Brick X on Lateline, own Property for $100

Discussion in 'Innovative Property Investment Techniques' started by Gonx, 1st May, 2017.

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  1. Angel13

    Angel13 Well-Known Member

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    All their current properties are fully renovated so it's unlikely that these scenarios would happen.

    They've said that they might consider some renos in the future as part of their investment strategy. For these Reno props my understanding is the brick price will be: the purchase price + Reno cost + acquisition cost minus the loan amount.

    For repairs there is a decent size of funds put aside which they would draw from. If funds are used then this is topped up from the rent. That's my understanding anyway.
     
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  2. Angel13

    Angel13 Well-Known Member

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    If the market drops same thing that always happens in the property and share market will happen.

    - Some will panic and sell and lose $$.
    - Some will get that property is a long term investment and get that it's normal for markets to go up and down. So they won't stress and hold their bricks.
    - Some will buy the bricks that John West rejects and make good money when the sea changes again.

    I think you will always be able to liquidate if you are prepared to take a loss This is no different to if you own the whole house.
     
  3. Angel13

    Angel13 Well-Known Member

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    This will be the case weather it's shares or bricks or an entire investment property.

    I'd rather earn a dollar and pay 45c and be left with 55c than have not earned that dollar at all.

    I also have a good account who is practically family so I know I can rely on him for sound advice.
     
  4. splatters

    splatters Well-Known Member

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    someone just bought a whole stack of bricks at 250% premium. what the hell is going on? a competition to see who can make the most stupid purchase?
     
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  5. kierank

    kierank Well-Known Member

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    Can Mum/Dad buy as trustee for Daughter/Son now and resign as trustee when child is 18+?
     
  6. Danyool

    Danyool Well-Known Member

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    No. Don't have any say in it. The current properties were bought renovated, so no need for it now. The only thing Brick holders can do is sell their bricks on the platform, or request a vote to sell the underlying property.

    From the PDS:

    BRICKX, or its appointed agent, performs the following functions in relation to managing a property:–
    making leasing arrangements;
    including sourcing the tenants and determining rent;
    –tenancy management;
    –rental collection;
    –undertaking periodic inspections of each property;
    –providing written reports relating to the state of the property and items requiring attention; and
    –co-ordinating repairs or maintenance

    Brick Holders do not take an active part in managing the properties and will not be consulted for any day-to-day decisions relating to any property.
     
  7. Simon Hampel

    Simon Hampel Founder Staff Member

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    But will you?

    Think about it.

    The market has tanked 20%, the property is worth less than when it was purchased. Rental demand has not yet caught up and so rental yields are still really low so not great income either. These are presumably blue chip locations, so yields were probably down around the 2-3% to begin with. How much do prices have to drop for it to actually become a reasonable yield play?

    You're not buying an asset you can control - you're buying a portion of something and ceding control to the collective and to the managers - who you can't even fire if they aren't doing a good job.

    What exactly is your exit strategy?

    Right now it seems to be operating on the "greater fool" theory - but when there are no fools willing to take on an asset that has no control poor returns ... who is going to buy it?

    If you can't own more than 5%, you can't even take the opportunity to buy effective control cheaply.

    You will always be able to sell real property that you control - the land has intrinsic value due to scarcity and a house in reasonable condition will always be able to be rented out.

    But we're not talking about real property - we're talking about a "share" of a property ... there is no intrinsic value in that share - you are completely reliant on the market for that share being liquid to be able to realise any value in it.

    Sure, if you don't have enough money to be able to afford an actual property, or you are only investing "play" money into it - then it doesn't really matter does it? But scale that up - are you prepared to put $100K or your own money into it? $250K of you own money? $500K of your own money? If not, why not?

    I'm not impressed by 200% gains on a $500 or $5,000 outlay - not even $50K really. If you're putting real money into an investment (ie money you could never recover from just working your day job), you'd better have a damned good exit strategy for when things go badly.

    I'm really not convinced the liquidity will continue to be there long term. Right now it's all marketing hype feeding on the property boom.
     
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  8. Danyool

    Danyool Well-Known Member

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    Can't be from the Landline piece - no one watches the ABC! :)
    Certinally not the younger generations. Must be the boomers buying up in ther SMSF's!
     
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  9. Angel13

    Angel13 Well-Known Member

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    Sounds like it's similar to the Real Estate portion of the managed funds we have for her.

    We have a little bit of $$ for Helaina in a Diversified United Investment (DUI) . A close family friend bought these for her in my partners name soon after her birth. This fund invests in listed property trusts. I just had a look at an old annual report and the DUI invests in:
    - Australand Property Group
    - Commonwealth Property Office Fund
    - Scentre Group
    - Stockland Group
    - Westfield Corporation
    - Westfield Group Lyd

    Are these REITs?

    We reinvest the dividends.
     
  10. PandS

    PandS Well-Known Member

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    Read the details carefully that all I can say
    This is bull market and many exotic products exist, I have seen them all before
    beware and read carefully especially around fee structures and liquidity.

    You like properties lot of nice REIT on the ASX can deliver far safer and better return at much lower fee
     
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  11. Danyool

    Danyool Well-Known Member

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    Yeah - it's getting a bit silly now on the Double Bay one how much it is over the valuation. And people are buying!

    Noticed that change to the order this arvo too. Will be interesting to see how the new Darlinghurst one goes tomorrow. They sold out all* the Bricks on pre-oder in 36 hours. *I do wonder if Brickx has kept a stake in it, to control the sales/prices a bit. And are they they ones buying back the Double Bay ones at ridiculious prices! Aah conspiracy theroy!
     
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  12. Danyool

    Danyool Well-Known Member

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    Double Bay is going mental! They must be hacked!!
     
  13. PandS

    PandS Well-Known Member

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    Yes they are REIT I know a fair bit about

    Scentre is the split of operation (Aus + NZ operation) of the old Westfield
    Scentre owns Westfield malls in Australia and NZ
    Westfield Corp (WFD) now own all international Westfield operation
    they now list separately on the stock exchange.

    If you have the old WDC shares you get shares in both (WFD, SCG)

    Stockland has a bit of everything from the regional shopping centre, to retirement village, office building, warehouse logistic etc..

    Commonwealth Property Office Fund has taken over by Dexus again they are in similar space as CPA, office, retail and industrial properties
     
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  14. pjames

    pjames Well-Known Member

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    not many boomers watch it or take ABC seriously anymore. it is going the same way as the other extreme politically correct/lefty broadcasting flop Fairfax. People are seeing through the brainwashing agendas of these stations that want to turn every Aussie into a pc extremest.

    What I love about BrickX is the creative idea behind the concept. It makes me want to come up with my own scheme now.... trouble is I don't have 3 million but I have a ton of creative ideas.
     
  15. Angel13

    Angel13 Well-Known Member

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    I think you are missing the point of who BrickX is intended for.

    It's for people who don't have $100K, $250K, $500K. It's for people who can only afford to start with $100 - $1000 who wants an alternative to shares or managed funds.

    If I had $100 - $250K spare I would hire a buyers agent, buy a good property I can sub-divide. Renovate the old house, build on the new house and either sell one and keep one or keep both. But I don't have $100K - $250K so I'm happy to settle for a few bricks for my daughter in some blue chip properties.

    As for her exit strategy, she's 3 years old and have nothing but time on her side.

    Re: your comment about not being impressed by 200% gains on $500 or $5000 investments... I don't even know how to respond to that!
     
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  16. kierank

    kierank Well-Known Member

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    I didn't realise I was a politically correct, lefty, baby boomer being brainwashed by the ABC. Thanks for that diagnosis :).

    I don't know whether I should admit it on a public forum but I also watch SBS :) :).

    Can you guide me to the home of good TV in Australia - Channel 9 or 10?
     
  17. Simon Hampel

    Simon Hampel Founder Staff Member

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    I guess my point is that it's a really really expensive way of getting marginal exposure to an asset that has relatively high risk because A) you control nothing, B) your exit strategy is questionable.

    I've been around long enough and been burned enough times in my youthful exuberance of investing to have learned some very very difficult lessons and having both control and a rock solid exit strategy is critical to surviving the tough times.

    Any fool can make money when times are good. Being able to hang on to your money (and indeed continue to profit) when times are bad is what will sort out the financial winners from the losers.

    I'm just not (yet) convinced that this is a sound way for people to get into investing when we already have highly liquid alternatives.

    I love the idea of what they are trying to do and I would love for my kids to be able to buy into real estate using their (modest) pocket money savings - I just don't think that the control and liquidity issues have been addressed well enough.

    Yeah, I should have qualified that a bit further.

    What I should have said was "people bragging about 200% gains on $500 or $5000 investments". You see it amongst share traders all the time - they brag about their multi-baggers or their great stock picks and their high risk strategies, but when you question them - they only have a few thousand dollars at risk.

    If they lose the lot - there's no real risk to their lifestyle or any other asset.

    Same with gearing to invest - if your margin calls can be covered from your salary - the risk management is very very different to managing leverage on several million dollars.

    Put several million dollars at risk and then tell me your risk management strategy and I'll pay very close attention to every word you say.
     
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  18. Angel13

    Angel13 Well-Known Member

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    Fair enough. I get what you are saying about liquidity.

    I can only speak of my situation and I am not planning on putting 10s of thousands in. We're starting with $3 - $5K and adding some birthday and Christmas money every year. We also have a little managed fund set up for her which we will continue to put $$ into so she is well diversified I think.

    Now your comment about 200% gain on $500 - $5K totally makes sense. I bet they don't brag about their day trading losses either.
     
  19. Simon Hampel

    Simon Hampel Founder Staff Member

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    Sounds good - I am genuinely interested to hear how things progress, so please do keep us updated.

    My 8yo son has over $200 in his bank account now (saved from his pocket money), but is rightly unimpressed with the amount of interest he is earning.

    I am looking for something he can invest in that has a low entry level and decent returns. Vanguard index funds have a $5,000 minimum investment. ETFs, LICs and direct shares aren't really cost effective for very small investments due to brokerage costs.
     
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  20. Angel13

    Angel13 Well-Known Member

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    Will do Simon. I'm looking forward to July as June is when they will revalue all their properties.