WO2004040484A1

WO2004040484A1 - Real estate investment system and method

Info

Publication number: WO2004040484A1
Application number: PCT/AU2003/001438
Authority: WO
Inventors: Peter Olsen
Original assignee: Dempwood Pty Ltd
Priority date: 2002-10-31
Filing date: 2003-10-30
Publication date: 2004-05-13

Abstract

A computer-based method to match passive investors (12) and active investors (14) in the purchase of real estate prope (20) using a mortgage provided by a financial institution (18). The active investors (14) and the passive investors (12) ente into an agreement whereby the passive investor (12) maintains a passive investment in a property by providing at lea: guarantee to the financial institution (18) that the mortgage will be serviced, and the active investor (14) maintains an active investment in a property by providing servicing the mortgage. Also disclosed is system for matching active a passive investors of real estate property, a real estate investment instrument for use by active and passive investors the purchase of real estate property and a computer-based system to maintain records associated with passive investments made by passive investors in real estate property and active investments made by active investors in re, estate property.

Description

REAL ESTATE INVESTMENT SYSTEM AND METHOD

Technical field

The present invention relates to a real estate investment method and system. Background of the invention

It has been well known for many years to pool numerous investors together in order to purchase real estate property. The formation of property investment syndicates comprising a pool of funds provided by a group of individual investors, allows the syndicates to purchase real estate property that might have been beyond the resources of individual investors investing alone. Investors of property investment syndicates pool their resources and thereby obtain a share in any capital gains or loss realised on the sale of the investment property and obtain a share from any income generated by the property by way of rental streams. The individual investors of the property syndicate may enter into a formal legal agreement whereby each of the duties of the investors is defined or they may enter into an informal arrangement whereby individual investors duties to the investment syndicate are based on trust (i.e. members of a family arranging to invest in property).

Other more formal types of investment structures to invest in real estate property include managed property trusts. In such a structure, real estate property is held in the name of a unit trust.

The trust is overseen by a trustee and will typically include a professional management team which oversees the trust's investments in real estate property and makes decisions regarding the purchase, management and sale of property investments held by the trust. Units are held by unit holders who receive any benefits distributed by the trust. If the property trust is listed on a public exchange, units within the trust can be bought and sold by investors.

By pooling funds in property syndicates and property trusts, investors are not only able to obtain a stake in real estate investment properties that may have been beyond their individual means, but they are also able to reduce their exposure to investment risk associated with investing in real estate investment property.

One tool to increase investors exposure to investment property is to leverage their investment using finance provided by a financial institution such as a bank. Any capital gain or loss realised on the sale of the property will include a gain or loss on the loan amount that was used to purchase the property. In the case of a capital gain on the sale of the property, the investor reaps any gain on the loan component and any equity they have invested in the property. Conversely, any capital loss on the sale of the property must be worn by the investor.

Banks typically provide finance to purchase real estate investment properties to investors by way of a mortgage. To obtain a mortgage for the purchase of property, the bank will require some form of security from the investor, typically in the form of a monetary deposit, an interest in equity associated with another property or a legal guarantee provided by the investor based on capital owned by the investor.

In Australia, to obtain an investment loan, most banks require a 20% deposit of the property purchase price to secure the loan. If the vendee intends living in the property, some financial institutions will grant the loan if the vendee provides a 5% deposit of the property purchase price to secure the loan. However, the vendee will typically have to take out mortgage insurance which increases the costs of financing the loan.

A number of established investors (e.g. older people) have a large amount of equity in their family home and are able to use this equity to purchase investment properties. One way to arrange finance for an investment property is for the established investor to use the equity in their home linked to a bank guarantee in support of the loan.

It can be quite difficult for less established investors (i.e. younger people) to enter into the property market if they do not have a cash deposit saved in order to obtain an investment loan from a financial institution. This is particularly so in a rising housing market wherein the capital growth on housing increases by 10% each year, as the required deposit will consequently increase by 10% each year.

In situations where the average income does not keep pace with the rate of property growth, entering the property market for the younger investor or an investor who has good cash flow but little or no equity, can be difficult. Additionally, older investors, such as people approaching retirement or in retirement, may own their own home, however, as older investors may be retired or living off invested income, they may not have any spare cash to unlock the equity in their home and use it to invest in investment property. ^■

Generally speaking, younger investors are less . established investors and typically have good cash flow as a result of steady income, but minimal capital. Established investors are typically older (such as retirees) and typically have minimal disposable income (as they may be on a fixed retirement income) but have a. substantial amount of capital or equity available in their homes.

For a younger investor to obtain a mortgage for a home without a deposit, it is known for an older investor (such as the younger investor's parents) to provide the bank with a guarantee that the younger investor will service the loan. The older investor's guarantee is based on capital owned by the older investor or equity in the older investors home. The guarantee may stipulate that the older investor will take over the loan should the younger investor default and will rely on the equity in the older investor's home as security. However, for this arrangement to come about, it is necessary for the less established investor and the established investor to have an existing relationship (ie related by family) in order to purchase property. It would be an advantage if the present invention provided a facility to assist in matching active and passive investors in the purchase of real estate property.

It would also be an advantage if the present invention provided a facility to assist in matching active investors who are able to service a mortgage for a property with passive investors who are able to provide a bank guarantee to obtain the mortgage. It would be an advantage if the present invention provided an investment instrument for use by active and passive investors in the purchase of real estate property.

It would be a further advantage if the present invention provided a computer-based system to maintain records associated with passive investments made by passive investors in real estate property and active investments made by active investors in real estate property. Summary of the invention

According to a first broad aspect of the invention, there is provided a computer-based method to match passive investors and active investors in the purchase of real estate property 5 using finance such as a mortgage provided by a financial institution; said active investors and said passive investors entering into an agreement whereby a passive investor maintains a passive investment in a property by providing at least a guarantee to said financial institution that said mortgage will be serviced or a deposit for said mortgage, and said active investor maintains an active investment in a property by at least providing an undertaking to service a predetermined 0 amount of payments associated with the mortgage for the purchase of a property, said method comprising the steps of: maintaining one or more records of potential active investors that have registered an interest in holding an active investment in real estate property; maintaining one or more records of potential passive investors that have registered an 5 interest in holding a passive investment in real estate property; allowing said potential active investors and said potential passive investors to select a property to purchase after they have reviewed real estate listings; matching, from said selection by said potential passive investors and said potential active investors of property to purchase, at least one active investor and at least one passive investor to 0 purchase said selected property.

, ' The method may include the further step of allowing said potential active investors and said potential passive investors to access real estate listing data relating to a plurality of real estate properties that are listed for sale.

The method may further include the step of allowing a potential passive investor to 5 nominate an equity holding in said property in return for providing said guarantee to said financial institution.

The method may further include the step of allowing a potential active investor to nominate an equity holding in said property in return for undertaking to service said predetermined amount of payments associated with said mortgage. 0 Optionally, a plurality of said nominated equity holdings submitted by a plurality of said potential passive investors are prioritised according to defined criteria for selection of a passive investor by an active investor.

Optionally, a plurality of said nominated equity holdings submitted by a plurality of said potential active investors are prioritised according to defined criteria for selection of an active 5 investor by a passive investor.

The active investor may undertake to pay all payments associated with said mortgage for said property.

The method may include the step of allowing a broker agent to facilitate matching of said passive and active investors. The broker agent may obtain financial information relating to the finances of said active and passive investors and uses said financial information to prepare a mortgage application to purchase said property.

Preferably, the broker agent manages said real estate property on behalf of said active investor and said passive investor.

The agreement may optionally allow said passive investor to sell or transfer their passive investment in said property according to a predefined formula.

The agreement may allow said active investor to sell or transfer their active investment in said property according to a predefined formula. In one embodiment, the predefined formula is based on at least two property valuations obtained from a property valuer.

The step of maintaining one or more records of potential active investors may include data fields relating said potential active investor's selection criteria for purchasing a property.

The step of maintaining one or more records of potential passive investors may include data fields relating said potential passive investor's criteria for purchasing a property.

The selection criteria optionally includes any one or more of the following: maximum and minimum purchase price of the property; geographic location of the purchase property; the purchase property type; the minium and maximum term for holding an active or passive investment in the property; nominated range of equity in the purchase of the property that the active investor or passive investor intends holding in the property. '

According to a second, broad aspect of the invention^ there is provided a computer-based system to match passive investors and active investors in the purchase of real estate property using finance, such as a mortgage, provided by a financial institution, comprising: computer means; database means adapted to be interrogated by said computer means, said database means adapted to record data associated with an agreement made between an active investor and a passive investors whereby said passive investor maintains a passive investment in a property by providing at least a guarantee to said financial institution that said mortgage will be serviced or that a deposit for said mortgage, and said active investor maintains an active investment in a property by at least providing an undertaking to service a predetermined amount of payments associated with the mortgage for the purchase of said property; said database means adapted to maintain one or more records of potential active investors that have registered an interest in holding an active investment in real estate property and to maintain one or more records of potential passive investors that have registered an interest in holding a passive investment in real estate property; a selection program executable by said computer means, said selection program being adapted to record a selection to purchase a real estate property by said potential active investors and said potential passive investors; a matching program executable by said computer means, said matching program being integral with said selection program or said matching program being adapted to interface with said selection program, said matching program being adapted to match at least one active investor and at least one passive investor to purchase said selected real estate property.

Optionally, the computer-based system further comprises listings data means executable by said computer means and being used by said potential active investors and said potential passive investors to access real estate listing data relating to a plurality of real estate properties that are listed for sale.

The selection program may allow a potential passive investor to nominate an equity holding in said property in return for providing said guarantee to said financial institution.

The selection program may allow a potential active investor to nominate an equity holding in said property in return for undertaking to service said predetermined amount of payments associated with said mortgage.

The selection program optionally puts in order of priority, a plurality of said nominated equity holdings submitted by a plurality of said potential passive investors according to defined criteria for selection of a passive investor by an active investor. The selection program optionally puts in order of priority, a plurality of said nominated equity holdings submitted by a plurality of said potential active investors according to defined criteria for selection of an active investor by a passive investor.

The active investor preferably undertakes to pay all payments associated with said mortgage for said property. . " The computer means may include a broker agent computer having said matching program stored therein to facilitate matching of said passive and active investors.

Optionally, the database means includes a broker agent database located on said broker agent computer, said broker agent database adapted to record financial information relating to the finances of said active and passive investors. Optionally, financial information located in said broker agent database is accessible by an application program located in the memory of said broker agent computer to prepare a mortgage application to purchase said property.

The financial information located in said broker agent database may be accessible by said application program to manage the retrieval of rental income from said real estate property on behalf of said active investor and said passive investor.

Preferably, the broker agent database includes records fields associated with selection criteria for purchasing a property defined by said potential active investors and said potential active investors.

The selection criteria may include any one or more of the following: maximum and minimum purchase price of the property; geographic location of the purchase property; the purchase property type; the minium and maximum term for holding an active or passive investment in the property; nominated range of equity in the purchase of the property that the active investor or passive investor intends holding in the property. According to a third broad aspect of the invention, there is provided a method of creating a real estate investment instrument for exchange by active and passive investors in real estate property, said method comprising the steps of: creating an agreement between at least one active investor and at least one passive investor to own the title of at least one real estate property; financing at least a part of the purchase cost of said at least one real estate property using funds provided by a financial institution under a mortgage; allowing said title of said at least one real estate property to be controlled by said at least one passive investor whereby a passive investor maintains a passive investment in a property by providing at least a guarantee to said financial institution that said mortgage will be serviced or a deposit for said mortgage, and said active investor maintains an active investment in said property by at least providing an undertaking to service a predetermined amount of payments associated with the mortgage for the purchase of said property.

According to a fourth broad aspect of the invention, there is provided a computer- based system to maintain records associated with passive investments made by passive investors in real estate property and active investments made by active investors in real estate property, the purchase of real estate property being at least partly funded by a mortgage provided by a financial institution, the system comprising: computer means; database means adapted to be interrogated by said computer means, said database means recording data associated with an agreement made between said active investors and said passive investors whereby a passive investor maintains a passive investment in a property by providing at least a guarantee to said financial institution that said mortgage will be serviced or a deposit to obtain said mortgage, and said active investor maintains an active investment in a property by at least providing an undertaking to service a predetermined amount of payments associated with the mortgage for the purchase of said property; and an application program provided on said computer means, said application program being adapted to interrogate records within said database and to generate reports associated with said active and passive investments. According to a fifth broad aspect of the invention, there is provided a method for managing a real estate investment portfolio, wherein the method includes pooling guarantees of passive investors as security for one or more debt instruments to finance the investment portfolio, pooling the funds of active investors in order to service the one or more debt instruments over a predetermined time period, either maintaining a sufficient level of pooled guarantees from the passive investors to maintain the security for the one or more debt instruments, or maintaining a sufficient level of pooled funds from the active investors to maintain servicing of the one or more debt instruments for the predetermined time period or both.

According to a sixth broad aspect of the invention, there is provided an investment structure for investing in real estate property, the investment structure comprising: a plurality of investment instruments issued from an entity capable of issuing investment instruments to a plurality of investors of real estate property, the plurality of investment instruments representing, or associated with, equity holdings in one or more real estate properties, wherein the one or more real estate properties are financed under one or more debt instruments provided by one or more financial institutions; wherein investors are selected from a group including active investors and passive investors; wherein the passive investors are issued with one or more investment instruments by providing at least a guarantee to the one or more financial institutions that the one or more debt instruments will be serviced, wherein the active investors are issued with one or more investment instruments by providing at least an undertaking to service a predetermined amount of payments associated with the one or more debt instruments for a predetermined amount of time, wherein the security provided by the passive investors is managed to ensure that sufficient security is available to maintain security for the one or more debt instruments, and wherein the repayments provided by the active investors is managed to ensure that sufficient repayments are available for servicing the repayments associated with the one or more debt instruments.

In one embodiment, the entity is a company and the investment instruments are shares, options or convertible notes issued by the company. In another embodiment, the entity is a trust and the investment instruments are units that are issued by the trust.. In yet another embodiment, the entity has an equity holding in a further second entity and wherein title to the one or more properties is held by the second entity. The second entity may be a trust.

According to a seventh broad aspect of the invention, there is provided an investment method for investors of real estate property, wherein the investors are selected from the group of active investors and passive investors, the investment method comprising the steps of: offering a plurality of investment instruments to one or more passive and one or more active investors of real estate property, the investment instruments being issued by an entity capable of issuing investment instruments, the plurality of investment instruments representing, or associated with, equity holdings in one or more real estate properties, financing the one or more real estate properties under one or more debt instruments; entering into an agreement with the one or more passive investors, wherein the one or more passive investors are issued with the one or more investment instruments by providing at least a guarantee that the one or more debt instruments will be serviced or by providing at least one deposit of funds, and entering into an agreement with the one or more active investors, wherein the active investors are issued with one or more investment instruments by providing at least an undertaking to service a predetermined amount of payments associated with the one or more debt instruments for a predetermined amount of time. According to an eighth broad aspect of the invention, there is provided a computer program encoding a set of computer instructions for an investment structure for investing in real estate property, which when running on a data processing system is adapted to perform the method of the fifth broad aspect of the invention or seventh broad aspect of the invention. According to an eighth broad aspect of the invention, there is provided a data processing system that monitors the obligations of investors that have been issued with investment instruments from an entity under an investment agreement, the investment instruments representing or associated with, equity holdings in one or more real estate properties that are at least partly financed by one or more debt instruments, the investors selected from a group including active investors and passive investors, the system comprising data processing apparatus including a data processor and data storage means associated with the processor and interactive communication means in communication with the data processor; the interactive communication means is configured to allow the data processor, configured in accordance with an application program running on the data processor to:

(i) record in the data storage means, investment data associated with each investor that has been issued with investment instruments, the investment data including information as to whether an investor is an active investor or a passive investor under the investment agreement, ^• and ■ (ii) to monitor the obligations arising under the investment agreement for each investor over a predefined time period, ^{• • ■} <^•,- wherein the obligations of the active investors is to make a predetermined amount of payments associated with the one or more debt instruments during a predefined time period; and wherein the obligations of the passive investors is to maintain at least a guarantee as security for the at least one or more debt instruments.

The term 'real estate property' and 'property' in the description of the specification and in the claims, are to are to be given a broad interpretation and include residential real estate property, apartments, strata developments, land parcels, commercial property, industrial developments, and agricultural land. Brief description of drawings

A preferred embodiment of the invention will now be described by way of example only with reference to the accompanying drawings which describe:

Figure 1 shows a schematic diagram of the interaction between passive investors and active investors in the purchase of real estate property; Figure 2 shows a computer system used by a property broker to implement the preferred embodiment of Figure 1 ;

Figure 3 shows a process flow chart of the steps active and potential investors must undertake in order to purchase investment property in accordance with a preferred embodiment of the invention; Figure 4 shows a schematic diagram of an investment structure for active and passive investors in accordance with a further preferred embodiment of the invention;

Figure 4A shows a computer system that is used to implement the investment structure of Figure 4;

Figure 5 shows a schematic diagram of yet another alternative investment structure for active and passive investors to Figure 4; and

Figure 6 shows a schematic diagram of the steps for an algorithm used by the application program of the computer system of Figure 4A to monitor funds from active investors;

Figure 7 shows a schematic diagram of the steps for an algorithm used by the application program of the computer system of Figure 4A to monitor funds from passive investors; and Figure 8 shows a schematic diagram of the steps for an algorithm used by the application program of the computer system of Figure 4A to assist in the adjustment of the investment structure of Figure 4.

Description of the preferred embodiments

Referring to Figure 1 , there is shown a schematic diagram of the interactions between passive investors who wish to make a passive investment in real estate property and active investors who wish to make an active investment in the purchase of a real estate property.

The system 10 includes passive investors P^, Pl₂ ... Pl_n, labelled 12, and active investors Al_l, AI₂ ... AI_n, labelled 14.

The system also includes a property broker 16 who assists the active investors 14 and passive investors 12 in arranging finance from financial institution 18 for the purchase of real estate property. In this embodiment, .the property broker also assists active investors 14 and passive investors 12 in selecting real estate property from property listings provided by real estate agents (not shown). The property broker 16 also operates a computer system that is programmed to match active investors 14 and passive investors 12 that have selected particular property to purchase.

It will be appreciated that any number of passive investors 12 and active investors 14 can register with property broker 16. When passive investors 12 and active investors 14 register with property broker 16, a user account is opened by property broker 16 and information associated with the user account is stored in a database operated by the property broker as will be further described below.

Additionally, although a single financial institution 18 has been shown in this embodiment of the invention, any number of financial institutions could be associated or used by broker 16 to arrange finance to purchase properties for active investors 14 and passive investors 12.

The property broker 16 has access to a plurality of listings associated with the sale of real estate property, labelled 20. Real estate property 20 includes property Pi, P₂ ... P_n.

Referring now to Figure 2, there is shown a schematic diagram of a computer system 22 that is operated by the property broker 16. The computer system 22 includes a processor 24 that processes data according to instructions received from programs located in memory 26. For convenience, not all of the programs to drive the various functions of the computer system 22 are shown in Figure 2 or described herein. These will be known to persons skilled in the art, but for present purposes, the memory 26 includes listing program 26A matching program 26B, and application program 26C.

Each of the programs located in memory 26 are able to interrogate database 28 which stores data associated with the computer based matching system 10 of the preferred embodiment as will be described further below.

An overview of the system 10 will now be described with reference to the arrows of Figure 1 and by way of example.

A passive investor 12 registers with the property broker 16 and maintains an account with the property broker 16. The information relevant to the account is stored in database 28. The passive investor registers their interest in purchasing a property with the property broker 16. The passive investor 12 usually must show evidence that they have sufficient equity or capital that they can use to provide at least a bank guarantee or equity deposit to a financial institution should an agreement be entered into with an active investor to purchase a property 20. The passive investor 12 will be provided with a monetary figure as to how much he/she can invest in real estate property 20 based on the equity they have in their existing real estate portfolio or based on any other assets that they own.

The passive investor 12 registers their interest with property broker 16 by filling in a form and providing this information to the property broker 16 or they may in fact register their interest online using a website (not shown) maintained by property broker 16. Information provided by the passive investor 12 will be verified before they are allowed to select a property to purchase in partnership with. an active investor.

An active investor 14 maintains an account with the property broker 16 when they register their interest in making an active investment to purchase property. The active investor 14 must provide details to the property broker 16 such as their income and any debts that must be serviced. The property broker 16 will obtain an undertaking from the active investor 14 to allow them to perform a credit check with a credit reporting agency and the property broker 16 will obtain or have checks conducted to ensure that the active investor provides correct information to the property broker 16.

When the passive investor 12 and the active investor 14 register with the property broker 16 they define their expected limit as to how much they believe they want to invest in real estate and they define any limitations which should be used in matching passive investors with active investors.

The active investor 14 and the passive investor 12 have to provide the following additional information before matching can be completed: • the maximum and minimum purchase price of the property;

• the geographic location of the purchase property;

• the property type (i.e, commercial property, housing, apartment);

• the minium and maximum term that they expect to hold their active investment in the property; • the nominated range of equity in the purchase of the property that the active investor 14 and passive investor 12 wish to hold in the property for their respective active and passive investment commitment. Either the active investor 14 or the passive investor can also nominate whether or not they themselves want to live in the property and pay a rent component to the other investor. Once the passive investor 12 and the active investor 14 have registered with the property broker 16 they are able to view listings of properties held by the property broker 16.

In this embodiment, the listings of property held by property broker 16 are show generally labelled 20. However, it should be realised that other property listings may become available to the property broker 16 such as listings held by real estate agents or alternatively, either the active and/or the passive investor may locate properties themselves which are private properties held by individuals who wish to sell their property, or alternatively, properties that are held by other agents. These properties can be listed with the property broker 16 for property broker 16 to arrange finance to purchase the property.

Referring now to Figure 3, there is shown a process flow chart for the steps involved in matching passive investors with active investors in the preferred embodiment of the present invention. As shown in step 30A, potential active investors 14 review properties held by property broker 16. In step 30B, potential passive investors 12 also review properties held by property broker 16.

Step 32A, 32B shows the next stage in which a passive investor 12 selects a property that they wish to purchase 32B and the active investor 14 selects a property they wish to purchase 32A.

In this embodiment, property broker 16 is informed of the active investor 14's or the passive investor 12's selection and uses listing program 26A to interrogate database 28 and store the selection as data within database 28. In this regard, processor 24 receives instructions from listing program 26A to process instructions entered into by an operator of the computer system 22. An example will now be described in which passive investor PI-, decides from viewing properties 20, that they wish to purchase property Pi, they make a selection that registers their desire to make a passive investment in property P-i This may be done by either the passive investor using a web-based browser which is connected to the computer system 22 by a network link (not shown). Alternatively, the passive investor Pl-i may communicate this information to the property broker 16 verbally or in writing.

The passive investor P 's intention to purchase property P_Λ is recorded in database 28. Listing program 26A records property P₁ as being selected by passive investor PI-,.

Listing program 26A invokes Matching program 26B to interrogate database 28 to determine if an active investor 14 has been recorded on database 28 as having selected property Pi to purchase (step 34).

If at the time passive investor Pl-'s intention to purchase property -_\ is recorded in database 28, property Pi is not selected by an active investor 14, then the property broker 16 may use matching program 26B to interrogate database 28 and thereby determine if property P-i falls within the criteria of any of the active investors 14 registered with property broker 16. Those active investors 14 whose criteria to purchase property falls within the specifications of property Pi, will then be added to a shortlist that will be recorded in database 28. The property broker 16 contacts each of the active investors 14 that have selection criteria that is matched to selected property Pi and will let them know that a passive investor has selected property Pi and an invitation will be made to the matched active investors 14 to make an active investment in property P^. Should one of the matched active investors 14 respond by communicating that they desire to make an active investment in property Pi, matching program 26B will determine if the matching criteria between the active investor and the passive investor is satisfied.

If however none of the matched active investors respond within a time frame (ie 2 or 3 days) the Matching program 26B will record in database 28 that property P^ has been selected for passive investment by Plι and the property P^ will be listed as 'pending passive investment' in database 28.

If for example active investor A^ decides that they would like to make an active investment in property Pi, then they inform property broker 16 that they wish to make an active investment in property P^ The operator of computer system 22 then instructs matching program 26B to interrogate database 28 to determine if matching criteria is satisfied between the passive investor P and the active investor Al-i as shown in step 36.

If no active investment is made, the active investor A and the passive investor P^ will be told that they can deselect property Pi and return to reviewing properties as described in steps 30A, 30B. If however matching criteria is satisfied then the property broker 16 will then send off an application to financial institution 18 as shown in step 38. In step 38, the financial institution assesses the application on the basis that the passive investor provides a bank guarantee for the loan and this information is assessed on the information that has been previously registered by the passive investor Plι with the property broker 16. The application program 26C interrogates financial data stored in database 28 to generate a financial report in relation to passive investor Plι that is given to financial institution 18. Financial institution 18 uses the report to decide whether an active investor and the passive investor should be provided with a mortgage to purchase the selected property. Likewise, the income of the active investor will be reviewed to ensure that they can service the mortgage repayments as set by the financial institution.

In the instance of the property P-, being an investment property, the financial institution 18 will take into account any rental income from property Pi and will make an assessment as to whether the loan should be granted in the form of a mortgage on property Pi. If finance is not approved (as shown in step 40), then the selection of property p., is removed from database 28 and the passive and active investors respectively proceed back to steps 30B and 30A.

If finance is approved, then the property broker 16 proceeds to make an offer to the vendor of property Pi on behalf of the active investor Al_l and passive investor Pl-j (step 42).

If the offer is accepted as shown in step 44, then contracts are exchanged as shown in 46, the conveyancing period is undertaken as shown in step 48 and settlement of the property is undertaken as shown in step 50.

The assessment of the loan by the financial institution 18 in step 38 is known for those skilled in the art and shall not be repeated here. Likewise, steps 46 to 50 are known to those skilled in the art and they shall not be repeated here.

If the offer is not accepted then the active investor Al_l and passive investor Ph proceed back to step 30A, 30B.

Once settlement 50 has been undertaken, the investment proceeds according to criteria agreed to by the active investor A and passive investor Ph- The active investor A and passive investor Pli will enter into a legal agreement whereby the specific duties for performance by the active investor Ah and passive investor Ph will be agreed upon and formalised by way of a legal agreement. The legal agreement can be used as a financial instrument and can be drafted such that either one of the active investor A or passive investor Ph is able to on-sell their share to another investor. Furthermore, the legal agreement made between the active investor Ah and passive investor Ph may stipulate that when either the active investor Ah or the passive investor Ph sell their share in the property, the retaining investor has an option to purchase the property from the selling investor according to a formula agreed to at the time the active investor Ah and passive investor P execute the agreement. As shown in figure 1 , the receipt of any rental income from property Pi is handled by property broker 16 who will use the rental income to pay the mortgage on the property to the financial institution 18. The application program 18 is programmed to record in database 28, information concerning fees associated with the management of property 20. Additionally fees to provide the mortgage which are owing to financial institution 18 are recorded in database 28 and are accessible by application program for reporting purposes.

It will be appreciated that the legal agreement by which the active investor Ah and passive investor Ph hold the property Pi will be drafted according to the circumstances of the individual investors. For example, the title of the property Pi may be held in a trust with the active investor Ah and passive investor Ph being the beneficiaries of the trust. Alternatively, the active investor Ah and passive investor Ph may be recorded as joint tenants or tenants in common on the title of the property Pi.

In this embodiment, the passive investor 12 does not have to provide any further funds for the mortgage but only has to provide a bank guarantee to the property broker 16 as shown in Figure 1. In other embodiments, the passive investor 12 only has to provide the deposit for financing the loan, which may be generated by using equity existing in passive investor 12's home or some other property type. In this embodiment, the active investor 14 undertakes to service the repayments of the mortgage and therefore provides any shortfall between the mortgage repayments less rental income on property Pi. It will therefore be appreciated that in the present embodiment, the system 10 provides a facility for matching an active investor who has a regular cash flow with a passive investor (who possibly has minimal regular cash flow) who can provide security for the mortgage in the form of a bank guarantee.

In other embodiments, it should be realised that the matching program 26B may receive multiple passive investor or active investor selections of a single property. In such a case, the matching program 26B is programmed to make a prioritised list of the matching criteria to select the most appropriate passive investor and active investor match. In one embodiment, for example, if multiple active investors select property Pi but only one passive investor such as passive investor Pl₂ chooses to select property Pi, active investors who have selected property Pi will be provided with an opportunity by the matching program 26B to adjust their proposed nominated equity share in property , and passive investor Pl₂ is then able to make the most attractive available to them (ie passive investor Pl₂ could select the equity shareholding of active investor 14 that provides the passive investor Pl₂ with the greater equity holding in the investment property P^.

Passive investors and Active investors share in any capital gain (or loss) upon selling invested property 20. Another advantage for implementation of the invention in Australia, is that both the Active investors 14 and passive investors 12 are able to reduce their taxable income under Australian Taxation Law for any operating loss on their equity investment in property 20.

As real estate properties are sold by real estate agents and this sales data is made available to public, the sale prices of sold property is recorded in database 28 by the operator of computer system 22. The specifications of sold property is also recorded in the database 28 and includes such data as property type, geographic location, number of bedrooms etc. This sales data is used by application program 26c calculate an estimated price of properties 20 registered with property broker 16. The application program 26c generates a report to the property broker 16 listing the estimated prices of properties 20, which is used by property broker 16 to make contact with passive and active investors (12,14) to inform them of the estimated price of their property based on recent sales data and to provide them with an estimate of their property investment based on the equity holding that they hold in the investment property.

" It will be further understood that the present embodiment allows a younger person with a ; regular income to undertake an active investment in a property and thereby enter the property market without having to provide a deposit to the financial institution. Furthermore, the young passive investor could live in the purchased property themselves and thereby only pay rent on the equity held by the passive investor.

It will be appreciated that either active investors 14 or passive investors 12 may choose to purchase a property and then make an offer to other respective passive and/or active investors to invest in the property.

It will be further understood that the present embodiment allows an older person having equity in their home to undertake a passive investment in a property and thereby invest in property without having to have a regular income. Furthermore, the older active investor can sell their passive investment to another party if they need cash or they can pass it on in their estate upon death.

It will be further understood by the skilled addressee that the passive and active investments can be sold as a financial instrument by the property broker 16 or on a public exchange. This would increase the depth of market for direct investment in property. The benefits of the invention will now be illustrated by the following example: Example

The implementation and benefits of the investment structure provided by matched passive and active investors in the purchase of real estate property will now be described in the following example. It is important to realise that tax systems and finance regimes differ from jurisdiction to jurisdiction at any given time. The following example is generally based on the taxation and finance regimes in Australia at the present time, and is intended to give a general overview only.

This example is based on the following assumptions for the purchase of investment property Pi by active investors A and passive investor Ph:

Table A Investment Property P., Assumptions

In Table A, the active investor Ah is paying back all of the interest associated with the loan at a fixed rate of 6.6% per annum. The loan is an interest-only loan. The active investor Ah in this example, pays for all operating expenses associated with the investment property and holds a 70% equity holding in the investment property. A bank provides the active investor Ah with a mortgage to purchase the property Pi. The active investor Ah and the passive investor Ph have been matched by the system 10 described above to purchase investment property Pi.

The active investor Ah and the passive investor Ph enter into a purchase agreement whereby the passive investor Ph provides a guarantee for the mortgage to purchase investment property based on equity in their home in order to hold a 30% equity holding in the investment property Pi. The passive investor Ph in this example does not have to provide any cash. It is assumed that the passive investor Ph has enough equity in his/her home to obtain the loan for property Pi by way of a bank guarantee. In this regard, it is assumed that the financial institution 18 providing the mortgage would require that the passive investor Ph to have at least 10% of the purchase price of the property Pi ($45,000) and be able to cover the transaction costs ($38,300) to be eligible to invest in the mortgage. Hence, the passive investor Ph would need to have at least $83,000 in equity to be eligible to obtain the mortgage. It will be realised that in this preferred embodiment that the equity requirement by the passive investor Ph of $83,000 is not paid as a cash sum by the passive investor Ph as the passive investor Ph's bank guarantee is used as security for the loan. The equity requirement of $83,000 represents the minimum threshold of equity that the passive investor Ph must have to be able to invest in the property Pi using the mortgage.

The active investor Ah agrees to service the interest payments associated with the loan for the investment property Pi and the total loan to purchase property is $488,300 inclusive of transactional costs. The active investor Ah agrees to meet the operating expenses associated with the investment property Pi, which is $37,839 per annum comprising $32,228 (p.a.) in interest expenses, $3,242 (p.a.) in operating expenses and $2,369 p.a. in management expenses.

The agreement also stipulates that the active investor Ah is entitled to any rents received for the investment property Pi, which in this example is $21 ,840 per annum assuming that the property has a 100% occupancy rate.

As the active investor A is committed to service all of the loan repayments, the active investor Ah incurs a taxable loss on the investment of $15,999, which he/she can use to reduce their personal income tax. For example, if the top tax rate that the active investor A pays is 40 cents/dollar, they will receive a tax refund of $6,399 and therefore, the net cash payments that are made by the active investor Ahbased on the above assumptions will be $9,599 (p.a.).

Any depreciation in the value of the investment property Pi would also be a deductible expense from the active investor Ah's taxable income, but the present example does not take depreciation into account.

The title to property Pi is, in this example, held in the name of the active investor Ah and the passive investor Ph as tenants in common. In other examples, the property P₁ may be held in the name of some other vehicle such as a trust in which the investors are beneficiaries or in the name of a company in which the investors are share holders. The particular structure or vehicle in which the property Pi is held will be chosen by the investors.

It will be appreciated by those skilled in the art that the passive investor Ph and the active investor Ah share in any capital gain (or loss) when the property is sold on the market. For example, Table B shows passive investor Ph's gain on property over a 20 year time period based on 30% equity in property P₁ and the active investor Al_l's 70% equity in property Pi assuming that the value of property Pi increases by 10% per annum.

Table B - Investors' gain

Referring to Table B, the column 'Property Value P1 ' represents the value of the property Pi since the time that the property has been purchased. For convenience, it has been assumed that the property value grows at a rate of 10% p.a. each year. The actual figure would of course vary depending upon market conditions.

The column 'Gross gain since purchase (exclusive of transaction costs and operating expenses)' represents the gross gain in value of the property since the purchase date of the property. The Loan/Value % represents the amount of the loan as a percentage of the value of the property. Initially the loan amount is greater than the property value due to the 'Total purchase expense amount' that has been used to purchase the property. However as the value of the property increases over time, the Loan amount as a percentage of the value of the property decreases.

The 'Gross gain - Active Investor' column represents the active investor Al_l's 70% equity gain (or loss represented as a negative number) during the period of the investment. As the active investor Ah must meet the operating expenses but is able to take advantage of any tax rebate, the net cash position each year of the Ah is -$9,599, which is reduced from his/her gain as can be seen in this column. It can also be seen that the active investor Ah investment does not break even until the second year of his/her investment because of transactional costs in purchasing the property and the particular gearing used by the investors.

The 'Gross gain - Passive Investor' column represents the passive investor Ph's 30% equity gain during the period of the investment. The passive investor Pli does not put any money down and therefore, breaks even as soon as positive growth on market value for the property Ph is reached, which in this example is during the first year of the investment .

It should be realised that the above figures are estimates only as the calculations have assumed zero rental growth and that the property will be rented for 52 weeks of the year. In practice, rental growth will come into play by typically increasing over time. The figures do serve as a guide however as to the benefits of long-term geared direct investment in property by active and passive investors.

After seven years from purchasing property Pi bought for $450,000, property Pi will be worth $876,923, if the property Pi has increased by 10% per annum. The gross gain of the property will be $426,923. The passive investor Ph will have gained $128,077 from his/her investment while the active investor Ah's investment will have gained $260,546 from his/her investment in the property after transaction costs.

The purchase agreement between the active investor Ah and the passive investor Ph may allow either investor to sell investment property Pi to another investor. For example, passive investor P may decide to sell his/her passive investment to another passive investor PI_N who, in this example, provides another bank guarantee to support the loan (in other examples the new passive investor PI_N may provide a one-off cash deposit to be payed into the loan). In such an example, new passive investor PIN provides a bank guarantee while the active investor AI_N arranges for the mortgage to be re-financed so that the old passive investor Ph can be paid out his/her 30% share of the growth associated with the investment property i. In this example, new passive PI_N provides a bank guarantee to secure the mortgage on the property Pi and the remaining active investor Ah pays out the old passive investor Ph, the gross gain of the passive investor PI_N's 30% equity holding ($128,077). The new loan includes any transactional costs associated with transferring title of the mortgage from the old passive investor Pli to the new passive investor PI_N. New passive investor P|_N is then joined as a new party in the purchase agreement with active investor Ah and passive investor Ph is removed from the agreement. Alternatively, passive investor Ph may be bought out by active investor Ah so that active investor Ah now holds a 100% holding in the property Pi.lt will also be realised that either passive investor Pli or active investor Ah may use their equity holding in property Pi to purchase other investment and/or home properties. It will be appreciated that the system 10 provides a facility to assist in matching active investor Ah and passive investors Ph in the purchase of real estate property Pi.

It will also be appreciated that this provides a facility whereby established investors who have equity but little cash flow can be brought together with investors who have minimal equity but regular cash flow in the purchase of real estate property. This may assist less established investors in building wealth through property as they don't have to save a deposit or for fees in order to purchase property.

The system 10 may also allow established investors to maintain an investment without having to commit cash to the investment and also lets the passive investor gear his/her investments. For example, referring to Table A, it can be seen that the passive investor must have at least $83,300 in equity to purchase a $450,000 property as described above. If the passive investor has for example $600,000 in equity in their home, by using the system 10 above so that the passive investor can be matched with an active investor to hold direct ownership in property, the passive investor could in theory purchase up to seven homes to the value of $450,000.

Upon death of either the active or passive investor, their property holding may be transferred to their estate. It will be understood that the invention disclosed and defined herein extends to all alternative combinations of two or more of the individual features mentioned or evident from the text or drawings. All of these different combinations constitute various alternative aspects of the invention.

A second preferred embodiment of the invention discloses a method and system of managing a real estate investment portfolio. The method includes pooling guarantees of passive investors as security for one or more debt instruments, such as a mortgage, to finance the investment portfolio. The method also includes pooling the funds of active investors in order to service the debt instruments over a predetermined time period. The method and system also includes maintaining a sufficient level of pooled guarantees from the passive investors to maintain the security for the debt instruments and maintaining a sufficient level of pooled funds from the active investors to maintain servicing of the debt instruments over a predetermined time period.

The second preferred embodiment of the invention will now be described with reference to Figure 4 which shows an investment structure 60 for .a plurality of passive investors 12' and a plurality of active investors 14'. In the investment structure 60 of the second embodiment, the active investors 14' and the passive investors 12' have not been matched to specific property as described in the first embodiment of Figure 1 to Figure 3 above. In the second embodiment, the active investors 14' and the passive investors 12', are shareholders in a company 62. The company 62 is a beneficiary of a unit trust 64 which holds the title to N properties (P.,, p₂, P₃...P_N) in property portfolio 68. The properties (P-,, P₂, P₃...PN) in property portfolio 68 may be commercial, industrial or residential properties. In the investment structure 60, the active investors 14' undertake an agreement with the company 64 to provide a regular deposit of funds to the company in return for an allotment of shares in the company 62.

The passive investors 12' undertake an agreement to provide a bank guarantee to the company 62, and security may be provided by the guarantee using the existing equity in the passive investor's home or by some form of security instrument to ensure that the mortgage will be financed, such as a deposit of cash funds, listed shares or some other transferable security.

The company 62 uses the passive investor's 12' guarantee to secure finance from a financial institution 66 and in return, the company 62 allots a quantity of shares in the company 62 to the passive investors 12'. The finance from financial institution 66 is used to purchase property for the property portfolio to be held in the name of the trust 64.

Rental income from the properties (Pi, P₂, P₃...PN) in the property portfolio 68 is paid by tenants of the properties (Pi, P₂, P₃...PN) to a bank account held in the name of the trust 64. The trust 64 distributes this rental income to the company 62, which is used to pay any interest, principle repayments or both, off of a debt instrument in the form of a mortgage that has been provided by the financial institution 66.

Any profit that the company 62 may make in a given time period ie such as a financial year may be distributed to the shareholders of the company 62 or alternatively, the company 62 may , use the profit to make acquisition of additional property to add to the property portfolio 68 of the trust 64.

Individual properties (P_1t P₂, P₃...PN) within the property portfolio 68 of the trust 64 are from time to time sold. Any capital gain from the sale of individual properties (Pi, P₂, P₃...PN) within the portfolio 68 is distributed by the trust 64 to the company 62. The company 62 pays any capital gain tax on profit of the sale of the property and may distribute its profits as dividends in any given period to the shareholders of the company; the active investors 14' and the and passive investors 12'. Accordingly, it will be appreciated that the investment structure 60 can be used by active investors 14' and passive investors 12' to share in the capital gain of rising property prices.

It will be appreciated that an advantage of the investment structure 60 is that it allows for the active and passive investors 14', 12' to pool their investment funds to thereby gain a greater economy of scale in their investment exposure to property (Pi, P₂, P₃...PN). Additionally the pooling of funds allows for greater diversification of properties in the trust's 62 portfolio 68. For example, property Pi may be a residential property, property P₂ a commercial property and property P₃ an industrial property.

The active and passive investors 14', 12' are exposed to any capital gains in the property portfolio 68 over the life of their investment in the investment structure 60. Furthermore, the company 62 provides a vehicle by which they may obtain a leveraged investment in property due to the finance provided by the financial institution 76.

It will be further appreciated that another advantage of the investment structure 60 is that the company may be a listed company so that its shares may be traded on the secondary share market. This enables the passive and active investors 12', 14' to gain access to sell their shares on the secondary market and gain access to their funds.

It will be further appreciated that the company 62 may include a management structure which manages the day-to-day operations of the property portfolio 68. The trust 64 is essentially a holding vehicle for the individual properties (Pi, P₂, P₃- - -PN) in the portfolio 68. The trust has the advantage of not paying tax on any capital gain from the sale of the property until benefits have been distributed to the beneficiaries ie the company 62.

The active investors 14 share in any capital growth of the property portfolio 68 and they may share in tax benefits ie such as franking credits that may be passed on by the company. Additionally, the active investors 14 don't have to save a large deposit in order to participate in the investment structure 60, thereby allowing the active investors 14' access to a leveraged investment in the property market.

The passive investors 12' also share in any capital growth of the property portfolio 68. Additionally, the passive investors 12' do not have to provide funds on an ongoing basis to maintain their investment, but they also gain access to a leveraged investment in the property market. Furthermore, they can make their investment in the investment structure 60 by possibly unlocking the equity that exists in their existing property.

A third preferred embodiment of the invention will now be described with reference to Fig 5, which shows an investment structure 70 for a plurality of passive investors 12" and a plurality of active investors 14". In the investment structure 70 of the third embodiment, the active investors 14" and the passive investors 12" have not been matched to by specific property as described in the first embodiment of Figure 1 to Figure 3 above. In the third embodiment, the active investors 14" and the passive investors 12", are unit holders in a master trust fund 72. The master trust fund 72 is a beneficiary of a plurality of trusts, which in the present example are represented by Trust A and Trust B. The investment structure 70 of Figure 5 works essentially in the same way as the investment structure 60 of Figure 4, with the exception that the master trust fund 72 and the trusts, trust A and trust B, don't pay taxes on any profit until profits are distributed to the beneficiaries, who are the active investors 14" and the passive investors 12". Additionally, the trust A and trust B may hold property in differing property sectors. For example, properties Pi, P₂, ...P_N might be residential properties in the Sydney property market while properties (Pn, Pι₂..-Pj) might be commercial properties in the Melbourne property market. This structure 70 allows both active and passive investors 14,12 to allocate their funds across targeted property markets, thereby providing greater flexibility.

The investment structure also includes financial institution 76, which provides finance to the purchase and mortgage properties held by trust A and trust B.

Referring now to Figure 4A, there is shown a schematic diagram of a computer system 80 that is used to manage the property investment portfolio of either the second embodiment in Figure 4 or the third embodiment in Figure 5. The computer system 80 includes a computer terminal 82 that includes a processor 84 that processes data according to instructions received from programs located in a memory 86. For convenience, not all of the programs to drive the various functions of the computer system 82 are shown in Figure 4A or described herein as these will be known to persons skilled in the art, but for present purposes, the memory 86 includes an application program 88. The application program 88 of Figure 4A can have the same functionality of the application program 26C of Figure 2 as previously described. The application program 88 also includes a 5 property portfolio management module 90, which is used to manage the investments of the active investors 14', the passive investors 12' and the management of the overall property portfolio, as will be described further below.

In the present disclosed embodiment, the computer system 82 also includes user interface means. The user interface means includes an input means in the form of keyboard 92 that is used 0 to input data to the computer system 82 and user display means in the form of a monitor 94 to display output data of the computer system 82.

The memory 86 also includes databases in the form of: Active Investor database 96, which stores and maintains records of all data associated with the active investors 14'; Passive Investor database 98, which stores and maintains records of all data associated with passive investors 12'; 5 and Portfolio Management database 100, which stores and maintains records of all data associated with management investors 14'.

The computer system 82 is used to implement the investment structure 60 of Figure 4 and the investment structure 70 of Figure 5. It should be appreciated that although a single computer system 80 is shown in Figure 4A, this is for convenience purposes only. The computer system 80 0 could be part of a network of computer systems and the processor 84, memory 85, and databases •- ^" 96, 98, 100 couid reside in different parts of. that computer network. Additionally, the computer system 82 might, in another embodiment, reside on a number of computer networks.

In the second preferred embodiment described with reference to Figure 4, the application program 88 is programmed to maintain records of all shares held by the passive and active 5 investors 12', 14', all transactions between the company 62, the trust 64 and the bank account and/or loan facility provided by the financial institution 66. In the third aspect described with reference to Figure 5, the application program 88 is programmed to maintain records of all shares held by the passive and active investors 12", 14", all transactions between the master trust 72, the trust A, trust B and the bank account and/or loan facility provided by the financial institution 76. 0 The function of the portfolio management module 90 will be described with reference to

Figure 6, Figure 7 and Figure 8 and for convenience, the investment structure of the second embodiment described with respect to Figure 4 will be described.

The portfolio management module 90 is used to manage the investment property of the passive and active investors 12', 14'. As the passive investors 12' are issued with shares in return 5 for their obligations in maintaining guarantees to provide security for mortgages to service the property portfolio 68, it is necessary to ensure that there are a sufficient amount of guarantees provided by the passive investors 12' to ensure that the security for the mortgages associated with the property portfolio 68 is maintained throughout the life of the investment structure 60. Likewise, as the active investors 14' are issued with shares in return for their obligations in undertaking to 0 make a predefined number of payments to service the mortgages associated with the property portfolio 68, it is necessary to ensure that there is a sufficient amount of repayments being provided by the active investors 12' to ensure that the payments associated with the mortgages for the property portfolio 68 is maintained throughout the life of the investment structure 60. As will be described in detail below, the portfolio management module 90 ensures that there are a sufficient number of guarantees provided by the passive investors 12' and the active investors 14' during the life of the property. The portfolio management module 90 also assists management in making decisions as to changes in the investment structure by modelling different scenarios.

Referring to Figure 6, there is shown an algorithm of the overall steps that the portfolio management module 90 invokes in an active investor management routine. The active investor management routine ensures the maintenance of sufficient funding is provided by the active investors 14' to meet the mortgage repayments. At step 110, the portfolio management module 90 is initiated for a predetermined time period 't' within the life of the investment structure 60. In the preferred embodiment, the time period t is one business day.

At step 112, the portfolio management module 90 interrogates the portfolio management database 100 in order to retrieve all repayment data for the time period t that is required for servicing of the mortgages. The portfolio management module 90 calculates the net mortgage repayments for the property portfolio NMR being the difference between the total mortgage repayments for portfolio 68 less rental income from portfolio 68 and less any fees associated with the mortgage from financial institution 66. At step 114, the portfolio management module 90 interrogates the active investor database

96 in order to retrieve all payment data for the time period t that the active investors 14' are obliged to file under their agreement with the company 62. Accordingly, the portfolio management module 90 calculates the Cash Flow from the Active Investors CFAI for the time period t, and then applies a predetermined weighting factor or "buffer" factor BF to the CFAI value for time t to ensure that at any given time during the life cycle of the investment structure 60, adequate cash flow is incoming to the company 62 to ensure that all payments associated with the mortgages of the property portfolio 68 are met. The value of the buffer factor is stored in the portfolio management database 100 at time t and the weighting factor or buffer factor applied to the CFAI value is less than 1 so that the Buffered Cash Flow from the Active Investors (BCFAI) value will be less than the calculated CFAI value for period t. Hence, the BCFAI is calculated as follows:

BCFAi = CFAI X BF where 0 < BF < 1 It will be appreciated that this ensures that an alternative to applying a buffer factor to the CFAI value would be to apply a buffer factor to the NMR value where the buffer factor BF was a number greater than 1.

The particular value of the buffer factor BF applied by the portfolio management module 90 will be dependent on a number of variables at time t, such as interest rates for the mortgages, the liquidity of the portfolio 68, and the gearing ratio between the mortgages held by company 62 and the equity held in those properties. The buffer factor will also depend on the particular risk posture taken by the management responsible for the administration and management of the company 62. It will be appreciated that an appropriate buffer factor will be calculated according to the particular circumstances at the time t, and that it would be understood by a person skilled in the art, an appropriate buffer factor to apply depending on the relevant portfolio being managed.

At step 118, the portfolio management module 100 calculates an Active Investor adjustment factor A_A. The A_A is calculated as the difference between the BCFAI and the NMR. The value of the A_A at time t is stored in the portfolio management database 100 by the portfolio management module 90. The portfolio management module 90 then generates an algorithm to make a decision as to whether or not an adjustment needs to be made to the investments of the company as shown by decision step 120. At decision step 120 the portfolio management module 90 invokes a routine to determine if the A_A value is greater or less than 0. If A_A > 0, then this means that there are sufficient funds during period t from the active investors 14' to cover the payments associated with the mortgages for the property portfolio 68 and the portfolio management module 90 goes to step 122, in which no adjustment is made to the company 62 and the portfolio management module 90 ends it routine for periodically monitoring the active investors.

If A_A <0, then this means that there are insufficient funds during period t from the active investors 14' to cover the payments associated with the mortgages for the property portfolio 68 and the portfolio management module 90 goes to step 124, in which the portfolio management module 90 invokes an adjustment routine in step 124, which will be described further below. Referring to Figure 7, there is shown an algorithm of the overall steps that the portfolio management module 90 invokes in a passive investor management routine. The passive investor management routine ensures that sufficient guarantees are maintained by the passive investors 12' as security for the mortgages. At step 130, the portfolio management module 90 is initiated for a predetermined time period 't' within the life of the investment structure 60. In the preferred embodiment, the time period t is one business day.

At step 132, the portfolio management module 90 interrogates the portfolio management database 100 in order to retrieve all guarantee data for the time period t that is required to maintain guarantees as security to hold the mortgages associated with the property portfolio 68. The portfolio management module 90 calculates the Mortgage Guarantee Value for the property portfolio MGV being the minimum required value of guarantees required to secure all mortgages associated with property portfolio 68.

At step 134, the portfolio management module 90 interrogates the passive investor database 98 in order to retrieve all passive investor guarantee data for the time period t that the passive investors 12' are obliged to maintain under their agreement with the company 62. Accordingly, the portfolio management module 90 calculates a Security Value from Passive Investors SVPI for the time period t, and then applies a predetermined weighting factor or "buffer" factor BF to the SVPI value for time t to ensure that at any given time t during the life cycle of the investment structure 60, adequate guarantees are available to the company 62 to ensure that the mortgages are secured for the property portfolio 68. The value of the buffer factor is stored in the portfolio management database 100 at time t and the weighting factor or buffer factor applied to the SVPI value is less than 1 so that the BSVPI value will be less than the calculated SVPI value for period t. Hence, the Buffered Security Value from Passive Investors BSVPI value is calculated as follows:

BSVPI = SVPI x BF where 0 < BF < 1

It will be appreciated that this ensures that an alternative to applying a buffer factor to the SVPI value would be to apply a buffer factor to the MGV value where the buffer factor BF was a factor greater than 1. A further alternative might be to apply buffer factors to both the SVPI value and the MGV value. As mentioned above, the particular value of the buffer factor BF applied by the portfolio management module 90 will be dependent on a number of variables at time t. It will be appreciated that an appropriate buffer factor will be calculated according to the particular circumstances at the time t, and that it would be understood by a person skilled in the art of the appropriate buffer factor to apply depending on the relevant portfolio being managed. At step 138, the portfolio management module 100 calculates a Passive Investor adjustment factor P_A. The P_A is calculated as the difference between the BSVPI and the MGV. The value of the P_A at time t is stored in the portfolio management database 100 by the portfolio management module 90. The portfolio management module 90 then generates an algorithm to make a decision as to whether or not an adjustment needs to be made to the investments of the company as shown by decision step 140.

'"i At decision step 120 the portfolio management module 90 invokes a routine to determine if the P_A value is greater or less than 0. If P_A > 0, then this means that there are sufficient guarantees during period t from the passive investors 12' to cover the payments associated with the mortgages for the property portfolio 68 and the portfolio management module 90 goes to step 142, in which no adjustment is made to the investment of the company 62 and the portfolio management module 90 ends it routine for periodically monitoring the passive investors.

If P_A ≤0, then this means that there are insufficient guarantees during period t from the passive investors 12' to secure the mortgages for the property portfolio 68 and the portfolio management module 90 goes to step 124, in which the portfolio management module 90 invokes an adjustment routine in step 124, which will now be described with reference to Figure 8.

Figure 8 shows a schematic diagram of the steps that the portfolio management module 90 undertakes after invoking the activity investor monitoring routine of Figure 6 and the passive investor monitoring routine of Figure 7, if step 124 is invoked as described above.

At step 150, the portfolio management module 90 invokes an output that is displayed on the monitor 94 to the operator of the computer system 82. The output at step 150 is a message indicating that an adjustment of the investment structure 60 needs to be altered to ensure that adequate funds are incoming to the company 62 or that an increase in guarantees is required to provide security for the mortgages associated with the property portfolio 68. It will therefore be appreciated that the application program 88, including the portfolio management module, is able to alert appropriate persons within the company to make a decision with regard to the investment structure 60 of the portfolio.

The portfolio management module 90 presents a number of options to the use of the computer system 82 so that management can make investment decisions on the portfolio in real time. If there are insufficient funds incoming from active investors 14' thereby raising an adjustment alert on A_A or insufficient funds incoming from passive investors 12' thereby raising an adjustment alert on P_A, the portfolio management module 90 generates the following options:

At step 152, the portfolio management module 90 invokes an algorithm that models scenarios to model the effect of increasing the number of shares issued to active investors 14'. An increased number of shares is issued in return for an increased cash flow coming into the company 62 to service the mortgages associated with the property portfolio. This has the affect of reducing increasing the BCFAI value and ensures that there is adequate liquidity in the company 62 to maintain servicing of the mortgages. A number of scenarios are able to be modelled by the portfolio management module 90 so that management of the company 62 can make an informed decision as to the investment decision of the company. At step 154, the portfolio management module 90 invokes an algorithm that models scenarios to model the effect of increasing the number of shares issued to passive investors 12'. An increased number of shares issued to passive investors 12' ensures that more guarantees are provided to secure the mortgages associated with the property portfolio 68. This may, in some circumstances, meet the financial institutions 66 lending requirements if cash flow from the active investors has been reduced ie, the mortgages may convert, from an principal & interest to an interest only loan. Again, a number of scenarios are able to be modelled by the portfolio management module 90 so that management of the company 62 can model different passive investment levels within the investment structure 60.

At step 156, the portfolio management module 90 allows for valuations of the properties within the portfolio 68 at the time t to be input into the portfolio management database 100. Over the life of the investment structure 60, the valuation of property in the portfolio will change due to capital growth. If particular properties have not been valued for an extended period of time, the market valuation at time t may be much greater than what is recorded in the portfolio management database 100. If the revaluations can be input into the portfolio management database 100, this may affect the level of guarantees required to maintain security in the mortgages associated with the property in portfolio 68 due to the equity level in those properties. Hence, this also alters the level of passive investment that may be required by the company 62.

At step 158, the portfolio management module 90 invokes an algorithm that models scenarios to model the effect of selling particular property assets within the portfolio 68. By selling property assets on the open market, the level of debt in the mortgages can be reduced, which may subsequently increase the A_A value or P_A value until it is greater than 0 (as shown by step 160). Thereby ensuring that adequate debt levels, cash levels and guarantee levels are maintained within the investment structure 60.

The optional steps 152, 154, 156 and 158 are pursued by the management of the property portfolio 68 until the A_A value or P_A value until it is greater than 0 (as shown by step 160). The application program 88, also includes an algorithm to monitor the obligations arising under the investment agreement for each passive investor 12' and active investor 14' during time period t. A report is generated for period of time t which records all payments made by active investors 14' and all guarantees maintained by passive investors 12'. It will be appreciated that, at the start of the life of the investment structure 60, passive investors may provide more equity than initially required by the financial institution 66 to create a further buffer for early exits of passive investors 12'.

The company 62 may be a listed company so that the shares may be traded on a stock exchange. Another advantage of the investment structure 60 shown in Figure 4 and the investment structure 70 shown in Figure 5, is that investors can use either incomes as active investors or equity as a guarantee as passive investors or a combination of both to acquire a direct ownership in property that is proportional to the investment instruments they hold in the form of share or units. Investors are therefore able to gain access to a leveraged investment in the real estate property market while sharing in any capital growth of the real estate market. This is a particularly attractive option for younger people, such as potential first home buyers, who may participate in the investment structure 60 or 70 as active investors and thereby bridge the so-called 'home loan deposit gap'. Furthermore, older investors having equity in their own homes may be able to participate as passive investors and gain an equity holding in the property market without having to invest in cash. It might also be possible for superannuation funds to participate as active investors so that they can gain access to a leveraged real' estate investment product.

Although the particular embodiments shown and described above will prove to be useful in many applications relating to the arts to which the present invention pertains, further modifications of the present invention herein disclosed will occur to persons skilled in the art. For example, it should be noted that the method to maintain adequate active investor funds and passive investor guarantees described above with reference to Figure 6, Figure 7 and Figure 8, is but one example of maintaining adequate funding and guarantee levels. Other ways to maintain adequate funding and guarantee levels known to those skilled in the art might be contemplated in other embodiments of the preferred second and third aspects of the invention. All such modifications are deemed to be within the scope and spirit of the present invention as defined by the appended claims.

Claims

1 A computer-based method to match passive investors and active investors in the purchase of property using finance provided by a financial institution; said active investors and said passive investors entering into an agreement whereby a passive investor maintains a passive investment in a property by providing at least a guarantee to said financial institution that said finance will be serviced or a deposit to obtain said finance, and said active investor maintains an active investment in a property by at least providing an undertaking to service a predetermined amount of payments associated with the finance for the purchase of a property, said method comprising the steps of: maintaining one or more records of potential active investors that have registered an interest in holding an active investment in property; maintaining one or more records of potential passive investors that have registered an interest in holding a passive investment in property; allowing said potential active investors and said potential passive investors to select a property to purchase after they have reviewed real estate listings; matching, from said selection by said potential passive investors and said potential active investors of property to purchase, at least one active investor and at least one passive investor to purchase said selected property.

2. A computer-based method as claimed in claim 1, wherein, said method includes the further step of: . ^• ; ^{• • •■} allowing said potential active investors and said potential passive investors to access real estate listing data relating to a plurality of properties that are listed for sale.

3. A computer-based method as claimed in claim 1 or claim 2, wherein said method further includes the step of: allowing a potential passive investor to nominate an equity holding in said property in return for providing said guarantee to said financial institution.

4. A computer-based method as claimed in any one of the preceding claims, wherein said method further includes the step of: allowing a potential active investor to nominate an equity holding in said property in return for undertaking to service said predetermined amount of payments associated with said finance for the purchase of said property.

5. A computer-based method as claimed in claim 3, wherein a plurality of said nominated equity holdings submitted by a plurality of said potential passive investors are prioritised according to defined criteria for selection of a passive investor by an active investor.

6. A computer-based method as claimed in 4, wherein a plurality of said nominated equity holdings submitted by a plurality of said potential active investors are prioritised according to defined criteria for selection of an active investor by a passive investor.

7. A computer-based method as claimed in any one of the preceding claims, wherein said active investor undertakes to pay all payments associated with said finance for the purchase of said property.

8. A computer-based method as claimed in any one of the preceding claims, wherein said method includes the step of: allowing a broker agent to facilitate matching of said passive and active investors.

9. A computer-based method as claimed in any one of the preceding claims, wherein said finance to purchase said property is a mortgage and said broker agent obtains financial information relating to the finances of said active and passive investors and uses said financial information to prepare an application for said mortgage to purchase said property.

10. A computer-based method as claimed in any one of the preceding claims, wherein said broker agent manages said property on behalf of said active investor and said passive investor.

11. A computer-based method as claimed in any one of the preceding claims, wherein said agreement allows said passive investor to sell or transfer their passive investment in said property according to a predefined formula.

12. A computer-based method as claimed in any one of the preceding claims, wherein said agreement allows said active investor to sell or transfer their active investment in said property according to a predefined formula.

13. A computer-based method as claimed in claim 11 or claim 12, wherein the predefined formula is based on at least two property valuations obtained from a property valuer.

14. A computer-based method as claimed in any one of the preceding claims, wherein said step of maintaining one or more records of potential active investors includes data fields relating said potential active investor's selection criteria for purchasing a property.

15. A computer-based method as claimed in any one of the preceding claims, wherein said step of maintaining one or more records of potential passive investors includes data fields relating said potential passive investor's criteria for purchasing a property.

16. A computer-based method as claimed in claim 14 or claim 15, wherein said selection criteria includes any one or more of the following: maximum and minimum purchase price of the property; geographic location of the purchase property; the purchase property type; the minium and maximum term for holding an active or passive investment in the property; nominated range of equity in the purchase of the property that the active investor or passive investor intends holding in the property.

17. A computer-based system to match passive investors and active investors in the purchase of property using a finance provided by a financial institution, comprising: computer means; database means adapted to be interrogated by said computer means, said database means adapted to record data associated with an agreement made between an active investor and a passive investors whereby said passive investor maintains a passive investment in a property by providing at least a guarantee to said financial institution that said finance will be serviced or that a deposit for said finance, and said active investor maintains an active investment in a property by at least providing an undertaking to service a predetermined amount of payments associated with the finance for the purchase of said property; said database means adapted to maintain one or more records of potential active investors that have registered an interest in holding an active investment in property and to maintain one or more records of potential passive investors that have registered an interest in holding a passive investment in property; a. selection program executable by said computer means, said selection program being adapted to record a selection to purchase a property by said potential active investors and said potential passive investors; a matching program executable by said computer means, said matching program being integral with said selection program or said matching program being adapted to interface with said selection program, said matching program being adapted to match at least one active investor and at least one passive investor to purchase said selected property.

18. A computer-based system as claimed in claim 17, further comprising: listings data means executable by said computer means and being used by said potential active investors and said potential passive investors to access real estate listing data relating to a plurality of properties that are listed for sale.

19. A computer-based system as claimed in claim 17 or claim 18, wherein said selection program allows a potential passive investor to nominate an equity holding in said property in return for providing said guarantee to said financial institution.

20. A computer-based system as claimed in any one of claims 17 to 18, wherein said selection program allows a potential active investor to nominate an equity holding in said property in return for undertaking to service said predetermined amount of payments associated with said mortgage.

21. A computer-based system as claimed in any one of claims 19 to 20, wherein said selection program puts in order of priority, a plurality of said nominated equity holdings submitted by a plurality of said potential passive investors according to defined criteria for selection of a passive investor by an active investor.

22. A computer-based system as claimed in claim 20, wherein said selection program puts in order of priority, a plurality of said nominated equity holdings submitted by a plurality of said potential active investors according to defined criteria for selection of an active investor by a passive investor.

23. A computer-based system as claimed in any one of the preceding claims, wherein said active investor undertakes to pay all payments associated with said finance for said property.

24. A computer-based system as claimed in any one of the preceding claims, wherein said computer means includes a broker agent computer having said matching program stored therein to facilitate matching of said passive and active investors.

25. A computer-system as claimed in claim 24, wherein said database means includes a broker agent database located on said broker agent computer, said broker agent database adapted to record financial information relating to the finances of said active and passive investors.

26. A computer-system as claimed in claim 25, wherein said finance is a mortgage and said financial information located in said broker agent database is accessible by an application program located in the memory of said broker agent computer to prepare a mortgage application to purchase said property.

27. A computer-based method as claimed in claim 26, wherein said financial information located in said broker agent database is accessible by said application program to manage the retrieval of rental income from said property on behalf of said active investor and said passive investor.

28. A computer-based system as claimed in any one of claims 25 to 27, wherein said broker agent database includes records fields associated with selection criteria for purchasing a property defined by said potential active investors and said potential active investors.

29. A computer-based system as claimed in claim 28, wherein said selection criteria includes any one or more of the following: maximum and minimum purchase price of the property; geographic location of the purchase property; the purchase property type; the minium and maximum term for holding an active or passive investment in the property; nominated range of equity in the purchase of the property that the active investor or passive investor intends holding in the property.

30. A method of creating a real estate investment instrument for exchange by active and passive investors in real estate property, said method comprising the steps of: creating an agreement between at least one active investor and at least one passive investor to own the title of at least one real estate property; financing at least a part of the purchase cost of said at least one real estate property using funds provided by a financial institution under a mortgage; allowing said title of said at least one real estate property to be controlled by said at least one passive investor whereby a passive investor maintains a passive investment in a property by providing at least a guarantee to said financial institution that said mortgage will be serviced or a deposit for said mortgage, and said active investor maintains an active investment in said property by at least providing an undertaking to service a predetermined amount of payments associated with the mortgage for the purchase of said property.

31 A computer-based system to maintain records associated with passive investments made by passive investors in real estate property and active investments made by active investors in real estate property, the purchase of real estate property being at least partly funded by a mortgage provided by a financial institution, the system comprising: computer means; database means adapted to be interrogated by said computer means, said . database means recording data associated with an agreement made between said active investors and said passive investors whereby a passive investor maintains a passive investment in a property by providing at least a guarantee to said financial institution that said mortgage will be serviced or a deposit to obtain said mortgage, and said active investor maintains an active investment in a property by at least providing an undertaking to service a predetermined amount of payments associated with the mortgage for the purchase of said property; and an application program provided on said computer means, said application program being adapted to interrogate records within said database and to generate reports associated with said active and passive investments.

32. A computer-based system as claimed in claim 31, wherein said application program estimates the value of a purchased real estate property based on real estate property sale data recorded in said database means.

33. A method managing a real estate investment portfolio, wherein the method includes pooling guarantees of passive investors as security for one or more debt instruments to finance the investment portfolio, pooling the funds of active investors in order to service the one or more debt instruments over a predetermined time period, either maintaining a sufficient level of pooled guarantees from the passive investors to maintain the security for the one or more debt instruments, or maintaining a sufficient level of pooled funds from the active investors to maintain servicing of the one or more debt instruments for the predetermined time period or both.

34. An investment structure for investing in real estate property, the investment structure comprising: a plurality of investment instruments issued from an entity capable of issuing investment instruments to a plurality of investors of real estate property, the plurality of investment instruments representing, or associated with, equity holdings in one or more real estate properties, wherein the one or more real estate properties are financed under one or more debt instruments provided by one or more financial institutions; wherein investors are selected from a group including active investors and passive investors; wherein the passive investors are issued with one or more investment instruments by providing at least a guarantee to the one or more financial institutions that the one or more debt instruments will be serviced, wherein the active investors are issued with one or more investment instruments by providing at least an undertaking to service a predetermined amount of payments associated with the one or more debt instruments for a predetermined amount of time, wherein the security provided by the passive investors is. managed to ensure that sufficient security is available to maintain security for the one" or more debt instruments, and wherein the repayments provided by the active investors is managed to ensure that sufficient repayments are available for servicing the repayments associated with the one or more debt instruments.

35. An investment structure as claimed in claim 34, wherein the entity is a company and the investment instruments are shares, options or convertible notes issued by the company.

36. An investment structure as claimed in claim 34, wherein the entity is a trust and the investment instruments are units that are issued by the trust.

37. An investment structure as claimed in any one of claims claim 34 to 36, wherein the entity has an equity holding in a further second entity and wherein title to the one or more properties is held by the second entity.

38. An investment structure as claimed in claim 36, wherein the second entity is a trust.

39. An investment method for investors of real estate property, wherein the investors are selected from the group of active investors and passive investors, the investment method comprising the steps of: offering a plurality of investment instruments to one or more passive and one or more active investors of real estate property, the investment instruments being issued by an entity capable of issuing investment instruments, the plurality of investment instruments representing, or associated with, equity holdings in one or more real estate properties, financing the one or more real estate properties under one or more debt instruments; entering into an agreement with the one or more passive investors, wherein the one or more passive investors are issued with the one or more investment instruments by providing at least a guarantee that the one or more debt instruments will be serviced or by providing at least one deposit of funds, and entering into an agreement with the one or more active investors, wherein the active investors are issued with one or more investment instruments by providing at least an undertaking to service a predetermined amount of payments associated with the one or more debt instruments for a predetermined amount of time.

40. A computer program encoding a set of computer instructions for an investment structure for investing in real estate property, which when running on a data processing system is adapted to perform the method as claimed in claim 33 or claim 39.

41. A data processing system that monitors the obligations of investors that have been issued - with investment instruments from an entity under an investment agreement, the investment instruments representing or associated with, equity holdings in one or more real estate properties that are at least partly financed by one or more debt instruments, the investors selected from a group including active investors and passive investors, the system comprising data processing apparatus including a data processor and data storage means associated with the processor and interactive communication means in communication with the data processor; the interactive communication means is configured to allow the data processor, configured in accordance with an application program running on the data processor to:

(i) record in the data storage means, investment data associated with each investor that has been issued with investment instruments, the investment data including information as to whether an investor is an active investor or a passive investor under the investment agreement, and

(ii) to monitor the obligations arising under the investment agreement for each investor over a predefined time period, wherein the obligations of the active investors is to make a predetermined amount of payments associated with the one or more debt instruments during a predefined time period; and wherein the obligations of the passive investors is to maintain at least a guarantee as security for the at least one or more debt instruments.