With the introduction of Budget 2019, the government has allowed P2P lending based property funding to take off. The interest for the government to allow this new idea is mainly due to affordability, bringing down the cost of ownership. The first to launch is FundMyHome, initiated by the EdgeProperty.com.
FundMyHome is this:
- 20% downpayment of the desired completed property
- 80% contributed by the respective financial investors
- Lock on for 5 years. Any gains and loss is shared by 20% of the buyer and 80% by the respective financial investors
- FREE to do whatever with the property whether to stay or rent.
FundMyHome is supported by large players in the property and financial industry such as MahSing, CIMB, PKNS, PNB, Sunway, IJM and Trinity Group to name a few.
So far, FundMyHome does not seem to limit too much to investors, as long you are able to put down the 20% downpayment. This will possibly lower the cost of investment but spread off in a shared risk environment for the property buyer, investors and also the property developer.
As some analysis pointed out, its not without risks involved. If a property is valued at RM250,000, the property buyer would have to find financing to pay RM50,000. However he would save on the mortgage loan of the other 80%. That could be a savings of about RM10,000 for the first 5 years. Also if there other upside if he actually puts in a full downpayment for the RM50,000 and getting rental. Not bad for lower entry barrier to buying a property and investing.
Its not without downside though, if property devalues, every investee would lose but it should be limited to the amount invested as it is a shared risk. Property devaluation is usually limited but of course not without risk.
The issue is after 5 years, if it goes up a lot, the property buyer will be asked to buy but if unable to finance it so it will be sold to the next buyer. On the upside, the property buyer will gain on the investment, however, if he/she is living at that property, he/she would have to find a new place. For the investor, this is good as this is exactly how investors wants it to play out – a profit.
So its good for 5 years and its a good buffer time to build up living finances. Maybe there are more goodies later on how the government or shared financial investors wants to help deal with the next 5 years, maybe an extension of the current concept ? Typically, investors wants an exit plan.