My Say No. 73 – Property Investing??

My Say – No. 73

07th March 2023

Property Investing??

A couple of years ago the property industry decided to make it easier for people to access investment properties by effectively unitising them like a managed fund. This allowed people to access a property with smaller amounts of cash by simply buying a few “bricks”.
Thus, was born BrickX. The purpose as outlined by them is as follows. “BrickX is an award-winning platform that provides a simple and low-cost way to access the property market. It’s the new, easier way to invest in property”.
 
I welcome this, said he laughing, as it allowed me to test the water without committing a huge sum. I purchased 10 bricks in a 2-bedroom apartment in Double Bay in Sydney at a cost of $97.00 each plus commission of $16.97 for a total cost of $986.97. So, in December 2016 I became a property ‘investor’!
The progress, if you could call it that, has been interesting. The rent has averaged $1.06 per month giving me a yield of 1.28%. This has been low as a result of the months where I am paid nothing. Initially it was just the odd month here and there but of late, I have not received any income since January 2022.

I wrote to them to find out what was going on and the reply is as follows.
“Thank you for your enquiry. The Double Bay property in question last paid a distribution in January 2022. 
Since this time income has had to be held back to offset the holding costs of the property, the 5-year independent voting process and subsequent rising interest rates in order to facilitate the debt against this property. Prior to recommencing distributions, the cash reserve for the property needs to be replenished. 
 
In the interim the BrickX Investment management team is assessing alternative actions including but not limited to refinancing the debt and/or issuing more bricks to reduce the debt and provide additional working capital. Ongoing updates are provided in the details section of the property’s profile”.
 
I found this interesting; the property is geared. As interest rates rise, I can only assume that my income will decline further. I could even become negatively geared; Ha, Ha! In addition, if they issue more BrickX, my holding will be diluted. But this is only the tip of the iceberg. The fees charged are as follows.
Management fee 2% p.a. Performance fee 30%.  Transaction fee 0.5%.  Expenses fee 1.1% Property Management fee 6% of gross rent.

The current ‘valuation’ of my holding is $1248.00. As usual, all the action is in the price but heaven knows what the property would be worth if it were actually sold. I also wonder what the result would be if I had bought into the management company as opposed to the physical property! BrickX is now owned by Thundering Herd, a venture capital and private equity firm.

However, on to more positive things; it is pleasing to see the continued recovery in dividends as the fallout from Covid dissipates. This has been enhanced by a bit of bargain hunting during Covid as the ASX200 index declined from 7,139 to 4,816. It is certainly noticeable as we enter the current dividend season and with the index back over7,200. I do love market crashes!

Hot off the press.

Have just been invited to a function at the ASX to celebrate the 100^th Anniversary of one of my favourite Listed Investment Companies; Whitefield, thus celebrating the 100^th anniversary of LIC’s in Australia.

Finally, I am currently organising full day presentations in Sydney, Adelaide and Perth. Details and booking information will be notified shortly.