Interviewer: Long been said that Australian property market is almost impossible to get into for many people. Our next guest has designed technology making it possible for investors to get a foot in the market in a similar way you would invest in the share market. Arthur Naoumidis, welcome to Ticker.

Let’s talk about property, and what do you see at the moment that are the key issues facing property investors, you know, during the COVID time?

Arthur: Oh well, clearly the obvious one is to do with the high rate of unemployment, which is the vacancy risk. And that’s really scaring a lot of investors into property in terms of buying a property and then not having a tenant in it. And a follow-on risk from a vacancy risk is really price risk, a combination of, you know, fewer investors buying properties, but also the issue of some homeowners not being able to stay in their homes. You know, so they’re sort of the major issues. And as a platform that facilitates property investment, clearly that’s a challenging environment for us all.

Interviewer: Yeah, for sure. Let’s talk about the strategies that you have seen that have been brought in to try and respond. You know, we know a lot of local businesses, there’s so much stimulus going on for individuals, businesses. What about property? What are some of the strategies that we’re looking at at the moment?

Arthur: The one that we’re focusing on is saying, “Well, how can we find properties that are less likely to be vacant?” And so we’ve locked in on a strategy called Rent-to-Own. So we’re taking developers and taking the distribution margin that we’d normally pay, you know, project marketing companies, which is about 10% of the property. So we take that distribution margin and then we pass that on a bit to the tenant and a bit to the investor. So we allocate 5% of the equity to the tenant, 1% a year. The idea is that that’s a leasing incentive so that when the tenant, you know, the tenant’s got a choice of five properties, because, you know, there’s a property glut, and one of them gives you equity in that property, we’re hopeful that the tenant will choose our property.

Interviewer: This is interesting. Where did you… Oh sorry, you just cut out there briefly. Tell us about the idea around this technology. You know, in my intro I mentioned it’s partly trying to invest in property in a similar way to the share market. So how did you sort of work through this idea and then look to actually introduce it, because it’s pretty fascinating really.

Arthur: Okay. Yeah. My background is equities.  And to me, in creating DomaCom all we did was take equity concepts and apply them to property. So you know, from a equity side, no one would ever put all their money into one stock, like you know putting everything into BHP. So basically, we’ve taken that concept and using a retail managed fund legal structure, enable investors to syndicate online and acquire a property, and you know, buy a bit of four properties exactly as they would with equities. So diversify. And that’s how you manage your risk.

So we’re using that technology and legal infrastructure and then saying, “Well, how can we make our properties more attractive to tenants?” Well, we give tenants a bit of equity in the property. So that way the tenants become shareholders. So they are much more likely to look after the property, and also probably more likely to want to buy more of the property from other investors using our secondary markets. So we’ve got a market maker license as part of our financial services license.

So effectively, you know, that’s the sort of innovation that we’re having to create to deal with the current environment. So that way hopefully vacancy risk will be addressed. In fact, we’re really proud, we’ve just done our first Rent-to-Own transaction in Melbourne, in Moonee Ponds, of all places, a couple of weeks ago, in the middle of a pandemic. It just shows you this product works. So we’re just settling that property this week. And we’ve got further properties coming in Brunswick, Moonee Ponds, but also Sydney now. So, yeah. So it’s one model for addressing the vacancy risk.

And the other element of this product is the pricing risk. Okay? And so, to help address that is that, if you buy cheaper. And how? We’re simply taking some of the developer distribution margin and giving that to the investor so they’re getting a lower price point. So that way you’ve got a buffer, in terms of, if the prices do go down next year, well you bought it cheaper anyway. So yeah. So, really the product is taking equity concepts and applying them to property.

Interviewer: Let’s talk about self-funded retirees, obviously a huge group within the market. Tell us about the impact that you have seen on that group from what we’ve experienced now with COVID-19.

Arthur: Yeah. I think they’re one of the major groups that have been impacted, and I’m surprised how little attention they’re receiving in the press. You know? Because several hundred thousand self-funded retirees, who have, you know, planned their retirement well, they have saved their money, they get to retire. And all of a sudden historic low term deposit rates coupled with what’s happened the last few months with the pandemic, with the dividends being slashed. So what was a livable income from their superannuation  is no longer a livable income. And nothing the government has done, JobKeeper, JobSeeker, HouseBuilder you know, nothing the government has done has created a solution for these retirees. So that’s another area that we’re looking at because at the end of day, if you can’t live on the income from your SMSF portfolio, you’re going to have to start drawing down your capital, which means there will be less income next year, so you have to have more capital. So it becomes a vicious circle.

So one of the possible solutions is to be able to sell a bit of your house, and put the proceeds in your super using the downsizer legislation. So that uses one of our new product called Seniors Equity Release. Now we have approached the Australian Tax Office for a private ruling so that, we’re pretty sure we’re compliant with the legislation, but as you would expect, you need the regulator to give you the tick. So we’re hopeful in the next two weeks we’re going to get that tick.

Interviewer: Yeah nice, exciting times. Certainly something different to look forward to in the future. Tell us about how we can find out more. Where is the best place to head online?

Arthur: Okay. Obviously our website, We’re listed on the ASX. Our ticker is DCL. So yeah, you can go to the ASX as well. So, I look forward to telling you more some time in the future.

Interviewer: Absolutely. Let’s touch base yeah six months down the track. Hopefully things have opened up a little bit, and more exciting news ahead. Appreciate your time.

Arthur: Thank you. Thanks for having me.