Mike: (00:00) Thom Richards, thanks for joining me on Geared for Growth.
Thom: (00:04) Thanks for having me mate, I really appreciate the invite.
Mike: (00:06) No, of course, you’re someone that I definitely wanted to pick the brain of because the topic today is property technology. Now we’ll talk a little bit about what you’re doing as a day job but talk to us about Proptech. It’s something that has been a big buzzword, we now have Proptech awards in Australia. For your average investors, perhaps they haven’t heard to much about it but what were some of the first iterations of Proptech in Australia?
Thhom: (00:32)Yeah, I mean, Proptech has always traditionally targeted real estate agents in the early days. It was always focussed on helping an agency become a little more efficient but what we’ve seen with this whole Proptech explosion is just so many different pieces of tech that are targeting different users in different spaces and a lot of it is starting to filter down to landlords themselves, so whether it’s self-managing, or doing their own reports, or managing payments, all those kind of things, so it’s, the evolution has really pushed throughout this little eco-system that we’ve got, and it’s touching almost every stakeholder now.
Mike: (01:09) Mmm, and who are the big beneficiaries of Proptech from a financial investment point of view? Are we talking these are the real estate portals that are doing it or is it really just anyone who sees value in creating something that makes transactions easier or makes communication better between agent and landlord for example?
Thom: (01:30) Yeah, I mean the big Proptech players like your Domains and REAs and those kinds of guys, they are obviously releasing lots of products and are benefiting greatly from them, but the other platforms in the industry, you see a lot of different founders behind them and a lot of them come from just Mum & Dad investors, real estate agents, people that are on the ground floor and facing those problems. And they’ve just gone out and created something quite simple but it’s solves the problem. I know one of my mates started a business in the form space a while ago, just from his frustrations of using legislative forms and filling out pdf’s with the REI and created something much more simple and that just purely came from his experience in signing leases with people. So you do have the big players but there’s also a lot of great tech that’s coming from the garages of some of these guys that are doing it as a hobby project and then it becomes a little bit bigger than what they anticipated.
Mike: (02:28) That’s great. Yeah, I guess when people see an inefficiency or a need and they create something based on that, there’s a lot of great companies that have been created that way. Please tell your mate to talk to the banks too because they seem to be a little bit slower than the real estate industry. Why do you think real estate is the industry for disruption and for this technology? Is it just by virtue of the fact that it’s a big sector in Australia?
Thom: (02:55) I think just ‘cos there’s so many moving parts. I mean if you just look at property management as an example, it’s an incredibly complicated process, lots of variables, lots of stakeholders, lots of physical requirements as well. I mean, you’ve got your maintenance, your on-site, you’ve got your routine inspections where you’ve got to go out there, your inspections. You can’t get away from a lot of that manual admin and the manual tasks that you need to do, both in person and online. And that’s just part of it, right, you’ve got your whole sales, and then you’ve got maintenance, and then you delve into the other side for the investors, so I think it’s purely because there’s so much there that needs to be done. People see it as an opportunity to remove a lot of that admin with tech.
Mike: (03:36) When it comes to your average property investor who is working with a property manager and presumably they’re getting their statements, the property manager is organising maintenance, typically what are the systems that are in play that an investor might not know that the real estate company is using?
Thom: (03:54) Yeah, most of the investors would be aware that there’s a reporting system behind the scenes. Probably what they don’t understand is how much is involved, with getting that statement to them. So if you look at the Trust Accounting world, the amount of admin that goes into Trust Accounting, and how much is required to reconcile those payments and make sure everything arrives at the right place and that the reports make sense and all those kind of things, it’s not as simple as just getting a statement out of a Trust Account software. There’s a lot more that goes into it, whereas the investor just sees a pretty pdf at the end of the month and that’s about it.
Mike: (04:32) What do you see on the agenda for investors? Are they likely to see more interaction where, for example, they’re submitting sort of, tickets, or let’s say the tenant is submitting tickets to a property manager for the landlord to approve? Do you think landlords will see a little bit more technology in their day to day interaction with their investment property and their property manager?
Thom: (04:56) Definitely, I mean it’s already happening. All the latest iterations of property management tech are all moving on from that old Trust Accounting approach. So if you look at the old RESTs and the Property Tree’s and the Property Me’s, all those guys have been around for a while under the old processes. You’ll see that a lot of the new tech do things in a very different way to those, in my opinion, outdated systems, purely because landlords want more. They want access, and if you look at how you interact, Mike, with your internet banking, if I was to sell you a bank account now I’d be very surprised if you took the one with no alerts and no internet banking, no online portal. If I told you, you had to go to your branch to get your balance update, would you do it? Or if you had to call a branch manager to know how much was in your bank account, would you accept that product? Or would you go to CBA and say ‘ok, well we’ve got the best app in the business and everything is at your fingertips, it’s fully personalised and you’ve got 100% clarity on your money’. Investors want that same experience with their property now.
Mike: (05:58) Yeah, I don’t need to answer that question because I think everybody knows the answer. It’s a little bit like when the self-checkout things came in at Coles. As much as I want to sort of support employees, and that sort of stuff, we do tend to like the ease of flicking through and not having to have that interaction sort of thing, don’t we?
Thom: (06:19) Yeah, yeah, and it’s faster. I mean, why would you join a line of twenty people to get the same result right? You’re still getting your groceries at the end of the day, you’re just getting it faster and you’re walking through and it’s just a much more efficient process.
Mike: (06:30) What do you see as the benefit for the investor with the influx of this property technology? Or does it really translate more to the property manager and then is that sort of passed on with greater efficiency and lower fees? Who’s the real winner here?
Thom: (06:47) Yeah, I mean the real winner at this stage, with a lot of the platforms, is still the property management business, because a lot of it hasn’t filtered through to the investor, or there’s still a hesitation in the industry for property managers to share the technology with the investors. There is a lot of ‘oh, I don’t think my landlord would like that’ and we see that a lot in our day to day operations. In some cases it’s true ‘cos a lot of landlords are a little bit old school and they still like their paper statement being posted out to them and those kinds of things, but it’s becoming less and less common that you get those old school landlords and more common that you want someone that wants a touchpoint almost every day or a bit of tech that keeps them connected.
Mike: (07:32) Yeah, and I see that continuing to change right, as the baby boomers sort of transition out and even according to our sort of metrics the average investor is kind of closer more to my age in the sort of mid to late thirties, although I’m clinging on to that, I’ve got to be honest. When it comes to the future of property technology, are there any things that you think are rich kind of ground, areas that haven’t solved that there needs to be more efficiency or transparency?
Thom: (08:02) Yeah, I mean I definitely think that the approach to money is, is a big one. I mean, for me, I mean there’s the reason why we designed our business, without a trust accountant. There’s a lot of them coming out of the woodwork now, but for me, trust accounting is something that is still prevalent and doesn’t need to be. So that’s one of the big ones for me, is to see trust accounting disappear over the next little while. It’s a very archaic way of handling money. The other approach is purely around maintenance and communicating the property’s condition. I think taking a bunch of photos from an iPhone from a property manager is not a great way to really understand how you can maximise a return on your investment, how to look at things like depreciation, how to look at things like capital improvements, preventative maintenance, all those kind of things. They’re probably the two biggest ones for me, and also the two biggest ones to tackle ‘cos they’re quite large.
Mike: (08:56) That’s a really interesting point, because if you look at your average communication with your property manager, just sort of using myself as a case study, rarely do I get a conversation where it’s kind of like ‘if you were to do x,y,z, at this property, I anticipate that your valuation would be an extra 10% or your rent could probably be increased by x amount which would be a payback period of 6 months or something like that.’ That seems to be a hugely lacking thing, is that something that you’ve got your eye on with your business?
Thom: (09:29) Yeah, definitely, I mean if I was to ask you where would you go now if you wanted an idea on what your property was worth in the rental market, I think you’d be pretty well stumped, because there’s a million tools out there for sales and estimating values and looking through the history of what houses have sold for in the street like RPData and those kind of things but there’s very few records on rental returns. It’s very difficult to find out what you realistically should get in the market. You might find that a property was advertised, a two bedroom, for $850 in the advertising history, but they might have signed that for $650. You never know. So having that access to information is something that would need to come to enable property managers to give a bit more guidance and I think that’s part of the reason why they don’t do that, is that they just don’t have any solid information or solid data.
Mike: (10:20) Now that data exists in the residential sales space with say Valuer Generals, obviously you’re needing to have a record of that, which will figure out what the stamp duty is that you’re paying. Is there an equivalent of that with rental information? Is there data out there that can be kind of farmed and mined and analysed?
Thom: (10:44) It’s difficult because that data belongs to the individual real estate agencies or those landlords. The reason why the sales data is so accessible is because you’ve got public registers of these amounts. You’ve got your Land and Titles, and all those sorts of businesses, I don’t know if it’s called that any more but you’ve got public records with those sale amounts. Whereas you don’t have to register how much you lease your property for, right, it’s just on a piece of paper in a lot of instances or saved in a property manager’s system and never really shared with anybody. So accessing that is a lot harder. There’s some great estimate tools that I know are in the works at the moment, some of the bigger players, but they’re yet to be seen and their effectiveness is yet to be seen.
Mike: (11:29) Yeah, and I suppose they’ll always have limitations based on generic sort of median rentals.
Thom: (11:35) Unless you’ve been to the property it’s very difficult and that’s the hard thing. Doing a sales appraisal, it’s why agents still get in their car and go and have a look at a property physically and why desktop appraisals are taken with a grain of salt when it comes to valuation firms. They can do them, but it’s usually a lot more accurate to have somebody go through the property and compare apples and apples as opposed to just ‘two bed, two bath, one parking’ ‘cos it doesn’t tell the full story.
Mike: (12:04) Yeah, exactly. Now tell us about your business, why you started it, what is the problem that you’re planning to solve with Managed?
Thom: (12:11) Yeah, the key word that we built our business around was clarity. We really wanted an open forum for managing property. I just felt that giving landlords and tenants and tradies tech that allowed them to be on the same page at all times as the property manager, would make for a much more healthy and conflict free relationship. That was our main goal from the start. We did that in a number of different ways. When I say we did that, we’re working towards that. I don’t think we’ll ever 100% get there ‘cos no-one ever does, but we did that firstly with the payments ‘cos I felt that was one part of the real estate industry that was quite hidden. So a property manager previously had control over statements, you could enter whatever you wanted in your software and then that would go out to your owner. The statement never actually reflected the real transactions that were going on behind the scenes, they were all just entries. So what we did was we created internet banking for the property which was an identical experience to their personal bank account. Landlords were used to having a personal bank account, a business account, an offset account, kids accounts, all those things and they control their permissions and visibility and alerts and personalise them. They just could never do that for their property until Managed app came along. That was one of the big ones for us and then the communication side was key too so being able to opt in for alerts that allowed everybody to give their feedback in real time, communicate in real time, it all helped to achieve that openness that we were after,
Mike: (13:50) Let’s zero in on the payments side of things. So the traditional model is a trust account so that’s where the real estate agent has a bank account where it’s funds in trust for all of their clients for want of a better term. So your rent goes into the trust account, your property manager might be withholding some of that to pay for maintenance and then you’re getting your statement. With your system, there is an individual bank account for each property or each property investor without a third party account owned by the agency?
Thom: (14:25) That’s exactly right. So we use the term ‘account’ loosely. It’s a digital wallet, and I’m sure 90% of the listeners will be familiar with that, not so much by the term but by other businesses that use them, so if you think about your Paypals or your Airtaskers, they all have the digital wallet approach. So Paypal’s a great analogy, you can keep money in your profile right, and I can use it to buy anything I want. If somebody buys something off me, I can keep it in my Paypal account or I can send it to my bank account. So our system, our technology that we built works in a very similar way, we just repurposed that tech and built some really clever logic to apply to all the really basic property management workflows and also some of the edge cases that property managers have to deal with.
Mike: (15:10) What about some of the things like the routine inspection and the maintenance. How is that typically handled by property managers at the moment?
Thom: (15:18) So they usually have a number of different apps that will allow them to do it. I know a lot of my mates that run real estate agencies have multiple subscriptions when it comes to these workflows. So they might use a maintenance app or a tradie app as a third party which helps them run that process and then they’ll use a different app to run their inspections and they’ll have a different one for forms and then they’ll have a different one for applications and then they’ll have a different one for the trust accounting and some of the basic processes. The reason why they do that is because, as most people are aware, there is no one app that does everything. That’s typically the case in any industry. Even at Managed App, we use Google to power the base of our business. It’s something like a trillion dollar business now, whatever it is, and we’re on Zoom today because you can’t record on Google Hangouts. As an example, so if a trillion dollar business can’t deliver something that we need as a tech business, there’s no chance that all the Proptech is going to be able to do everything and that’s something that a lot of real estate agents have become aware of and they are looking for the best tech in each particular field so that’s why they’ve got all these different systems to manage those workflows at the moment.
Mike: (16:36) Now for the poor landlord that’s listening that’s saying ‘yeah, this Thom guy, he’s onto stuff, I want what he’s talking about,’ can they be having this conversation with their property manager saying ‘what technology do you use? I want access to all the back end stuff’ or can they be saying ‘I want you to be using this Managed system’. Is it up to the real estate agent to basically acquiesce to the landlord?
Thom: (17:02) It is, yeah. So at the end of the day, if the Landlord is looking around for an agent, that’s one of the things I’d encourage any property investor that’s looking to hire an agent to run their investment, is ask them what tech they use and what benefits they get. And when they tell you, you get a portal, ask them what that is because it’s typically a buzzword, yeah you get a portal and it’s basically just document storage that never gets updated. So ask what the real benefits are of the software that they use. Can you get instant payments or do you still have to wait? Are they double-handling your money? Does the agency have to touch your money or does it come direct to you? So all those kind of things. Can I chat with you? Can I see real time alerts? Can I personalise my notifications? All those kind of things. So they’re all the things that are important to me and a lot of my mates that own investment properties but it is definitely a question that they should be asking. If you’re already with an agency, chances are they might be considering new tech if they are running trust accounts, ‘cos most agencies that are running trust accounts now are looking at the alternative solutions because they have become prominent, so just ask them what they’re looking at. Where they’re thinking of going, and let them know how important it is. Because they do base their decisions, like most businesses, on feedback from their customers. It’s a really important part of their decision making process.
Mike: (18:23) Is the property management industry a little bit sleepy and wanting to continue the status quo or do they see the advantages in the prop technology is something they’re desperately trying to claw onto as well, and who’s the real driver?
Thom: (18:40) Yeah, I mean, the driver would be the investor, I see, in a lot of cases. Property management businesses are typically quite slow to adopt technology and make changes. And I think it’s almost like a stalemate. I think they think it’s like the investors don’t want to do anything and the investors think that the management businesses are getting a little bit lazy with updating their tech. And it’s kind of this Mexican standoff in terms of upgrading. But I think it’s worthwhile both of them understanding what’s out there, and looking at the industry data and doing surveys and even looking at the conversations and the communications that a lot of landlords are having or even the trends or how much self-managed tech has taken off over the last few years. That gives you an idea. I mean Macquarie Bank, I think, they released a report where they assumed something like 30% of landlords have gone to privately managing their property and I think part of the reason for that is the tech that they get on that side was better than the trust accounting tech.
Mike: (19:40) Yeah, that’s a really interesting point. I wonder if you might indulge us by sort of finishing off with giving us an idea about what the Landlord could actually get, what is out there, what could the discussion with the property manager be if they’re wanting to get technology in their real estate practice like Managed, where they’ve got all of these bells and whistles. What should an investor be saying that they want?
Thom: (20:08) That they want? There’s a number of things. The key parts – I want access to my information, as an investor, so that’s something I’d be encouraging all investors to look at. So being able to log on, have a look at details, access documents, and see reports. I would want real time payments. So I don’t want somebody else, as an individual, touching my money. I also don’t want my money sitting in a Trust account because I can put that money in my offset, right, so rather than my monthly rent sitting in a Trust account, for the best part of three weeks, four weeks, depending on the tenant’s payment frequency, I could have that in my offset account, reducing the interest over the course of my loan. Why would I put it in a Trust? It also means I don’t have the cashflow if I need it. I’d like options when it comes to making payments, so the ability to pay things on a credit card, as an example, to conserve cash as opposed to taking it out of my rental income, the ability to fund certain things. If I’ve got a special levy, or a big maintenance bill. Let’s say I need to pay ten grand to do a coat of paint and carpet and other improvements, just because the property’s getting tired. I’d like the ability to pay in four and make partial payments, or use something similar to Afterpay or Possible or one of the lenders, because that allows me to update it without putting too much strain on my cash. So they’re some of the big ones from the access to information, the payments. And I also want to know what exactly is going on with the property itself. So I want to see photos, videos, comments. I want real time updates on the condition of the property. I want to track my capital improvements and understand when things get over ten years old, as an example and I want to be able to look at my property profile and see all that info. So they’re the biggest things from my end.
Mike: (21:58) Now you’ve obviously built this system so for property investors that want to have this conversation with their property managers, where can they go to sort of see some of this in evidence and have this conversation with their property manager?
Thom: (22:16) Yeah, so we don’t have a portal, per se, that allows them to find a Managed App powered agency. What we do is, we typically ask them to enquire through the website and we’ll give them a list of all the agencies within their service area. We’re not a portal, or we’re not a lead gen tool for agencies so we just want to be as open as possible. We can share all of the agencies within an area and we encourage them to approach them. At the end of the day, tech is an enabler, it doesn’t stipulate who the best person is. So we encourage investors to make sure it ticks the boxes when it comes to tech, but also look at the individual agency and their point of difference and whether they’re a good fit for that individual. So I’d encourage them to jump on the website, or on Managed TV, which is our Youtube channel, look through all the investor videos, send an enquiry and go through the list of agencies that are powered by Managed App within their area, and see which one is the best fit for them.
Mike: (23:10) Awesome. There’s a lot of good stuff coming for property managers. Just more empowerment and understanding of their assets which is a huge part of their financial future so this is pretty critical for them. Thom, thank you very much for sharing your time and your wisdom today.
Thom: (23:25) Mate, I really appreciate it. Thank you again.
Mike: (23:28) Cheers.
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