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Using data to guarantee rent: LongView Real Estate

A new Melbourne agency is shaking things up with big data and technology coming to the forefront, meaning traditional real estate roles are changing with the times. Ahead of the Business of Real Estate Conference, Kylie Dulhunty looks at LongView Real Estate and how data mining plays a pivotal role in their operations.

In Australia the traditional real estate model is changing with agencies employing in-house photographers, videographers, database experts, marketing and creative specialists.

In November last year, LongView burst onto the scene in Melbourne, providing a data-driven agency focused on property investors. Co-founder Evan Thornley is a former co-founder, chair and CEO of LookSmart, a pioneer of internet search advertising, and Australia’s first NASDAQ-listed, high-tech company.

He says a conversation with business partner Antony Cohen about the poor service they’d received in connection to their own investment properties inspired LongView.

“Most agencies treat property management as an occupational hazard or just for in-house sales leads,” Evan says.

“As investors, unless you’re looking to sell, no one cares that much about you.

“So we entered the industry to meet that need, and we service it with data and tech.”

DATA MINING
LongView employs data analysts who mine data to establish a risk profile for every property on its books and that allows it to offer landlords guaranteed rent.

Guaranteed rent sees LongView and its landlords agree on weekly market rent for the property.

Letting, vacancy, advertising and management fees are deducted, along with landlord insurance, and the rest is paid directly to the landlord on the same date every month, even if the property is vacant.

“It’s our job to find good tenants, collect the rent and replace the tenants, but if we don’t do that who suffers?” Evan asks.

“Traditionally it’s the landlord, but we believe if we are responsible we should bear the risk.

“If we do a good job, we will make a bit of money.”

Evan says landlords want stable cash flow but agencies weren’t offering such certainty because they didn’t know how to measure the risk to their business.

“That’s where the data analysts come in,” he says.

“If we can mine the data we can find out what the average vacancy period is per property over a three to five year period.

“For example, if we find that a four-bedroom home in the Glen Waverley Secondary College zone is vacant, on average, every 26 months and averages five weeks per time, that would average out as 2.4 weeks vacancy per year.”

LongView also analyses data to find out which type of advertising and layout generates the most views and, combined with price, leads to the most inspections and applications.

“We can test if running a certain photo in a certain way generates 40 per cent more inquiry,” Evan says.

“If I know that 160 views in the first three days advertising leads to 25 inspections and five applications, which gets me what I want, and I market the property at $580 per week and get 200 views then I know we’re on track.

“But if we get 40 views then maybe we missed on price in this market and it should be at $550 per week.

“That data exists.

“We’re swimming in data and no one is using the data.”

WHAT’S NEXT?
LongView currently has about 1,800 properties and hopes to increase to as many as 3,000 by the end of the year through organic growth and acquisition.

He said other areas the agency was beginning to use data analysis in were whether virtual staging reaped rewards and whether properties with floor plans generated higher inquiry levels.

Another different LongView offering includes providing advice on whether investors should use their properties for Airbnb and managing those properties if required.

“This is a really hot topic with a lot of landlords at the moment,” Evan says. “They come to us saying ‘I’ve got a friend that makes more money this way, should I do it?’

“We give clients an honest answer, and that’s included doing an appraisal and saying it’s line ball or that we don’t recommend it.

“Those that do go ahead we can manage it for them, we can help with organising furniture and we keep a very tight eye on things.”

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