Why invest in factional property?
Property has long been seen as a “safe as houses” investment in Australia, underpinning 51% of the nation’s household wealth. But there are some challenges to investing in property. It’s capital-intensive, it’s hard to diversify and it doesn’t offer much liquidity – if you need to release cash quickly, a sale process can take many months, and you’ll incur high transaction costs in the process.
With challenges in getting decent rental yields in a hot market, we have seen a trend where purchase price growth has outstripped rent rises – in July 2021, gross rental yields were just 3.4% nationwide.
But tech platforms are opening new fractional investment opportunities for the savvy investor. Solutions like the AltX platform give you access to institutional-quality opportunities with smaller-sized investments – helping you address some of the issues of investing in real estate.
A new alternative to REITs
Until recently, real estate investment trusts (REITs) and property funds were the only real option for fractional investments in property. Then platforms like BrickX came along, acting as a ‘stock exchange’ for fractional residential real estate investment.
But there is another option for investors – offering the potential for attractive risk-adjusted returns. Invest in institutional-quality private real estate debt, underpinned by property assets.
AltX aggregates investors to provide private debt to developers and property-rich commercial borrowers. Over 800 active investors on the platform have already funded more than $2.1 billion in deals over the past 10 years.
By allocating funds to private debt as an asset class you are effectively acting as the bank. And like any lender, the product is designed to provide a return on your capital in the form of monthly interest payments made by borrowers.
So while a property fund targets returns of between 3.00 percent and 4.45 % per annum, AltX transactions – though not participating in capital appreciation – target returns of between 4.00% p.a. and 8.00% p.a.
When you invest in private debt, you get the benefit of a fractional investment backed by real estate security, with a predictable monthly return. You can start with a single investment of just $50,000 with the AltX model, and build a diversified portfolio based on available capital and risk profile.
A diversified fraction of the whole
Options like AltX can help you diversify risk according to your appetite, with first mortgage security across residential, commercial, and retail property assets. And they are a strong potential fit if you are in search of yield. The deals are typically short-term – on average 12 to 18 months – so they make a compelling alternative for investors who can’t achieve target income with traditional fixed-income investments, including SMSFs.
As a fractional player, you also have a smaller capital outlay and the benefit of detailed due-diligence. For example, at AltX, we get a 360-degree view of the true valuation of the asset underpinning the deal.
The path to fractional investing is becoming mainstream, and it’s connecting investors with opportunities they might otherwise not have known existed. With fractional investment platforms like AltX, access to insto-quality deals are now on the table for more market players than ever before.
Is it time to rethink the classic 60:40 investment portfolio? Nick Raphaely from AltX joins AusBiz TV to discuss whether this tried and tested allocation theory may have passed its used-by date.
Australia’s scorching property market has made traditional valuation methods seem almost obsolete – We asked a panel of experts for their insights into the current state of the market around the country – and where we go from here.
One area attracting a lot of attention is real-estate debt investments. As with any investment, it is important to understand the factors driving the returns, as well as the key areas of risk.
According to AltX Co-Founder and co-CEO Nick Raphaely, credit flow is critical to the economy – and right now there’s a kink in the flow. As presented on AusBiz TV.
Property has long been seen as a “safe as houses” investment in Australia, underpinning 51% of the nation’s household wealth. But with challenges to investing in property, tech platforms are opening new fractional investment opportunities for the savvy investors.