STRICTLY FOR DISTRIBUTION ONLY TO LICENSED FINANCIAL ADVISORS, WEALTH MANAGERS AND PRIVATE WEALTH BANKERS

October 2016

DomaCom Model Portfolios – Diversify with confidence

The DomaCom fractional property fund simulates the experience of investing in real property without the need to purchase an entire property. With DomaCom, you can remove the concentration risk that single property investment presents and offer your clients a real asset allocation solution.

Diversify across cities, and diversify across residential property types.

For a Singapore-based licensed advisor using the DomaCom platform, you do the client asset allocation and then DomaCom makes use of a professional Buyer’s Advocate, licensed in Australia, to search and select a model portfolio of properties that meet your client’s designated capital growth and income requirements.

One advantage of using DomaCom is that it is a widely-held retail unit trust, currently with over 950 members focussed upon the Australian Self-Managed Super Fund (SMSF) market. A benefit for Singaporeans is that under the DomaCom platform, you can invest in any property anywhere in Australia – you are no longer restricted to new or off-the-plan properties. This means that with the professional assistance of a licensed buyer’s advocate, you have the benefit of the selection of the best existing properties based on the historic capital growth and the current market rent.

A model residential portfolio of actual properties bought by one of our panel buyer’s advocates is shown below. This has six properties, three in Brisbane and three in Melbourne, with a total capital value of AUD$3.3million. The capital growth is based upon the actual sale and purchase transactions over the last 5 to 10 years. The rental income is the most recent rental price of the property. Therefore, the buyer’s advocate is equipped with the knowledge of the property’s performance and you as the advisor, may have some confidence of the potential of the property based on that historical information.

The residential model portfolio example below, illustrates overall that it has delivered 8.8% capital growth per year with  a gross rental income yield  of 4.2 %*(see table below).   This is higher than the average figures for Melbourne and Brisbane properties.

This means as a financial advisor you give client advice on asset allocation. The DomaCom platform process, using licensed buyers’ advocates, facilitates investment in model portfolios chosen by property experts. Your client gets a fractional property investment in each of the properties selected within the portfolio which is designed to deliver capital growth and income.

Residential Model Portfolio**

Historic 8.8% growth and 4.2% current market rent*

Street &  Suburb City Property Type Asset Value (AUD$) Actual Weekly Rent ** Actual Gross Rental Yield **  Asset growth (Historic 5 to 10 years) **
Harcourt Street, New Farm Brisbane Apartment $333,000 $385 6.0% 8.4%
Miles Street, Hawthorne Brisbane Town House $640,000 $575 4.7% 7.9%
Hawthorne Road, Bulimba Brisbane Detached House $745,000 $470 3.3% 9.8%
Ormond Street, Kensington Melbourne Semi-detached House $796,000 $480 3.1% 8.4%
Edinburgh Street, Flemington Melbourne Apartment $390,500 $300 4.0% 7.4%
The Avenue, Spotswood Melbourne Villa $412,000 $335 4.2% 10.7%
Portfolio Asset Total $3,316,500
Portfolio Averages         4.2% 8.8%
Brisbane – Average current market rent (source: Corelogic & ABS)

 

4.4%
Brisbane – Average annualised growth 7 years (source:  CoreLogic & ABS)   1.8%
Melbourne – Average current market rent (source: CoreLogic & ABS)

 

3.0%
Melbourne – Average annualised growth 7 years (source:  CoreLogic & ABS)   7.5%
** Source: DomaCom and one of its buyer advocate partners, Empower Wealth

*Please note that past performance sourced from historical figures is not an indication of future performance. These figures do not guarantee future performance and should not be relied on solely when you make your investment decision.

How does the DomaCom platform work with Model Portfolios?

Step 1: Decide on a real property asset allocation for your client’s portfolio and capital growth / income yield requirements.

Step 2: Open an account with DomaCom and transfer the client’s funds.

Step 3: Brief DomaCom and in turn brief the licensed buyer’s advocate on the model portfolio requirement and total clients’ funds available.

Step 4: The buyer’s advocate screens and selects the best properties, and these are uploaded onto the DomaCom platform. Using the DomaCom platform you can then allocate client funds to each property, a process we call a ‘bookbuild’.

Step 5: When the bookbuild reaches 30%, DomaCom begins its formal due diligence process on each property, e.g. reviews the contracts. At 50% of the bookbuild, formal valuations and property inspections are done.

Step 6: At 100%, DomaCom requests final confirmation from the investors via a Supplementary Product Disclosure Statement (SPDS) that they wish to proceed with the purchase. Once confirmed, the buyer’s advocate may then proceed to negotiate and sign the purchase contract(s) on behalf of the DomaCom Fund.

Step 7: Once the properties are settled, a property manager is engaged to find a tenant for and manage the property.

Step 8: The sub-fund holding each individual property is set up for a 5-year term under the Fund’s constitution, and each year during that term, DomaCom organises a revaluation of the property.

Exit: To exit an investment in the sub-fund, investors can make use of the liquidity facility and list their units in a sub-fund for sale, where other investors may purchase those units. A 2nd option is if there is a majority vote, investors can vote to wind-up the sub-fund, sell the property and distribute the proceeds. The 3rd option is at the end of 5-year period, each sub-fund has a vote for wind-up or roll-over.

DomaCom now has a lending solution from ThinCats

ThinCats has operations in the UK and Australia. ThinCats operates a peer-to-peer lending platform linking borrowers to investors. ThinCats Australia has recently entered into an agreement with DomaCom facilitating the DomaCom Fund’s access to ThinCats’ 350 lenders in Australia as a funding solution for DomaCom Fund investors wishing to gear a fractional property investment.

ThinCat’s lenders receive a rate of 4.75% p.a., which is quite attractive in the current low interest rate environment.

For DomaCom property sub-funds borrowing money, the rate is 3.5% above the ANZ overnight cash rate which currently puts it at 5.25% p.a. The cost of the facility is 0.5% of the loan amount, and loans must be positively geared with an LVR not exceeding 50%.

The arrangement with ThinCats is an innovative approach offering new options for investors looking to benefit from gains associated with property ownership, whilst earning an attractive fixed income return at the same time.

For example, an investor could lend cash to ThinCats borrowers for a 4.75% return. Another investor could access this loan money at a 5.25%, with up to a 50% loan to value ratio, to make a fractional property investment. The borrower is DomaCom’s Responsible Entity so this debt gearing approach does not affect the fractional property investor’s credit profile.

Asset Allocation in the current volatile market, what are the choices?

We live in a pretty volatile world in more respects than one, so how are you managing asset allocation for your clients in the current climate?

With interest rates at a record low, volatile currency exchange rates and equities markets, the much-vaunted strategy of diversification should be a key consideration.

As the low cash return environment has a potentially negative real return when you take tax and inflation into account, investors need some sort of short term liquidity, particularly retirees.

Government bonds are also close to an all-time low and fixed interest rates are unlikely to provide sufficient income to outpace inflation, again making this option particularly difficult for retirees.

Apart from individual sector issues, the equities market could present potential earnings issues going forward. Australia’s AAA rating may be under threat as we continue to borrow money for consumption instead of investment, particularly in agriculture which could potentially be our biggest export industry.

What about property? There is still plenty of opportunity in property, but for most it is an expensive all- or- nothing proposition unless you opt for a partial investment via an unlisted or a listed property trust. However, if it is residential property you seek, then property trusts are not the answer.

This is where the DomaCom Fund offers a solution. With DomaCom you choose the property you want, list it on the DomaCom platform and start a bookbuild from your client list to acquire it. Using the DomaCom platform, provided you have enough client funds to invest, you can select multiple properties to give your clients a diversified portfolio.

Property is also a relatively stable asset that fits into income or capital growth style portfolios. With help from professional buyers advocates in Australia, they can create a model portfolio matching your asset allocation criteria of income or capital growth.

Case study for an Australian property development – Mt Barker

Situated in the Adelaide Hills, 30km east of Adelaide, Mount Barker is anticipated to become the largest settlement in South Australia outside metropolitan Adelaide in the next decade or so.

Mt Barker Concept Art

The Mount Barker and District Residents Association (MBDRA) has identified a significant site in the heart of Mount Barker, that they believe will become available in the near future. The Association has developed a plan to create a substantial Town Square to give a ‘heart’ to Mount Barker.

The Association intends to fund a two-stage development through DomaCom. The Association also hopes to attract local and state government investment into the development. Plans include a civic office, a performing arts centre and gallery, a boutique hotel and retail and residential apartments. The estimated cost is $100m.

Stage 1 – Land Acquisition & Development Approval

The mission in Stage 1 is to acquire the land and obtain development approvals.

Stage 1 Targeted funds
Land acquisition & development approvals $16 million
Estimated value of Stage 1 after completion $20 million*

*A potential gain of 20% is estimated for the land component of Mt Barker Town Square development with approvals in place, based on external assessment of the land.

Stage 2 – Construction

The objective in Stage 2 is to raise funds to cover:

  • Detailed design work
  • Legal and administrative costs of the tender process to engage contractors
  • The estimated costs for construction and commissioning
Stage 2 Targeted funds
Construction of the Mt Barker Town Square $90 million
Estimated value of Stage 2 after completion A return will be determined during the completion of Stage 1

For more information on DomaCom’s crowdfunding campaign on this project, please visit https://www.domacom.com.au/public-crowdfunding-campaigns/commercial-properties/mount-barker-town-centre-sa/

 

DISCLAIMER: DomaCom Australia Ltd ABN 33 153 951 770 and holder of AFSL No 444365 is authorised to provide general financial product advice in Australia. Whilst DomaCom has taken all reasonable care to produce the information in this material, it does not make any representations in respect of, or warrant the accuracy, timeliness or completeness of any of the information. The information provided in this material is general information only. It does not constitute financial, tax or legal advice or a forecast. DomaCom Singapore Private Limited is not authorised to provide advice. This information is strictly for distribution to Singapore licensed financial advisors, wealth managers or private wealth bankers only.

 

 

STRICTLY FOR DISTRIBUTION ONLY TO LICENSED FINANCIAL ADVISORS, WEALTH MANAGERS AND PRIVATE WEALTH BANKERS

April 2016

Residential Property for asset allocation mix

Asset allocation is the most critical factor in wealth management, and in reality, it involves not just one decision, but a series of decisions.  It’s also typically sold as a simple share-vs-bonds split, but we believe there is much more to it than that if you want an effective result for your investor clients.

The step many people overlook in considering asset allocation is ensuring that they are clear about their goals. If your investor clients already have a nest egg and are close to retirement, their approach is going to be more conservative than if their goal is total return.

Residential property

Atchison Consultants have released a report on property asset allocation recently that shows a rolling 20-year return on residential property in three different risk categories; Moderate, Balanced and Growth.

Taking an average asset allocation across domestic and international shares, fixed interest and cash as generally applied to a Moderate, Balanced and Growth portfolios as a base, Atchison’s research suggests that returns on a growth portfolio can be enhanced by up to 9.6% by including 20% asset allocation in residential property.

Growth_Atchison

Balanced_Atchison

Moderate_Atchison

The asset allocation breakdown for each of the above-mentioned portfolios is based on the asset allocation of a typical portfolio of a similar nature as applied in the industry. And the residential return figures are calculated out of the Real Estate Institute of Australia (REIA) Housing Index produced by Atchison Consultants. The index is constructed based on the houses and units prices across all Australian states and territories weighted by population.

Since the industry average allocation in direct property is very limited, being 3.8% in Growth portfolio, 3.0% in Balance portfolio and 2.9% in Moderate portfolio, a 20%, 15% and 10% residential property allocation respectively will result in the proportional decrease in the allocation of other asset classes.

Atchison_Table

However, it is likely that the relatively low volatility of residential property provides a stable anchor to the above-mentioned portfolio types.

Residential property as an inclusive strategy for Moderate, Balanced and Growth portfolio types can enhance the return over the longer term.

Source: Atchison Consultants, Portfolio Return Commentary – Residential Property, November 2015

Good Class Bungalows, at one third of local prices!

Good class bungalows, more commonly known as GCBs, are considered the most exclusive residential properties and desirable investments in Singapore.

So what is the profile of a Singapore GCB?

  • Land area of over 1,400 square meters (15,000 square feet), bigger land areas can offer swimming pools, multi-car garages, tennis court, gardens
  • GCB is in a residential zone that offers privacy, exclusivity and planning protections of the character of the zone
  • A GCB cannot be more than two stories plus attic plus basement
  • Singapore GCB Price per square foot is around S$1,500 for the top ten GCB properties sold in 2014.
  • Restricted to Singaporean Citizens.

The prices of the top ten Singapore GCB sold in 2014 had an average GCB value of S$1,500 square foot.

What would a GCB look like in Melbourne?

There are a few sought after Melbourne suburbs with iconic family mansions that aligned to the Singapore GCB Profile.

MelbMansionThese are often leafy green suburbs with wide roads, some built for horse and carriage in the Victorian era of 1890s. Some of these suburbs include: Brighton 3166, Kew 3101, Canterbury 3126, Toorak 3142, Armadale and Malvern.

A selection of twelve landed houses ranging from 1,200 square meters to 2,900 square meters were identified in these Melbourne suburbs. The average land size and price of this sample of 12 properties was 1,827 sq meters and sale price of AU$7.8million, that is AU$476 per square foot.

The lowest sale price was AU$4.9 million and the highest sale price was AU$11.7m.

Singapore GCB are three times more than Melbourne GCB

The Melbourne GCB average price per square foot for AU$476 which compares to the average price of the top ten Singapore GCB sold in 2014 of S$1,500 square foot.   So buying a Melbourne GCB with land over 1,400sq meters is around one third of the price of a Singaporean GCB.

Foreign Ownership

The Australian Foreign Investment Review Board (FIRB), restricts non-resident foreign investors to new/off the plan properties. So direct foreign ownership of an Australian GCB or established iconic property like a penthouse, even via a company structure, is not allowed just like in Singapore.

DomaCom Platform allows for Fractional Investment in all Property Asset Classes.

The DomaCom Platform enables fractional investing from 1% to 100% of a property in a segregated sub-fund. DomaCom is a widely held collective investment scheme and so is able to buy Australian established and iconic GCB and penthouses.

So via the DomaCom platform, you could buy 1% to 100% of the units of a sub-fund that holds a Melbourne CGB!

For more information about this property development, please contact Paul Zaman, Managing Director of DomaCom Singapore at paul.zaman@domacom.com.au

Woolworths, Orange NSW

For illustrative purposes, Woolworths in Orange, NSW is an example of a commercial property that you could look to crowdfund in the DomaCom platform.  Inclusive of a long term lease to Woolworths Ltd until 2034, this immaculately presented property offers a rare opportunity for astute investors to purchase a freestanding Woolworths supermarket with a rare net lease, ensuring the Lessee pays for all statutory and operating outgoing expenses.

Woolies_2A diverse range of industries including healthcare, mining, agriculture, retail and education results in attractive demographics with 15.9% of Households earning a high income compared with 11.3% average for regional New South Wales, and with an unemployment rate of only 4.4% it is sitting well below the Regional NSW rate of 6.1% (Source: ABS 2011 census).

Located a short distance from Orange Train Station, 100 metres from the Mitchell Highway and surrounded by an expansive on-grade council car park, the property provides a high level of connectivity to the local community and ease of access for patrons.

  • Price range: $15 – $17 million
  • Net income: Approximately $1,098,360

For more information on this Woolworths (Orange, NSW) public crowdfunding campaign, visit https://www.domacom.com.au/woolworths-orange-nsw/

Property Wealth Planning Simulator

Empower Wealth New BookDomaCom has begun working with property adviser, Empower Wealth, to provide a variety of investment models via their Property Wealth Planning Simulator.

Empower Wealth will offer Growth, Yield, Balanced and Mixed property portfolio models each containing multiple properties to provide diversification.

With 5 and 10 year holding terms and ‘if sold’ projections based on no debt property purchases, advisers can provide an asset allocation solution with minimal risk and diversification.

A geared model will also become available as DomaCom finalises a lending solution for the platform.

The Simulator model will be available to all DomaCom accredited advisers along with client presentation material. Their book, The Armchair Guide to Property Investing, is also free to DomaCom Accredited Advisers who wish to integrate property into their client advice model.  Please email Paul Zaman, Managing Director of DomaCom Singapore at paul.zaman@domacom.com.au for your copy.

The DomaCom Platform can kick start wealth planning with a diversified portfolio of property

Often getting started in investments is difficult, because the question of where and when to start is often an inhibition.

DomaCom can offer on its platform a portfolio of properties. This option can be selected by yourself and your advisor with help from Australian property investment experts like Empower Wealth.

For example, two popular commercial asset classes are Student Accommodation and Serviced Hotel rooms. Here are two illustrative diversified portfolios.

A diversified portfolio example of Student Accommodation

  • Diversified across two capital cities: Melbourne and Brisbane
  • Rental Income, giving gross yield of around 9.4% to 10.4% and net yield of 7.5% to 8.5%
  • Historic capital gain over last 15 years of 2% to 4%
  • Professionally managed with Student 6-month & 12 month leases
  • Rent is set by market rates

StudentAccom_Table1

A diversified portfolio example of Condotel Serviced Hotel Rooms

  • Diversified across three capital cities: Melbourne, Perth and Sydney
  • Guaranteed Income, giving gross yield of 6.5% and net yield of 5.5%+
  • Historic capital gain over last 15 years of 2% to 4%
  • Professionally managed with long term leases, typically 10+ and 5+5+5+5 year
  • Annual Rent is guaranteed and typically increased by 4% per annum

StudentAccom_Table2

Wealth Management and Planning

Your Wealth Manager can help you, in asset allocation, and identify the split of investment funds that should be in high income and low risk. Plus, they can advise you on the unique risk and performance profile of Australian real property.

  • Consider Asset Allocation as “high income yield and low risk real estate”
  • Can distribute units as part of inheritance planning, withholding tax of 10% payable
  • Additional potential exposure to AUD:SGD over the long term
  • Lower effective tax compared to direct ownership
  • Hassle free real property ownership

 

 

DISCLAIMER: DomaCom Australia Ltd ABN 33 153 951 770 and holder of AFSL No 444365 is authorised to provide general financial product advice in Australia. Whilst DomaCom has taken all reasonable care to produce the information in this material, it does not make any representations in respect of, or warrant the accuracy, timeliness or completeness of any of the information. The information provided in this material is general information only. It does not constitute financial, tax or legal advice or a forecast. DomaCom Singapore Private Limited is not authorised to provide advice. This information is strictly for distribution to Singapore licensed financial advisors, wealth managers or private wealth bankers only.

STRICTLY FOR DISTRIBUTION ONLY TO LICENSED FINANCIAL ADVISORS, WEALTH MANAGERS AND PRIVATE WEALTH BANKERS

November 2015

Ask yourself the question, “Have I safely diversified my property investment?”

Asset allocation is a critical aspect to wealth management. This is true for both goals of growing and protecting your wealth.

A good advisor will determine your overall financial goals, an investment plan to achieve those goals and then ongoing advice on asset management that may require a rebalancing of the asset classes. The plan will have a mix of capital growth and income yield investments.

Realestate investment, excluding the principal home, is usually circa 20% of a High Net Worth Individual’s (HNWI) asset portfolio. Are you in line with that level of asset allocation?

Yet diversification is key to minimising risk, so that 20% of net wealth should be invested across several properties, i.e. not just one or two.

Ask yourself the question, “Have I safely diversified my property investment?”

Asia-Pacific Wealth Report

Capgemini and the Royal Bank of Canada produce the Asia-Pacific Wealth Report, the most recent 9th edition of the report was published in late 2014 www.worldwealthreport.com .

That report has some very interesting survey findings from more than 4,500 HNWIs across 23 countries. A HNWI is defined as an individual with assets over USD$1 million, excluding the principal residence.

There are 4.3 million HNWIs in the Asia-Pacific world of the 23 countries surveyed:

A-PAC_WealthReport_Pic1

  • Japan had the largest population with 2.32 million HNWIs
  • China had 0.758 million
  • Australia is 3rd largest with 0.219 million
  • Singapore was 8th largest with 0.105 million HNWIs

 

The 4.3 million HNWIs represented a total wealth of USD$14,200 billion.

A-PAC_WealthReport_Pic2

  • Australia’s 219,000 HNWIs had total wealth of USD$ 674 billion, which gives an average of around USD$3 million per HNWI.
  • Singapore’s 105,000 HNWIs had total wealth of USD$ 523 billion, which gives an average of about USD$5 million per HNWI.

 

The Asia-Pacific Wealth Report also breaks this population down into bands:

  • USD$30 million – Ultra HNWI –   0.7%A-PAC_WealthReport_Pic3
  • >USD$5 million to <USD$30 million – Mid tier HNWI – 8.2%
  • < USD$5 million – Mass Affluent – 91.1%

 

 

It is interesting to note that the Mass Affluent makes up 91% of the 4.3million HNWIs, i.e. millionaires living next door!

Wealth growth versus wealth protection

The Survey results show that across Asia Pacific – excluding Japan – around 40% said they wanted wealth growth as the focus and 30% said they wanted wealth protection as the focus.

Survey respondents over the age of 60 had a stronger, almost 55% focus on wealth protection.

Everyone is ‘in love’ with real estate

The survey broke down the asset allocation into five asset classes:

  • Real estate, excluding the principal residence
  • Cash and cash equivalents
  • Equities, including direct ownership of shares, mutual funds and ETFs investing in shares
  • Bonds and fixed income, including direct ownership of bonds and mutual funds and ETFs investing in bonds and fixed income
  • Alternative investments, includes banks structured products, hedge funds, derivatives, forex, commodities, and private equity

Is it surprising that Australians love real estate as an asset class?

Asset Class Asia-Pacific excluding Japan Australia Singapore
Real estate 23% 33.1% 22.8%
Cash and Cash equivalents 22.6% 22.7% 27.1%
Equities 21.7% 22.3% 23.1%
Bonds and Fixed Income 18.2% 11.4% 12.5%
Alternatives 14.5% 10.5% 14.4%
Total
Source: Asia-Pacific Wealth Report 2014

Too few eggs in the basket, so diversify more!

This means for the average wealthy HNWIs the following would be allocated to real property net assets:

  • Australian average HNWI wealth USD$3 million, with 33% in real estate indicates an average of USD$1.0 million in property net assets
  • Singapore average HNWI wealth USD$5 million, with 23% in real estate indicates an average of USD$1.2 million in property net assets

If we assume the average price of an investment property in Australia is USD$500,000 then the Australian average HNWI could buy outright 2 investment properties, or with a 50% loan to value ratio (LVR), 4 investment properties.

Likewise, if we assume the average price of an investment property in Singapore is USD$1 million, then the Singaporean average HNWI could buy outright 1 investment property, or with say 50% LVR, 2 investment properties.

From a diversification and risk mitigation point of view, many advisors would consider this as too much concentration, as the saying goes “too few eggs in one basket”.

For example, if you had USD$ 1 million to invest in equities, would you put it into just two companies? We would guess your answer is, no. You would most likely choose a basket of growth stocks and dividend yield stocks, and across different industry sectors.

Similarly, this level of concentration in one to four properties represents a high level of concentration.

DomaCom platform offers real estate diversification

The essence of the DomaCom platform means that each property is in a segregated sub fund. This means that an investor can choose between buying 100% to only 1% of the units in the sub-fund, which holds one property.

DomaCom offers an easy way for investors to achieve real estate diversification. Therefore, the same HNWI could diversify across many properties, types and geographic regions:

  • Residential
  • Commercial
  • Industrial

DomaCom enables hunting in packs

Another aspect of diversification is ‘hunting in packs’. Not every investor is an expert, and so needs a mastermind group or perhaps to hire a real estate expert.

This allows for someone who is not an expert in the chosen property geographic area, or expert in the property asset class, to ride on the back of experts who have selected, screened and already buying the majority of the units in the specific property sub-fund.

This is particularly important for a foreign investor buying real estate in a different country, such as Australia. Safer to simply hunt in packs!

DomaCom also will enable a loan to value ratio of 50%

Through local Australian finance houses, loans will become available to leverage off the segregated mutual sub-fund. It’s important to note that this is not a mortgage on the underlying property. It is simply a loan linked to the mutual fund and more specifically only that particular sub-fund. It is very much like a margin lending facility on listed equities.

Spring Financial Group’s multi-property portfolios

Following Spring Financial Group’s approval of the DomaCom platform a couple of months ago, we have been working closely with them to finalise their property portfolio offerings.

Spring Financial Group’s expertise in direct property investing is well known and we are delighted that they see the merits of the fractional ownership approach.

Diversification is the backbone of modern portfolio theory and Spring Financial Group have assembled more than 50 high quality properties in a series of boutique and landmark projects developed by some of the countries most experienced and best regarded developers. They have packaged these into portfolios of 5, 10 and15 properties each.

Each portfolio will consist of properties in leading inner-city geographic locations. In this way portfolios can both maximise upside and minimise downside by spreading the investment risk so your clients avoid having all their eggs in one basket.

To meet the needs of these multi-property portfolio bookbuilds, DomaCom has upgraded the platform technology to make it easier for financial planners to bookbuild multiple properties simultaneously.

Stay tuned for more information on property portfolios.  This capability will be opened and available for public bookbuilds in late 2015.

In the meantime, interested advisers who would like further information about how their clients can access Spring’s diversified model portfolios, should contact us directly or contact Spring’s group general manager Mitchell Ansiewicz at mithcell.ansiewicz@springFG.com .

managedaccounts.com.au gives DomaCom the green light

managedaccounts.com.au (ASX: MGP) is the first managed account provider to add the capability of fractionalised real property onto their platform.

Managed account solutions offer portfolios created to meet specific investment needs; defensive, conservative, income and growth but until now, real property has been under-represented from many model portfolios.

Property is our largest asset class and with less volatility than equities it should play a pivotal role in anchoring investment portfolios, particularly residential property which has been absent in managed account portfolios.

For example, an income portfolio should have some higher yielding commercial property and a growth portfolio should have some residential property, as the low volatility of property is ideal for a defensive or conservative model.

The integration with DomaCom will give advisers access to any property in Australia provided a bookbuild can be completed. Advisers can initiate a private bookbuild within their own client base or a public bookbuild for a wider audience.

Offering property exposure within a managed account portfolio will give advisers, particularly those working with SMSFs something they have never had. Property is a major asset class in high demand but until the DomaCom solution, something that had to be managed externally to their managed account and usually, as a whole asset purchase. The DomaCom model makes it easy for advisory firms managing client portfolios to add property without the need for LRBA arrangements.

There is no other platform where financial advisers can precisely set the asset allocation to real property proportionate to their clients’ need, other than on DomaCom.

DomaCom wins most ‘disruptive’ award

More great news to share with you is from the recent Afiniation Showcase Awards held in Sydney where DomaCom won the top prize in the Disruption category. The judges selected the product they felt has the most disruptive effect on the current market and participants

Marc Evans, Afiniation co-founder and head judge said that the winner of the disruption category is going to change the way that the financial markets work moving forward. The judging panel felt that DomaCom really is a new way to invest in the Australian property market and that this new innovation will fundamentally disrupt the way people can invest in housing in Australia.

Our objective in creating DomaCom was to make property more easily available and affordable to investors by eliminating the need to buy a whole property.

Upcoming events

Financial Planning Association of Singapore (FPAS) Workshop 24th November 2015

FPAS has one of their regular afternoon briefings for Financial Advisors on Tuesday 24th November 1:30 to 5:30pm. This workshop is entitled “Property Investment: Outlook and Risks of rising interest rates; Taxation implications and Investment Potential of Australian Properties”. This talk is for FPAS Financial Planners interested in Australian property investments – please apply direct to FPAS, www.fpas.org.sg

DomaCom will be one of three speakers, with an educational focus upon asset allocation and fractional investing (1% to 100%) in Australian Property.

Which experts should clients engage when investing in property?

By Miriam Sandkuhler

Australians love property! Just as most people wouldn’t seek advice from friends about heart surgery if they weren’t a surgeon, it is important to realise that the same level of awareness should apply when investing hundreds of thousands of dollars in property.

It’s therefore also important as Advisors when working with your clients, that you help them to understanding that risk mitigation is factored into establishing a property portfolio and that engaging experts is part of the process.

Investors should think of property investing as a business – where their team of experts all form part of the success of that business. Independently, they help them to maximise the investment opportunity, minimise tax and/or risk, while collectively they combine their expertise to increase your success multi-fold.

If they were building a house, they would need expert advice to ensure the foundations, concrete, frame, bricks and mortar were sound and kept their house standing strong and upright. There would be significant consequences if they found out the concrete was too thin and the mortar too weak AFTER the house has been built! The same applies when engaging experts to help them in the property investing process. After they have purchased the property, it’s too late for these experts to help.

Miriam Graph

As you can see in the chart above clients need different experts to be engaged at different stages, and some of them need to be engaged simultaneously. The chart shows they will usually need nine professions to ensure their property transaction is sound – and all their experts will play a very important role.

As with any business, they should seek out the best experts available who specialise in working with investors to successfully build a portfolio.

Why? Because they need to step into the future with them and consider all of the implications – how big they want to build their portfolio, what type of properties they will buy, which strategies they will use and who will benefit financially and when – so that they can provide the correct advice, planning and structuring in advance.

Why in advance? Because after the purchase, it is TOO LATE

About Miriam Sandkuhler

Some of the article content is extracted from the book Property Prosperity – 7 Steps to Buying Like an Expert by Miriam Sandkuhler © 2013, with the authors permission.

Miriam Sandkuhler is the founder of Property Mavens – a specialist property advisory firm based in Melbourne.

Unlike most ‘Property Advisors’, Miriam is an Accredited Property Investment Advisor (PIAA), Licensed Estate Agent and REIV member and multi award nominated Buyer Agent, with 15 years of real estate experience in two States. She is also the author of the book Property Prosperity.

Miriam and her team excel at identifying high-performing property that deliver strong returns and stable tenants, while strategically building a client’s portfolio with high capital and income growth property. She has a strong track record helping investors and home buyers and believes education is the key to empowering people on their journey to achieving their goals. 

In the media

 

DISCLAIMER: DomaCom Australia Ltd ABN 33 153 951 770 and holder of AFSL No 444365 is authorised to provide general financial product advice in Australia. Whilst DomaCom has taken all reasonable care to produce the information in this material, it does not make any representations in respect of, or warrant the accuracy, timeliness or completeness of any of the information. The information provided in this material is general information only. It does not constitute financial, tax or legal advice or a forecast. DomaCom Singapore Private Limited is not authorised to provide advice. This information is strictly for distribution to Singapore licensed financial advisors, wealth managers or private wealth bankers only.

 STRICTLY FOR DISTRIBUTION ONLY TO LICENSED FINANCIAL ADVISORS, WEALTH MANAGERS AND PRIVATE WEALTH BANKERS

August 2015

Why Serviced Apartment accommodation has been a popular choice


Serviced Apartment accommodation has been a steadier performer compared to other Hotel and Motel accommodation providers over the past decade, according to an IBISWorld May 2015 recent report.

Serviced apartments depends more on business travellers, whereas hotels and motels depend more on domestic and foreign tourism.

Since the early 2000s, the Serviced Apartments industry has grown steadily. Demand was boosted as leisure and business travellers recognised the benefits of serviced apartments compared with hotels. Advantages such as more space, the ability to self-cater and comparatively lower prices have appealed to travellers. In the five years through to 2015, IBISWorld estimates that industry revenue has increased by an annualised 2.3% to $3.0 billion in 2015.

The key business and leisure serviced apartment providers in Australia are Quest, Mantra and Accor groups. They are well established hotel managers and operators, with Quest offering a 25 year track record.

On the supply side, investors, managers and franchisors have targeted serviced apartments as a growing market. Industry development was aided by favourable strata schemes and the relatively low development costs of serviced apartment complexes compared with traditional hotels.

Sydney and Melbourne Serviced Accommodation available in the April to May 2015 Timeframe

Address Bedroom Price (AUD) Rent (AUD) (Gross Yield %) Managed by:
111 Punt Road, Prahan, VIC 3181 2 bedroom $430,000 $514 per week.(6.2% p.a.) Quest
3 Kingston RdMoorabbin, VIC 3202 2 bedroom $406,000 $527 per week.(6.75% p.a.) Quest
741 Whitehouse Rd, Mont Albert, VIC 3127 1 bedroom $280,000 $361 per week.(6.70% p.a.) Quest
616 Glenferrie Rd,Hawthorn, VIC 3122 1 bedroom $295,000+ $364 per week.(6.43% p.a.) Quest
15 Springfield Ave,Potts Point, NSW 2011 1 bedroom $345,000 $423 per week.(6.38% p.a.) Quest
Source: Serviced Apartment available in April-May 2015

The serviced accommodation generally yields a net income for property owners in the 6.0%+ range. Serviced apartments tend to be purpose built, with long leases of 5+5+5+5 years with dedicated professional hotel operators. The leases have built in rent reviews and fully managed by the hotel room operator. The capital value is currently AUD280,000+ for a 1 bedroom and AUD400,000+ for a 2 bedroom serviced apartment.

Income and Expense Illustration

Student Studio (A$ Value) $   475,000
Gross Rental Yield (%) 6.7% $ 31,668
Management Fee inclusive (% of rent) 0.0% $       967
Body Corporate (A$ fee) $     1,400
Rates and Water (A$ usage fee) $       1,810
Net income (A$) $   28,458
Net income yield (before tax, %) 6.0%
Source: Student Property available in April-May 2015

About Quest

Quest was born from humble beginnings in 1988, with one property in Fitzroy, on the fringe of Melbourne’s central business district.  Since then, Quest has emerged to become the largest and most successful serviced apartment brand in Australasia with 25 years’ experience under their belt. Currently, there are more than 150 Quest sites across Australia, New Zealand and Fiji.  In total Quest has over 5,000 strata titled properties. This growth is a testament to their commitment to meeting the accommodation needs of the business travellers. As their businesses have grown over the years, the Quest group has too.

It is a mutual prosperity, where Australian investors see the benefits. Quest has stayed involved in the growth of every property. From location, through to planning, opening, and the day to day operations, Quest is a recognised leader in the Australian Serviced Apartment industry. Since 2000, Serviced Apartments have gone from strength to strength, growing to a 25% market share in accommodation.

Associated Costs

Quest Properties

Typical residential property

Lease Long term lease with a trusted Australian brand. Short term 12 month lease and changes of tenants
Rental increases Fixed annual rental increases at 4% or CPI with 5 year market reviews Uncertain and subject to market conditions
Vacancy periods Nil – rent paid regardless of occupancy No rent when vacant between tenants
Agent Management fees Nil Landlord cost – typically 7-8% of rent
Repairs and maintenance Quest responsible for non capital repairs. Landlord cost – all major and minor repairs
Body Corporate fees (Admin fee) Paid by Quest Operator Landlord cost – paid quarterly
Body Corporate (Sinking fund) Landlord obligation – capital account contribution Landlord obligation – capital account contribution
Building Insurance Paid by Quest Operator Landlord cost
Furniture and Fittings Quest obligation to maintain and replace Landlord obligation (fittings)
Letting fees Nil Landlord cost – typically 2 weeks rent
Advertising Nil Landlord cost
Capital works Landlord obligation, programmed & managed by Quest Landlord obligation as required
Building depreciation allowance Full taxation benefits Full taxation benefits
Property Inspections Daily 6 monthly
Source: www.questproperties.com.au

Anniversary of 1st bookbuilds


We’re excited to say we are approaching the anniversary of our first property bookbuilds in mid-August.  These were commenced in July 2014 under the auspices of Australian financial planning firm Shartru Wealth Management.  Shartru have since introduced more than 40 clients to DomaCom’s innovative fractional property investing platform, purchasing several residential property investments through the DomaCom Fund.

Alternative property types for fractional investment


Since launching DomaCom, a number of alternative property types have been listed on the platform for bookbuilds.  Among them are strata car parks, rural property, student accommodation, new developments, existing houses and small to medium commercial/retail properties including an office complex, a hotel and a KFC fast food store.

The significance of these listings is that they offer varying levels of yield, capital growth or a balance of both, but the preference of the investors for one property type over another must also be considered.

One of the most interesting bookbuilds is a Southern Mallee Victorian property of 1,281 Ha, a $2m property with a long term lease.  This property offers a 5.1% yield. Farmland in the Mallee shows an historic growth of 7.2% p.a over 20 years (1990-2010).

SouthernMalleeFarm_v1_SmallEttaro_Lvl1Office_v1_Small

 

Gen Ys – a generation that knows what they want and how to get it!


It’s pretty well known that Australians love bricks and mortar.  It’s the “great Australian dream”.  With record low interest rates, property investment is an increasingly attractive option for building wealth.

But is it held in the same regard for Gen Ys?

The Gen Y’s often also called the ‘millennials’ are often referred to as precocious, demanding and rude, the ‘entitled generation’. But that may just be a by-product of the previous generation’s need to feel superior.  The war generation had an opinion of the baby boomers who had an opinion of the Gen Xers.  It’s a generational thing.

One certainty in relation to property is that for many, the price of property it seems has roared well ahead of their ability to get their foot on the ladder, and that is a concern.

However, what a recent survey has revealed may floor us.  Literally!

According to the Domain Consumer Insights Study, 16% of Gen Ys own two or more properties, compared to 17% of Baby Boomers and Gen Xs.  The study shows that younger generations are entering the market at an earlier age.  The average age that Gen Y Australians became  investment property owners is 25 years, whereas the average age for Gen X was 35 years and 45 years for the Baby Boomers.

So for the financial advice industry there is opportunity aplenty if they embrace the property asset class, specifically residential property, to help the clients of tomorrow who are showing early signs of strong interest in this sector.  It seems they prefer property rather than the equities market which is seen by many as risky.

It is worth noting that Gen Ys are by far the most tech savvy, which gives them the ability to access information, and they like participating online.

With many Gen Ys living at home with their parents for longer, delaying marriage and children until later, they are able to complete their higher education and seek life experiences such as travelling a lot earlier.  Naturally, living at home with parents has the significant benefit of allowing them to have sizable savings.

Despite government incentives to enter into home ownership, plenty of wised-up Gen Ys are buying investment properties as their first purchase.  And it makes so much sense!

From a cashflow and lifestyle point of view, it does seem like a win-win situation.  They have:

  • A home – they can continue living with their parents where they have the freedom to come and go (plus less cleaning, less cooking, less expenses); and
  • An investment property – where they get the tax benefits, and a purchase which requires less commitment than a home.

We shouldn’t underestimate Gen Ys.  They know what they want and are quick to work out how to get it.

If Gen Y are the next generation of financial planning clients and property is what they want then help them achieve it in the best possible way.  Be flexible enough to engage this demographic at their level and in the way they want, or get out of their way seems to be the message coming through.

Property advice


We have added a property advice page to our marketing site www.domacom.com.au to help you find a suitable buyer’s advocate or agent to take a brief from you to source suitable investment properties for your clients.

You’ll find some information about PIPA and PIAA, two industry bodies who represent professional buyers’ agents who will help you produce a property SOA for your client’s property investment.

Below each association you will find a list of members who are happy to assist you and your clients in this process.

The key things to look for in selecting a property adviser are: they do not sell stock, they are fee for service based, they are hold a QPIA or APA qualification from their respective membership and they also hold PI insurance.

In the media

 

DISCLAIMER: DomaCom Australia Ltd ABN 33 153 951 770 and holder of AFSL No 444365 is authorised to provide general financial product advice in Australia. Whilst DomaCom has taken all reasonable care to produce the information in this material, it does not make any representations in respect of, or warrant the accuracy, timeliness or completeness of any of the information. The information provided in this material is general information only. It does not constitute financial, tax or legal advice or a forecast. DomaCom Singapore Private Limited is not authorised to provide advice. This information is strictly for distribution to Singapore licensed financial advisors, wealth managers or private wealth bankers only.

 

STRICTLY FOR DISTRIBUTION ONLY TO LICENSED FINANCIAL ADVISORS, WEALTH MANAGERS AND PRIVATE WEALTH BANKERS

May 2015

Location, location, location versus yield, yield, yield

In property investment the mantra is “location, location, location”. Currently in wealth management and asset allocation the mantra is “yield, yield, yield”.

At present across Australia the highest yields are from commercial property, often purpose built and professionally managed, such as:

  • Student accommodation
  • Hotel Serviced apartments
  • Child care centres
  • Aged care centres
  • Car parks
  • Hotels
  • Shopping centres
  • Office blocks

The gross yield is in the 7%-11% range*. The net yield after all outgoings, yet before tax, is 5% to 8%. Student accommodation provides the lowest capital entry point of $118,000. Other commercial properties are $0.5m to $50m so they are perfect for fractional property investment.

*Estimate only and may change from time to time

Why Student Accommodation has been a popular choice

From 2012 to 2015, each year there were between 185,000 and 217,000 international students enrolled into higher degrees in Australia, mostly in the cities of Melbourne and Sydney according to Australian Government Statistics on International Student Enrolment data April 2015.

Higher education services is a major income earning channel for Australia. At March 2015, there were 217,000 higher education enrolments, with students coming from the following top ten countries:

  • China (#1 at 77,000)
  • India (#2 at 25,000)
  • Malaysia (#3 at 13,000)
  • Indonesia (#7 at 7,000) and
  • Singapore (#9 at 6,000).

PieChart_Sgpre

 

 

 

 

 

Several DomaCom private book-builds have been completed on student accommodation in Melbourne. The Student accommodation yields a higher than average net income for investors generally in the 6%- 8% range.

Whilst this type of property sometimes needs a cash buyer and can be limited in its capital growth, student accommodation may be the right type of investment if you are heading into retirement, want to minimize your borrowings and simply want a good income.

Generally, student accommodation prices tend to be on lower side of the property spectrum ranging from the low AUD$100,000 to AUD$250,000 making them more affordable.

To give you an idea of the range of student accommodation available in the Melbourne region, we have prepared the following list.

Address University Nearby Price (AUD) Rent (Gross Yield % and AUD) Managed by:
Sophia House Apartments, 127 Leicester Street, Carlton VIC 31 Melbourne University, RMIT $165,000 $270 per week.(8.5% p.a.) SHA
308/2 Easter Place, Hawthorn East Swinburne University, 15-minute train ride to Melbourne CBD for Melbourne University & RMIT $110,000+ $205 per week.(9.5% p.a.) SHA
36/16-18 Poplar Street, Box Hill Box Hill TAFE, Deakin University $120,000 $225 per week.(9.7% p.a.) SHA
336/484 Elgar Road, Box Hill Box Hill TAFE, Deakin University $118,000+ $210 per week.(9% p.a.) SHA

Please note that an example of the main outgoings for student accommodation are:

Expenses
SHA 8% of gross rental (Based on a 9% gross yield on a $118,000 property = $10,600 per year)
Body Corporate Between $1500-$2000 per year
Rates & water Between $600-$900 per year
*Please also note that the DomaCom platform fee of 0.88% (including GST) will be deducted from the sub-fund. **DomaCom distributions will incur a 15% withholding tax, whereas foreign direct ownership tax is 32.5% to 45% on net rental income and capital gains on sale.

About SHA

Student Housing Australia (SHA) specialises in the management of purpose built fully furnished student accommodation complexes with a portfolio of over 2,500 apartments.  In addition to management services, SHA also conform to the planning permit conditions of the building, providing student accommodation specialist services which include Pastoral Care, Car Park monitoring, Resident Eligibility and 24 hour onsite Caretaking, which is a requirement to be an approved Managing Agent for Student Accommodation in addition to normal estate agency management requirements.

 These services together with their specialised Local University and International marketing programs and contacts, ensure that your apartment will be a desirable choice for both local and international students.

If you are interested to explore student accommodation as an investment consideration for your clients, please contact Paul Zaman, Managing Director of DomaCom Singapore at +65 3158 0487 or paul.zaman@domacom.com.au . DomaCom is also looking for more Singapore Advisory firms to become our strategic partners.

Arthur Naoumidis @ Wholesale Investor Conference in Singapore

Arthur Naoumidis, CEO of DomaCom, was at the recent Wholesale Investor conference in Singapore on 21st May. The Wholesale Investor conference was a by-invitation-only private conference for accredited investors and wealth advisors at the NTUC Auditorium overlooking the Marina Bay area of Singapore’s financial CBD.

Over 500 delegates attended this conference and DomaCom was one of several Australian businesses showcased. The focus was on briefing accredited investors on DomaCom -background of the company, brand, legal and technology platforms, and equity investment opportunity.

We hope to see many more of you at this Conference in the near future.

Fractional Property Investing versus Property Syndication

Property syndication is a buzz across the world. Yet DomaCom is in Fractional Property Investing – so what is the difference?

There are three online property syndication sites in Australia, many across the world, and no doubt even more will emerge. Property syndication operate by raising money from accredited investors, as an online business to consumer (B2C) model. Property syndicators are generally unregulated, to date.

As these sites are marketed online directly to end investors, they may reach your clients. This could pose a potential risk to your advisory business, if you are unable to provide a suitable property investment solution, not to mention if your clients overcommit or invest in inappropriate property and lose their wealth.

Property syndication typically lacks regulatory oversight and so comes without the consumer protection afforded to the regulated products.

Also property syndication is often a closed fund, targeting riskier property developments, with a long term lock up, which means it may present issues with liquidity in the event your clients want or need to exit their investment.

At DomaCom, we offer a fractional property investing solution, which is a regulated offering. We have gone to great lengths to ensure robust corporate governance and compliance are adhered to within a regulated product environment. Furthermore, with an authority to make a market in underlying sub-fund units, DomaCom is able to create liquidity in a secondary market for investors wishing to exit and investors wishing to enter or simply top-up on a great investment.

At DomaCom, the platform enables you to make a fractional property investment in new and existing property – removing the property development risk. This is also true for foreign investors, as DomaCom is an Australian fund, the Foreign Investment Review Board (FIRB) restrictions, do not generally apply to a broadly held Australian fund.

DomaCom recently signed a Heads of Agreement with one such Australian syndicator, Estate Baron, to provide the fulfilment engine to their distribution which will enable them to reach the retail market. To do so, Estate Baron must engage with DomaCom Accredited Advisers so this will provide additional business for the adviser and expose the adviser to new potential planning clients.

The three common Property Investment Myths

By Ben Kingsley, CEO & Founder of Empower Wealth

Deciding to invest in property can be intimidating especially when everyone else seems to have plenty of cash to throw around. Even then, it isn’t usually the cash that keep people from getting started. People are hesitating because of the various ideas frequently thrown around about property investment which are mostly just myths.

Here is a look at three common myths and why they shouldn’t keep you from growing your property portfolio.

  • You need a lot of money to get started

Just because your property-investor friend has a lot of cash now, it doesn’t mean he or she started out that way. Purchasing a house on a full block certainly would cost a lot, but you can start with much smaller investments, such as townhouses, units and apartments. When you start earning income from these investments, you’ll have more money to finance others. On top of that, if you pick the right asset at the right location at the right time, the property would appreciate in a few years’ time which translates to more equity to fund your next purchase.

You don’t need a large savings account initially, either. If you are just getting started, you can benefit from the equity in your home. If you have significant equity and have made timely payments, you may be eligible for a loan to make a new house or apartment purchase. Owning another asset may provide a tax advantage, thus extra cash, as well.

  • Buying purely for a Negative Gear (tax benefits)

Negative gearing is owning a rental property that generates less income than it costs to possess it. As a result, the negative income can be treated as a tax loss which can offset other income, which has had tax paid. The hope with negative gearing is that over time the asset will grow in value, and as it grows, so will the rental income. But this is not always the case. Nobody should ever invest with the idea that running an asset at a loss is a smart investment. Instead, the property asset should be bought with the view that the long term growth and income will justify the short term lost (and if applicable, losses).

Instead of just focusing on the tax benefits, buying an investment property should be more about the long term performance and how it fits in with your cash flow position. Some household works well with negative gearing as an ancillary benefit because of the high liquidity of their cash flow but some others might require a positive gearing investment.

  • All property values go up

Perhaps one of the most commonly heard myths is that property values will always increase. This cannot be more wrong in the Australian Property Market. Land and housing are not immune to downturns, at least not in the short term. When investing, you need to take into account many factors when deciding if it is going to pay off for you. Are you in it for the long haul or are you just trying to flip it?

When you consider a purchase, take a look at its initial acquisition cost as well as ongoing maintenance costs such as management fees, regular maintenance and potential upgrading cost. Then contrast that with possible rental income now, as well as possible future increases. Look at your surroundings to find indication of rental demand increasing; is there a school nearby? Will there be a potential development in the area? What kind of lifestyle drivers are there that would push up the value of the property? Taking into account these differing costs and factors, the price may outweigh the possible return on the investment, or it may highlight a great potential for growth.

Keep in mind that worrying too much about numbers can also rob you of possible opportunities. While others fret over inflation or unemployment rates, you’ll have less competition and can take advantage of lower buying prices. By thinking creatively, you can ignore any stock market downturn and instead see your long-term real estate values increase.

It can be difficult to decide whether direct property investment is right for your clients, and they too might have a lot of questions. Before you or your clients explore the idea, bear in mind that many of the reasons against it are really just myths. Investing can bring good returns in the form of rental income and capital appreciation. If your clients are nervous about directly investing in property, the right professional call is to contact a qualified property investment adviser. He or she are specialist property investment professionals, they will know what pitfalls to avoid, and what can work best with the financial plan you have put in place. In this way you have a professional referral to help your clients achieve their goals, you’re protecting them from selling agents and property marketers and inappropriate investment properties and you can bring property into your service offer.

First published in www.empowerwealth.com.au

About Ben Kingsley – CEO & Founder of Empower Wealth

Ben Kingsley is the Founding Director of Empower Wealth and Chair of Property Investment Professionals of Australia (PIPA). A qualified Property Investment Advisor (QPIA), Ben holds a Real Estate Agency License (QLD), a Diploma of Finance and Mortgage Broking Management, a Diploma of Business and has become one of Australia’s leading experts in property investing for wealth creation. Ben has over 20 years of experience as a property investor. Last year Ben was awarded the Best Property Investment Advisor in 2014 by Your Investment Property Magazine.

In the media

 

DISCLAIMER: DomaCom Australia Ltd ABN 33 153 951 770 and holder of AFSL No 444365, a wholly owned subsidiary of DomaCom Limited, is authorised to provide general financial product advice in Australia. Whilst DomaCom has taken all reasonable care to produce the information in this material, it does not make any representations in respect of, or warrant the accuracy, timeliness or completeness of any of the information. The information provided in this material is general information only. It does not constitute financial, tax or legal advice or a forecast. It does not contain and is not to be taken as containing any financial product advice or securities advice or recommendation. DomaCom Singapore Private Limited is not authorised to provide advice or market the Units in the DomaCom Fund. This information is strictly for distribution to Singapore licensed financial advisors, wealth managers or private wealth bankers only.

 

 

STRICTLY FOR DISTRIBUTION ONLY TO LICENSED FINANCIAL ADVISORS, WEALTH MANAGERS AND PRIVATE WEALTH BANKERS

March 2015

Listen to Alan Kohler on DomaCom


domacom-feb-image-2As a trusted source of investment advice to Australians for many years, Alan Kohler, financial journalist and business commentator on the ABC News and founder of Eureka Report and Business Spectator, recently interviewed Arthur Naoumidis, CEO of DomaCom, to demystify fractional property investing and the benefits of the DomaCom Fund.

Enough said, this video clip says it all!

Private Bookbuild: PYD Building, Waterloo, Sydney

aerialimage

 

 

 

 

 

 

 

The PYD opportunity

This is a unique opportunity to acquire a strategic South Sydney investment with established trading history and stable tenancy mix.

The PYD building is a design driven centre built with the purpose of retailing unique objects and leading brands. The brand “PYD” comes from its location being the on the corners of Phillip, Young and Dank streets in Waterloo.

Location

The corner location in Waterloo, offers the occupants exposure in the heart of the cosmopolitan and sought after Dank Street precinct of South Sydney, only 2.5km from the Sydney CBD. Its proximity to the city, high density residential and business mix makes it the ideal location for bulky retail – i.e. retailers that need a location that is central for their clients and can provide a large enough floor space to display their product.

Public Bookbuilds: Residential Property across Australia

Many of DomaCom accredited financial advisers have expressed an interest in joining a bookbuild for clients but as they have not yet gathered enough client funds, they are unable to complete a private book build.

DomaCom public bookbuilds can help your client to get started in this new era of property investing. The public book portfolio includes Serviced Hotel Apartments, Residential Flats, Residential Houses across Australia. It also includes land and house packages, new property and established property.

Foreign Nationals, using the DomaCom platform, can now invest in second hand real estate assets, in the most desirable of geographical locations.

A number of recent the bookbuilds centred on student accommodation have been snapped up by eager advisers and their clients. These low value properties (sub AUD$200,000) offer up to 8.5% gross yield. We expect another group of student accommodations to come online shortly if this is of interest to your clients.

Foreign national property investors to be charged an additional 0.5% to 1% on Australian real estate

Foreigners love to buy property and that interest includes Australian property. According to the Australian Foreign Investment Review Board (FIRB), China foreign nationals are the leaders and in the year ending 2013 bought AUD$5.9 billion worth of residential real estate.

Very recently, the Australian Treasurer, Joe Hockey, announced a plan to fine foreign national buyers of up to one quarter of the value of the property if they buy a property without FIRB approval. The Government will maintain a register of foreign nationals owning property in Australia and will charge foreign national buyers a once-off application charge:

  • AUD$10,000 for properties up to AUD$1million in value, effectively 0.5%.
  • AUD$10,000 for each AUD$1million value above AUD$1million in value, effectively 1%.

There are mixed views in Australia on whether this plan, once implemented, will affect the real estate market in Australia.

In the UK there are annual fees for foreign nationals, resident and non-resident, owning property. Foreign investment review exists in countries like the USA, Singapore and Hong Kong and so Australia is aligning itself with similar policy in other countries.

This plan is to give the FIRB teeth, to better supervise foreign national investment. It will be administrated by the Australian Tax Office (ATO) as it has better data mining and execution capability.

So who buys residential real estate in Australia? According to the 2014 FIRB annual report the top five countries are*:

Country AUD$billion
China 5.9
Canada 4.9
USA 4.4
Singapore 2.0
Malaysia and UK 1.6

*Source FIBR Annual Report 2014, year ending 2013.

With the proposed changes, the DomaCom platform becomes an increasingly better way to invest in Australian property.

As DomaCom is an Australian managed investment fund or mutual fund, it is considered an Australian entity. This means foreign nationals who qualify for the investment (either as an ‘accredited investor’ or an ‘institutional investor’) can buy fractional property investments, side by side and on the same terms as Australian nationals.

Ultimately, this means greater flexibility – i.e. a foreign national (who qualifies) is able to buy ANY property anywhere in Australia, just like an Australian national and diversify and own 1% to 100% of a DomaCom segregated sub-fund that owns the individual unique property.

It also now means that a foreign national will be able to avoid all of these extra compliance, administration and charges, by using the DomaCom platform.

It should also be noted that there are taxation implications for property investments in Australia.

A quick glance at the ATO website shows that for property rental income, the net taxable income (i.e. after allowable expenses) is at 32.5% for a foreign, non-resident national.

On the sale of the real estate investment, there is also Capital Gains Tax (CGT) applicable, assuming after allowable deductions there has been a capital value appreciation. A net capital gain is included in a taxpayer’s assessable income and taxed along with their other assessable income at their highest marginal rate of tax.

The top marginal rate of tax is currently 45%. For Australian nationals and foreign non-residents, up until 2012 there was a 50% CGT discount. However, effective May 8, 2012 this discount ceased to apply to non-residents and temporary residents. Currently the income tax brackets for a non-resident are as follows+:

AUD$0 – $80,000 32.5c for each $1
AUD$80,001 – $180,000 AUD$26,000 plus 37c for each $1 over AUD$80,000
AUD$180,001 and over* AUD$63,000 plus 45c for every $1 over AUD$180,000

+Sources: FIRB web site and ATO web site

Let’s say in a general example, that an AUD$1,000,000 property is held for 7 years and its net capital appreciation after allowable deductions is AUD$280,000. The CGT would now be AU$108,000, effectively a 38.5% tax payment on the taxable gain of AUD$280,000.

If that same property is purchased using DomaCom, the tax payment would be a 15% withholding tax on rental income distribution and on any capital gain on whatever percentage of units owned in the DomaCom sub-fund of the AUD$1,000,000 property.

There would also be less hassle managing the property as a professional property manager will be assigned by the DomCom Investment Manger to perform the task.

It is however, imperative that both foreign and Australian national investors always seek professional taxation advice and property investment advice, before making any investment. None of the above information purports to be, or constitutes taxation advice. It is for general information only.

If you are an Advisory firm please contact Paul Zaman, Managing Director of DomaCom Singapore Pte Ltd, via email: paul.zaman@domacom.com.au or call +65 3158 0487.

In the media

 

DISCLAIMER: DomaCom Australia Ltd ABN 33 153 951 770 and holder of AFSL No 444365 is authorised to provide general financial product advice in Australia. Whilst DomaCom has taken all reasonable care to produce the information in this material, it does not make any representations in respect of, or warrant the accuracy, timeliness or completeness of any of the information. The information provided in this material is general information only. It does not constitute financial, tax or legal advice or a forecast. DomaCom Singapore Private Limited is not authorised to provide advice. This information is strictly for distribution to Singapore licensed financial advisors, wealth managers or private wealth bankers only.