Fractional property investment is moving into the investment mainstream, with news last week that one of the big banks will run a six-month pilot in collaboration with investment company DomaCom.
The as-yet unnamed bank will trial DomaCom’s fractional investment model. If successful, it may lead to commercial deployment within the bank.
Fractional investment is not a new concept. Listed and unlisted property trusts, syndicates and partnerships all allow investors to purchase an interest in an asset they would not have been able to buy outright.
However, in the property market most of those vehicles have been used to acquire commercial property.
Newer online platforms allow investors to invest fractionally in residential property. The main players in the market are BrickX and DomaCom. In January last year, CoVESTA entered the market.
The self-managed super fund sector is a target market for these companies. In an arrangement outlined in a recent court case, DomaCom was custodian for the purchase of a residential property in Victoria, which was owned 25 per cent by an SMSF, 50 per cent by a relative of the fund member and 25 per cent by other relatives.
DomaCom also offers loans to investors using its platform.
The company has $40.5 million of funds under management and said in a recent briefing note that it had another $20 million in the pipeline – made up of a mix of residential and commercial property.
DomaCom says it intends to extend its platform this year to provide an equity release product for retirees.