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

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • 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%
UNLIMITED REDRAWSSPECIAL 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%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • 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
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS
NSW/VIC/SA METRO & INNER REGIONAL AREAS

Variable Home Loan (Principal and Interest)

  • $5000 Cashback. T&Cs Apply.
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
NO ONGOING FEESFREE REDRAW FACILITY
  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.
NO ONGOING FEESFREE REDRAW FACILITY

Live-in Variable Loan (Principal and Interest) (LVR < 90%)

  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 25, 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 strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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