomes on a monthly basis. Investors can buy a maximum 5 percent ownership.
Each individual property is in a trust and investors can buy or sell into that trust.
The property is managed by BrickX on behalf of the investor on the platform, and the investor receives a dividend from the rent of the property that they own, in proportion to the units that they own in the trust. As the price of the “Bricks” move, so do the investor’s returns.
There is no minimum investment required to purchase Bricks and there is a flat 1.75 percent transaction fee on purchases.
Tim Lawless says it would carefully select properties based on a number of key strengths including:
- Value $500k-$1.5m
- Newly renovated/good condition
- Modern fit-out
- Buying the normal type of property in an area (i.e. if a suburb is known for houses, buy the normal)
- Healthy strata budgets
- Avoid large unit blocks where rents can be under pressure from other void units in same block
- Avoid off plan or large new developments
- Avoid properties which have additional features that would add to the running costs (i.e. pool)
This article was first published in the Daily Telegraph.
