Rayhan’s Proptech column: Who will be the traditional letting agent’s next customers?

I’ve long written about Rightmove being the only winner in the traditional vs online agency wars. Regardless of how someone chooses to sell their home, Rightmove gets paid.

But this dynamic isn’t true with lettings. There is no clear evidence, but it seems anecdotally obvious that many landlords forgo using an agent and list on Gumtree, Spareroom or just spread the word offline. How large is that market?

According to the ONS, there are just over 5m privately rented households (in addition to the just over 4m socially rented households). If we take for given that the average renter moves every 18-24 months, we should see at least 2.5m moves a year. Yet Rightmove has fewer than 800,000 rental listings. Can it be true that more than half of properties are let without appearing on Rightmove?

It’s important to draw a comparison: the Land Registry exists, so we know how much was paid for homes, when the transaction took place and how many homes were sold. None of this exists in the world of rental property. It should.

The deposit protection schemes have this data. Just like EPC data is finally being released as ‘open data’, this rental data should be anonymised and released for analysis.

It would actually be very easy to do. Sajid Javid should instruct lawyers that advise the Department for Communities and Local Government to vary the contract with each deposit protection scheme. A simple change allowing them some fixed (small) compensation to release the data on a monthly basis is all that is needed.

If the Government wants to encourage institutional investment into the private rented sector, then give investors certainty about how much demand there is for rented homes in an area and how much rent they could achieve. The result would be the difference between a few hundred million being invested and hundreds of billions.

But would lettings agents benefit? My thinking is yes and no.

Yes, they’d spend the time to get a better handle on their local rental market – far more than a DIY landlord could because agents should still be a more active market participant.

However, if big institutions start to push out the accidental landlord – the ones that leave their property with lettings agents for decades – then who is left to give traditional lettings and management agents regular custom?

Younger generations who inherit rental property do the quick calculations that the previous generation took for granted. Using a traditional agent is something they find uneconomical vs using the internet for ‘listing’ and doing the ‘letting’ themselves.

So what could save lettings agency? What could lettings agents provide that would make a DIY approach seem the wrong thing to do? Customer service.

I spoke with Richard White, CEO of Goodlord, in light of their extraordinary £9.2m raised in the last 12 months.

Amongst the detail of what he would spend the capital on, he kept saying, “What we get excited about is giving consumers a really good experience.”

He adds, “Focus is important. I question any online agent who can build the systems and do it really really well.”

Goodlord, in case you haven’t used it, allows agents to shed the day-to-day paperwork of signing agreements, taking payments and conducting reference checks.

While electronic signatures have been around for a decade, few lettings agents today truly use them. Most agencies still rely on negotiators handing over tenants to administrators in their office. That’s certainly not a good experience for a tenant, and it’s massively costly for the agency owner.

To this end, White says they’ll soon be launching a tenant app for agents to use with their own branding. The app will give tenants all the relevant documents in one place.

When I asked White what one thing he’d want agents to take away when interacting with Goodlord, he said: “We’re in it for the right reasons – we want to be a breath of fresh air. I want agents to feel we actually care and are out to do some good. Not only for estate agents but for everyone.”

With 80 staff – mostly employed on the tech, sales and ‘success’ sides of the business – and plans to expand to 117 staff, White won’t be short of resources to build better software and “do some good”. But will agents take in the marketing and buy, or will they be preoccupied trying to keep their clients going DIY?

 

Who is the best estate agent?

I thought it worth expanding on Ed Mead’s excellent piece on making agent performance statistics a publicly available service. Estate agency isn’t in pain yet from either regulations or technology, but public sentiment is definitely still on a downward trend and many agents don’t think they’re standing on a burning platform.

If you’re a good agent, you’d want the world to have an objective measure to show that is the case. If you’re not so good at agency, you’d want a benchmark measure to help your staff raise their level to. Either way, standards are a rising tide that lift all ships.

Most important of all, transparency brings trust. And with trust follows money.

 

What is innovation?

There’s a great video of Rory Sutherland (Ogilvy exec) saying that innovation isn’t just about invention. It’s about invention + marketing.

If techies (and agents) don’t understand how to sell to their customers, the opportunity cost is massive: it opens the door for someone else to innovate and eat their lunch.

Please watch from 30 minutes here: http://futurefifty.com/10-things-learnt-rory-sutherland-future-fifty-2017-launch/

 

Real estate is sexy. Real estate tech isn’t

This was one of the first posts I wrote: http://www.realpundit.com/home/2014/real-estate-is-sexy-real-estate-tech-isnt

It pains me greatly that the post is still relevant almost three years later.

Many agents think building software is easy. Hence why so many have founded online agents, and before this fad even more tried to launch property portals. All have failed. Michael Bruce is proving to be the one exception thanks to Neil Woodford’s financial wizardry.

If you didn’t watch the Rory Sutherland video, here’s my take:

It’s important to note that Kodak invented much of early digital camera technology to the point of holding many essential patents. They just didn’t know what the market was.

Rory Sutherland’s TED talk says this best: Innovation isn’t just product. It’s product and marketing.

When 3M accidentally invented Post-it notes, they then sent a box to the PAs of every Fortune 500 CEO. That seeded the product as a must-use for everyone else in the company.

Proptech may throw up interesting tech and process improvement. But the marketing to date has been anything but innovative.

If you look at the successful companies, they all had distinctive marketing: Rightmove had over a million listings, Zoopla owned the word Smart and Purplebricks made a mockery of paying agent commissions.

What’s your marketing technique? And will it help, finally, make your property tech sexy?

 

3 Comments

  1. Neilw

    Zoopla through their CFP Winman and other products are already offering this system

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  2. Windsor197848

    “Most important of all, transparency brings trust. And with trust follows money.”

     

    I like this quote.

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  3. KByfield04

    Lettings agents have two massive opportbuities to prove value:

    -Hands-On customer service: the bastion of all successful agents going forwards (sales and rentals) will be either price (cheap) or service (quality). Service takeks abt more effort and bedding in but is ultimately lower risk and much, much higher reward.

    -Transparency of Legislation: Rayhan’s sts are widely supported and there is a general consensus that the PRS is 50/50 to agent and private Landlords. However, many of these Landlords:

    a) Have no clue about the vast majority of legislation now in place

    b) Unaware of this, dont appreciate the value derived from agents now- as opposed to 10 years+ ago (before deposit legislation) when most just marketted, did a simple tenancy, gas cert and handed over keys- for the same price we all charge for all the extra work and due diligece we do today.

    So- sort our yourservice offering. Then, rather than wait hopelessly for the government to properly regulate the industry (which, even if they did, would have no workforce to implement/enforce it) and start looking at ways to make legislation transparent. Educating Tenants on their rights & protections (if you are a professional, competent agent) hewps Landlords understand all the work you do for them and to understand the value you put in the transaction.

    P.S. Many of the cutback, online offerings do very little to educate Landlords on the array of reg’s and also do little to ensie the necessary steps are taken. Educating Landlords & Teannts alike of these substantial risks is well worth your time & effort!

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