A new fintech partnership will allow investors to enter the property market without having to borrow.
Under a new agreement announced last week, DomaCom will provide the back-end online book-build process, or syndication, and compliance for properties listed by crowdinvesting site Estate Baron.
DomaCom is a ‘fractional property investment’ platform that combines online property listing with online trading. Estate Baron is a crowdinvesting site created to raise capital for opportunities in real estate.
On its website, Estate Baron proclaims: “Invest in Melbourne real estate developments for as little as $2,000.”
The partnership with DomaCom enables Estate Baron to connect smaller investors with real estate opportunities, according to co-founder Moresh Kokane.
DomaCom chief executive Arthur Naoumidis said DomaCom provides the expertise to ensure that those investors are properly serviced in a regulated environment.
“Engaging with the new phenomena of property investment, crowdfunding is another first for DomaCom and further demonstrates the flexibility of our platform model,” he said.
“Estate Baron are also breaking new ground as the first real estate equity crowdfunding site to provide investment property via a regulated product.”
The fractional investment market allows home owners – principally retirees – to sell equity in their home.
DomaCom runs a managed investment fund that allows investors to register an interest in specific properties via a book-build process.
When a book build is complete, DomaCom purchases the property, places it in a sub-fund and issues the investors with units according to their investments.
Mr Naoumidis told Alan Kohler in a February video interview that the process is a modern form of syndication.
“Every sub-fund has a five-year term,” he explained. “At the end of five years all investors vote to either renew it or not.”
The minimum investment to become a participant in the Domacom fund is $20,000, but investors can join a particular book build or syndication for as little as $2,000.
“Having put your $20,000 into the fund you can then choose to put $2,000 into 10 individual sub-funds if you wish,” Mr Naoumidis said, adding that the process allows investors to spread their risk across multiple property types and geographies.
Investors can only access the fund via a financial adviser, he said.
DomaCom successfully raised $7 million to fund the product in October last year.
Reuben Buchanan from corporate advisory firm, Axstra Capital, who assisted DomaCom in the placement, said he was surprised with the level of interest and the speed at which the group secured funding from both new and existing investors.
“The DomaCom solution to property investing is a game changer in so many aspects,” Mr Buchanan said.
“Not only is it the first platform of its kind in Australia – it is the first in the world.”