There is no doubt that technology is changing the way that the real estate industry operates, but just where will it impact in 2019?
As an investor in technology enabled business that sit in and around the real estate industry, we see hundreds of technology businesses every year. Following are 3 trends that I think will emerge over the next 12 months. Not all of them are technology trends, but they have all been caused by the massive change that technology is having on the industry.
Trend 1: Remote Management of Rent Rolls
Declining commissions in property management, a tough sales market in many states, and increasing competition from low cost technology enabled start-ups means traditional real estate agencies are likely to do it tough in 2019. Principals will need to look for ways to operate more efficiently and to reduce costs. One trend we’ll see growing in 2019 is the complete outsourcing of the management of real estate agencies including property management.
It’s no secret that managing a large rent roll produces economies of scale that smaller operators can’t achieve. This is why we are starting to see consolidation of rent rolls and the white labelling of property management services.
Several such services are up and running including services like StaffLink and Universal Property Systems. Stafflink is a white label service which was founded by Image Property Management’s Joel Davis. Davis manages rent rolls for over 20 different real estate agencies around the country, by implementing the systems he uses at Image to operate the 4000 properties he has under management in Queensland.
“Over time we see ourselves freeing up the principal from managing their rent roll, which allows them to concentrate on running the sales business. The tenants and landlords get a far better service, and the business is more profitable, so everyone wins.” Says Davis
Utilising best of breed cloud-based software as well as having developed software tools to improve efficiencies internally has meant Stafflink can operate these rent rolls much more profitably than the principal who owns them. Services like Stafflink and Universal Property Systems would not have been possible 5 years ago without the development of cloud-based software with API integrations.
Trend 2: Elimination of Trust Accounts
One of the biggest risks that all businesses face is the temptation to keep doing things the way they have always been done. Nowhere is this truer than in the real estate industry. For decades real estate agencies have operated trust accounts, a labour-intensive costly process that has very few tangible benefits for the average real estate agency. The question is why does the industry do this? Part of the answer is because in some states like NSW it is a legislative requirement.
The technology has existed for many years that allows all the transfers of money to flow without the need to have a trust account. Although this technology hasn’t previously been applied to the real estate industry, this is starting to change. There are now several organisations working on this problem, with companies like “Managed App” and “Our Property” already with systems in the market that allow an agency to operate without a trust account.
Trend 3: The Technological Need To Change Legislation
With the introduction of so many new tech enabled businesses in the real estate industry, legislation is going to find it hard to keep up with changing business models. One tactic we are likely to see is new technology start-ups in the sector bend or break real estate related legislation so they can provide a better quality service at a cheaper price in order to gain market share.
A classic example of this outdated legislation is the need to for NSW agencies to operate a trust account.
One lesson the industry should learn from the Uber v Taxi wars of the last 10 years is that ultimately consumers will determine what’s legal and what’s not. As a result, forward thinking real estate principals will focus more on what’s best for the customer as opposed to what they are required to do under the letter of the law. Legislation that increases costs for consumers or slows down processes will be the first to go. This need to lobby government and amend legislation should also see industry support for Real Estate Institutes grow as the collective need to level the playing field between tech start-ups and the incumbent industry increases. (Please note: this is view of the author and not necessarily that of the REINSW.)