First home owners/Gen Ys: buying shares of a property

Discussion in 'Innovative Property Investment Techniques' started by TMNT, 27th Apr, 2017.

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  1. TMNT

    TMNT Well-Known Member

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  2. jaybean

    jaybean Well-Known Member

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    Years ago there was no easy way to sell an apartment. It would either go under a company title or tenants in common, neither of which banks liked lending to. But the population was growing and apartments were starting to become popular so about 60 years ago they invented the strata title. An Aussie invention. Perhaps a new title type needs to be invented now to support a changing country.
     
  3. Cimbom

    Cimbom Well-Known Member

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    It seems like a scam. I guess people like having a photo of the property they are apparently buying - sort of like the marketing for the 'sponsor a child' programs.
     
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Buying a share of a property through fractional ownership is like paying $1.0m for a $500K property when all the parties take their cut (endlessly). BrickX and iits parties all want their fees. And the spread between units can be as much as 20% leaving a risk that unless the property value increases 20% then no profit can occur. Its hardly a good value buy. I also didnt note any mention of depreciation in the PDS. Its like a cost they missed ?

    You dont actually own it - You have a trust interest. And it appears the bulk of the property is geared so in theory if property collapses 20% you could be wiped out since the lender is a preferred owner as such. Sure you can pick "your" property but thats not quite true when you have no control influence or decision involvement. And you can never buy all the bricks to own it anyway. And when the market gets tough liquidity may suck taking the spread to 20% and also meaning there are no buyers. Hence no sale. There are still investors waiting to get their capital back from mortgage securities in the 2008 GFC. From "reputable" organisations like ING.

    Fractional Property Investment - Canstar
     
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  5. The Y-man

    The Y-man Moderator Staff Member

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    Better to do into a large commercial portfolio via REIT IMHO (4 letter acronyms everywhere!!)

    The Y-man
     
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  6. TMNT

    TMNT Well-Known Member

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    do you have to go through one of these companies,

    cant 4 people just buy a 25% in the property

    and if one wants to get out, the others have to buy them out or come up with the cash?
    and whoever wants to live there pays the full rent, at least your tenant will look after it
    obviosuly can get very messy
     
  7. The Y-man

    The Y-man Moderator Staff Member

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    https://www.propertychat.com.au/com...at-are-the-basics-to-protect-each-party.19843

    The Y-man
     
  8. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Hopefully not for that single Mum but I end to agree - scam.
     
  9. Danyool

    Danyool Well-Known Member

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    What do you mean - spread between units can be 20%?
     
  10. The Y-man

    The Y-man Moderator Staff Member

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    Think of it as the "profit margin for the company running the deal".

    The investor may be paying $100 for every $80 the property is actually worth.

    The Y-man
     
  11. Zoolander

    Zoolander Well-Known Member

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    Would this approach invalidate potenial future home owner grants if they group buy?

    I think one of the appeals of brickx is that it doesn't affect FHOG eligiblity from the way the investment is categorised.
     
  12. Cimbom

    Cimbom Well-Known Member

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    Yes, it would, because they would be buying an actual share in a property. BrickX is just a managed investment scheme.
     
  13. evalord

    evalord Well-Known Member

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    Less liquidity than the share market. No thanks.
     
  14. Zoolander

    Zoolander Well-Known Member

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    Damn... Sucks to find out you don't qualify for a five figure benefits package because you own a fraction of a doormat somewhere
     
  15. Danyool

    Danyool Well-Known Member

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    Well, the main fees they get is:
    Buyers Agent Fees $16,500 per property which forms part of Brick price - which is around 1.65% on ~$1m purchases (and is amortized over 5 years along with other acquisition costs, eg Stamp Duty, legals, etc) and;
    1.75℅ transaction fee on buy and sell Bricks

    So, it's about 5.15% fees (or just transaction fees of 3.5% if you compare to someone using BA anyhow).

    You can check the price they have paid for the property and see if it's comparable value to other property sales. I thought they were OK and bought a few Bricks in a few of their properties with a bit of play money.

    The Bondi one hasn't gone up (yet), but Double Bay one has shot up about 20% in a month since I bought. I think this is because it is getting closer to when they will do their valuation - which was my play, but I keep getting surprised. (It's up 23% on initial price)

    I think it's attraction is if you can't afford a million dollar place by yourself (I can't!) you can own a part of one.
     
  16. Danyool

    Danyool Well-Known Member

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    But more liquidity than the property market ;)

    They have recently added an average sale time onto their website and it's about 4hours.
    (compared with weeks if you're directly selling)

    You also don't have to sell your total Brick holding in one go, you can sell part if you want, compared to having to sell your whole house if direct.
     
  17. Scott No Mates

    Scott No Mates Well-Known Member

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    FHOG only gets lost if you live in the place you have bought in association with others. If you don't inhabit the place & your partner hasn't either.
     
  18. Zoolander

    Zoolander Well-Known Member

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    I had a look at brickxs faq page and it briefly explains that fhogs won't be at risk as its considered an investment fund instead of housing.

    Still, i wouldn't trust two sentences on a website looking to sell when the NSW grants faq says you need to "never have held a relevant interest in property". The second point offers an out though. I guess we'll find out when a brickxer tries to get a grant.

    • you or your spouse (including de facto spouse) have never held a relevant interest in any residential property in Australia prior to 1 July 2000

      However, you may be eligible if you or your spouse, including de facto spouse, have only had a relevant interest in any residential property in Australia on or after 1 July 2000 and you have not resided in that property for a continuous period of at least 6 months.


      Source : First Home Owner Grant (New Homes) scheme | Office of State Revenue
     
  19. The Y-man

    The Y-man Moderator Staff Member

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    ...and again I come back to my point above - why wouldn't you just do the same thing for commercial property, for tenants that are paying far more % wise than residential tenants, where you have no residential tenancy acts to deal with, where lease terms are 5+ years, where you can buy a brick or 1 mosaic tile in the toilet of a commercial office block - and unquestionably not risk your FHOG?

    The Y-man
     
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  20. The Y-man

    The Y-man Moderator Staff Member

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    @Danyool

    Quick question - does the net yield take account of running costs? (Body corp if any, rates, utiltities etc)

    Also is there a "sinking fund" for the inevitable repairs etc? (whilst admittedly should not be large - still needs to be there one assumes)

    Also, for the likes of Bondi where it is geared, how long is the interest fixed for?

    Thanks (saves me singing up)

    The Y-man
     

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