One of the key uses of the DomaCom platform is really for self-managed super funds to acquire investment properties. Now at the moment, the traditional way of doing so is that an SMSF creates a limited recourse borrowing arrangement, creates a Bare Trust and spends thousands of dollars and then takes a huge risk, they put it all on one property, so what DomaCom allows people to do is to SMFSs to basically invest just that portion that they wish to access into property, invest with others or invest with family or whatever they like into a sub-fund that owns a property.
One of the key features is that sub-fund itself has the debt. In our model, there are a couple of benefits to self-managed super funds, the first, is like in equities you’d never put all of your equity exposure into one asset so why we’re doing that for the property?
Traditionally because that was the only way to get property investment exposure. Well that’s no longer the case, self-managed super funds now can co-invest fractionally exactly as they would in equities, and to use the single most important risk mitigation tool called diversification, and basically in our model self-managed super funds don’t need to create a limited recourse borrowing arrangement, in fact you not even need to borrow and the actual borrowing is done within the DomaCom sub-fund, also they don’t need to put all their eggs into one property they can split their $100,000 for example across $20,000 in five properties. They get diversification between Melbourne, Sydney, Brisbane, however, suitable for that particular self-managed super fund.
With the current environment where the banks have pulled out of lending to self-managed super funds, there’s really not many choices for self-managed super funds to get access to residential exposure and so DomaCom is one of the modern ways of doing so and it fits in with the financial planner’s business process because, the argument we would use is that you enter into a service agreement with your financial client and planning clients to say we’ll look after your time and future and what we exclude one of the biggest asset classes and so our view is that, if you don’t provide residential property solutions for your clients including your self-managed super fund clients, someone else is and that someone will be a property spruker who’s invited your clients to the latest Pullman lounge on a Thursday night plied them with alcohol etc and then next thing you know your clients are the proud owner of an apartment in Yeppoon.
Now your client hasn’t had their risk managed but also your funds under management must have dropped as well and that’s the feedback we’re getting from the financial planners. So our platform enables you to include self-managed super funds in an asset class that up until this point you haven’t been able to include and to do so using techniques that are common in the equities world called diversification, and also to have the leverage within side the investment structure so that’s really the powerful feature is that super funds no longer needs a limited recourse borrowing arrangement, no longer needs a bear trust, no longer needs to have concentration risk, everything on one house. They can basically, using your advice, spread the investment across multiple assets and have responsible levels of leverage within the investment vehicle that’s within the DomaCom Fund.