Crowdfunded Real Estate

A relatively new investment concept is crowdfunding real estate investments. The idea is that an individual could directly invest small amounts in a range of properties or development opportunities thus reducing their risk. Rather than a fund manager picking the properties, investors could evaluate deals themselves.

I read about Fundrise on Financial Samurai. It seems to actually be closer to a traditional unlisted real estate managed fund, except there is more of a property development angle. They allow investments in both real estate debt and equity. They claim very high historical rates of return. I find it hard to understand how they could be so high. Equity investments could have leverage but debt investments must return the interest rate on the mortgage minus costs? I didn't feel that there was enough transparency around how returns are generated. In any case, unfortunately, it is not open to non-US investors.

So, I looked for crowdfunded real estate opportunities in Australia. This is what I found:

Crowdfundup – I only found one active project on the site.

Estatebaron – This website has more active deals. It focuses exclusively on property development. There seems to be very little information about each project and the site is much less polished.

Brickraise – The link seems to be dead.

Domacom – This is an ASX listed company. The company looked like they were heading to bankruptcy before a recent fundraising. The new money will only last just over half a year as their burn rate is AUD 5 million a year. They will need more than AUD 0.5 billion assets under management to break even given a 0.8% of NAV management fee. However, they have the largest number of deals on their site and have high quality information. Deals include a wide range of projects including solar farms and bioenergy as well as more conventional real estate. This is something I might consider when we have an SMSF up and running if it looks like the company will survive.

Based on this, real estate crowdfunding is not well developed in Australia. Do you know of other better websites?

New Investment: PERLS XI

As a place to park Australian Dollars cash until I can move it out of Interactive Brokers, I bought some PERLS XI hybrid bank securities. These are Commonwealth Bank bonds that instead of paying interest pay franked dividends. The "grossed up" rate is 5.7% p.a. roughly. At some point the bonds should convert into Commonwealth Bank shares. However, the conversion rate isn't pre-determined. Instead, $100 of bonds will convert to $100 of shares at whatever the share price is at that time. I thought this was better than earning only 1.4% interest on my money, though there is a risk that the capital value will fall if interest rates rise in Australia. That doesn't look very likely at the moment to me. They are in theory less safe than bank deposits, but the risk of Commonwealth Bank getting into bad enough financial trouble in the next few months to reduce the value seems extremely low to me.

I think this is the first time I have ever bought bonds directly for my own account.

Insane Moves in Australian Dollar and Yen This Morning

Moves this big never happen in currencies. It's like one month's worth of moves in 5 minutes. Yen did the same thing in the other direction, other currencies not so much. No idea what sparked this. I managed to buy AUD24k...

This is being called a "flash crash".