Loans for fragmented property investing are now a thing

author-avatar By on August 11, 2020
Loans for fragmented property investing are now a thing

Photo by Halacious on Unsplash

Maleny Credit Union now offers personal loans for fragments of real estate through platform 'Bricklet', for investments averaging $25,000 to $35,000.

The unsecured personal loan comes with a variable interest rate of 7.5% p.a, which can be repaid weekly, fortnightly or monthly with no early payment penalty.

Compared to home loans for whole properties, which are secured against the property, the personal loan is around five percentage points higher than some of the more competitive variable home loans for owner-occupiers.

While other fractional/fragmented property platforms exist - TicX, BrickX - personal loans for fragmented property investment appear to be a unique offering.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Rates correct as of September 28, 2021. View disclaimer.

Maleny Credit Union chief Sarah Davies said the partnership with Bricklet offers customers a "unique investment opportunity".

"It also extends our ability to offer all-purpose loans to all Australians. It’s not every day a credit union has the opportunity to out-innovate the major banks," she said.

Bricklet chief Darren Younger said it takes the burden out of property investment.

"Property investors now have the opportunity to better diversify their portfolios without the risk of being over-leveraged on entire properties," he said.

"Bricklet removes the complexity of accessing property as an investment."

Mr Younger also told Savings.com.au that investors can live in the properties.

"Having a long-term tenant that also part-owns the property can be beneficial as everyone is invested in the property's future outcome, as well as guaranteeing ongoing rental yield for all parties," he said.

Bricklet is a platform that gives fragmented property investors true ownership of that piece of property, handing over real estate deeds, with the aim of generating passive income through rental yields and capital gains.

Strengths and limitations

While fragmented owners using Bricklet hold true ownership of their part of the property, interest paid on the loan could outweigh capital gains and rental yield. 

However, interest costs, along with other costs of the investment, could be claimed as a tax deduction. 

A 7.5% interest rate on $25,000 paid off monthly over five years could mean about $5,000 in interest paid, assuming there are no extra fees associated with the loan.

According to SQM Research, housing stock gained 7.0% in value over the past 12 months.

However, past performance is not a reliable indicator of future performance, and this capital gain was only based off houses - apartments have generally performed worse across the capital cities, according to SQM Research, in the same timeframe.

Billie Christofi, of investments group Reventon Finance, told Savings.com.au about some of the other potential limitations of fractional property investments.

"Fractional property investment provides people with a springboard to gain experience and build their funds," she said.

"One thing to be wary of are the fees associated with the organisation you're purchasing through - this, combined with a higher interest rate, can potentially eat into a big chunk of your capital gain."

Property pundits are predicting drops of up to 30% in property prices during COVID-19, while median housing values fell 0.6% in July alone.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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