Fifty-nine investors in Auckland and Wellington are now the proud part owners of a block of land they will probably never set foot on.
That’s because the site in question, described as a “good northend location just a short walk from schools and amenities,” is in Oamaru, North Otago.
Specifically, it’s lot 33, Ashburn St, a 1,065 square metre hillside section located in the northern part of North Otago’s largest town. It has a population of 13,107.
It’s also the first successful crowdfunded offer for Opoly, a company aimed at opening property investing to “everyday Kiwis” without the requirement for big deposits or mortgage repayments.
The firm, founded by Felix Watkins, a software engineer and blockchain enthusiast, has already launched two failed crowdfunding campaigns earlier this year.
The first, a $1.1m, two bedroom apartment on Ponsonby Rd in Auckland, stalled after raising just $42,100, while a $947,200 retail unit in Florence Ave, Orewa, managed to raise only $53,500.
This time, Watkins (25) and business partner Isaac Williams, a commercial real estate broker, set their sights much lower.
Its downscaled offer, parcelled as 1,050 shares at $100 each, was launched via PledgeMe on Aug 18.
That covers the purchase price of $90,000, PledgeMe fees of $6,875, a contingency reserve of $3,000 and an acquisition fee to management company Opoly, of $5,125.
On Sunday, it hit its $105,000 target, with pledges from 115 investors. More than half of those came from people in Auckland and Wellington. There were also 13 investors from Canterbury and another 10 in the Waikato, with five local investors from Otago, who took 4%, or $4,200 in shares.
Based on the 1,200 Facebook ‘likes’ the campaign generated, about 56% of those investors are likely to be men and most of those are millennials.
The investment plan is simple, to resell the property in three years for an estimated $130,500 and pocket the capital growth. No GST, no annual rates, no fuss.
Watkins suggested there would be capital growth of about 7.5% compounded annually, based largely on growth projections on the rising Oamaru population and “council land not keeping up with demand”.
At that rate, the average investor who invested $913 can expect to get back $1,134, a return of $221.
PledgeMe chief executive Claire McGowan said fundraising for community owned properties is not new to the platform.
Collett’s Corner, a multi-use commercial building for community use in Lyttelton, raised $1.6 million from more than 600 investors across two campaigns last year.
But their success is often linked to how successful they are in developing communities around them, she said. "That's probably been the most impressive part of Felix's campaign."
Crowd funded real estate schemes have had hit and miss results in NZ to date.
Both Auckland startup The Ownery and The Property Crowd, which both offer a way of entering the housing market by buying shares in the company that buys the house, have had less than stellar results.
A slightly different scheme comes under YouOwn, which provides capital to families to help them pay deposits on a home purchase. That model, which effectively makes the firm a co-owner in the property for five years, suits buyers with a low deposit or whose salaries are too high to qualify for a HomeStart grant.
It can cost the lender up to 1% of the purchase price of the home, however.