Investors are being urged to look at alternative property strategies, including fragmented property ownership, as a way of diversifying and growing their portfolio.
During a recent episode of The Smart Property Investment Show (hosted by REB's sister brand, Smart Property Investment) CEO of Bricklet, Darren Younger, shared how the model works and the type of investors who can benefit from it.
“It is a fragmented property. So the way that the platform works is I guess, a differentiation between fragmented property and fractional property is that fragmented property means that all the owners of all the different pieces are actually on title. So, they’re on that land title as opposed to a fractional ownership model where that’s typically some kind of unit trust or company structure, something that sits around the property, owns the property and then all the fractional owners effectively own units in that trust or shares in that company,” Mr Younger said.
He explained to consumers how this alternative strategy can help various types of property investors.
“There’s a number of popular segments that we’re seeing.
“One is definitely the property investor who loves property and can’t borrow to buy the next piece of property and so they’re looking at Bricklet as a way to extend that or a way to diversify their current portfolio.
“Another big market that we’re seeing is self-managed super funds because they see the value of if they’ve got $200,000 to spend and they want to put that into direct property assets, they can’t really buy much for $200,000, especially with that alone. So, by having a portfolio of Bricklets across, that $200,000 is actually quite interesting for them. So, we’ve seen a number of SMSFs come on and buy Bricklets in that context,” Mr Younger said.
He also believes investors who are saving for a deposit can get ahead through exposures to the property market.
“And then also I think the Millennials or the people that are trying to get into the property market, this really helps them as well, especially now that we’ve partnered with a finance company to provide loans for Bricklets,” Mr Younger noted.
“So, the other big advantage of fragmented property, where the fragments are on title, is that we can also use that as security for finance. And so we’ve got a finance company that provides loans as well. So, if you think about someone who’s got five or $10,000 saved up, they can then get a loan to buy a 30, $40,000 Bricklet.”
While highlighting some of the benefits, Mr Younger explained that the platform could even be used to help mortgage-holders in distress.
“It could be some friends that want to buy an Airbnb property. It could be any sort of investment property that can be fragmented. But I think the cases that I guess are a little bit more surprising, especially now that we have the funding opportunities against Bricklets and the finance company partnering with us, are things like distressed mortgages.
“So, the ability to solve that situation by selling down some of your property so effectively, Brickletizing the house and keeping most of it, but selling some off and then refinancing it. It’s a very interesting model,” Mr Younger concluded.