REA Group, the operator of realestate.com.au, has made an investment in the property management platform ‘Managed’. This strategic move not only allows REA to expand its involvement in various sectors of the real estate industry beyond the traditional portal space but also brings them closer to the transaction process. In this article, we explore the reasons behind REA’s decision to invest in Managed and analyze the potential implications for the industry.
Managed is an Australian platform for property management and investment, which aims to facilitate the connection between property managers, investors, tenants, and tradespeople through its user-friendly app.
REA’s decision to invest in this start-up not only highlights its potential as a marketable product that can boost revenue for agents but also reveals additional strategic benefits behind this move.
Below are some reasons why having a stake in Managed is a wise move for REA.
MOVING A STEP CLOSER TO THE TRANSACTION
REA is undergoing a transformation from being just an advertising portal to becoming a transactional platform, learning from the success of their mortgage business which generates significant commissions. The Managed platform provides an opportunity for REA to earn service fees from various transactions, including rental payments and maintenance fees. With their extensive marketing reach across the nation, the Managed platform is expected to be widely adopted by agents and investors who actively engage in deals on the platform. Even with a small percentage of each transaction, REA stands to gain a considerable return.
As illustrated in the diagram, REA aims to expand its involvement in various parts of the transaction process to facilitate transactions more effectively. Diversifying revenue streams and generating additional profits is a smart business strategy for REA. This will further boost their already substantial stock value, which has soared to as high as $113 on the ASX in the past year.
CLOSING THE TENANCY LIFECYCLE’S LOOP
With this new investment, REA is now able to fully complete the tenant transaction lifecycle.
Search: When individuals are searching for rental properties, the search feature of REA is highly reliable. It is widely known that one can rely on REA to discover a property that meets their requirements, at any hour of the day.
Lease: In 2014, the leasing app 1form was acquired by REA. This acquisition enabled REA to enhance their service offerings and strengthen their involvement in the real estate industry by providing a platform for agents and tenants to securely and efficiently establish lease agreements.
Move: As an enhancement to the 1form platform, tenants may be connected with service providers who can assist with the moving process. These service providers specialize in utility connections and can simplify the process for consumers.
Manage: In the past, REA’s involvement would typically come to an end at the Move stage. However, with the introduction of Managed, REA now has direct involvement in property management, effectively completing the tenancy lifecycle loop.
REDUCING PAIN POINTS FOR STAKEHOLDERS
Lease transactions pose unique challenges for tenants, landlords, and property managers. However, Managed offers a comprehensive toolkit that simplifies the process for all stakeholders. With features like automated payments, streamlined condition reports, tenancy agreement sharing, and maintenance booking, Managed makes life easier for everyone involved.
Moreover, Managed addresses the issues faced in lease transactions, reducing approval and transaction times. As a result, REA’s value proposition is steadily increasing among consumers, agents, and property managers. This also sets them apart from their primary competitor, Domain, with hopes of further widening the gap in user adoption.
GATHERING DATA
REA has the chance to capitalize on the Managed platform, which provides a distinctive opportunity to expand and refine their marketing target lists. Managed captures a diverse range of data throughout the lease transaction spectrum, encompassing:
- Identifying landlords
- identification of the properties owned by each landlord
- Facilitates quality control checks on tenants with the use of a centralized database
- Creates a tenant profile by identifying the type of properties and important qualities that they prefer.
- Provides insights into property management trends, including the ability to forecast when maintenance tasks such as painting will need to be completed.
The information collected can also enable the estimation of the duration spent by agents and property managers on specific tasks, enabling them to identify areas where improvements can be made to increase the efficiency of their operations.
DIRECT ACCESS TO LANDLORD
By catering to the needs of all stakeholders and incorporating key functional elements, REA has strategically positioned themselves to establish direct connections with landlords. As a result, they have the potential to disrupt traditional agent business models and possibly even usurp the longstanding relationships that agents have worked tirelessly to cultivate
This could potentially empower REA to persuade landlords to:
- Directly list and advertise through the portal
- Centralise and streamline all documentation with the Managed platform
- Conduct the transactions via the 1form platform
- Monitoring all PM needs through Managed’s interactive, real-time capabilities
Although REA has not revealed any plans to do so, it is possible for the company to create an environment that eliminates the need for traditional property managers. PropTech firm :Different has already implemented a similar approach that is less invasive and disruptive, providing a time-, labor-, and cost-efficient alternative to property management. Given the vast reach of REA’s operations, the platform could be expanded to automate daily tasks, while a team of virtual property managers focuses on delivering high-quality service to clients.
FINAL WORD
REA, an Australian real estate company, is taking inspiration from US companies like Zillow by investing in complementary adjuncts to their core property portal business. This strategy grants them closer access to various steps in the transactional chain, creating new pathways to sustained revenue growth and expanding their reach within the Australian real estate market.
It remains to be seen where and how REA will continue to invest, and how it will further integrate with transactional elements of the real estate industry.
