Loans for fragmented property investing are now a thing

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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
ZERO APPLICATION FEESFEE FREE OFFSET

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

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

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

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
FixedMore details
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Rates correct as of January 24, 2022. 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. 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. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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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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