Australian rich lister and co-founder of Flight Centre Geoff Harris has thrown his support – and money – behind a new property start-up offering to buy homes for a guaranteed price.
The company, Brickfloor, guarantees to buy selected properties if they fail to get a better offer during the sales campaign, essentially ensuring the vendor gets a sale.
It launched in Melbourne five months ago and has been making offers to home sellers in Sydney for the past two months. So far, it has made $50 million in offers on properties in the two capitals but the company would not reveal how many properties it now owns.
Mr Harris, who has also invested in live property auction site Gavl and is ranked 111th on Australia’s rich list, said he wanted to become involved in the company because the idea was unique.
“We get companies coming to us all the time, hundreds annually,” Mr Harris told Domain. “The concept was just so novel.
“The fact is, it’s real estate agent-friendly because it’s not excluding them, it’s working with them and the customers.”
Homes valued between $350,000 and $2.5 million within 50 kilometres of the Sydney and Melbourne CBDs are being sought by Brickfloor, with the company charging a 2 per cent fee to the vendor after a sale goes through with them or another buyer.
Around 20 per cent of the stock will be used as discount rentals for people on low incomes, which was another reason that enticed Mr Harris to invest.
While Mr Harris’ family company Harris Capital is one of the investors, ANZi Ventures is also backing Brickfloor, with the company’s chief executive Dean Fraser and his team the majority shareholders.
Mr Harris is one of the big names on Brickfloor’s board, which includes former Stockland chief executive Matthew Quinn and former ANZ bank economist Saul Eslake.
Mr Fraser, a former investment banker at Greenhill Caliburn, said the idea for the business had come to him about 10 years ago when he was working in the sector.
The idea of underwriting (insuring) property sales, particularly residential homes, made a lot of sense as an investment given the size of Australia’s property market, he said.
In a move that implies an upbeat view of the market, the company hopes to buy homes, rent them out, and later sell some. Money from sales would be used to fund more property purchases, he said.
Mr Fraser said the specific types of properties being looked at by Brickfloor included houses, townhouses and apartments that were in a building of eight or less.
“It’s basically 80 per cent of the housing stock in the market,” Mr Fraser said.
“We do a full assessment of the property and look at comparable sales data and market trends and use our own valuation algorithm.
“The price needs to be fair otherwise no one will take us up.”
Both Mr Fraser and Mr Harris were not concerned that Melbourne and Sydney’s property markets were on the improve after 18 months of house price falls, meaning fewer people may be looking for a guaranteed sale of their property.
“It works well in a softening market and in a rising market,” Mr Fraser said.
He said those looking to buy in a rising market could struggle to get back in if they sold their home for less, or not at all.
“There is no certainty and we provide certainty,” Mr Fraser said. “We think that the model works very well in a soft and a strong market.”
While Melbourne and Sydney are the starting points for the business, they will look to expand not only to other cities in Australia, but also overseas.
Mr Harris said the five-year-plus plan was to see the business start in both the UK and US markets.