Fractional Property Investing for First-Home Buyers

Many cash-strapped first-home buyers see fractional property investing as a way to enter the housing market faster, offering partial ownership solutions but raising questions about long-term costs and sustainability.

It has become increasingly challenging for first-home buyers to save for a full property deposit in today’s market. Recent data highlights that individuals earning an average income may take over 10 years to save a 20% deposit for homes in major cities. Even after buying, more than 50% of their income often goes toward mortgage repayments, leaving little room for financial flexibility.

Fractional investing platforms such as BrickX and DomaCom provide alternative pathways to property ownership. These options let buyers purchase small shares of properties rather than committing to entire homes upfront. For instance, BrickX users can invest in “bricks,” small property portions, with initial costs as low as $50, plus associated fees. However, these shares don’t allow immediate residence in the properties and generate returns through rent and property value growth. On the other hand, DomaCom collaborates with Bricklet, combining investment models with co-ownership terms that enable buyers to live in the property while investors fund part of the deposit.

A unique co-ownership setup has been introduced where prospective buyers cover 80% of the home’s purchase price through traditional loans, while investors contribute the remaining 20% through equity funds. These buyers handle mortgage repayments, property maintenance and additional fees, while also paying rent for the portion they don’t own. Buyers can eventually purchase the remainder of the equity to achieve full ownership, typically within 5-7 years, assuming property values increase.

While this model won’t suit everyone, many first-home buyers regard partial ownership as a more attainable route to breaking into the housing market rather than waiting decades to save for a deposit. However, the program’s success hinges on attracting enough investors to fund the equity shares, which might limit its scalability despite high demand.

Source: The Australian