Kylie Davis: (00:00)

Welcome to the Proptech 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. I passionately believe we need to create and grow a sense of community between the innovators and real estate agents, and sharing our stories is a great way to do that.

Kylie Davis: (00:18)

So the aim of each episode is to introduce you, our listeners, to a proptech innovator who is pushing the boundaries of what's possible, and explore the issues and challenges raised by the tech, and how they can create amazing property experiences.

Kylie Davis: (00:31)

And my guest in this episode is Darren Younger from BRICKLET. Now BRICKLET is a proptech startup in what they call the fragmented ownership space. Using BRICKLET, you're able to invest in fragments of property, but you still have your name on the title. So it's a property investment play targeted at millennials and that generation of Australians who are now struggling with housing affordability, and according to the latest CoreLogic data from late last year, it currently takes 8.6 years for a typical household to save for a 20% deposit on a home. And it requires 34.4% of a typical income to pay for a mortgage here in Australia. But what's interesting about BRICKLET is the role that real estate agents can play in this new fragmented transaction. So here to tell us all about it, Darren Younger, welcome to the Proptech Podcast.

Darren Younger: (01:24)

Great to be here.

Kylie Davis: (01:25)

Yeah. Again, take three. Right? So, look, this should be a really slick episode because Darren and I have actually had a bit of a test run, and I managed to screw up all the audio, but thanks so much for your patience, Darren. Do you want to give us your elevator spiel for BRICKLET?

Darren Younger: (01:43)

Yeah, for sure. No worries. So BRICKLET is a platform that creates independent part ownership for property owners and means that, when we fragment properties into multiple pieces, all the bricklet owners, they actually are all on title together. And so it's just a way for people to own property in smaller pieces. It keeps it really, really simple.

Kylie Davis: (02:06)

Cool. So it's a housing affordability or a way to ... it's a property affordability platform, I guess, in that regard, is it?

Darren Younger: (02:14)

Yeah, I guess, I mean, that's definitely one of the main reasons that we set up to do what we're doing with BRICKLET is the housing affordability is definitely one key area that enables people were getting into the property market sooner. The other big area that can be across many different segments is also diversification because you've got smaller pieces of property. So it means, even if you've got three or four hundred thousand dollars to spend on property, then you can have a diverse portfolio. So it works really, really well. Also we've, you know, like for example, [inaudible 00:02:51].

Kylie Davis: (02:50)

Fantastic. So, tell me the story as to how it came about that you got into this space.

Darren Younger: (02:55)

Yes. I mean, we were looking at ... I mean, in the Kiva group, which is the parent company, we're always looking at different innovations and different, I guess, innovations around solving problems in the market. And one of the things, obviously, that's been always in the media is the growing house prices and housing affordability challenges. And there's a lot of people that feel that, and so even in the office that we work in.

Darren Younger: (03:21)

And so it was just kind of an idea that, seeing a lot of different fractional ownership models that have been around for a while that don't really fit the bill, and can you actually own a piece of the actual property on title as opposed to having a share in a unit trust or something like that.

Kylie Davis: (03:40)

Right. So talk to me, in a little bit more detail, about what the difference is between a fractional ownership versus a fragmented ownership. Is it that name on title or?

Darren Younger: (03:49)

Yeah, absolutely. So fractional ownership has been around for a long time. Basically you've got a company, or a unit trust structure, or something that owns the property, and then all the fractional owners then own shares or units in that vehicle. So, that's really how that works. And so you don't have a direct ownership of the property and you're not on title. Whereas fragmented property, through BRICKLET, is where you end up on title. So we use the tenants in common. So if you got 20 bricklet owners, they're all listed on the title.

Kylie Davis: (04:23)

Right. So how does it work if you've got multiple people's names on title? Do you have arguments over what colour the living room's going to be or how does [crosstalk 00:04:35]?

Darren Younger: (04:32)

Potentially, it could happen. Right? [inaudible 00:04:37] property is still owned by multiple people but, what we do with BRICKLET is, we automate and simplify the process of that communication, and also enable people to do that in a more efficient way. You might choose to not really have a say in it. If you don't want to, leave it up to the property manager, or the asset manager, to manage up all that on your behalf, which most people opt in to do. So, on a rare occasion, obviously, there'll be people that want to have an actual say around things. But the idea of this is to try and create something that is as flexible as possible to enable people, if they choose to, to have a passive investment around property.

Kylie Davis: (05:15)

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Kylie Davis: (05:43)

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Kylie Davis: (06:05)

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Kylie Davis: (06:23)

So if I'm interested in buying a bricklet, how do I do that?

Darren Younger: (06:27)

It's really, really simple. Go onto the platform, bricklet.com.au. You sign up. You do your ID checks and then you find a bricklet that you want to buy, and then you buy it. So we eliminate a lot of the challenges around buying property as well. We make it much more efficient for that. There's also ... there's a number of communities around, that are starting to be built around BRICKLET as well. So there's one that we work closely with at the moment called Futurealty, and Futurealty Tribe is a tribe of people that are working together to start building property portfolios using fragmented property. So we're starting to see an interesting shift in the market.

Kylie Davis: (07:10)

Cool. Is it a little bit like with the fancy boats, that you buy a share of the boat?

Darren Younger: (07:17)

Well, I guess, it is kind of. I mean, I'm not sure how those structures work but if ... I guess the way to think about it is that, if you and me and 20 other people wanted to have a share in a property, by putting it through the BRICKLET platform we all that piece of the property. So I'm not sure if you can do that with a boat but ...

Kylie Davis: (07:37)

No, I'm not either. So, if I'm looking for a bricklet, I go into your website and you've got a series of ... or you've got a selection of properties on that site, when I was there recently, that I can buy into. And most of them are new, aren't they? They're properties that have recently been built?

Darren Younger: (07:55)

Yeah, absolutely. And it's not just on the platform as well. So we've got a number of sales agents that are looking at some of the properties that they've got and choosing the BRICKLET model to sell the properties. And some of them don't even list it on the BRICKLET platform. They just ... they sell to their clients and then, once they've got everyone, basically all the bricklet owners subscribed, then come to the platform and use it to fragment the property. So that's ultimately what we do.

Kylie Davis: (08:23)

Oh, okay. Cool. So tell me a little bit about your background. How did you get into this?

Darren Younger: (08:30)

Yeah, so my background is primarily tech. I mean, I've had a number of investment properties and some war stories around some property developments that kind of ... we were lucky to get out, I think we broke even. So we were pretty lucky. So I know a little bit about property, but definitely I know way more about tech innovation but ... and so it's, I guess, it's just that kind of most people in Australia kind of have, at some stage in their life, thought about owning property. And so enabling those people that are finding it more challenging I think is a great thing.

Kylie Davis: (09:02)

Yeah. Fantastic. Let's talk a little bit about housing affordability. I mean, because, when I was at CoreLogic, I actually wrote the Housing Affordability Report and I know that it's more expensive than ... I mean, I think it has come down a little bit recently, but it is more expensive for this generation of people, of homeowners, than any generation before. And we're even seeing, basically, inheritance as a property purchasing strategy.

Darren Younger: (09:36)

Yeah. I mean it's definitely interesting. I mean, just as a-

Kylie Davis: (09:39)

You have to wait for the baby boomers in your life to die so that you can afford to put a deposit down on a property. It's about eight years, I think, from memory, to save up for deposit.

Darren Younger: (09:47)

Yeah. I mean, I think it's ... I mean, yeah. I mean, I guess ... I've got a couple of teenage kids that are ... [inaudible 00:09:55] soon sort of looking at that kind of space and, I think, from the seller, is that they'll be earning versus the property prices, especially if it's anywhere near Sydney and [inaudible 00:10:04] live on the northern beaches of Sydney, so saving up to buy a deposit on something there will be quite challenging for someone who's fresh out of university.

Kylie Davis: (10:13)

Yeah. And also with the HECS stick under their belt.

Darren Younger: (10:16)

Absolutely.

Kylie Davis: (10:17)

Yeah. So if I'm ... so I can either go onto the website, find a property that I'm looking for. Now, when we spoke last time, I remember you were telling me that there's quite a few developers that are working with you in this space.

Darren Younger: (10:31)

Yeah, absolutely. So we've got ... I mean, I guess the two biggest developers that we work with are Mirvac and Stockland. They are both investors in the platform. They see a lot of value of it. It's creating a new channel for market where, I guess, the really simple way to think about it from a developer's point of view is, you'll have a stock that you can sell for, let's say to an apartment of $500,000, instead of selling them all for that price, you can sell some ... brickletize it and sell them for $25,000 each. There's a very different market and there's a big opportunity for that type of, let's call it investment pieces or bricklets, and so there's ... for the developers that's a key piece around completed property.

Darren Younger: (11:14)

And then we also have a model that enables them to sell the bricklets at an earlier stage in the lifecycle. So, effectively, you get your DA approved. The traditional model is that you do some presales and you go to the ... you go to a finance company and you get a loan to do the finance, and then you've got to still have the risk of selling them later on. Well, in the BRICKLET model, we've got a way that the bricklet buyers can buy in earlier and then they ride that upside. So all the money is available the whole way through the project and there's no finance required for the project.

Kylie Davis: (11:46)

Right. Okay. So are we seeing ... are you seeing, therefore, that developers are putting up the stock that they just can't shift? Or is it a range of stock or?

Darren Younger: (11:59)

No, it's definitely a range of stock. I mean, it's no different to selling them in full, but if it does enable people to buy it because it's still up, well then that's helpful to developers if it is residual stock. But at the same point, people will still look at the price point. It's up to the market to decide whether it's good value or not. Whether they enter the market or whether it's sells or doesn't sell.

Kylie Davis: (12:22)

Yeah. And so how does the price get decided?

Darren Younger: (12:27)

It gets decided by the vendor at the start, but obviously justified. So we also have a valuation that we'll put ... a third party evaluation that we put with it, and then people can make their own decisions. You know what I mean? That's just the way that property is. There's a valuation, there's a price, and you make up your own mind whether you think it's too overpriced, too under priced. It's your call.

Kylie Davis: (12:49)

Yeah. And so I'm getting a proportion of the rent direct minus all the expenses for the property, I'm assuming.

Darren Younger: (12:57)

Yeah, that's right. So the property managers that run the property, or the asset manager, how we like to call them, so they will ... they'll basically pay all the month to month expenses, and then as the rent comes in, they get paid back. So it doesn't need a slush fund. It doesn't need the trust accounting anymore so it keeps it really, really seamless around how the process works. But, as a general rule, it just means that the bricklet owners don't need to contribute more funds throughout the life cycle of the bricklet.

Kylie Davis: (13:30)

Right. And so does that also include sort of strata fees or things like that? If there, if it's a-

Darren Younger: (13:35)

Yeah, absolutely. So it could include any fees and, say if there are, for example, one month where there's a lot of fees and let's say the fees even exceed the amount of rent coming in, it just means that the bricklet owners wouldn't receive rent that month. And then next month they going to get a little bit, and eventually they'll get more and more, but it's just a way to mitigate that risk around people having to put more money into it.

Kylie Davis: (13:57)

So if I'm a vendor, if I'm thinking about selling my property, why would I choose to do it as a bricklet rather than putting it on the normal residential market?

Darren Younger: (14:09)

Yeah. A good question. I think there's two things. One is, if you can see the appetite for those smaller pieces, or it might be that you might have in your audience, or you might be working with a sales agent that has, in their clients, a group of people that are looking to buy, so you can also leverage the BRICKLET platform. You might just have a family that just has five people that want to buy a property together. In a traditional sense it's quite hard and complicated and [inaudible 00:14:38] may not do that but, with the BRICKLET model, they might be happy to do that. So sometimes it's circumstances as well not just the fact that it's going to be cheaper. [crosstalk 00:14:49] The independent, part ownership is the real driving factor in what we're creating.

Kylie Davis: (14:53)

Right. And so this could, potentially, be a solution for something like, mum's getting old, or the kids need to buy into the property and ... could it work like that?

Darren Younger: (15:05)

Absolutely. Absolutely. In fact that's a big market that has yet to be tapped around, so, exactly that model. Right? So parents have got a property and ... I mean, we talked earlier about the way that people are using inheritance. Well, BRICKLET could be a way to bring inheritance to [inaudible 00:15:24] some bricklets in the property.

Kylie Davis: (15:27)

That's right. Yeah. It's like, "Hey kids, you can put your money into mom's house and then I'll make you inherit it later on. You can fund my retirement." It's a whole new take on it. So it is also being used for existing property as well, not just off the plan.

Darren Younger: (15:47)

Yeah, absolutely. I mean, anything ... any property that has a title, effectively, because it is just a platform for creating that independent part ownership. So, if you've got a property and there's a scenario or a reason why you want to do that, then if it has a title, we can do that. Execute on it. So it could be commercial property, could be industrial property, it could be a farm, it could be ... there's all sorts of ... as long as it's got a title, it can be fragmented.

Kylie Davis: (16:13)

Fantastic. So if I'm a real estate agent, how could I ... how does BRICKLET work for me?

Darren Younger: (16:20)

Yeah, it's a great opportunity for sales agents because it opens up a new opportunity around being able to offer two different, I guess, two different types of services. One is that they can just offer bricklets for sale to their clients that they didn't get access to before.

Darren Younger: (16:35)

But the real value is, they've got a property that they want to list, but it's in a brand new development or an existing property, they never had the option to say to the vendor, "Would you like to sell it as bricklets?" Or they might have a group of clients that they know [inaudible 00:16:50] 10 clients that, together, putting 50 grand together into ... are happy to buy a 50,000, sorry, $500,000 investment property. So it creates a lot of flexibility for the sales agent. They're not missing out on the commissions. That's part of their negotiation with the vendor. There's just an extra fee for the fragmentation.

Kylie Davis: (17:12)

Right. Fantastic. And now let's hear a word from our sponsors.

Kylie Davis: (17:16)

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Kylie Davis: (17:42)

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Kylie Davis: (18:08)

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Kylie Davis: (18:23)

There's a few other people sort of playing in this space. I mean, REITs have been around for a while. There was BrickX. There's a couple of other competitors. Darren, what do you see are the key benefits in this space and how do you see this space developing and-

Darren Younger: (18:40)

I think it's going to be interesting to see how it develops. I mean the ... what you would kind of, I guess, maybe class as competitors, I mean, they're all doing it very differently in that they're effectively creating an investment product that people are buying into, where BRICKLET is purely just a platform for fragmenting property. So it's quite different in the way that we've positioned it in the market and what the service is that we offer.

Darren Younger: (19:02)

So, as far as competitors go, and I don't think we have a competitor for the service that we provide, but at the end of the day, if it's someone who's going to buy a piece of property here, they could buy into a REIT, they could buy some BrickX, or whatever, but they're still, I guess, it comes down to the individuals around, if it is them looking for that particular type of property, are they're looking for an indirect property or a direct ownership.

Kylie Davis: (19:27)

Yeah. Cool. And so what do you see happening in this space? Like what's the future of fragmented ownership?

Darren Younger: (19:35)

Well, I think there's a lot of scale that will be coming out of this. So there'll be ... when we start to see a lot of people transact using this type of model and I think that, once people understand the benefits of it, not just from a point of view of a price point, but also the efficiency, so that independent part ownership, if I could just say to you, "Hey, do you want to buy this piece of property?" And you say, "Yeah, no worries." And then it's just transacted and done. It makes property a lot more interesting as an asset class or something to own. And it's property so it's quite robust.

Kylie Davis: (20:10)

But it's also, I guess, it's making it a lot more liquid. Like it's ... you can ... you can-

Darren Younger: (20:16)

Yeah, absolutely. So I think it just makes the whole buying and selling process much more seamless so it's no different to, I want to sell my TV, I put it up on some kind of listing and someone buys it. The ultimate goal is to get property to that point so that, if I want to sell my bricklet, I'm putting it up, someone buys it, and we transact, and it's done. So it's really, really that simple.

Kylie Davis: (20:41)

Right. And so you don't ... so what's the time on market for a bricklet?

Darren Younger: (20:47)

So far, so we launched late last year. We did ... so we sold over ... close to $10 million worth of bricklets. We got into the interesting COVID period, which was [inaudible 00:20:57] slow down and now we're kind of coming out of that. And it's very interesting. The market is very much moving forward and there's a lot of appetite, at the moment, around for bricklets.

Kylie Davis: (21:09)

Yeah. How many properties have you got on the platform at the moment or available to be bought-

Darren Younger: (21:13)

Yes, at the moment there's about ... I mean, on the platform itself, I think there's about 15. There's another, I think in total dollar value of bricklets is around $30 million at the moment, that are being sold across various agents and project developments.

Kylie Davis: (21:29)

Cool. And so are you aware of anyone overseas or anything that's ... anywhere else that's doing this sort of stuff?

Darren Younger: (21:35)

No. No. I haven't seen any like a fragmented property model where the name is on title. So I think if edge in Australia is that we have to Torrens Title, and the other advantage is that we had e-Conveyancing. So the guys at PEXA have done a great job laying the groundwork, so to speak, so how we can interact with the land titles in an efficient way, and then that will just get better and better over time.

Kylie Davis: (22:01)

Fantastic. So what do you see is the future of proptech for the next five years or so? Where do you see this going?

Darren Younger: (22:10)

Yeah, I think ... I see ... Really, if you look at proptech as a whole, I think it's more the gaining of efficiency. Property will be traded faster. It'll be searched easier. There'll be a lot more data that's more accessible. So it's really just making it easier and easier for people. I think, as a general rule, that's really what proptech's doing. Like property management platforms that make it really easy. Payment systems that make it really easy. It's more taking that pain away from what, back in the day, was to buy an investment property and look after it, manage it, then try and sell it, and all these things would ... always hard and slow. Whereas, with more efficiency and more proptech solutions, it starts to become a lot more interesting as an asset class and much more tradable.

Kylie Davis: (23:04)

Fantastic. So look, Darren, it's been absolutely fantastic talking to you again on the Proptech Podcast, and for our listeners at home, I had a bit of a brain melt and we screwed up the original recording, but so thank you so much for coming onto the show, and for your time a second time.

Darren Younger: (23:22)

No worries. Thanks for the practise run.

Kylie Davis: (23:24)

That's all right. It's always helps to have a dress rehearsal. Right?

Kylie Davis: (23:29)

So that was Darren Younger, CEO of BRICKLET, a new way to buy property through fragmented ownership. And there's a lot happening in this space of fractional property ownership and it's worth watching. Sadly, the data does show that property ownership is largely the privilege of baby boomers and gen X. With HECS debts and record property prices, the only way many millennials can afford property ownership is through inheriting it through the death of their parents. And isn't that a cheerful thought.

Kylie Davis: (23:59)

But with the investment of some of the country's major developers into BRICKLET, and the importance of buyers doing their own research on where they want to buy, I think there's a lot worth checking out. Now there's a few others playing in this space and we're going to take a look at them over coming months, but I've included the link to BRICKLET in the show notes and also a link to the latest CoreLogic Housing Affordability Report. So check them all out.

Kylie Davis: (24:22)

Now, if you have enjoyed this episode of the Proptech Podcast, I would love you to tell your friends or drop me a line either via email, say hi on LinkedIn, or on my Facebook page. You can follow this podcast on Spotify, Google Podcasts, Anchor, and Apple iTunes, or on my website, kyliecdavis.com.au. I'd like to thank my audio support, Charlie Hollands and the fabulous Jill Escudero, and our sponsors, Smidge Wines, official wine off the Proptech community, HomePrezzo, turning property data into amazing marketing content, and of course, Direct Connect, making moving easy. So thanks everybody. Until next week, stay safe and keep on Propteching.