Warren: Hi, my name is Warren Gibson and I want to talk to you today about fractional investing.
What is fractional investing? Well, basically it’s a modern form of syndication, sometimes referred to as crowdfunding. DomaCom is a fractional investment platform. Fractional investing enables people to buy a bit of an asset. And the typical asset that we fractionalize is property.
Why do we fractionalize property? Because buying an investment property is usually an all-or-nothing proposition and it’s a high transactional cost. And for most people, it’s too high. We can use DomaCom to invest in a wide variety of property types, typically residential property, apartments, house and land packages. But also in farms, commercial property, land banking, renewable energy, disability housing is another area if it’s socially responsible investment.
Young people can get their foot on the property ladder with a small investment, family and friends can club together to acquire a property. Financial advisers can use our retail fund to bring clients together to create a property investment portfolio. The problem that DomaCom solves is a single asset risk exposure. Typically people buy a whole property because there’s no alternative.
How does DomaCom work? Well, it’s simple. It’s an online catalogue of properties for sale in Australia courtesy of domain.com.au. All properties on the market are available to acquire. We’re simply a buyer. You can search for properties on DomaCom, or if you know of properties that aren’t listed, you can ask for those properties to be listed on DomaCom in order to start a campaign. You can invite friends and family to join you. You can open an account transfer the funds that you wish to invest in an ANZ account and interest-earning account.
No property investment is complete without a debt facility. DomaCom has an arrangement with the La Trobe Financial group to provide leverage for our property sub-funds to a maximum of 60% LVR. That ensures that the property sub-fund is at all times positively geared.
Michael: Hi, I’m Michael Watson, head of distribution at La Trobe Financial. La Trobe Financial is Australia’s leading credit specialist with over $7.5 billion of assets under management. Our award-winning La Trobe Australian credit fund has $3.5 billion dollars of assets under management across our award-winning product range. La Trobe Financial works with over 1,000 individual advice practices and is on the approved product list of over 250 licensees nationally. We’re really pleased to enter into an arrangement with DomaCom in 2019.
Warren: When a campaign begins DomaCom take responsibility for the due diligence. We outsource a legal review of the contracts of sale. We organize a formal valuation of the property, we will not acquire property outside of 10% variation on a formal valuation and that’s to protect investors from paying too much for a property.
Getting into an investment is all well and good. But everyone wants to know, “Well how do I get out of my investment?” There are three exit strategies for your investment in DomaCom:
- Term to expiry.
- Trade your units online.
- Vote to wind up the sub-fund.
Each sub-fund has a term to expiry. For residential property, it’s usually five years. The second exit strategy involves trading your units. DomaCom operates an online liquidity facility that enables you to list your units to sell or in fact make bids to buy units from other investors.
Investors may wish to get out early, earlier than the expiry time and they can call a vote to wind up the sub-fund. If 75% of the investors agree, DomaCom will wind up the sub-fund, sell the property and retain the capital.
Self-managed super funds typically like the fractional model, because they can apply a very specific asset allocation. They can acquire different types of property in different geographical locations so they get diversification.