00:00

Kylie Davis

Welcome to the Prop Tech podcast. It's Kylie Davis here, and I'm delighted to be your host as we explore the brave new world where technology and real estate collide. It's so great to have you here and to share stories of innovation and opportunity across real estate, property, and building services. The aim of each episode is to introduce listeners to a Proptech innovator who is pushing the boundaries of what's possible across how we design, build, buy, sell, rent, and invest in property and all of the associated behavior and activities around that. Now, none of this would be possible without our sponsors, so a big shout out to the Direct Connect team, making moving, easy, dynamic methods the innovators behind the forms, live and real works forms, and the Proptech Association of Australia. Thank you for your support of the podcast. 

00:55

Kylie Davis

Hey, everyone, it's Kylie here, coming to you from Barcelona. My guests in this episode are Richie Ragel and Michael Cleary, who I interviewed before I went away. They're longtime friends with marketing backgrounds who turned their side hustle of property investing into a buyer's agency that specialized in helping the expat market buy and sell property in Australia. The pair have since expanded their business into a full service model that supports all elements of researching, selecting, owning, managing, and even renovating property, not just for expats, but for anyone. They're in the process of building out a tech stack to ensure that all elements of the business are tech enabled. Where did their crazy name come from? Well, you'll have to listen to this episode to find out. 

01:42

Kylie Davis

Richie Ragel and Michael Clery from Milk Chocolate. Welcome to the Prop Tech podcast. 

01:47

Richie Ragel

Lovely to lovely to be here. 

01:48

Michael Cleary

Thanks for thanks for having us. It's awesome to be on. 

01:51

Kylie Davis

It's always fun to do a double interview. We'll try not to talk over each other too much. I do love that you guys gave me, actually, the questions back color coded based on who was talking. Thank you so much for that. We always kick off with the hardest question first, which is, what is the milk chocolate elevator pitch rich? Yeah. 

02:12

Richie Ragel

Thank you. Suppose at Milk Chocolate, we've got a core belief. We believe that in the future, all parts of the property journey will be verticalized into one. At Milk Chocolate, we'll empower Aussies with a vertically integrated software solution for a seamless property journey that essentially sums it up in short form. Obviously we'll get into it, I'm sure, further into the podcast. 

02:34

Kylie Davis

Okay, so, yeah, what do you do exactly? What is a seamless vertical property journey? 

02:40

Richie Ragel

Yeah, so essentially, we help buyers, whether that be investors or owner occupiers, to plan to buy, build, and manage Australian property using our bespoke software, data driven insights, and subject matter experts. We're talking about verticals, those verticals I've just touched on in terms of planning and strategy, purchasing, building and construction and management are the key verticals that we're talking about in this particular instance. We are the complete offering so encompassing research, planning, buying, building and management as I just touched on. Our property team is composed of economists, valuers qualified property investment advisors, data scientists, machine learning engineers, real estate agents, builders, project managers, interiors architects, interior designers and property managers, just to name a few. It certainly is an eclectic bunch of people under the one roof, as you can imagine, which provides really exciting outcomes, which we're starting to see the fruition of, which is really good. 

03:34

Richie Ragel

Essentially, consumers are using these services either separately or combining them to unleash essentially a powerful property solution to combat today's really fragmented and frustrating property experience. We know that property is the largest asset class in Australia, but the least liquid. The journey, as we always know, is long. It's arduous, it's incredibly low NPS with most Aussies having negative connotations towards property. Essentially the industry is fragmented and disjointed and there isn't a single intuitive digitized solution that encompasses the whole user journey that is for the sole benefit of the consumer. That's what we're at Milk Chocolate that we're solving that particular part of the problem and essentially we join the dots in the one software platform. Any user looking to buy a property in Australia only needs to use the one single platform. We do know that on average there are more than 500,000 property transactions per year in Australia. 

04:30

Richie Ragel

That's a lot of buyers speaking with individual banks, conveyances, real estate agents, research houses, financial planners, builders, interior designers, property managers. Surely there's just got to be a solution to have this all under the one roof and digitize, putting that power back into the hands of consumers. 

04:46

Kylie Davis

You guys are effectively, and I'm going to really simplify here, but you guys are effectively a digitized buyer's agency, but then all of the things that also buyers, property buyers are going to need as part of that service exactly. Solution around it. 

05:03

Michael Cleary

Yeah, exactly. 

05:04

Richie Ragel

We've been doing this in a very manual format for several years now and now digitizing that process using a bespoke tool, built in house under our roof to essentially make that process a lot more efficient and seamless. One for us as a business, but two for consumers looking to get into the property market. 

05:22

Kylie Davis

Awesome. Okay, cool. Because look, we know that real estate agents are basically well, they are legislatively under the legislation. They need to look after sellers, not buyers. That's how they make their that's what they're, in charge to do. So yeah. Buyers, it's the only thing you can buy in Australia, the only thing that I know of that you spend so much money on. Absolutely. You have to be grateful for any dribble of service that you might be delivered because it's upside down really, isn't it? Like the money comes from the seller. 

05:59

Richie Ragel

Yeah, it's incredible as well. When you think about that, just given the nature of the check size that you need to cut to purchase a property debt that you have to take on, that there is not a solution that makes that a lot more easier, a lot of people just have no trust in that whole process. 

06:13

Kylie Davis

Why would you like, why would you I mean, you get more visibility, transparency and cybersecurity out of buying a pizza than you do out of buying exactly. And the money is a bit different. 

06:27

Michael Cleary

Yeah. Add in if you want to do work that property or you need a property manager, all of those things just start to compound as well and it just becomes really confusing and really daunting for people. 

06:36

Kylie Davis

Yes, it's very adulting and look, it should be in some levels, but it doesn't actually need to be that hard. We're seeing around about four and a half to 500,000 properties sold every or sold every year. That's obviously at least that many buyers as well. What are your plans? Are you going to just stay in Australia or what's your vision? 

07:08

Michael Cleary

Yeah, we built the proof of concept on the Australian expat market, so we've been operating for a number of years now. If you were to talk to Australian expats and to talk about property in Australia, you should hear the name Milk Chocolate mentioned. Once our product is built, we're going to continue to really work with the Australian expat community and be the buyer's agent of choice for the Australian expat, but then also launch domestically as well. If we look at our target market and what we want to do, firstly, we are absolutely going to be concentrating on Australia and then we would absolutely love to move internationally and go globally thereafter, but really continuing to build out our product using the domestic market. I suppose if we look at what Milk Chocolate is doing, we're essentially five startups in one business. Rich and I really both only funny. 

07:57

Kylie Davis

You weren't doing anything between three and 05:00 A.m. 

08:02

Michael Cleary

Across. We've got a full planning team, a full purchasing team, a full construction team and a full property management team. To look at the addressable markets of each of those different verticals as you touched on Kylie and Ritchie. 500,000 homes sorry, are transacted in Australia each year. I mean, there's 10.5 million dwellings, there's 6.2 million homeowners in Australia. We know that industry is worth $9.2 trillion. 500,000 transactions a year, 300,000 new people entering the market. From our data, we believe about 5% of those currently are using a buyer's agent to purchase those homes. We look at somewhere like America, I mean, 6 million transactions a year and 88% buyer a broker, which is their buyer's agent. Obviously something that they're really used to doing. We look in the construction space, it's a $12 billion industry at the moment. We know that there's 37% of people wanting to renovate their homes in Australia. 

08:57

Michael Cleary

From a property management perspective, 2,050,000 property investors. 33% of the homes in Australia are currently rented. There's not one single business at all that's solving all of these challenges under one roof and digitizing that whole experience. I mean, if we look at Prop Techs by sector, you'd obviously know this really well, but from our research, currently circa about 50% of Prop Techs are property management businesses. About 18% in the construction space, 12% investment, 9% in transactions, and about 8% in smart cities. And the fastest growing being property management. We also know that about 80% of those are b to B. Again, there's just no one tackling this whole problem or all of these things for the consumer. So that's what we're doing. We're going to continue to do that for Australian expats. We're going to launch that domestically and then once we're feeling really confident about that, then absolutely the roadmap is to look to take that overseas. 

09:51

Kylie Davis

Okay, awesome. And look, I'm loving all the stats. Thank you so much for indulging me on that. I've got a couple of questions specifically for you guys. I want to hear your origin story, because I think this idea that you guys started in the Expat community is fascinating because it talks to two things that overseas buyers trying to get into Australia, just how hard our system is to do that. Also that expectation of I should be able to pay someone to help me with this is that kind of external thing, which is not so much what happens over here, although I think growing as people get more and more frustrated with it. Tell us about your origin story. Also I need to know the name. Where did it come from? 

10:39

Michael Cleary

Well, I suppose we can always tackle that first and take you through it. The reason the rationale for milk chocolate was where it first started was that everyone needs life's necessities. That was the milk component, which is housing, and everyone needs a bit of fun in their life, which was the chocolate part of it. We both come from marketing backgrounds, so we brought milk and chocolate together for life's necessities and fun. Obviously purchasing a home or building a home or property management, it's all really serious, it's all a necessity. The aim for people working with milk chocolate is we're giving them something very serious, but at the same time as well, we want it to be a fun experience for them too. The reason we started with the Australian expat community was we had lots of friends that were Australian expats and Richie and I started our careers in marketing and we had a traditional side hustle. 

11:28

Michael Cleary

I suppose to take another backward step. Rich and I are best mates from high school, so we've known each other for many years. Went to school together and were both working at a marketing agency in Sydney, both working there together. As a traditional side hustle, we started buying homes, renovating them and either flipping them or renting them out. Our exit friends actually had an experience with a buyer's agent that just didn't go very well. They were calling them at three in the morning, weren't respectful of time zones. You've got to buy this house now and they're like, it's 03:00 a.m. Where we are. They actually just said to us, can you purchase our next property for us? You will do it on commercial terms. You guys are doing this for yourself. Essentially that's where the business built from and was that we realized that no one was servicing the Australian expat community properly. 

12:16

Michael Cleary

We wanted to make sure that they're getting really proper, genuine advice. There were lots of property sprukers going over to Dubai and Abu Dhabi and Singapore and Hong Kong and selling really terrible off plan apartments or house and land packages and unfortunately they were just getting suckered into this. Milk chocolate as well was very different. It was very different name in the community. It stood out and it still continues to stand out. That's why we built the proof of concept on the Australian expat market. You live or die by that market, right? They're a very and you either do really well and your name gets spread really quickly or you could do really badly and it could get spread really quickly as well. Really fortunately for us, the Australian expat community has embraced us and we would actually consider ourselves to be the buyer's agent of choice in those particular markets. 

13:05

Michael Cleary

I suppose if we look at that more and just around those origins and what we've done to date so we've worked with over 300 clients. Currently we've written over 200 game plans, which are our property portfolio plans. We manage properties in five states and we've completed $35 million in construction projects nationally. Where we wanted to take those origins. As we mentioned, just looking at the domestic market, with the launch of our product, we will continue to work with Australian expats. Our goal is to really make planning, purchasing, construction and management services accessible to all consumers so that they can be properly educated and have the confidence they're buying, building and holding really quality assets. We appreciate we're not developing a product that's going to make it cheaper for you to buy a home, but what we want to do is make it more accessible for everyone to be able to use a buyer's agent for everyone to have really proper planning or really proper construction management. 

14:00

Michael Cleary

When looking at the domestic market as well. I'll take you through a couple of more steps that you might like. The way that we look at it is when looking at Generation Y for instance, which is people born between 81 and 96 and sections of generations there between 97 and 2012, what we want to offer them is the perfect mix. We know that they love technology but they also want a human to help them as well. This is going to be one of the biggest purchases they make. Typically loving technology, but also wanting that human someone that they can lean on, connect with for what will be something that they only do a couple of times a year. There's also those mid stages of Gen X who just can't believe to buy a property you need to seek out a mortgage broker, a conveyance, building inspectors, deal with real estate agents, all of the emails and so forth, that brings along and actually then leave your house to go and view another house and then think about building quotes and all of those sorts of things. 

14:56

Michael Cleary

It's just something that they don't want to do and they just all want an app that will do that for them. Ultimately that's what we're going to do is give them what they need and give them that app that will do all of those things but also still have that human connection that will help with that as well. Aside of that, what we're also doing is building a business for what is currently Generation Alpha, which is your two thousand and ten s to now. For us, this is a really exciting group of people. They've been born holding smartphones and tablets. Autonomous cars are just standard to them. We laugh because they have speakers in their homes that talk back to them. Everything's a smart device and their purchasing hazards are going to be wildly different to what we're seeing today. We're really excited to keep on evolving the product that will ultimately be a very tech first tool that will just allow the digitization of all of those verticals for those particular segments that are coming up. 

15:45

Michael Cleary

I've gone off a bit of a tangent there, but I hope I answered that okay. It's the the origins and then where we see that customer base moving forward to yeah, awesome. 

15:54

Kylie Davis

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16:58

Kylie Davis

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17:16

Kylie Davis

I think it's really interesting that you've looked at it through that generational lens, because I'm a card carrying member of Generation X and I just think, yeah, I mean, look, even my generation thinks, oh, why does it have to be like this? It's like, oh, yeah, that's right, because this is the way our mums and dads did it. 

17:35

Michael Cleary

It really isn't it? I was actually having a conversation with someone this morning about that exactly that they were like, Why are we doing it like this? It's like, Because Mum and dad did it like that. Do we just keep on doing it? 

17:47

Kylie Davis

No. No one wants to do it this way. It's a horrible way to do it. We all hate it. So, Richie, what's your business model? 

17:55

Richie Ragel

The business model? Yeah. It's a good question. 

17:58

Kylie Davis

Are you working that out as you go along? No, that was a little bit rude. Sorry about that. 

18:04

Richie Ragel

That's okay. So, essentially, we generate revenue through those verticals that we've just touched on. We talk about the game plans, the purchasing, construction and property management, milk chocolate generates revenue through each of those individual verticals. I obviously won't go into the specifics of what that looks like, but the aim of the business and the model is anyone that's looking to purchase property, they're obviously going to need a plan and a strategy potentially to renovate and obviously, property management. What we do know at the moment is about 75% of our clients will come into us to purchase an investment property and 25% of our clients are coming to us to purchase their family home. Of those clients, there's about 40% of those who will move into a renovation either immediately or in subsequent years thereafter. Of the clients that are purchasing investment property, 99% of them are moving straight into property management. 

18:58

Richie Ragel

That's essentially the business model from a revenue perspective. As Michael touched on, we ultimately want to make all of this information and education and tools accessible to all Australians. That's what we're working towards in the future. Now, that is our current strategy and the revenue that we generate through those particular verticals. Moving forward, as we build the business, build the product, we additional features and additional verticals such as conveyancing and finance and insurance, et cetera. Additionally, we'll be able to generate additional revenue through those particular streams. That's when we go back to the overarching vision of what we're working towards in respect of verticalization of that property journey, it's bringing all of those distinct verticals within this particular stream. We've been able to build that proof of concept as Michael touched on through the Australian export market, helping over 300 clients and $300 million worth of properties being purchased or collectively through our experience, more than $800 million. 

20:05

Richie Ragel

Where we are now from a very manual point of view, moving towards a tech business, we're using those skill sets that have been developed and those understandings of those specific pain points generated throughout the years of assisting those. Particular clients to build the perfect product that is going to help run the business, but ultimately help consumers execute across that whole journey, which is really important for us. 

20:30

Kylie Davis

You're basically a mix of commission, subscription, I'm assuming, consulting or that kind of stuff. 

20:38

Richie Ragel

I wouldn't say commission. We charge a fee for service, right? 

20:40

Kylie Davis

Okay. 

20:41

Richie Ragel

Yeah, it's a flat fee for service from a purchasing perspective, likewise with our game plans. Property management is a flat fee for service. With regards to construction, we are licensed builders, act as project managers as well. Depending on the project type and the requirements needed, we'll either look at it as the license builder and where we charge, obviously, builder margins, or we'll look at it as from a project management point of view. Charging a percentage fee based on the total project and we're not just taking part in the actual construction side of things. Milk chocolate enters the process from the very start. We're working with our clients from concept design all the way through to key handover. That includes your design, your approvals, tendering, managing subcontractors professionals, builders all the way through to key handover. That's really important to understand because when we're building out plans for our clients, those plans may or may not include a renovation project within that. 

21:42

Richie Ragel

When it does, our teams are working internally throughout that purchasing process, understanding any properties that we're looking at that have a renovation attached to that particular purchase. They're working with our construction team to understand exactly if that is going to meet the needs of the game plan, how much is it going to cost, is it as per the game plan, and what is the timings to execute on that? Before our client has actually purchased that property, we've done a lot of the due diligence and feasibilities to make sure that we understand that what we have set out to achieve is possible. I have gone on of a tangent there, but no. 

22:16

Kylie Davis

I think it's great because basically you're partnering with people to help them understand what we know in real estate because people do it so infrequently, but it is so expensive and so psychologically important to our sense of safety, is that people want help. People want someone who knows what they're doing, who is not going to rip them off, who has a clear and transparent process and system that they understand and can understand, even though they don't necessarily know all the bits. They want someone that they can trust with, that they can work with to hold their hand, and guide them through. What the key decisions that they need to make so that they don't make mistakes. Because buying or building or renovating I mean, the only thing more stressful than buying or selling a home is renovating or renovating one. Right. 

23:14

Michael Cleary

Yeah. 

23:15

Kylie Davis

They're a bit like prop techs. They take four times as long to do and then three times as much money. Or maybe it's the other way around. Right. 

23:23

Michael Cleary

It's understanding exactly as you touched on Kylie. It's understanding those different emotional needs as well, because we're working with clients across the whole broad spectrum. From an investment property purchase, there's obviously not as much emotion, but it's still a big financial commitment from a family home perspective, huge amounts of emotion. It's working across that broad spectrum of client to understand those requirements as well for each of those individual purchases. 

23:49

Kylie Davis

Yeah. 

23:49

Richie Ragel

As an example, we treat an investment renovation as an FYI non DIY process with our clients because historically we have seen where there's too much emotional attachment to that particular renovation. Because let's cut to the chase. Everyone gets excited by renovating a property irrespective of it's their family or their first investment property. The colors of the walls mean a lot more to them than it probably does to anyone else. That's where we try to remove as much emotion as possible. Like what we do through the purchasing process exactly. In the renovation and construction process, remove all of that emotion. Because every dollar actually you spend, that likelihood of getting a return on that investment is very minimal. Making sure that return on investment is top of mind for any renovations, because we do it day in, day out. We've got teams of buyers, agents, real estate agents, and builders and project managers who do this day in, day out. 

24:40

Richie Ragel

They know where to spend the money and where not to spend the money, because you've got to understand where you're going to make that return on investment in those key areas. It's an important feature of what we offer, and that can still be managed through technology. Also it shows the importance of subject matter experts throughout the process as well. 

24:58

Kylie Davis

Yeah. Okay. Awesome. I remember when I bought one of our investment properties and I kind of did it on my own. I think my husband just said, no, Luke, you sort it out. I remember sitting, I'd done all my sums and I'd done all of my research and I'd done been up to the place where I was going to buy for a couple of weekends. Well, there's two weekends in a row and found something. I remember sitting on the fence with my iPad, redoing the numbers and going, well, this place that I've seen, which I quite like, but I don't have to live there, so it doesn't really matter. The sums work. Like, it completely works. And then thinking, what am I missing? What's wrong with this equation? The thing that was missing was it was literally just completely logical. There was no kind of high drama around it because it was an investing place. 

25:53

Kylie Davis

Investment place. And I remember thinking, well, that's weird. Okay, anyway, but it was still very important that I got the stuff that you get it right. 

26:03

Michael Cleary

Yeah, absolutely. 

26:04

Richie Ragel

Because cost of construction, as we're all aware, is increasing and has increased significantly since COVID And it's more important than ever now to make sure you spend your pennies wisely. 

26:13

Kylie Davis

Absolutely. 

26:14

Richie Ragel

When renovating because it all adds up. 

26:16

Kylie Davis

Yeah, absolutely. What are the biggest challenges and lessons that you guys have learned to date as part of your startup? 

26:23

Michael Cleary

I think, as mentioned earlier on, just building and running five startup sets, it's no easy feat and just the daily challenges that come with that because they really are everything that we've spoken about. We literally have those teams in house and so navigating from just different personalities, which is great. That's really exciting. Having builders and real estate agents and data scientists in the one room, you've got interior designers that are obviously very creative. You've got data scientists that are very introverted. You've got real estate agents that are very loud. That's not a charming that's a great thing. Just bringing all of those teams together and just literally running all of these businesses as one would definitely be a challenge that we've had to overcome and that we continue through daily. 

27:16

Kylie Davis

How big is your team? 

27:18

Richie Ragel

Yeah, the team. There's 18 full time and 15 contractors and growing. It's a great size team at the moment. I suppose going back to the previous question, it's probably a good segue to my thoughts on the biggest challenges. And it's exactly that. It's growing from a two person business to 33 and growing. The hardest part at the moment is getting ourselves out of the weeds, as we call it. It's very difficult. Building those layers in place as we grow the business is going to be vital for our growth so that we can think strategically, creativity and continue to grow the business and focus on that key vision that we're working towards. I'm sure every other business that's gone from two to 33 and more is experienced. Pain points and you throw. In the challenges of COVID and everything that we've seen in the last couple of years. 

28:09

Richie Ragel

For me personally, that's been the biggest challenge and I think will always be a challenge as you go from different milestones. 33 to 100 to 500, whatever that might look like. They've all got their own challenges in itself, but I think it's pretty well written about around this particular size is quite difficult because you are going from. 

28:28

Kylie Davis

Growing fast is sometimes more dangerous than growing slow. Right. 

28:31

Richie Ragel

Yeah. 

28:33

Kylie Davis

You can throw money at things to solve problems when really maybe of thought and going slower can be powerful. I do think that maybe Prop Techs are like children. You think that once we get out of newborn, it'll be okay, and once we get out of toddlers, we'll be okay, and then once we get out of school and then suddenly they're teenagers, like, oh my God, I thought they were going to be easier. 

28:57

Richie Ragel

There's always something. There's always going to be something. Yeah. You just got to manage your own expectations, I think, knowing that there's never going to be the perfect scenario, it's just learning to deal with those outcomes. Michael and I have been doing this long enough to have a thick skin and just continue going on. 

29:14

Kylie Davis

Yeah. I think it would be interesting growing so quickly, growing the two of you, to bringing in other people, too, because especially if you've known each other for so long, you would have so much shorthand between the two of you. Like, you guys would know each other inside out. 

29:29

Richie Ragel

Right. 

29:29

Kylie Davis

You start to bring all these other people who don't know that well. 

29:33

Michael Cleary

That would be challenging. Yeah. It's really interesting that you say that, because we obviously do. We know what each other's thinking and probably more so a struggle for the other people that we bring in, unfortunately. And we're conscious of that as well. Rich and I think very differently, but can think the same. We're conscious of really briefing people on that when they. 

29:53

Kylie Davis

Start to yeah, I know. Nathan Kozinski and I, when were work husband and work wife, like, you do get to know each other very well and how each other's minds work and you get ticks. Don't ask him that.