GAIN INSTANT EQUITY IN YOUR INVESTMENT PROPERTY ON SETTLEMENT
A Manufactured Equity Product (MEP) allows you to pre-purchase a residential property at a significantly lower price, by allowing you to invest in the fund that the developer will use as a deposit to secure finance and build the property. Once construction is complete, you’ll receive the capital you invested as well as a trust distribution payment equal to approximately 15 percent of the market value of the apartment you purchased, up to a maximum of $75,000.
You are also entitled to any capital growth that was achieved between the time of purchase and settlement. For example, you may invest $100,000 in an MEP for an apartment that’s listed at a price of $400,000. Once the building is complete, you’ll receive your investment of $100,000 back, as well as $60,000 which is 15 percent of the property’s market value. This means you’ll have at least 15 percent equity in your investment property on settlement.
You can use this equity to get a head start on your mortgage, or as a deposit for a second property. We work with MEP specialist Future Estate, who invests in a range of high-quality residential development projects in the inner suburbs of Australian cities and near key employment hubs of mining regions. Extensive market research and rigorous due diligence is undertaken to ensure every project is ‘investment grade’ and located in key growth areas.
The Future Estate MEP program allows you to reinvest profits from one MEP into the next, helping you build a substantial property portfolio fairly quickly. BENEFITS OF MEP INVESTING MEP investments are ideal for property investors as they offer high potential investment returns as well as the security of property ownership at maturity.
Other benefits include:
- You can invest in direct property at near cost price with a single investment amount, usually $100,000 to $150,000
- An MEP investment typically provides a 10-20% discount on the property price, compared to retail pricing
- MEP is generally offered pre-release, which means you get a better choice of units
- Annual returns on your investment funds are often 20% and can be in excess of 50% over a 24- month timeframe
- You can choose to invest in different classes of MEP investments, which offer a range of property features, levels of invested equity and returns
- The MEP Unit Trust is registered with ASIC and compliant with all Self Managed Super Fund (SMSF) legislation and regulations 1
- Your investment is held securely in an MEP Unit Trust and only used as a deposit for the developer’s loan Both Australian and international investors can participate in an MEP Future Estate conducts stringent due diligence on every project, to ensure the developer is in a stable financial position and has a proven track record of creating high-quality projects that offer strong returns for investors
You don’t need to be a property expert to participate in an MEP—our team has extensive property expertise to help you secure your property and set up your MEP investment.
RISKS OF MEP INVESTING
Like any investment, you’ll need to consider the costs involved and understand the risks of MEP investing.
You’ll need to wait around two to three years until construction is complete on your property, before you can access your equity and investment returns
You may need to provide a cash or bank guarantee for 10 percent of the property’s purchase price
The investment required is usually 20-30 percent of the property’s value
There is a risk that the market may fall, as can occur with any property investment
Although the developer may go bust, it’s unlikely, as properties are pre-purchased and there is a lender that’s counting on the sale of the apartments to recoup finance.
If this does occur, the lender may appoint a new developer to complete the project.
Talk to your SF Wealth Financial Adviser to see if MEP investing is the best way to help you build your wealth and achieve your financial goals.
*This information is general in nature and does not take into consideration your personal circumstances. Talk to your SF Wealth financial adviser for property investment advice that’s right for you.