The Afterpay of real estate is here
Buy Now Pay Later is coming to real estate, giving investors an alternative avenue to realising their dreams of property ownership.
As housing affordability continues to be a pressing issue, especially for younger generations, and the national housing market rebounds solidly from COVID-19, the Afterpay of real estate has come knocking.
Dynamic micro-investing platform Bricklet is providing buyers the opportunity to become an independent part owner of their chosen residential or commercial dwelling via BNPL as of this weekend.
RELATED: The boom in fractional investing
"Bricklet came about from the idea of making property investment accessible to all Australians and buy now pay later is about extending that reach," Bricklet CEO Darren Younger said.
"Saving up your deposit for your first home is a big challenge and Bricklet has always been about providing an alternative to that. But we also understand saving up a lump sum to invest via Bricklet can also be an ask.
"That's why we have opened up the buy now pay later option. The amount required to get your foot in the door is within the reach of many potential investors."
However, Bricklet's investment proposal differs from most BNPL platforms in that there are no penalties for late payments. There are no extra fees or interest due on late payments.
"If you're late over a few payments our admin will work with the bricklet owner to help them get through that period," Mr Younger said.
"If it gets to the point where the owner can't continue they just need to sell their bricklet. It is no different to discharging a mortgage, the person keeps whatever percentage is theirs".
Bricklet and its BNPL option has caught the eye of potential investor Rachel Muscat-rahme, 27, a digital content developer from Redfern.
"I have worked full-time for a while now and want to create an investment portfolio. Like for many people it's a choice of shares or real estate and property feels more stable," she said.
"But I don't have a casual $100,000 lying around, so given the state of the Sydney property market it's hard to get a leg in.
"In assessing the market this seems more accessible and affordable. And with the buy now pay later option you can budget around that monthly repayment, it is not a huge sum. It's not the same as buying a house. But it is a step on the way."
The cost of a bricklet depends on the purchase price of the property and the number of investors or owners. For example, if a $1 million property is fragmented into 40 bricklets, each one is valued at $25,000.
Each owner is registered on the title as tenants in common and the independent part-ownership allows you to sell your slice of the property at any time on the Bricklet platform, which is a venture from the Lakeba Group. Mr Younger said the average time on market for a single bricklet is about a week.
Via buy now pay later, the owner would pay a first payment of 10 per cent of the value of the Bricklet (plus costs where applicable such as stamp duty and conveyancing) and then pay off the remainder of the amount owing over 18 months in instalments of five per cent.
Mr Younger said he expected a price point of around $20,000 could be the sweet spot for investors looking to use the BNPL option. In such a scenario, the initial investment would be $2000 (plus costs where applicable) and then monthly instalments of $1000 for the next 18 months until the bricklet is paid off.
Since launching last year, Bricklet has had over $13 million worth of property transacted on its platform. Like most real estate sectors Bricklet has been impacted adversely by the pandemic-enforced recession this year but over the September and October interest in the platform has growth 70 per cent month-on-month.
Ashleigh Mair, 19, a hospital admin from Ashgrove said Bricklet's investment options had caught her eye, especially the BNPL option.
"You're never too young to start investing and while I am earning an income without too many bills now is a good time for that," she said.
"It is hard to get a deposit up for a home and for something like this [a bricklet] but the buy now pay later option makes it easier. I utilise a few different buy now pay later options like Afterpay and I am strict with myself with it. It is all about control and it would be the same with investing in property."
Ms Mair said she was looking to invest locally in the Brisbane area.
Many of the properties for purchase on the Bricklet platform have been listed by property developers who see it as a viable sales option.
The platform has thus far appealed to many self managed super funds looking to diversify their portfolio.
Mr Younger said the BNPL option would likely see younger investors show a keener interest in investing via the platform.
"If you look at the average person who uses Afterpay to pay for things, they could also look to invest via Bricklet using the buy now pay later option," he said.
Paul Ho, 47, a customer service consultant, from Richmond in Melbourne, said Bricklet and also its BNPL option had opened up a new world to potential investors.
"I was just researching online and it looked like a great idea," he said.
"And once I had a good read I was pretty impressed. And that you only have to put down 10 per cent and then pay off the rest over 18 months makes it accessible and very possible.
Mr Ho said he was weighing up his options on where to invest.
"It might be here in Melbourne or in Sydney or even Queensland. The great thing is you actually have a choice," he said.
"It's great there is a team behind it all and you get a committment of knowledge through that."
As always, seek independent financial advice when considering buying real estate.
Originally published as The Afterpay of real estate is here