BrickX is a fractional investment platform with a mission to make property investment accessible to all Australians. Through dividing property into 10,000 ‘bricks’, the platform sells property portions to investors – who then benefit from a share of the property’s rental return or capital growth.
Want to know more? Read on for our review of this innovative platform.
Inside this review
What is BrickX?
BrickX is a fractional investment platform that offers investors the option to buy and sell shares or portions of an investment property. It could be thought of as a less costly alternative to traditional property investment.
The platform works by dividing property into 10,000 ‘bricks’, with each brick worth a share of the property’s total value. Investors then buy these bricks, effectively buying a portion of the property instead of buying it all. They earn income from their share of the property, and stand to make capital gains if the property value increases, just as they would with traditional property investment.
Is it safe and reliable?
BrickX is registered with the Australian Securities and Investments Commission (ASIC) as a Managed Investment Scheme. As such, it is subject to regulatory requirements and oversight. They took $12.5 million in funding from backers including NAB Ventures and Westpac-backed VC firm Reinventure. [1] In 2019 it was announced that BrickX had been acquired by Thundering Herd, a Melbourne-based private equity and venture capital firm. [2]
It is, however, worth noting the history of past BrickX competitors. CrowdfundUp took $2.1 million in investor funding in 2016 to "build its team and grow its market presence locally and in China". [3] However, in our view, CrowdfundUp appears to be dormant now. While it is still possible to register an account, the website has an invalid SSL certificate and they haven't published anything on their blog since 2018.
CoVESTA, which offered a fractional investment platform similar to that of BrickX, ceased trading in 2019 and collapsed. Its domain name has been acquired by a digital marketing agency and now hosts a blog.
With this in mind, it may be beneficial for those considering investment through a platform such as BrickX to ensure they understand the risks involved and to seek professional financial advice.
How does BrickX work?
BrickX works by buying properties and splitting them into 10,000 portions (bricks). These bricks are then sold to investors at a fraction of the property’s total cost. For example, if a property was worth $800,000, each brick would be valued at $80.
Investors earn net rental income from the property in proportion to the number of bricks owned. They are also eligible for any capital returns if they later sell their bricks (to other BrickX investors) or agree with other investors to sell the entire property.
Smart Invest or Build My Own
BrickX has two choices of investment methods, which relate to how the investor selects bricks to buy. Here is a general outline of the two methods:
Smart Invest
- Investor nominates how much they’d like to invest.
- BrickX makes choices on which bricks to buy/sell based on predicted property growth potential.
- BrickX automatically reinvests any share of rental income generated from properties (after deducting expenses).
Build My Own
- Investor chooses which properties to buy bricks in (from BrickX selection).
- Investor receives rental income from portion owned, less expenses.
- Investor can sell bricks at any time through listing on the BrickX platform for other investors to buy.
Self-Managed Super Fund (SMSF)
BrickX also offers the option for investors to invest their Self-Managed Super Fund (SMSF). This works in much the same way as the process outlined above – with the option to Smart Invest or Build My Own.
Who can use it?
BrickX is available to Australian resident investors, including individuals and SMSFs.
It may be a suitable strategy for investors in a variety of life states or financial positions. This could include:
- People who want to invest in property for the first time but don’t have enough funds
- Those saving for a home deposit
- Property investors who want to diversify
- Self-Managed Super Fund holders
- Retirees with long-term investment time frames
What does it cost?
There are various costs associated with investing through the BrickX platform.
- Establishment/membership fee ($10 + $240 minimum investment)
- Investment amount/cost of bricks (varies)
- Transaction fee (0.5% of the purchase price of bricks purchased)
- Fee for sale of bricks (0.5% of the sale price)
Historical performance
BrickX aims to invest in properties that will outperform the Australian residential property market. It measures its own performance annually against the CoreLogic Home Value Index. BrickX’s property values increased by an average of 0.21% for the half year to June 2020, a disappointing result compared with the CoreLogic indication of a 1.9% increase. However, BrickX outperformed the CoreLogic index for the half year ending December 2020 – CoreLogic +1.16%, BrickX +1.70%.
Alternatives
- DomaCom. Another fractional investment platform. Requires a higher minimum investment.
- Raiz. Similar concept but involves the share market, not property. Invest small amounts in ASX-listed exchange traded funds (ETFs).
- Spaceship Voyager. Involves the share market, not property. Users invest small amounts in an index portfolio of Australian and global stocks.
Pros and cons
Pros
- Low funding cost to invest.
- Smaller commitment than traditional property investment.
- May be easier to sell ‘bricks’ or a portion of an asset than it would be to sell an entire property, as with traditional investment.
- Hands-off method of property investment may appeal to some investors.
Cons
- Investors do not have the flexibility to renovate property or do things to add value.
- BrickX buys the properties, users can not choose their own.
- Limited properties available to invest in (currently 16 for Smart Invest, 24 for Build Your Own).
- Risk of vacant properties and no rental income, or property price downturns, (as with any investment property).
FAQs
How does BrickX make money?
Its revenue comes from the $10 membership fee charged, plus the 0.5% transaction fee on purchase and sale of ‘bricks’.
What is the minimum investment?
A minimum of $250, inclusive of a $10 application fee, must be transferred to BrickX at the same time as becoming a member. The minimum investment amount is the price of a single brick, which varies by property, e.g. $45 or $81.
How do you fund your account?
Investors select how much they would like to invest per month (minimum $50), although it is possible to skip a month or cancel the monthly deposit. BrickX allows investors to add funds to their account in a few ways. If using Smart Invest, users can set up a monthly direct debit, and top up manually at any time if they wish. If using Build My Own, they can also transfer funds from their Australian bank account manually via POLI or BPAY.
How long does it take to withdraw funds?
Typically, investors can withdraw available funds from their Digital Wallet at any time. However, the processing time may not be immediate, depending on validation checks, and it could take 1-3 days for the funds to appear in your account.
Verdict
BrickX may be a worthwhile consideration for those who wish to invest in property without the high outlay costs. Through its nature as a fractional investment platform, it allows users to own a portion of a property, rather than the whole asset. This may benefit those who wish to diversify their property investment or those that cannot afford traditional property investment.
However, the platform may not suit all property investors, such as those who prefer to be hands-on with their asset. Using the platform could also carry risk, as with any investment. Investors may find it helpful to seek professional advice before proceeding, to ensure they understand the risks.
Article sources
1 Startup Daily. "Property investment platform BrickX closes out $9 million Series A round with backing from NAB Ventures, https://www.startupdaily.net/2018/02/property-investment-platform-brickx-closes-9-million-series-round-backing-nab-ventures/". 28th February, 2018.
2 Australian Financial Review. "NAB, Westpac VC arms sell stake in BrickX, https://www.afr.com/street-talk/nab-westpac-vc-arms-sell-stake-in-brickx-20191211-p53isr". 15th December, 2019.
3 Australian Financial Review. "Property crowdfunding start-up CrowdfundUP closes funding round and eyes China, https://www.afr.com/technology/property-crowdfunding-startup-crowdfundup-closes-funding-round-and-eyes-china-20161004-grubag". 10th October, 2016.
Disclaimer: We put our customer’s needs first. The views expressed in this article are those of the writer’s alone and do not constitute financial advice. Advertisers cannot influence editorial content. However, Finty and/or the writer may have a financial interest in the companies mentioned. Finty is committed to providing factual, honest, and accurate information that is compliant with governing laws and regulations. Do your own due diligence and seek professional advice before deciding to invest in one of the products mentioned. For more information, see Finty’s editorial guidelines and terms and conditions.
