A fraction of a Queensland home: the questions ASIC says to ask first

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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Buying a whole house in Queensland comes with a familiar set of checks: the title, the contract, the building, the finance. Buying one fiftieth of a house, through a scheme or a token, comes with a different set, and most buyers have never been shown it. The regulator has written it down all the same.

The Australian Securities and Investments Commission (ASIC) published a guide for investors in unlisted property schemes in November 2012, built around six benchmarks and eight disclosure principles. Its Moneysmart website carries a page on property funds, a page on choosing a managed fund and a page headed "Check before you invest", which was updated on 4 September 2026. ASIC's Information Sheet 225 on digital assets contains one worked example about tokenised real estate. This guide puts the questions from those documents in a usable order and applies each one to the simplest case: a share in one house or one apartment in Queensland. It adds one Queensland check that the federal material does not cover, the title search.

None of this says whether any offer is good or bad. The documents are lists of things to find out, and that is how they are used here.

ASIC, "Investing in unlisted property schemes?", November 2012.

What exactly is being sold?

The first question is not in any checklist, because the checklists assume the answer. Is the thing on offer a piece of real estate, or a financial product built around real estate?

Moneysmart's "Check before you invest" page lists direct real estate among investments that are not regulated as financial products. A person who buys a lot in their own name is doing a property deal, under property rules. A person who pays into an arrangement that buys the lot is doing something else.

ASIC's Information Sheet 225 shows where the line can fall. In its Example 9, a company issues tokens described as fractional interests in an apartment building. Investors' money buys the building, the company holds it as nominee, lets the apartments, keeps the profits in an account and may buy tokens back. ASIC's view is that the token is likely to be an interest in a managed investment scheme. The information sheet describes such a scheme by three elements: people contribute money for rights to benefits, the contributions are pooled in a common enterprise to produce financial benefits, and the contributors do not have day-to-day control.

So the opening questions for a Queensland offer are these. Who will hold the property? What does each buyer receive: a unit, a share, a token, a contractual promise? And who makes the decisions about tenants, repairs and sale? ASIC says a token is the bundle of rights, benefits and expectations attached to it as offered to the public, so the answers lie in what is promised, not in the technology used to record it.

If the answers point to a financial product, the regulator's checklists apply in full. The rest of this guide follows them.

Stop, check, protect: who is behind the offer?

Moneysmart's scam checklist comes before any reading of the investment itself, and it is arranged as three words.

The "check" step names the tools. ASIC's professional registers search covers Australian financial services (AFS) licensees, authorised representatives and managed investment schemes. ASIC Connect holds the banned and disqualified register. Moneysmart keeps an investor alert list of suspicious or unlicensed companies, and there is a separate register of financial advisers. Moneysmart also points to ASIC's Offer Notice Board as a place to look for a prospectus or product disclosure statement.

Applied to a Queensland fraction, that gives a short list of look-ups. Is the company offering the stake on the professional register as a licensee or an authorised representative? Is the scheme itself registered? Does the name appear on the investor alert list? Are the phone number and address in the brochure the same as those on ASIC's record, or only similar?

That last point is there for a reason. Moneysmart warns that scammers misuse licence details: by claiming to hold a licence, by quoting another entity's licence number, or by impersonating a licensed business. It also reports that ASIC removed more than 19,400 online scams in 2025/26, up 182 per cent on the year before. A glossy page about a beachfront apartment proves nothing about who built the page.

The same Moneysmart page lists warning signs: a provider with no AFS licence or one that says it does not need one, repeated calls and messages, the borrowed name of a reputable organisation, a prospectus that is not registered with ASIC, and returns that sound exceptional.

The Queensland check: who holds the title?

The federal checklists stop at the financial paperwork. A Queensland property adds a record that anyone can read.

Under section 27 of the Land Title Act 1994 the registrar keeps a freehold land register. Section 28 says it must record the particulars that identify every lot, every registered interest, the name of the person who holds each registered interest, and the registered instruments with their dates. Section 38 defines the indefeasible title for a lot as the current particulars in that register about the lot. And section 35 allows a person, on payment of the titles registry fee, to search and obtain a copy of the indefeasible title of a lot, or of a registered instrument.

For a buyer of a fraction, this turns three claims in an offer document into things that can be compared with the State's record.

• Does the property exist as described? The offer should identify the lot. The search shows the lot's particulars.
• Who holds it? If the offer says a company or trustee holds the house for investors, the name on the register should be that entity's. If the offer says the property "will be acquired", the register will show the current holder, who is somebody else.
• What else is registered against it? Section 28 requires every registered interest to be recorded. An offer that says the property is unencumbered, or that states the size of the loan, can be read beside the interests the search discloses.

The title search has a limit that should be stated just as plainly. The Act's list of what the registrar records does not include units, tokens or interests in a scheme. A search will not show a buyer's own fraction. It confirms the base of the arrangement, and the financial documents have to account for everything above it.

Is this product meant for someone like you?

Moneysmart's page on property funds says the investment manager must provide a product disclosure statement (PDS) explaining how the scheme works, its features, risks, fees and management. Its page on choosing a managed fund lists what to take from that document: what the fund holds, whether the mix suits the investor's goals, the recommended timeframe, the minimum investment, how withdrawals work, fees and costs, the risk profile and how to complain.

A second document, the target market determination, lets the investor test the fit from the other side. Moneysmart says it shows whether the fund is in line with the investor's objectives, timeframe, risk tolerance and need for access to their money. For a single Queensland apartment those four points are concrete. Is the aim rent, growth, or both? Is the stated term five years, ten, or until the manager decides to sell? How would a year without a tenant be absorbed? And can the stake be turned into cash if circumstances change?

Then comes a question about the buyer. Is the offer made to retail clients, or only to wholesale ones? Information Sheet 225 lists the extra requirements that attach to retail clients: disclosure documents, design and distribution obligations, internal and external dispute resolution, and compensation arrangements. Moneysmart notes that sophisticated investors may be offered products without regulated disclosure documents, and its glossary gives the test: an accountant's certificate of gross income of $250,000 or more in each of the previous two years, or net assets of at least $2.5 million.

A buyer who is asked for such a certificate before being shown an offer should understand what the request means. It is not a compliment. It moves the buyer to the side of the line where a PDS may not be owed. ASIC's information sheet says entities are expected to know who their investors are to justify treating them as wholesale.

Where there is no PDS at all, most of the questions below still make sense. They simply have to be put directly to the operator, with no standard document to answer them.

How much has the scheme borrowed?

Four of ASIC's benchmarks and principles deal with debt, and they are the part of the guide that maps most directly onto a house.

Gearing ratio. ASIC's formula is total interest-bearing liabilities divided by total assets. The guide's scale runs from 0 per cent, with no debt, to 100 per cent and beyond, where the scheme owes as much as or more than it owns. It adds that a higher ratio means higher risk and records that advisers regard ratios above 60 per cent as highly risky. The matching benchmark asks whether the manager has a written policy that watches gearing loan by loan, because an overall figure can hide a problem in one facility.

Interest cover ratio. Earnings divided by interest repayments. The table sets out how ASIC's guide reads the result.

Interest capitalisation. ASIC's third benchmark is that a scheme should not add unpaid interest to its loan. If it does, the manager should explain how the larger debt will be repaid.

Scheme borrowing. The third disclosure principle asks for the debts and when they fall due, undrawn facilities, the prospects of refinancing, any breach of loan covenants and the key loan terms. ASIC singles out debt due within one year as a risk of forced sale.

A worked example shows why these matter more for one property than for many. Assume a scheme whose only asset is a Queensland apartment valued at $800,000, with a loan of $320,000, yearly earnings from rent after costs of $24,000 and yearly interest of $16,000. These are illustrative figures. The gearing ratio is $320,000 divided by $800,000, or 40 per cent. The interest cover ratio is $24,000 divided by $16,000, or 1.5.

Now assume the apartment is revalued 20 per cent lower, at $640,000, with the loan unchanged. Gearing becomes $320,000 divided by $640,000, or 50 per cent, without the scheme borrowing another dollar. And if the apartment stands empty for half a year so that earnings fall to $12,000, interest cover drops to 0.75, below the level at which the table says earnings meet the interest bill. A fund with twenty buildings averages such events. A scheme with one lot takes each of them whole.

The questions for the Queensland buyer follow. What is the gearing ratio today, and at what level does the lender have rights? What is the interest cover? Is interest being paid or capitalised? When does the loan fall due, and what happens if it cannot be refinanced?

One property, one valuation

Portfolio diversification. ASIC's fourth disclosure principle asks the manager to set out the number and value of properties by location and sector, recent valuations, lease expiries, occupancy, major tenants, and the value of any development or construction assets. Its comment is short: concentrated portfolios increase risk.

A single-property offer answers this principle in one line, and the honest reading of that line is that there is no diversification inside the product. The buyer's questions become: how long does the current lease run, who is the tenant, and what share of the buyer's total savings is going into this one address? Moneysmart's own first question about any fund is how it fits the investor's wider plan.

Valuation policy. The fourth benchmark asks whether the manager has a written policy that gets properties valued by experts at set times. For developments, ASIC asks for two figures, an "as is" valuation and an "as if complete" valuation, with the risks explained. For a Queensland fraction sold before the building exists, the gap between those two numbers is the amount that depends on the project being finished on time and on budget.

Useful questions here: who valued the property, when, and for whom? How often will it be revalued? And what purchase price did the scheme pay compared with that valuation? Moneysmart's point about unlisted funds applies with force: their value is less transparent, and an investor cannot easily see whether it is going up or down between valuations.

Where the income comes from, and who gets paid

Distribution practices. ASIC's sixth benchmark is that distributions are paid only from cash from operations, excluding borrowings. The matching disclosure principle asks the manager to state the source of current and forecast distributions and, where they are not paid from income alone, to say why and whether they can be sustained over the next 12 months. The guide treats payments funded by revaluations, new capital or borrowings as a sign that the level cannot last.

For one rented house the arithmetic is easy to follow, which makes the question easy to put. Is the advertised yield covered by the rent actually received, after rates, insurance, management, repairs and interest? If the distribution is larger than that, where does the difference come from?

Related party transactions. The fifth benchmark asks for a written policy, and the fifth principle asks for the number and value of dealings with related parties, the relationship, the terms, the remuneration, and how such dealings are approved and monitored. In a property scheme the obvious places to look are the seller of the property, the builder or developer, the property manager and the lender. If any of them is connected to the operator, the price or fee was not set between strangers, and ASIC's guide says such deals carry a greater chance of loss.

Fees. Moneysmart lists the kinds a managed fund may charge: establishment fees, contribution fees, management fees and costs, performance fees, and transaction, withdrawal or exit fees. A fractional offer may use other names for the same things. The question is what the buyer pays on the way in, each year, and on the way out, and how that compares with the rent.

How do you get out?

Withdrawal rights. ASIC's seventh disclosure principle asks whether investors have a right to withdraw, how it is exercised, on what conditions, the longest possible wait, and what could prevent a redemption. The guide's warning is direct: many unlisted schemes offer no withdrawal rights at all, and some impose delays of 12 months or more, or cap the amount that can be redeemed at one time. Moneysmart says the same of unlisted funds in general: money may be locked in for a set period, with strict conditions and fees for withdrawal.

Moneysmart's fund-choosing page turns this into four checks: when withdrawals are allowed, how long they take to process, what they cost, and in what circumstances they can be restricted.

A token adds a claim that needs the same scrutiny. An offer may say a fraction can be sold to another buyer at any time. That is a statement about a market for the stake, not about a right to have the scheme pay the money back. The regulator's question is about the second. If the only exit is finding a purchaser, the buyer needs to know where, at what cost, and what happened the last time someone tried.

Net tangible assets. The eighth principle asks for the NTA backing per unit: net assets, less intangibles and adjustments, divided by the units on issue, worked from the latest financial statements. Set beside the price being asked for a new fraction, it shows how much of each dollar is backed by the property after debt and costs.

A whole house can be sold by its owner. A fraction can be sold only on the terms the scheme allows, and those terms are written before the buyer arrives.

ASIC's nine plain questions

After the ratios, ASIC's 2012 guide steps back and puts questions that need no calculator. They are worth reading slowly with a specific Queensland property in mind.

1. Does this investment meet your financial goals and your timeline?
2. How does it fit into your overall financial plan?
3. Do you understand the risks?
4. Can you explain how the scheme makes its money to someone else?
5. Will the return compensate for the risk?
6. How does it compare with similar investments?
7. Can you get at your money if you need it, and how long would that take?
8. Is the scheme diversified or concentrated?
9. What happens if property values fall?

Moneysmart repeats the fourth as a test in its own right: try explaining the investment to another person, including how it generates money. For a fraction of a house the explanation has to cover more than "property goes up". It has to say who holds the lot, what the buyer holds, where the rent goes before it reaches the buyer, and how the stake becomes cash again.

The sixth question has a natural Queensland comparison. A listed property fund, as Moneysmart describes it, shows its unit value at any time and trades on a public market under listing rules. A direct purchase of a lot gives the buyer a name on the register and control of the asset. A fraction of one lot through an unlisted arrangement offers neither of those features, and the question is what it offers in their place.

If something goes wrong

Moneysmart ends its checklist with the difference a licence makes after the event. Where the company is licensed, an investor can lodge a complaint and the company must attempt to resolve it. Information Sheet 225 lists internal and external dispute resolution and compensation arrangements among the requirements that apply to services for retail clients.

Where the company is unlicensed or the investment unregulated, Moneysmart says losses are harder to recover and that speed matters. It directs readers to its page on what to do after a scam and asks that scams be reported to Scamwatch. ASIC's 2012 guide adds that misleading advertising and high-pressure selling of property schemes can be reported to ASIC itself.

That is why the order of the questions matters. The licence and register checks come first because they decide which protections exist at all. The title search comes next because it tests the one fact every other promise rests on. The ratios, the fees and the exit terms come after, and the regulator's material offers no shortcut through them: each is a number or a clause that the offer document either states or leaves out.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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