Brick X vs. Listed Shares

By | January 25, 2019

This post will be a comparison between buying Brick X “bricks” or buying one of my favourite REIT’s (Arena REIT).

If you don’t know what Brick X is… ” BrickX is a fractional investment platform that focuses on residential property. The company buys residential properties and splits the cost of the properties into 10,000 “Bricks”. Investors can then purchase Bricks at a price based upon the value of the property. “

Basically, you can purchase one or more of these “bricks” (basically shares of unlisted company) and you get paid a rent from owning these “bricks”.

Brick X

I’ll be using this property as an example. In Adelaide. As you can see it has a net rental yield of 1.3% and “historical growth” of 7.39%.

Some information on the property and how it was purchased.

A graph of previous sales and purchases of properties in this suburb in Adelaide.

A detailed breakdown of how they calculate the investment return. As you can see, only a small amount actually comes from distributions. Most of it comes from estimated growth. Ouch.

A breakdown of the rental yield.

Distribution history. Distribution is paid every month. This was started in October in 2018.

Arena REIT

Share performance of Arena REIT (listed around 2014).

Last years performance of Arena REIT.

Dividend payment history of Arena REIT.

Discussion

So we can calculate a fair assumption of the two businesses we will assume a couple things. We will assume both purchasing fees non-existent and we will buy some bricks and some shares with $1000 that was lent to us by granny. Thanks granny.

Without going into too much detail. It is hard to see the benefits of Brick X. You spend $1000 to get back $10 a year. Very low yield and some speculation on the potential growth. Everyone in Australia knows that the housing price in Australia is ridiculously high and will not (most likely) see the same growth over the next 20 years. It just isn’t possible. I would much rather something like Arena which has returned close to 30% p.a total return to shareholders including dividends. I think Brick X is an OK idea for people wanting a little bit but I don’t see my self investing in any ever.

Arena wins in every aspect. Yield is better. Dividend growth is attractive and overall a better investment. Almost all the Australian REITS (AREIT) would be similar. Thanks for taking a look.

10 thoughts on “Brick X vs. Listed Shares

  1. Pete Latham

    Terrific analysis. Most sophisticated investors would have come to the same conclusion as you did, but you have broken it down and explained it well for the less sophisticated investor who may have been tempted to “own” a brick or two.

    Reply
  2. DivvyDad

    While I currently own a number of REITs, I have also been investigating some of the options available to invest in physical properties. This is interesting analysis on the breakdown between these two options, and based on this I would agree that the REIT is definitely the better choice.

    Reply
  3. Pete Latham

    We own a number of rental properties and only have one son, who admits that he would be incapable of either managing the properties or carrying out maintenance tasks to cut costs. To maintain the balance between “shares” and “property”, one plan is to sell down the “physical” properties and to invest in Reits, thus maintaining an interest in property without the “hands-on” requirement.
    The income will be easier to manage without the agents management charges, Body Corporate fees and rates, but I wonder if there would be any downside with REits in terms of Capital Gains ?

    Reply
    1. Buy - Hold - Long Post author

      Hi Pete, first off I am not an accountant so take what I say with a grain of salt. But as far as I am aware the capital gains wouldn’t occur on REITs until you sell the share. If you mean when a REIT sells a property themselves at a profit, they go into some detail in distribution reports about what the distribution is from. But with Labor (most likely) going to win the next election it looks as if capital gains, franking credits and maybe even negative gearing will all be changed.

      Reply
      1. Pete Latham

        No, my comment about Capital Gains was in relation to…. “Are there any ?” with Reits. I see them as mainly a de facto income share and was wondering what history if SP increases and thus CGs there were ?

        Reply
  4. Charlie

    I think you’re being generous ignoring the fees. Plus after reading their 108 page PDS (which gave me a headache), running a ten year comparison I believe is pointless as Section 6.7 states, “on each 5th anniversary of the relevant Settlement date, Theta will request that Brick Owners consider passing a resolution to (dissolve). Unless the majority votes to continue, this investment type will always be throwing off taxable gains (or losses) rather than deferring over a longer horizon.

    Reply
    1. Buy - Hold - Long Post author

      I agree Charlie. I understand there would be a lot of younger people and others who do not want to part with a lot of money to invest in housing. But this is clearly not the best investment for residential housing. No matter how you spin it….

      Reply

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