Investment

The ResiFund Concept

By Matthew Lewison | | 0 Comments

The residential property market has been the best performing over the last 30 years with the lowest volatility

Property trusts are not unique in Australia. In fact, property trusts had been around for decades.

Most investors would be aware of the concept of investing in a property trust that buys retail or commercial office assets, but it struck us as strange that within Australia there were no residential property trusts that catered for a market that’s three times bigger than the ASX.

The residential property market is not only the largest asset class in Australia, it has also been the best performing over the last 30 years with the lowest volatility.

We thought we really need to spend some time focusing on this because Australians deserve to have access to that market. We looked all around the world for the best models.

We observed that in America more than 25% of capital that’s invested through managed funds ends up in residential property. In the UK it’s a growing market and in some other countries around the world it’s the largest asset class for major institutional investors.

We felt we needed to provide a similar option for Australians and we need to come up with a model that works within our market.

Harry Triguboff would have to be considered the most successful residential property investor in Australia. When he was starting out, he built townhouses, often selling some of the townhouses and keeping the rest.

Bulletproof

Now he owns thousands of properties generating rent every week and he’s become virtually bulletproof, in a financial sense. He has so much positive cashflow that he can now build and add value to his properties without needing to pre-sell.

Looking outside of Australia, a man by the name of Donald Bren has followed almost exactly the same path as Harry Triguboff. He owns thousands of properties in the US, generating rent every week.

No matter what happens in the market, even through the GFC, most of those tenants keep paying rent. Again, his portfolio is virtually bulletproof for most financial shocks provided that he does not suddenly decide to take considerably more risk.

A little bit closer to home, we realised that it’s almost the same model that my father introduced us to more than 30 years ago.

Positive cashflow

Steve Lewison built six townhouses in the 1980’s, selling four and keeping two with very little mortgage. From that small portfolio he was generating positive cashflow which allowed him to move onto his next property and once again added value to it, generating positive rent at the end.

That model allowed him to scale his portfolio without taking sales risk and after we started acquiring properties for ourselves in the 90’s, Allister and I also began to adopt the buy-add value-rent out model.

We realised that it was a model that could be replicated to help others to grow their wealth through residential property, without them needing to take considerable risks doing it on their own. The question was, how do we help to bring this to Australians in a way that works for them?

Low gearing

Our goal was to maintain low gearing and to buy assets that are either income generating from day one or which we can add value to and hold for many years, generating positive income for our investors. As that portfolio grows it becomes more and more bulletproof, like Harry Triguboff and Donald Bren.

The reason for this is that the more properties we have generating rent, from many different sources, the more robust the income will be and the lower risk it is for investors.

Not only does this mean that we can generate great cashflow over time, but it also allows us to continue to add property to the portfolio.

Even in a downturn, property owners that hold income generating assests are able to buy assets while others are selling and there less competition in the market.

Higher income yields

That leads to buy at a considerable discount to market price, translating to higher income yields and stronger rental income. It allows us to really take advantage of market cycles rather than being the victim of market cycles as many property investors are if they are reliant on too much debt and low yielding property.

It’s taken us three years to get to this point.

We’ve been all around the world, looking at all these models, and we’ve been making sure that we’re providing the best property investment platform that we can for investors and we think we’ve nailed it with ResiFund.

READ MORE: How ResiFund works

 

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