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.
Smart Booster Home Loan
- Discount variable for 1 year <=80% LVR
- No ongoing fees
- Unlimited redraw facility
Monthly repayments: $1,476
- Discount variable for 1 year
- No ongoing fees
- Unlimited redraw facility
Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
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."
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): Credit Union Australia, 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.
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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