Here at BrickX, we are proud to offer you an easy and affordable way to invest in the residential property market with an approach that is strikingly different to traditional Australian property investment and its associated products.
But, as with all investments, investing in BrickX has associated risks. We value transparency which is why we thought it would be helpful to touch on some of the key risks we are asked about the most below, you can also access a comprehensive list of risks involved in the PDS here.
Property Investment Risks
On any given day you will come across an article in the press on the property market in Australia highlighting booms, busts, growth, over-supply, interest rate movements and more. These are general property market risks and can impact property value, future income profiles and monthly distributions.
Properties offered on the BrickX Platform are held in individual trusts by the appointed custodian. By holding properties separately, BrickX aims to quarantine potential losses suffered by one property from other properties offered on the BrickX Platform.
Vacancy and Tenant Risks
All the properties on the BrickX Platform are residential investment properties, which we manage and tenant on your behalf. While we always aim for 100% tenancy, there will be times where our properties might be vacant, the tenant defaults on payment, or unexpected repairs occur and no monthly rental distributions will be paid for the property. New properties are generally not tenanted when we acquire them and there's often upfront expenses such as cleaning, repairs, inspections, etc. so there might be no Distributions for the first few months, until income is generated and starts to outweigh the expenses.
BrickX has adopted strategies aiming to reduce the impact of a vacancy or tenant default, such as landlord insurance and a Cash Reserve (see the What are the Property Acquisition Costs and the Cash Reserve FAQ) established at the time of property acquisition to cover costs incurred during vacant periods. In addition, we take an active approach to property management in trying to secure quality tenants.
Exposure to vacancy and tenant risks noted above can also be managed by you, the investor. You have the ability through the BrickX Platform to diversify your property portfolio and associated risks. So, the impact of a vacancy in one property will be reduced due to the fact that your other property investments on the Platform have tenants and can continue to pay distributions of the net rental income.
BrickX Business Risks
The BrickX Platform is a registered managed investment scheme that is subject to regulatory requirements and oversight. What this means is that we manage investments with investors’ best interests in mind and we continually monitor our performance against industry and legal standards.
As with any business – there is always the risk of failure. Should the BrickX business encounter operational or financial difficulties, BrickX Financial Services Limited (as trustee of the BrickX Trusts and responsible entity of the BrickX Platform) has the ability to elect an alternative Manager or to wind-up the trusts and sell the underlying property, returning any net sale proceeds to investors. The structure provides you, the investor, with the comfort that your Brick holdings will always be managed even in difficult business times.
This is simply an introduction to some key risks in investing in the BrickX Platform and associated properties. All prospective investors must read the PDS to understand the other risks involved with the BrickX Platform.
More articles on risks you should be aware of:
What are the benefits and risks of investing in a geared property?
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