Launched on Saturday, CoVESTA is a fractional investment property buying platform that brings potential buyers together in syndicates to purchase properties they may not be able to afford on their own.
The platform allows potential buyers to buy into a property in one per cent blocks, but the key feature is a syndicate can be established for any home, unit, commercial or industrial property on the market.
Potential buyers can start a syndicate, opt into an existing syndicate and even rent the property that they part own.
CoVESTA opened for pre-registration on Saturday, and CEO Daniel Noble explained it provided home buyers and investors more freedom than ever before in the types of properties they can buy.
“The goal posts have changed and this is a new way that everyday Australians can now get into the property market and build their future wealth.”
He continued, the philosophy behind CoVESTA was to make purchasing a home or investing in a property more affordable and accessible for the average Australian, and it was prompted by his own family’s experience.
“A few years ago, my 67-year-old mother in law was looking to buy the great Australian dream. But the closest affordable properties to Sydney were in Hobartville, 1.2 hours away. That’s a commute of 1.5 hours to Sydney twice each day and $40 in tolls.
“What does the average person do?”
So, he started looking at available options, noting there was little middle ground for people looking to buy into the property market. On the one hand, there was the traditional method of saving for a home, where an initial deposit now takes over four years to attain and in Sydney requires on average over eight years’ savings.
On the other side, there were trusts buying properties for investment, but the sphere was highly governed and structured with no choice of the property acquisition. Meanwhile, crowdfunding offered more flexible access but again no choice as to the property on offer.
“There was very little in the market to solve the real problem for the buyer.”
How CoVESTA works
CoVESTA allows potential buyers to start a syndicate or join an established one to buy into the purchase of any property on the market – from units and houses to hotels, pubs and commercial real estate.
Properties are divided into 100 blocks, and buyers decide the share they wish to own. The investment can be made with either cash savings or from superannuation held in a self-managed super fund.
Once registered on the CoVESTA platform, investors can search and view any property for sale nationwide. They can set up their own investor syndicate with friends, family or workmates or they can choose to join a syndicate of seasoned investors.
Investors then reserve the number of blocks they wish to purchase by paying a 1% deposit of their total investment amount.
When all 100 blocks of a property have been allocated, CoVESTA will purchase the property on the syndicate’s behalf. A trust is established for each property, with all investors holding an interest proportionate to the number of blocks they own.
If all 100 bocks are not reserved within 35 days, the syndicate closes and anyone who has put down a deposit then has the option of choosing another syndicate to join.
Purchased properties are held in trust for five years, during which time investors will be paid their potential share of the rent, less fees and expenses on a quarterly basis.
CoVESTA also acts as the property manager, finding a suitable tenant, taking care of the lease and looking after any repairs and maintenance.
After five years, investors vote to either retain or sell the property – hopefully at a capital gain.
Mr Noble explained the platform provided a new way for buyers to get their foot in the door of an increasingly expensive property market.
It also allowed parents a more streamlined way of contributing to their children’s first home, and established a clear process for family and friends looking to pool their resources and purchase property together.
Family and friends can set up a syndicate, purchase a property and all reap the rewards of capital gains and ongoing rent.
For example, if a property costs $1 million, buying in would cost CoVESTORS as little as $10,000. If a buyer were trying to purchase that property independently, they would need a deposit of up to 20% or $200,000.
CoVESTA also incorporates an Invest and Rent element, where the person who starts the syndicate buys a minimum of 5% of the property share and can also apply to be the property’s tenant for the five-year period.
Mr Noble cited an example in Sydney of how this strategy works, lowering the cost of living as a result.
Say a person wishes to buy an $800,000 property in Coogee. They start a syndicate and use their savings and super to buy 20% of the property blocks and apply to become the tenant, spending $160,000 (plus costs like stamp duty).
Over the next five years, they pay the $800 per week rent, minus the 20% share of the property they own. This makes their weekly rent around $640, significantly less than the standard rental price. Meanwhile, the property is enjoying the capital growth that they will benefit from at the end of the term.
So, if that property increases to $1 million within the five years, the 20% owner will receive around $200,000 from the sale, making a profit of $40,000 (minus expenses and tax). All the while they have enjoyed more cash at hand courtesy of the lowered weekly rental price.
Mr Noble also explained CoVESTA opens up new opportunities for investors, allowing them to diversify their portfolio while exposing themselves to less risk.
An investor can now use their savings to buy into properties previously unaffordable and markets that were once beyond their reach, using the savings they have at hand.
For example, an investor can allocate funds to a syndicate buying an upmarket property in Sydney that looks likely to return good capital growth. At the same time, they can also allocate further funds to an area where capital growth is minimal but the rental yield is high, or buy into a commercial property to widen their asset class.
Ultimately, this means they can spread their investment across numerous properties without a major initial buy-in and can tailor their strategy based on their own risk.
They can also join syndicates of more experienced investors to learn the ropes along the way.
“CoVESTA ensures there is a place in the market for the experience and inexperienced investor alike,” Mr Noble noted. “It becomes the pathway for the majority of Australians to get into the property market.”
CoVESTA opened for pre-registrations on Saturday, December 9, and is due to go live in early 2018.