A model like no other for developers, investors and tenants
- Developers sell lines of stock to investors via financial advisers
- Investors receive a significant developer discount
- Tenants receive up to 5% equity
A unique pathway to homeownership for renters…
DomaCom has negotiated with developers to share in the profit and ownership of new properties to give investors a head start on growth and tenants a pathway to ownership.
Rent-to-Own enables investors and tenants to leverage off DomaCom’s unique fractional investment technology, a modern form of syndication that shares ownership in high-value assets like property. Investors can share income and capital growth in proportion to their contribution, from as little as $2,500.
At an attractive discount for investors In Melbourne
One of the key features of this offering is that DomaCom accesses the developer distribution margin to deliver equity investors an effective discount of up to 15%. This reflects the low cost to the developer of selling a line of stock in one transaction rather than the cost of individual sales.
A unique pathway to homeownership for Melbourne renters
The DomaCom Fund offers an opportunity for Melbourne tenants to build equity whilst renting a property of their choice from a list of new and modern housing developments.
In conjunction with major residential developers, DomaCom has created a mechanism enabling tenants to secure incremental equity ownership during the life of the tenancy so they can be a property owner, not just a tenant.
It also provides an opportunity for investors to invest in the equity component at a discount and receive attractive investment returns over the medium to long term.
Rent-to-Own is a win/win for everyone.
Developers can sell lines of housing stock, investors have rental properties with secure tenancy and minimal risk and tenants build equity over time in two ways.
The first is, the tenant will be gifted 1% of the equity per annum for up to 5 years, resulting in the tenant owning up to 5% of the property over a 5-year period.
The second is, tenants can purchase additional units over time from equity investors at their own pace when and how they can afford to do so, gradually increasing their equity ownership.
How does Rent-to-Own work?
- Developers list properties that have an indicative gross rental yield of around 4% and for which the developer will offer their distribution margin as a rebate.
- DomaCom verifies indicative yield with an initial review by an independent property manager.
- DomaCom completes property due diligence incorporating legal review, building inspections and independent valuations.
- DomaCom creates a syndicate campaign for each individual property.
- Investors collectively contribute 20-40% of the purchase price (a potential tenant can contribute as much of this as they choose).
- A loan is established by the Fund for the remaining amount of the purchase price.
- DomaCom creates a trust that holds the 5% tenant ‘gifting reserve” called the DomaCom RTO Trust (“RTO Reserve” ). This trust then distributes 1% equity to the tenant annually until the 5% is exhausted.
Benefits for investors
- Build equity with an investment from as little as $2,500
- Developers discount the price to investors by up to 15% by gifting some of their retained equity
- Investors share rental income and future capital growth
- The 5% tenant gifting feature should act as a leasing incentive which should result in lower vacancy risk
- Tenants with equity reduce the tenant risk for investors
- Tenants with equity increase market depth in the event investors wish to sell their units
- The Rent-to-Own model offers further diversification in the residential property sector
Benefits for renters
- There is no mortgage required by the tenant therefore no loan serviceability test.
- Tenants receive 1% equity from the RTO Reserve each year they remain a tenant, up to a maximum of 5%.
- Tenants can buy units in the sub-fund that holds property at any time using their income or savings.
- The Rent-to-Own model does not affect any future entitlement to the Government First Home Buyers Grant.
DomaCom charge an annual platform fee of 0.66% incl GST on the value of the property in the sub-fund, and a 1% syndication fee.
DomaCom undertakes due diligence with a legal review of the contract of sale, a formal valuation and a build/property inspection. The cost is shared across the unit holders in proportion to the number of units held and is estimated at approximately $1,500.
If you would like to invest in Melbourne Rent-to-Own, you can join this crowdfunding campaign by completing the application and lodging your investment funds through this General Advice page. Please ensure that you first read the DomaCom Fund’s Product Disclosure Statement (PDS). For a copy of the current PDS, please click here or call your financial adviser.
When you have lodged your bid and the campaign is filled, you will also receive a Supplementary Product Disclosure Statement (SPDS) outlining the specific offer to invest in the Melbourne Rent-to-Own project which will contain all the information required for you to make a decision. You are not bound to proceed with your bid amount for this Rent-to-Own project crowdfunding campaign until you accept the offer contained in the SPDS (which will include the specific details for the property you have selected).
If you are new to DomaCom, click on the Apply button to begin your application. If you are an existing DomaCom Fund investor, you can login to access your account and all the other public crowdfunding campaigns by clicking the Investor Login button.
Risks for Property Sub-Funds
Refer to Sections 7 and 12 of the Risk section of the PDS for an explanation of the risks involved in an investment in the DomaCom Fund the features of a ‘Special Opportunities’ subfund.
Specific risks of this investment:
• Value changes – The value of an Investor’s investment will go up and down in accordance with the value of the Underlying Investment. There is no guarantee that the value of the investment will increase, and it may in fact decline in value.
• No guarantee – Returns are not guaranteed, and Investors may lose some or all of their capital.
•Past performance – There is no empirical data on the performance of this type of investment in the proposed location. All projected returns are based on best analysis of the current wholesale and retail energy markets.
• Liquidity risk – An Investor cannot withdraw from the Sub-Fund until the Sub-Fund is terminated, and the Underlying Property is sold. DomaCom does intend to offer a facility through which Investors can seek to sell their Units to another party, however there is no guarantee of this.
• Damage or loss – There are a range of events that can damage the Underlying Property including acts of God (fire, flood, earth quake and other natural disasters) through to accidents, negligence, and failures of maintenance. While insurances will be in place it may not cover or may not fully cover such losses.
• Insufficient income – The costs associated with Underlying Investment may exceed its income, however if there is a shortfall Investors will be given an opportunity to subscribe for additional Units in the Sub-Fund to meet those expenses pro rata to their Unit holding in the Sub-Fund. Investors who don’t subscribe for further units will have their investment in the Sub-Fund diluted.
• Vacancy risk – Genius Energy will be appointed to manage the property and derive income from the underlying property and its improvements. There is a risk that the property will not generate the income that has been budgeted for. If this were to occur the investors may be required to raise further funds to offset the expenses of running the property.
• Unexpected property event – The risk that the Underlying Investment may be negatively impacted due to a property specific event, for example, a change could occur to local zoning rules, development of competing and other events that were not anticipated at the time of acquisition.
• Economic risk – There is a risk that the general economic conditions in Australia may change in relation to interest rates, employment rate and economic growth that could in turn have an impact on the investment and energy markets and specifically the value of the Underlying Property.
Fees and Costs
Refer to section 13 of the PDS for Fees and Other Costs
The Management Fees for managing your investment
- The annual MER fee will be 0.66%
- There will be a 1% Platform Syndication Fee
- There will be a 1% Adviser Syndication Fee
Set out in the table below is illustration of the campaign costs that are likely to be incurred. An Investor who participates in a Campaign and has had an Active Bid which fails to result in the formation of a Sub-Fund will be liable (in a proportion that is equal to the amount of their bid divided by the sum of all Active Bids at the time the Campaign costs were incurred) for the Campaign costs incurred by DomaCom. The investors will be only liable for Campaign costs and Acquisition costs that are set out below if the Sub-Fund was not created, as these costs have been incurred prior to the acquisition of the property.
The settlement costs set out below are only incurred and payable if the Sub-Fund is created and the property acquired.
If the Sub-Fund is established, these costs will be deducted from the Sub-Fund and only those investors that accept the SPDS will incur the on boarding costs – Campaign, Acquisition and Settlement costs.
The costs below are an example of the campaign costs, the actual costs may differ and will be set out in the SPDS.
|Contract review and title search||$500-$1000+GST|
|Building inspection and pest report||$500-$1500+GST|
|Property valuation report||$500-$5,000+GST|
The following costs will be incurred, whether or not the property is purchased.
|Legal costs (if contracts require further amendments||$2,000-$2,500+GST|
Below is an estimate of the following Settlement costs if the purchase is successful and a Sub-Fund is created. These costs will only be incurred if the Property is purchased and will be paid from the capital raised on the acceptance of the SPDS.
|Estimated Settlement Costs||Estimates|
|Conveyancing costs||$1000 – $2,500+GST|
|Stamp Duty||Varies based on state and Property Value|