{"id":11945,"date":"2017-06-07T03:00:16","date_gmt":"2017-06-06T17:00:16","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=11945"},"modified":"2017-06-07T03:00:16","modified_gmt":"2017-06-06T17:00:16","slug":"fractional-financing-what-is-it-warren-gibson","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/fractional-financing-what-is-it-warren-gibson\/","title":{"rendered":"Fractional financing – what is it? \u2013 Warren Gibson"},"content":{"rendered":"

Fractional financing is growing in popularity as a way for many people, who could not normally afford to invest in property, to do so.\u00a0 Warren Gibson<\/strong> from Domacom tells us how easy it is.
\nTranscript:<\/strong>
\nKevin:\u00a0\u00a0<\/b>With so many people talking about housing affordability, this may be just a unique way for you to get into the market if you are struggling. There is a company called DomaCom, and a man behind it is Warren Gibson, who joins me.
\nWarren, thank you very much for your time. What is DomaCom? How does it work?
\nWarren:\u00a0\u00a0<\/b>DomaCom is a fractional property investment platform, Kevin. It\u2019s simply a modern form of syndication that enables people to come together and put various amounts of money in \u2013 from a small minimum of $2500 \u2013 towards acquiring a property, and then they share in the rent and the future capital gain from that property in proportion to the amount of money they\u2019ve put in.
\nKevin:\u00a0\u00a0<\/b>Lots of questions I want to ask you, but you mentioned the term \u201cfractional financing.\u201d Is that the term you used?
\nWarren:\u00a0\u00a0<\/b>Yes. It\u2019s an interesting term, isn\u2019t it? Another term for that is syndication, and yet another one in the modern lexicon would be crowdfunding, and that\u2019s the one that seems to resonate with most people.
\nKevin:\u00a0\u00a0<\/b>So, the whole idea here is that a whole group of people are going to put in relatively small amounts of money each but then they have some part ownership of property. Is that the way it works?
\nWarren:\u00a0\u00a0<\/b>Because property has a single title, somebody has to hang on to the title, and you can\u2019t have 20, 30, 40, 100 different people all having their names on the title. So, what we do is we put together a legal structure, and the purpose of the legal structure is to protect the interests of the investors.
\nWhen we acquire the property, it sits in a sub-fund of a managed investment scheme, a trust, and this is an ASIC-registered fund. The title rests with an independent trustee, and we use perpetual trustee for that purpose.
\nAnd then we issue units in the fund. So, you own units in the fund, the fund owns the property, and perpetual being one entity just hangs on to the title in the interests of representing the unit-holders.
\nKevin:\u00a0\u00a0<\/b>As someone investing in DomaCom, am I going to have the opportunity to decide which properties I want to invest in? Or is it that I just come into the idea of it?
\nWarren:\u00a0\u00a0<\/b>There are a couple of different ways, but absolutely, you have choice \u2013 and that\u2019s our ultimate goal. When people go into other trust types like unlisted property trusts or real estate investment trusts or something like that, somebody else chooses the property. In our structure, you get to choose what you want to invest in.
\nSo, if you see a property that\u2019s on the market and you want to invest in that, you can either commence a book build through an advisor, or you can come to us and we can start a book build and we can bring other people together for it.
\nOr sometimes we go and select a property. Recently, we selected a cattle property in Western Victoria because we had tenants lined up for it. It was an excellent property, had growth prospects and a good rental yield, and we decided that we would start a book build on that, and in the ensuing few weeks, 94 people came together and we bought the cattle property.
\nKevin:\u00a0\u00a0<\/b>Was this the Kidman property?
\nWarren:\u00a0\u00a0<\/b>No, not the Kidman property. We did attempt to crowdfund the Kidman property, but as you can imagine, a $400 million cattle property is somewhat difficult to pull together.
\nKevin:\u00a0\u00a0<\/b>How did you go with that one, by the way?
\nWarren:\u00a0\u00a0<\/b>We got over 5000 people who pledged $80 million. We had a major bank who agreed to leverage it for $70 million, and that was just towards the value of the land. The actual cattle business, which was the cows, we valued around $160 million. We had a consortium of businesspeople prepared to buy that part of it, so we got reasonably close, within about $70 or 80 million or something like that. But at the end of the day, it was a big task.
\nKevin:\u00a0\u00a0<\/b>If $70-80 million is getting close, well, then you were close.
\nWarren:\u00a0\u00a0<\/b>In terms of $400 million, it is pretty close.
\nKevin:\u00a0\u00a0<\/b>That\u2019s close enough. A couple of questions then for you. Okay, so I invest in this. You mentioned there at the start I think that we can share in the profits. Say I have to exit from my investment. How difficult is that for me? Is it possible, and do I share in the profits at that point in time?
\nWarren:\u00a0\u00a0<\/b>That\u2019s a really good question, and one of the issues with investing is you always have to have an avenue of exiting the investment. Not everybody is ready to get out at the same time. So, we thought about that hard and long when we were putting the structure together, that getting out of an investment is important.
\nWhen we acquire these properties and put them into a fund, we run the fund for a term of five years. When we get to five years, we ask all of the investors \u201cDo you want to stay in it, do you want us to retain the property? Or do you want to sell it and go?\u201d And if most of them say \u201cLook, we would like to retain it,\u201d we will keep it, provided those who want to get out can get out and everyone else buys them out, or we get new investors in. We\u2019ll roll it over and keep it.
\nBut let\u2019s say three years after we acquired a property, somebody wants to get out \u2013 for whatever reason. Then we have what we call a liquidity facility. It\u2019s like a secondary market, if you like, where they can go online, just like you do with your shares \u2013 you can go onto Etrade or Comsec or one of those online traders \u2013 and list your units for sale.
\nWe can then advise other investors in that property if they want to increase their exposure to it and buy you out. We\u2019ll do that at the latest valuation, so we revalue the properties every 12 months.
\nKevin:\u00a0\u00a0<\/b>Okay, that probably answered my question. So, there is an exit strategy there, but it\u2019s not simply as easy as just picking up the phone and getting an agent to come and sell it for you. You have to go through a process.
\nWarren:\u00a0\u00a0<\/b>No, it isn\u2019t, but there\u2019s no cost involved in doing that. No entry fees, no exit fees at all.
\nKevin:\u00a0\u00a0<\/b>Is there a minimum amount for me to invest, to become involved?
\nWarren:\u00a0\u00a0<\/b>$2500 will open an account.
\nKevin:\u00a0\u00a0<\/b>Warren, thank you very much. The website is DomaCom.com.au. My guest has been Warren Gibson.
\nThank you very much for joining us.
\nWarren:\u00a0\u00a0<\/b>Thank you, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

Fractional financing is growing in popularity as a way for many people, who could not normally afford to invest in property, to do so.\u00a0 Warren Gibson from Domacom tells us how easy it is. Transcript: Kevin:\u00a0\u00a0With so many people talking about housing affordability, this may…<\/p>\n","protected":false},"author":176692471,"featured_media":10306,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[32,34,10,11,13,36,22,25],"tags":[101],"class_list":["post-11945","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-property-topic","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-research-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"\nFractional financing - what is it? \u2013 Warren Gibson - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/fractional-financing-what-is-it-warren-gibson\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fractional financing - what is it? \u2013 Warren Gibson - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"Fractional financing is growing in popularity as a way for many people, who could not normally afford to invest in property, to do so.\u00a0 Warren Gibson from Domacom tells us how easy it is. 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