Kylie Davis: (00:01)

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 a sense of community between the innovators and real estate agents and property owners, and sharing our stories is a great way to do that.

Kylie Davis: (00:21)

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

Kylie Davis: (00:35)

And, special guest this week is Dean Fraser, founder of Brickfloor, a really exciting new proptech for home sellers, which guarantees that their home will sell for a market price, delivering certainty, peace of mind and price leverage for sellers, and allowing buyers to buy before they sell safely.

Kylie Davis: (00:57)

So, Dean is a lawyer and former investment banker who's also had a fascinating career innovating across food and fintech, and, in fact, Brickfloor were a finalist for Emerging Fintech of the Year in 2020 from FinTech Australia and we are again a finalist in 2021, and Brickfloor is also a finalist in the Proptech awards.

Kylie Davis: (01:14)

So here to tell us all about it, Dean Fraser, welcome to The Proptech Podcast.

Dean Fraser: (01:18)

Thank you very much for having me, Kylie.

Kylie Davis: (01:20)

No, it's great. I'm really excited about this conversation about Brickfloor. We always kick off with an elevator pitch. So tell us, what's the Brickfloor elevator pitch?

Dean Fraser: (01:29)

Yeah, sure. So we provide a product called a market price guarantee, which is essentially an upfront commitment to buy a seller's home for a market price that we guarantee for the length of their sale campaign, and which provides the seller with peace of mind, sale price leverage and the ability to safely buy before they sell.

Kylie Davis: (01:46)

Okay. That sounds really interesting. Let's pick it apart a little bit. In a market as hot as now, why do I need a seller's guarantee?

Dean Fraser: (01:56)

Yeah, really good question, Kylie. So, what we've discovered with our product through being in market for about 15 months before COVID came upon us, is that our product was being used as both a shield and a sword. So, in a win market, the product provides certainty and peace of mind for home sellers, and also leverage in terms of a seller being able to use our price, or their agent being able to use our price in market to maximise and to seek a higher price from the market.

Dean Fraser: (02:25)

In a strong market, there's a really strong benefit in buying first. If you sell first and you're out of a rising property market, you could be going backwards, obviously, against the property market that you're trying to enter back into. So there's a real incentive for buyers to buy first but, at the moment, it's very risky to buy first because you won't have any visibility or transparency around whether your current home will sell and for what price it might sell for. Even if the market is strong, you still don't have certainty around that.

Dean Fraser: (02:53)

So we give the ability for a buyer to confidently buy before they've sold, knowing that there's a guaranteed take-out for their current home, which can mean a significant saving in a rising property market, which is the current property market context.

Kylie Davis: (03:08)

So how big are these pain points that you're solving for, this anxiety around, "Will we sell for what we think we need to sell for in order to buy"?

Dean Fraser: (03:19)

Well, we think they're really significant. I think the pain point around just providing peace of mind and certainty to sellers, most sellers find selling a home one of the most stressful experiences in their life. It's up there in-

Kylie Davis: (03:31)

Amen!

Dean Fraser: (03:32)

[crosstalk 00:03:32] most stressful experiences, based on a lot research, behind death and divorce, but it's way up there.

Dean Fraser: (03:41)

We have done some market research around people wanting to buy before they've sold in the current strong market, where it makes a lot of sense to buy first, and we've discovered that basically 89% of the market would prefer to buy first and then, step two, sell, if it were safe to do so. And that's a big if because a lot of people don't feel like it's safe to buy first even in this strong market.

Dean Fraser: (04:03)

We do see that basically 21% of the market will move forward and buy first even though there is risk with that, and the main risk being you [inaudible 00:04:10] potentially, you don't know exactly what your current home is going to sell for. So maybe you've either over-extended yourself on your purchase or potentially under-extended.

Dean Fraser: (04:24)

But with our home price guarantee product or market price guarantee product, you can confidently buy first knowing that you've got an absolutely guaranteed, rock solid offer on your current home. That's your floor price and you can then use that floor price to work out your equity in your current home, plus the amount of debt that you can borrow gives you, effectively, what's safe to spend on your next home.

Dean Fraser: (04:40)

So there's a really strong and big market for people who want to buy first, and we enable people to buy first safely.

Kylie Davis: (04:49)

So, it's so super interesting, isn't it, because I think the way the markets or the way the transactions are set up at the moment, this whole... it makes intellectual financial sense to sell first and buy second, but we all know that homes are deeply emotional commitments and if you sell first and then buy, you're basically tipping your entire family into homelessness until you find something to buy and that's often more terrifying than the cost of getting the financial side of it wrong.

Kylie Davis: (05:22)

So it is a really big psychological barrier, this whole idea that I have to give up everything before I can take the next step. Whereas if you let people buy first, then it's an exciting adventure to move into their new home and we just have to get through the sale to get that. That kind of feels like a completely different psychological kind of journey that we're asking people to go on, right?

Dean Fraser: (05:45)

Well done, Kylie. There's a really big dilemma in the market: Do you sell first and then buy, or do you buy first and then sell?

Dean Fraser: (05:52)

Really, the drivers of people wanting to buy first, we've discovered there's really four key drivers. One is, they don't want to miss out on their dream home once they've discovered it. Often people will discover the next home they want to move into before they're ready to sell, and it's like, "Wow. I love that home but it's going to market in three weeks' time or four weeks' time." There's no way they're going to get things ready. They might get their pre-approval on their loan to purchase ready but they won't be having certainty around whether their current home is going to sell for the right price to let them move forward. So there's a fear of missing out that you deal with if you can buy first with safety through our home price guaranteed price.

Dean Fraser: (06:26)

There's also just the basic people want to avoid two moves. So if you can buy first, you can move once into your new home. Versus if you sell first, you're moving into your parents' house, you're moving into temporary accommodation perhaps. How long do you rent for? Is it six months or is it 12 months? You just don't know because you don't know how long that's going to take to find the next place. So this double move issue is removed if you can buy first.

Dean Fraser: (06:49)

The third one is, selling first means that you're out of a rising property market in the current climate. If you think about it, if the market's going up 10% per annum, which a lot of commentators are saying will occur, if you can buy first and then sell, you can save yourself six months or more in your timeframe because if you sell first, it takes you a month to get ready, it takes you one or two months to sell your home. You've then got to settle on it, and then you've got to start looking and finding your next place. It can be six months or often much longer.

Dean Fraser: (07:19)

If you're willing to wait six months or longer before you next buy and you've sold it already, if the market's going up 10% per annum, in six months' time you're actually paying 5% more for the same home. So on a million dollar property that you're looking to buy, as an example, you're paying $50,000 more from having to wait and sell first and then, step two, buy. So we're saying it makes a lot more sense and, based on your research, it makes a lot more sense to sell as to buy first, as long as they can do it safely and to then separately sell.

Dean Fraser: (07:49)

The other key reason why people want to buy first too is that they don't want to commit to selling until they know they've found the place that they like.

Kylie Davis: (07:56)

Yeah. Why go through all that trauma if you then end up somewhere worse than where you are, or that you just can't find what you need? And-

Dean Fraser: (08:03)

[inaudible 00:08:03] actually know where you're going. So, knowing where you're going before committing to sell makes so much sense, but the problem is, there's no safe way to buy first. Outside of our home price guarantee product, there is no way of buying first knowing that you've got absolute certainty around your sale outcome for your current home.

Kylie Davis: (08:21)

So tell me more about that home price guarantee. If I get one with you, do I have to sell to you? How does it work?

Dean Fraser: (08:30)

Yeah. We basically extract some information from the home seller to come up with a price on the home. So we extract around 50 data points of information from a home seller, which can be done either online or through a telephone or Zoom conversation. We also get some photos from the home seller. We use that information, together with comparable home sales data on market trends in our own pricing algorithm, to come up with a market offer on your home.

Dean Fraser: (08:57)

We certainly do offer market prices for homes. We've bought 66% of the homes that we've put offers out on and that have been accepted by customers we've ended up buying, and I'll explain our business model around buying homes a little bit later. But we certainly offer fair prices. We buy homes.

Dean Fraser: (09:14)

But, as a seller, your experience is that you'll provide some information to us. We'll then provide you back with an offer on your home within three business days. If you're happy with that offer, you'll have seven days to accept that offer. If you accept it, we then come out and do a physical valuation on your home.

Dean Fraser: (09:30)

So we want to make sure if we're offering you $1 million, as Kylie, the seller of a home, we want to make sure that it is a fair price. So we do come out after you've accepted that offer and do a quick physical inspection to make sure everything is as is or as we expect it to be.

Dean Fraser: (09:47)

Assuming we firm up the number, which 95% of the times we hold our number... very rarely do we change it unless there's like a pest or building structural issue with the home. We firm up the number. You then have a commitment from us for a period of 90 days. So we've locked in that, say as an example, $1 million for a period of 90 days. You have four weeks to get your home ready, as an example, four to eight weeks on market, and you've got certainty, absolute certainty that your home will sell for at least $1 million all on that way.

Dean Fraser: (10:19)

What we see it means for sellers is that they can actually celebrate their sale success from the minute that they list. They're not worried about whether an agent as over-promised or under-promised on the number. They're not worried about whether COVID phase four or five or six comes in. It's certainty.

Dean Fraser: (10:38)

The agent that they're working with... so it's an agent from your process where the seller still tests the market to try to get a higher price, if there is one out there. The agent, we're seeing, can actually use our offer in market to leverage a higher price from other buyers. On average, we've seen in our testing in market in real life customer case studies we're delivering 8% higher sale prices, being the difference between what the agent was getting an indication back from buyers in the market before talking about the fact that there's already an offer on the home from Brickfloor, to where the ultimate sale price went to. There's about an 8% increase on average with our customers' homes. So there's a real benefit in being able to leverage our offer in market through both the agent and the seller using our offer as price leverage.

Dean Fraser: (11:32)

At the end of the sale campaign, either there was a higher bidder, in market in which case the seller will sell to that third party. We charge a 2% fee on the amount that we commit to. So if we underwrite $1 million, our fee is 2% of the $1 million, or $20,000 out of that settlement.

Dean Fraser: (11:49)

If the home doesn't sell, or if there's a low ball offer, we step in and we buy it for that pre-agreed price of $1 million and, again, we charge that 2% fee on the $1 million that we've guaranteed. We don't charge any fee on the additional that's achieved through leveraging our offer, which the seller might get $1.1 million, as an example. Our fee is structured on the $1 million that we've [crosstalk 00:12:12]

Kylie Davis: (12:12)

That you valued it at yeah.

Dean Fraser: (12:14)

Yeah.

Kylie Davis: (12:17)

Okay. And now, let's hear a word from our sponsors.

Kylie Davis: (12:18)

For almost 16 years, Direct Connect has made moving easy for over 1.2 million renters and homeowners by arranging connections to a wide range of services, from electricity and gas to internet and paid TV. With a national team of local account managers who are experts in the industry, Direct Connect are there to support your real estate business with competitive rewards for every successful connection, plus an industry-leading rewards programme.

Kylie Davis: (12:45)

The connection process is simple and Direct Connect's always-on guarantee ensures your customers will be connected on the day they move in. Direct Connect offers a range of market-leading suppliers and Direct Connect has now made it even easier than ever to send connections, directly integrating with MRI Software's Property Tree. So, in just a few clicks while processing a tenancy, you can send the connection details through and get your customers connected.

Kylie Davis: (13:10)

To make the right connection and find out how Direct Connect can make moving easy for you and easy for your customers, visit agents.directconnect.com.au., or call 1300 558 169.

Kylie Davis: (13:23)

Is Brickfloor like an Aussie version of an iBuyer technology that we're seeing out of the U.S.?

Dean Fraser: (13:35)

Yeah. It's a really good question. It certainly has overlaps-

Kylie Davis: (13:37)

Elements.

Dean Fraser: (13:38)

... for sure. So we provide certainty and peace of mind to home sellers. So that's absolutely something very similar to the iBuyer market.

Dean Fraser: (13:46)

We also use technology to come up with an offer on the home. So we look at currently 50 data points of information. We have our own pricing algorithm to work out what we think that home is worth, and we also look at standard things like comparable home sales. That's kind of where the differences end because the iBuyers overseas don't let sellers extract a higher price from the market, they don't [crosstalk 00:14:11]

Kylie Davis: (14:11)

No.

Dean Fraser: (14:11)

... just to market.

Kylie Davis: (14:12)

Yeah. You sell it for what they offer you or don't, yeah.

Dean Fraser: (14:15)

The benefit is that you get paid within seven days from the iBuyer, but then if you're left a little bit on the table as a seller and there's a little bit more out there in the market, your iBuyer in the U.S. takes that increment because they renovate the home and then sell it within three months, typically.

Dean Fraser: (14:30)

Whereas we're saying to sellers, "If there's a little bit more out there in the market, then you really deserve that. You deserve the peace of mind. You deserve the leverage to attract a higher price, and you deserve to be able to buy before you've sold. But any extra price that you can achieve is really for you, it's not for us as a business." So we think we're kind of a lot better and more adapted for the Aussie market, through letting people achieve that dream price that they want. We lock in the market price but we give them a better chance of achieving that dream price through leveraging our number.

Dean Fraser: (14:59)

The other big difference is around our property fund. So the way that we underwrite and guarantee a home sale price is, we have a fund behind us and capital behind us to actually buy those homes in the event that we're the highest price in market. So we have a long-term hold strategy in our fund.

Dean Fraser: (15:16)

So, any home that comes into our fund because we've been the highest price in market, and to date that's been 66% of the times, we put that property into a fund, and we basically want to institutionalise residential property as an asset class. So we want to build a big fund of homes where we get institutional investors such as super funds and other family offices and big investors into residential property, because everybody understands it but not many big institutions have exposure to it because it's hard to get a streamlined and scalable business model that allows you to accumulate enough homes, and ultimately the returns may not be as strong as commercial property returns on a yield basis. But on a total return basis, including capital growth, residential property has historically been a lot better than commercial property.

Dean Fraser: (16:06)

So we're different to the iBuyers in that we buy homes, we hold them for a longer term period, versus the iBuyers who kind of buy a home and would look to sell it within three months ideally.

Kylie Davis: (16:17)

Right. Yeah. So you're holding them as an asset and encouraging other investors into that asset class-

Dean Fraser: (16:24)

Exactly.

Kylie Davis: (16:25)

... to grow your fund. Okay.

Dean Fraser: (16:27)

[inaudible 00:16:27]

Kylie Davis: (16:27)

Wow. Okay. This is taking me a bit to take this all in. So just step me through again how it works with real estate agents. How can agents understand what Brickfloor does for them so that they're not scared of it, so that they actually see that it's an asset?

Dean Fraser: (16:42)

It's a really good question. We've been partnering with some of the large agents in Victoria since we started the business model, and they've seen the product as a listing tool.

Dean Fraser: (16:55)

So when they have a relationship with a seller, or maybe they don't, they're able to say to the seller, "Don't worry about your home not selling." And even in this current market, if you're being asked by your agent to invest 10, 15 or maybe even 20 grand in some expensive homes in marketing, that is a lot of money that you have to invest with risk around whether your home will sell. It may sell, but often there are more than one property market in Victoria and in New South Wales where some markets are going... or some markets going super well, others are not doing as well. So there is risk around investing a lot of money into marketing where your home might not sell and yet you're still on the hook to pay your marketing fees.

Dean Fraser: (17:37)

So agents see our product as a way of alleviating that concern. Also of showing some innovation and differentiation, where they can say to the seller, "Don't worry about your home not selling. We can guarantee that it will sell. By the way, we can also qualify more buyers for your home in market." Because a lot of sellers obviously appreciate that the way that they get the dream price is through having two or three really motivated buyers, and often what happens is that a lot of people coming through your open for inspection as buyers are not qualified to buy because they haven't sold.

Kylie Davis: (18:09)

Yes.

Dean Fraser: (18:09)

And so [crosstalk 00:18:10] they're going, "Well, I don't want to move forward." I've seen it first-hand when I've worked through open for inspections when some agents will talk to different buyers, and one of the first questions often is, "Oh, do you need to sell?" If it's a, "Yes, I need to sell," often the agent will just almost dismiss that buyer and then will walk around the room and try to find other buyers who maybe are more able to move forward.

Dean Fraser: (18:33)

But if that agent is able to say to that buyer, "Okay. Well, don't worry about the fact that you need to sell. Get a home price guarantee or a market price guarantee from Brickfloor. Within a week you know that your home is guaranteed to sell. You can [inaudible 00:18:45] my current home that I'm selling. By the way, I'll help you sell your home that you need to sell." So it's a way for them to win another listing from the buyer.

Dean Fraser: (18:56)

So the agents who can kind of see that the product is designed to help them with listings and to give certainty and peace of mind to a seller, and also as a way of qualifying more buyers who may want to buy the home that they're selling but need to sell first, they're the agents that we're working really well with.

Dean Fraser: (19:13)

As with any new innovation, often there is some sensitivity around, "Oh, what does this mean for me? Do I miss out on the customer or anything like that?" But it's really clear-cut, that if we're getting a referral from an agent, that we're super grateful for that. We often become sort of a co-partner, effectively. We have our fee that we charge which is separate and for a different product or service to the agents, and the agent still gets their fee if they're referring through to us. There is an extra fee payable to Brickfloor from the sales point of view.

Dean Fraser: (19:43)

But what we're seeing in market is that through having the home price guarantee in place, there's three things that are occurring. One is, you're avoiding a potential bad outcome for selling your home, which may not always occur in a strong property market, but, on average, over 10 years, there's been sales discounts or vendor discounts of about 4% in Melbourne and Sydney. So you avoid the risk of a 4% discount.

Dean Fraser: (20:11)

We've seen sellers leveraging our offer for a higher price to a tune of 8%. So you're getting the ability to get up to 8% higher or potentially more for your home through your agent leveraging our price, and then you're buying before you've sold, and if the market's going up 10%, as I mentioned before, and you're buying six months sooner, you're saving 5% on your purchase.

Dean Fraser: (20:31)

So there's a real clear value proposition, we believe, for our product, that you're paying 2% for our product. Yes, you're paying separately for the agent and paying their fee, but our 2% can deliver you, and we expect it to deliver you, around about 10% more, whether it's through avoiding a discount, buying sooner and paying 5% less, or leveraging our offer to get 8% higher. You're getting a real benefit that's way above the cost of that product. So-

Kylie Davis: (21:00)

Yeah. Well, I just think that peace of mind. Look, anyone who has bought or sold, or who has sold their family home and moved everyone up, knows how stressful that it is. It is full of the worst conversations you never want to have with a spouse or partner.

Kylie Davis: (21:17)

I remember some of the most stressful ones with my husband when we moved, which was 20 years ago, and we still haven't recovered from the trauma of it, was standing at auctions before we'd sold and my husband saying, "Do you love it?", and I'm like, "Well, yes, I quite like it." He's like, "No. Do you love it? Do you love it enough for us to go through this pain that we're about to go through?" And often it was like, "Oh, no. I don't know because that's such a big hurdle to jump over." But if you already know that you've sold and everything's okay, that does kind of change that.

Dean Fraser: (21:53)

Yeah. One of the highlights that I had about a year ago was a customer who came to us and we underwrote a sale price of $2.34 million. So it was a really nice house in [inaudible 00:22:05]. He went to market. He passed [inaudible 00:22:09] no offers auction. Marshall [White 00:22:12] were running the sale campaign. They did a fantastic job, but there was no-one there to bid. He calls me up straight away and goes, "Are you still there as-

Kylie Davis: (22:19)

As my back up.

Dean Fraser: (22:21)

That's the whole purpose of the business model. He goes, "So can I have a wine with my neighbour tonight to celebrate the success of the sale?" I said, "Absolutely." I said, "I'm going to have one too at home to celebrate with you, virtually." But the feeling I got from that seller was that it had an absolutely massive impact on not only his emotional wellbeing but his financial wellbeing too because he'd bought somewhere else and he was under a lot of pressure to make it work.

Dean Fraser: (22:49)

The beauty of the whole transaction too was that two weeks later he got an offer from a third party at 2.2, so below our number. Marshall White and him were able to say, "Look, nick off. We're holding firm. We've got a price materially above your offer." Eventually he attracted 2.4 from the market, like four weeks after auction, and he sold for 2.4, above our 2.35 offer. But he had so much gratitude and we were so grateful to work with him as well because he said, "I would have accepted 2.2 if it wasn't for you at 2.35, and ultimately I got 2.4." So in that example he got 9% higher than his 2.2.

Dean Fraser: (23:28)

It has a really positive impact on the sellers, both financially and emotionally, and some sellers say things like, "This is securing my future, this product."

Kylie Davis: (23:38)

And my marriage! No, seriously, I don't think you can underestimate the stress of selling and the stressful conversations that happen in marriages when you're both selling and moving.

Kylie Davis: (23:54)

So, Dean, tell me about your background. How did you get into this?

Dean Fraser: (23:57)

So I started my career as a lawyer back in 2000, and then I did that for about three or four years, then went into investment banking up in Sydney with a firm called Caliburn Partnership.

Dean Fraser: (24:09)

Through both my Minter Ellison days as a lawyer and Caliburn days as a banker, you could see people underwriting share issues for companies. So you have Goldman Sachs, Macquarie, UBS, getting paid a lot of money to actually guarantee the sale price, the sale timing and the sale outcome for a company that's looking to raise capital, and I thought, "That's a really good product and a well-established financial services product, of underwriting for capital raising in a corporate context." And I thought, "That should really apply to some other sectors," and then clearly I could see residential property as one that was standing out as a huge amount of stress and anxiety and divorce-ridden potentially as well. A lot of those issues could be, I guess, cured with certainty and peace of mind wrapped around them through underwriting. So the home price guarantee or market price guarantee was a way of providing that underwriting but for the residential property landscape.

Dean Fraser: (25:04)

And then we did some surveys with home sellers and it was pretty clear that sellers were resonating with the concept. And then I got Matthew Quinn involved, who was a former CEO of Stockland for about 13 years, and he was like, "I love the product. It's really different, and there's a real problem there to be solved," and then it just sort of all really went from there.

Dean Fraser: (25:22)

We then raised a fair bit of money from [inaudible 00:25:26] Bank originally and Harris Capital who's the... Geoff Harris is the co-founder of Flight Centre. We've raised some money and have gone to market and now we're looking to scale and raise more money and diversify our shareholder base as well. But it also started through that just past work experience, seeing something that had kind of been used and-

Kylie Davis: (25:47)

In a different market.

Dean Fraser: (25:49)

Different market.

Kylie Davis: (25:49)

Yeah. Awesome. So how big is Brickfloor? [crosstalk 00:25:53]

Dean Fraser: (25:52)

We're still very much a startup. So we have around seven people working with us. We've raised a bit over $50 million, which is a lot but a lot for that was earmarked for our property fund to acquire homes. So we're very capital intensive.

Dean Fraser: (26:10)

Our property fund, there's two parts. There's a property fund that buys homes, and that's very capital intensive. And then there's a proptech consumer co-business manager... sorry, fund manager business that actually employs staff and owns the platform and technology. That's capital-wide, but there's kind of two parts to the business.

Dean Fraser: (26:29)

But the fund piece requires a lot of capital. So we raised a little over $50 million a couple of years ago and we've sort of built out a team. We had to scale back a little bit our team during COVID because we paused temporarily in market because it was very hard to price homes with precision. We're now looking to get back out very soon. We're going through a capital raise process now to raise between sort of 50 and 250 of equity, million dollars of equity. So a lot of money, but you need a strong capital base to underwrite homes in the way that we do.

Dean Fraser: (27:05)

So it's sort of exciting times now. Looking to get back out into market and also use some of our, as I was sort of talking about before, people wanting to buy first, using our market price guarantee product to actually create... We're looking to create a new or a market first buy now, sell later home move product. So, really at the moment the only option is a bridge loan and nobody likes bridge loans.

Kylie Davis: (27:30)

No-one likes them. They're like the credit cards of home loans.

Dean Fraser: (27:32)

High cost. [inaudible 00:27:35] costs can be not too bad, but just the thinking that you're going to have to sell your current home under pressure because you've already bought is not a good feeling and won't get you the best outcome, generally speaking. But if you can create a loan and a guaranteed sale assurance on your current home, combine them together, then you can actually buy first and sell with confidence knowing that your current home is going to sell for at least a full price agreed with Brickfloor.

Dean Fraser: (28:00)

So some really exciting things that we're looking to do following this capital raise, that we'll kind of leverage both our property fund and our market price guarantee product to create some new lending opportunities for lenders and some other products and services as well.

Kylie Davis: (28:16)

If you're a real estate agent, you know you need to do more digital marketing, and that includes creating articles, blogs, emails and landing pages, but that's a lot to learn and it can be really hard. So check out ActivePipe. ActivePipe is a specialist digital marketing platform designed especially for real estate agents. It allows you to quickly and easily create engaging emails, including the ability to drag and drop properties into emails that you can send out to buyers, sellers, renters, anyone.

Kylie Davis: (28:46)

ActivePipe's smart automation allows you to get more leads from your database by understanding the property journey of your contacts and automatically customising and personalising emails based on their preferences. And now with the new product, Real Estate Content, you get access to hundreds of stories written about the property market that answer common questions your clients have about how to buy and sell and market performance.

Kylie Davis: (29:11)

So download ActivePipe's free white paper, The Scalable Agent. It's got everything you need to know about how to become a better digital marketer, and it's written by me, Kylie Davis. Go to activepipe.com.au or Google The Scalable Agent.

Kylie Davis: (29:27)

So, Dean, do you have any competitors in this space?

Dean Fraser: (29:32)

No. There's no-one active in the market that's doing what we're doing. I think, for us, we feel the main competitor is just the status quo, that people are selling their home, the most valuable possession that typically they own, in a risky way. So there's a risky way of selling your home and then there's a safe way. So we're looking to challenge the status quo and say, "Look, there is a safe way, and not only is it giving you certainty and peace of mind but it's giving you leverage and the ability to buy before you've sold, which are really important things in a strong market."

Dean Fraser: (30:03)

So no direct competitors, but it is to get people understanding of the product and to change the way that they're currently thinking of selling a home, being the status quo, is kind of our biggest competition.

Kylie Davis: (30:18)

Yeah. Given everything I've seen, all the research I've seen, and just all the stories that I see, and especially from the focus group research when you have talks to people around what it's been like to sell or buy a property, there is an... I think as an industry we gloss over the trauma that people go through. So I think it sounds great.

Kylie Davis: (30:47)

So, traditionally, country or regional markets would have more trouble selling or longer time on market periods than city markets. Are you covering regional markets as well or is it just the city, or is there a risk that you might end up with geographically lumpy markets?

Dean Fraser: (31:09)

It's funny because with our leads and our customers that we've had, it's basically been a third, a third, a third, in terms of inner, inner Melbourne-

Kylie Davis: (31:18)

Okay.

Dean Fraser: (31:19)

... sorry, inner ring, middle ring and outer ring. So we're getting a spread, and same with Sydney as well, which is good because we want to have a bit of diversification, and there is that theory, I guess, that maybe some middle and outer ring properties might do a little bit better now with de-urbanisation; now, how long that will last for and whether it reverses is another question.

Dean Fraser: (31:39)

But we definitely want to build a portfolio of great Aussie homes, and I think the original... The fund that we've built as a result of our product is certainly diversified across those inner, middle and outer rings. We haven't offered our product to homes located more than 50 kilometres outside of Melbourne and Sydney to date-

Kylie Davis: (32:00)

Right.

Dean Fraser: (32:01)

... but I think there are opportunities to consider, like Geelong or maybe Newcastle or maybe Bendigo or Ballarat, or some regional hubs that could do quite well over the next sort of three to five years. So we're certainly open to exploring that, but to date we've been a little bit more focused and just looked at, essentially, properties worth 350K up to $2.5 million, houses, townhouses, units and some apartments, but only if they're one of eight or less.

Kylie Davis: (32:26)

Right.

Dean Fraser: (32:27)

So we don't want the high-rise. We're not helping at the moment sales with high-rise apartments. And then the home needs to be located within 50Ks radius of Melbourne and Sydney CBDs at the moment.

Kylie Davis: (32:39)

Right, okay. Got it.

Dean Fraser: (32:40)

When we reopen in Queensland, we're also looking at providing offers to Queensland sellers.

Kylie Davis: (32:45)

Okay. Okay. So, at the moment, Melbourne and Sydney predominantly and then Queensland to come.

Dean Fraser: (32:51)

Exactly.

Kylie Davis: (32:52)

Yeah, okay. So, Tazzy, South Australia, Perth, you guys will have to wait.

Dean Fraser: (32:58)

Yeah. If we feel the demand from there and if we feel like we can price with precision, and if we feel like it's a sensible investment, which it most likely is, to be honest, then we'd look to expand into those cities as well.

Kylie Davis: (33:14)

Okay. Awesome. So, Dean, what do you think the next five years holds in residential real estate, especially if we adopt this thinking around security and taking the risk out of selling that Brickfloor's driving forward?

Dean Fraser: (33:31)

Yeah, that's a big question actually. I think almost as important as selling and giving security around the sell side is buying because it's another big pain point, to actually just find the right place and to perhaps do whatever you can to avoid as much competition as possible.

Dean Fraser: (33:49)

I think that's where creating sort of like a buy first loan prior to a buy first product, that we're looking to do, would be very helpful, and we've seen one of our customers who bought first, he, effectively, was able to buy before the home went on the market because he could buy with confidence. He knew he was all set up. He had his pre-approval, he had his offer from Brickfloor. He knew exactly what was safe to spend, and he just went in and he made an offer before the home went onto market. The seller was happy to sell pre-market because they had a bird in the hand.

Dean Fraser: (34:20)

But I think that's an example of just there is... I think there is, and always will be, a big friction point around selling, and there will always be a really big issue around being able to find somewhere to buy. So I think there will be more and more products that sort of focus in on both of those ends of the spectrum.

Dean Fraser: (34:40)

I wouldn't be surprised too if we saw just more proptechs, whether it's the portals or businesses like Brickfloor or similar ones, moving into that... whether it's lending or mortgage broking, because we've seen obviously with Domain and the lending partnership with REA now sort of taking a stake or purchasing Mortgage Choice and having smart line exposure.

Dean Fraser: (35:02)

I think a lot of the portals in other businesses, they're a bit... and even Brickfloor, we're quite transaction focused, like we depend on a specific transaction to make money. Whereas if you can move into that kind of more annuity style income, in terms of whether it's mortgage broking and taking kind of a clip on the upfront and then a trailing commission or some other annuity style income, then I think that's quite a smart strategy.

Dean Fraser: (35:27)

So I think you'll see more people moving into that space, particularly if they've got strong brands. Banking is super competitive, isn't it?

Kylie Davis: (35:33)

Yeah.

Dean Fraser: (35:34)

It feels like every road is very similar out there, but if you've got a really unique brand or a unique audience focused on millennials or a strong brand, then I think there's opportunities for them to use those customers or that brand to move into an annuity style of income through competitive loan products.

Kylie Davis: (35:57)

So you're purchasing a whole pile of properties obviously and you said before that you're looking to bring in more institutional investors into that, into the property market and ownership. How's that going to play out over the next five years? How will that change the landscape?

Dean Fraser: (36:17)

I think there's a huge opportunity there with super funds and the like, that really are looking for yield, and a lot of people are looking for yield; not only super funds, but retirees are looking to generate yield on their cash at bank or on their investments. And resis just perform so strongly over such a long period of time and, to some extent, it's not protected, but obviously there's a lot of support. No-one wants to see residential property fall. It obviously can fall, but I think governments and the like will provide support to that sort of asset class to some extent. I think it just makes a lot of sense for people to pump money in resi.

Dean Fraser: (36:59)

So I think there'll be more and more money flowing into it, but there are challenges around how do we... If you're an institution, you're better off writing one single cheque for $50 million and buying a shopping centre, versus 50 $1 million homes, but we feel that our product allows a super fund to really streamline more easily into buying 50 $1 million homes through our product because it's designed to pick up homes into the fund. So we can fix that, and then I think we can get the returns right through being really quite strategic in where we buy homes and maybe perhaps where we put more offers out in particular areas that are likely to perform strongly. So then we kind of get scalability and strong returns and therefore, all of a sudden, residential property becomes as attractive, if not more attractive, than commercial property.

Dean Fraser: (37:43)

Most big institutional investors might have 15% or 10% of their fund allocated to commercial property but nothing really in resi, or very little. They might have some developments but they very infrequently would have established housing. They might have some build to rent that they're thinking about doing but it's very small. So I think there's just a big opportunity to create a platform for investors into resi.

Dean Fraser: (38:08)

And then I think the exciting thing for us too is that if we can do that and build out a big fund, then we create an affordable housing allocation in our fund, which has always been the intention, to have 20% of our fund allocated out to half price rentals. So then we can have people who need a home, need a little bit of a leg up, but can't afford to pay current rentals, they can move into some of our homes and we can make a bit of an impact in that way too, and that's consistent with super funds and the like too who are looking at more socially focused investments. As long as they stack up financially, if they can also have an impact socially, then I think it's a really strong proposition for [crosstalk 00:38:48]

Kylie Davis: (38:48)

Fantastic. Because there is a lot of desire to invest in social housing but no real vehicles for it at the moment, and so the effort to do it just seems a bit too hard in so many ways. That's fantastic.

Kylie Davis: (39:09)

If we start to see, like they say in the States, Wall Street starts to take over Main Street, in terms of residential property ownership, is that going to affect prices? Will it make the market more unaffordable?

Dean Fraser: (39:25)

It's a really good question. With our model, we're buying homes in our model that don't sell to a third party. So it's not like we're removing or sort of forcing out buyers; we're really buying when there is no other buyer. Sometimes we are forcing buyers effectively to pay a little bit more because we're there as the underwriter, but often we're buying when there's just for some reason or another there just hasn't been a buyer at that time for that home. So it's not like we're sort of creating an artificial market, we're sort of supporting the seller.

Dean Fraser: (40:03)

And then I think really, if you're creating a vehicle that enables a seller to more easily sell their home, there's going to be more liquidity in the market. There's this kind of like skipping rope analogy almost where people go, "Oh, do I sell or do I buy?" It's like when you're a primary school kid and the skipping rope's going around and you're watching it go but you're not really wanting to jump in.

Kylie Davis: (40:26)

Get roped in.

Dean Fraser: (40:28)

[crosstalk 00:40:28] scared about the whole thing. If it's not scary, then you're going to be... and hopefully with stamp duty changes as well, it's going to be more easy for you to put your home on the market and sell with peace of mind, and then to buy somewhere else.

Dean Fraser: (40:45)

So we think giving people confidence to sell and to buy, it should create more volume in the market, more liquidity, more moveability for people who want to change locations, and it should be sort of a net positive for real estate agents and for mortgage brokers, for banks, and for people who just want to be able to change locations and change homes to suit their needs.

Kylie Davis: (41:05)

So what do you do with all those properties that you've bought? Do you rent them out?

Dean Fraser: (41:11)

Yeah. We rent them out. All our homes are rented. We rent them out, and hopefully they enjoy some good capital growth. Our first fund that we've built out has had some really strong capital growth, even though we bought quite a few of them during COVID, which was great for the seller because they had a whole lot of stress from not selling their home that was amplified by COVID, and we honoured our commitments and we bought homes, and it turns out that they've done well because the market has since recovered.

Dean Fraser: (41:38)

We buy them, we hold them. We look to sell them maybe every sort of three to five years. We can hold onto them for longer or we can sell them sooner. But we're looking to create an asset class effectively, out of residential property that's diversified and strong returns.

Kylie Davis: (41:54)

Fantastic. So, look, thank you so much, Dean. This has been an amazing conversation. I've been really interested to hear about Brickfloor and the potential, the removal of all of that stress and the potential that it opens up for so many other better experiences in real estate.

Dean Fraser: (42:11)

Thank you very much, Kylie. It's been a pleasure to talk to you and I really appreciate your time.

Kylie Davis: (42:15)

Now we're going to include your contact details in the show notes. So, if any agent or if anyone wants to get in contact with you, the details will be in the show notes.

Dean Fraser: (42:25)

Oh, fantastic. Sounds great.

Kylie Davis: (42:27)

Thanks so much.

Kylie Davis: (42:28)

So, that was Dean Fraser from Brickfloor. Isn't it a fascinating business? We've been hearing for years from the U.S. about this phenomenon of iBuyers, and I love that Brickfloor is a truly Australian version of it that's also responsive to how our market behaves.

Kylie Davis: (42:46)

Over the past five years, there's been a growing body of evidence that one of the key reasons property supply levels are so low is it's because of this huge fear that we have as sellers that buying up and up-sizing just might not be worth all the pain. Increasingly, sellers are asking themselves, "Is it really worth going through all that work and stress of getting the house ready for sale, of going through the sale process, only to find out that actually there's nowhere better to move to and, in fact, you're worse off now because you're homeless?"

Kylie Davis: (43:17)

The intellectual property as an asset argument has always been that you sell first and then you buy. That's the most financially sensible thing to do apparently because you know how much money you've got to spend and bridging finance is a complete punitive horror. But if the worst comes to the worst, you just rent and you ride it out until it's over. But how does that actually play out today in 2021? Well, with so little stock on the market, there's absolutely no guarantee that you'll find something better to buy, especially if you're trying to move up locally. It's one of the key reasons there's so much renovation going on at the moment.

Kylie Davis: (43:53)

So you sell your current home, you can't find anything to buy. It's also extremely hard to find places to rent. So you have to go through all of that pain kind of twice, and then you end up on an adventure into an unknown, of housing insecurity and watching prices gallop away from you while eating up your capital with the rent. Suddenly the financial logic of selling doesn't really feel that sensible.

Kylie Davis: (44:18)

But I love how Brickfloor's changing the psychology of all of that. It recognises that selling is a deeply emotional experience and it works from there to make it a more sensible financial exercise. If we find something that we want to buy first, we can put all of our energy into imagining how awesome our new life is going to be and so the pain of selling doesn't seem so bad.

Kylie Davis: (44:40)

I also love that it's such a powerful tool for real estate agents to use to underpin how they present the property to market around pricing. There'll be no more arguments from buyers who miss out about the price guide if there's a price guarantee sitting behind it. And the fact that the product is also providing an avenue for institutional investment in property, that's really interesting to explore, and I think it provides wins all round. So, well done, Brickfloor.

Kylie Davis: (45:06)

Now, if you've enjoyed this episode of The Proptech Podcast, I would love you to tell all your friends or drop me a line, either via email, LinkedIn or Facebook. And I am sorry, we've had our episodes missing for a few weeks while we've got through the Proptech Awards.

Kylie Davis: (45:20)

But you can follow our podcast on Spotify, Google Podcasts, [inaudible 00:45:24] and Apple iTunes, and I'd like to thank my audio support, Charlie [Hollands 00:45:28] and the fabulous [Jill Escadero 00:45:29], and our sponsors: Direct Connect, making moving easy; Smidge Wines, exclusive wines made in limited quantities and available only via the cellar door at Smidgewines.com; and ActivePipe, helping you make engaging content for email marketing.

Kylie Davis: (45:44)

So, do you run a proptech business or are you a founder of a proptech? Make sure you join The Proptech Association of Australia. It's Australia's new not-for-profit association made up of tech people who are passionate about the property industry and committed to improving experiences in how we buy, sell, rent, manage, build and finance property. Joining will give you access to events and networks across Australia and globally that will help promote and grow your business. So go to proptechassociation.com.au and sign up.

Kylie Davis: (46:14)

Thanks, everyone. Until next week, keep on proptech-ing.