While platforms like Kickstarter have become an accepted way for people to fund a wide range of projects, whether or not crowdfunding can be a successful way to invest in real estate is yet to be seen.
Accounting firm BDO and real estate crowdfunding platform CrowdfundUP could soon answer that question though, as they collaborate on a report into the state of real estate crowd funding in Australia.
The report is set to be finalised and released in the near future and CrowdfundUp founder and managing director Jack Quigley is looking forward to seeing its findings.
“I think there will be some interesting things in the report, I think we’re just starting to see it (real estate crowd-funding) start to take off in Australia,” Quigley said.
If Quigley’s CrowdfundUP is anything to go by, the Western Australian might be right about the direction of real estate crowdfunding in this country after a number of positive signs for the platform.
Developed in the two and half years before it launched in March, CrowdfundUp has already closed out the funding arrangement for its first investing opportunity, a development of a block of eight units in Perth
, and this week launched its second opportunity giving investors the chance to be involved in the purchase of commercial properties in Ingleburn and Wetherill Park.
While only opening up two investment opportunities in that time may not seem like “taking off” Quigley said the pace Crowdfundup has been moving at is deliberate.
“We’ve been going slowly because we we’re being super responsible,” Quigley said.
“We’re about responsible growth, we’ve put a lot of time and effort into this so we’re being very pedantic with how we do things, we’re in this for the long haul and we see huge potential in this.
“We could have put up any number of opportunities, we’ve probably got $150 million worth of projects in our pipeline, but we want to make sure that we’re diligent in making sure that we’re working with good developers and good projects.”
Quigley said the platform was only working with developers who have “runs on the board” and a proven track record over at least 5-10 years.
While their current investment opportunity is only open to people who meet the criteria of a wholesale investor, Quigley said CrowdfundUP hoped to become a platform for all investors to benefit from.
“The area where we see ourselves having the most benefit is somebody who has something like $250,000 to invest and doesn’t want to have to borrow or mortgage their home to get the rest of the money they might need for an investment property.
“They can come to us with that money and choose where they want to invest it and spread it around as many investments as they want and get a diverse portfolio.
“We don’t see ourselves as a threat to the traditional way of property investing, we see ourselves as a way to streamline the process and put people in touch with a range of different opportunities they may not get otherwise.”
While there is no minimum investment amount that must be pledged in CrowdfundUP, the platform is different to other crowd-funding endeavours in that people submit an offer of what they would like to invest and the developer will then choose those they wish to work with.
CrowdfundUP is not the only Australian platform looking to disrupt the current model of real estate investment, with Sydney based BrickX also bringing a new approach to the buying, owning and selling of property.
Founded in 2014 by Markus Kahlbetzer, chief executive officer of investment firm Bridgelane Group, BrickX is also hoping to become an investment avenue for people who may otherwise not be able to get involved in the property game.
“There’s definitely a problem there at the moment for everyday people who are going to have to save a $100,000 for a deposit if they want to be involved in property investment and we see ourselves as a method to make it easier for those people to get in to the market,” Kahlbetzer said.
In a sense BrickX aims to bring an investment model typically found on the stock market to the world of property investment.
The platform offers investors the chance to purchase “bricks,” which are essentially shares in a property.
Each property the platform looks to buy is divided into 10,000 “bricks” and owners are paid a monthly return of the rental income of the property proportionate to the number of “bricks” they own.
The starting price for each “brick” is the sale price for the property divided by 10,000 and following the original purchase the “brick” price is open to fluctuations similar to the way shares do.
Like shares the “bricks” can also be sold between investors, however no investor can own more than 5% of the “bricks” in any one property.
BrickX has strict criteria for the properties it targets; studio or one or two-bedroom apartments with a floor space greater than 46m2 that are tenanted, newly built or recently renovated, are in buildings with sound structural health and have adequate strata budgets.
Like CrowdfundUP, BrickX is currently only open to wholesale investors but Kahlbetzer hopes to have satisfied the legal requirements to open the platform to retail investors by Christmas and he hopes after that questions about the platforms future will be answered.
“The question for us is how will investors approach the platform?”
“Buying and selling in the property market is very sticky because it takes a lot of time and money, but if we can reduce that are we going to see people be more willing to trade more often?
“I think it will be a good test for the property market, are people going to embrace the increased liquidity and look at the price of their bricks and be willing to sell if they see annualised growth of 5% or are they going to hold on to their investment and be content with the monthly rent returns?”
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