Rob: Hello and welcome to the Property Edge Podcast. My name’s Rob Turnbull, and today we’re looking at business acquisitions and we’re looking at it in a way that’s going to interest principals, owners and agents. So in an era of industry consolidation, we’re going to discover what agencies can do to make buyers really get excited about them. 

Understand what individual agents can potentially do to build portable career assets that can travel with them. And joining me today is someone who knows this more than anyone in the country. She is Australia’s business broker of the year. Not once but five times. Last year she was inducted into the REISA Hall of Fame, and this year the first woman to ever be inducted into the REIA Hall of Fame. She is the rent roll broker. She is of course, the wonderful Nikki Katz welcome. 

Nikki Katz: Hello, how are you? Thank you for inviting me onto the show. 

Rob: It is brilliant to have you on. I know our audience are going to get a lot of value out of this, whether you’re an individual agent, whether you are a principal, thinking about selling, or a principal thinking about buying today, this episode is going to cover off everything. To start with Nikki, can you just give the audience a bit of an overview of who you are and exactly what you do. 

Nikki Katz: I’m happy to do that. I’m Nikki Katz, director of the Rent Roll Broker, and I’ve spent 13 years specialising in the sale of all kinds of businesses, but including rent roll property management agencies across Australia. I’m the director of South Australia and WA currently, and we’ve got other agents across the country. 

So I’ve spent lots of times just doing transactions from everything from small boutique agencies to major consolidation plays. And today we wanted to think, dive into something that most principals awake at night. How to position your agency not just to survive, but to thrive in the era of this industry, consolidation, which is most definitely happening. So whether you’re a principal thinking about your exit strategy or an agent wondering about how foolproof your business. Today’s conversation hopefully will help people to understand building assets and the real measure and value of them. 

Rob: Absolutely. Well, starting on transactions then, how many agency transactions would you typically see in a year and any sort of particular trends that you might be noticing? 

Nikki Katz: We do lots of transactions. There’s an awful situation with South Australia where people like to do these private off market deals. I never really understand it because to be honest, if you go to one buyer and you set your price, that’s the price you’re going to get for your agency. Whereas if you go out to market and I have a plethora of buyers for might be up to 15, 20, 40 buyers for a particular rent roll, then that edge of competitive spirit kicks in and people usually get over and above asking prices and are usually very pleasantly surprised by the outcome with that. 

So it really just depends. We don’t get to do as many as we would like to do on the market because as I say, there’s an old adage of why would I pay a broker commission to do something that is my job? But then I go back to them and I say, but you would not let any of your clients try and sell their houses themselves without having an agent. It just, so it’s kind of this really mixed messaging that we have with principals at the moment and we’re trying to re-educate them that do not leave money on the table, get it onto the market, get that equity edge going, and you’ll definitely be a happy chappy when you do so. 

Rob: And just covering you off, you know, your awards demonstrate you’re very effective, but what makes you personally so effective? 

Nikki Katz: Well, let’s explain, start explaining what I do. I am a broker who specialises in facilitating the sales, so therefore. I’m everything from a forensic accountant, data analyst, strategic planner, and then roll all that into one. That’s what business brokers do, so we do a whole load of things that are not seen the same way as selling a house, for example. 

We’re analysing data and that data constantly changes and moves. So I always say when a house is sold, it’s got four walls and a roof, right? And it always, from the minute it goes on to market, it stays exactly the same. But we are selling something that’s a moving entity. It’s constantly changing whether you’re losing rent roll, getting new clients, you’re growing your building. And so we constantly got to update that on an ongoing basis. So that’s what I do. 

Rob: Well, so if we look at that, when you are valuing an agency for acquisition, what’s the first thing that you look at other than rent roll? Maybe you could explain why or what makes rent roll interesting. But then what are the other things apart from rent roll that interest you? 

Nikki Katz: Well, the whole mechanism behind the business is that rent roles are what I would say, the bread and butter income, the lifeblood of an agency where it pays all the bills, it captures all the ongoing revenue that happens on a weekly, monthly basis. So that’s what I would say is the bread and butter, and then the sales on top of that is the icing on the cake. 

Right? But the rent rolls are transacting for really high volumes right now because of the sustainability of them. Banks like them, there’s security in the tenure of them. They stay there. Most people don’t change land agents unless you really make a mess of something. They generally, it’s a bit like your bank. You’ll have the odd bugbear with your management agent. But at the end of the day, you tend to stick with someone you know, and someone that you’ve built up a relationship with. 

Rob: What’s the first thing you tell a principal who wants to sell his or her agency in 12 months time? 

Nikki Katz: They need to get into the systemisation of it because at the end of the day, the more professional you are in your setup, the easier it is for someone to do their due diligence on the business or the rent roll and then understand what they’re paying for. And if it’s too muddy, I call it, if it’s too murky, there’s too many ifs and buts, people will shy away from taking that on. 

There’s a lot of money exchanging here, so you have to make sure that you’re doing it with credibility. I mean, where we get tactical is when we see agencies missing out on big premiums because they haven’t got their data of what I say, the ducks in a row. They haven’t got all of that at the readiness to be ready for market. It’s a bit like going and doing a renovation on your house before you put it to market so that it features better. 

We just need to make sure that the efficiencies are there. So that would be like, you know. Making sure that you have capacity for growth, making sure you’ve got occupational efficiencies and checking out your risk profile and making sure that that isn’t high risk. And just being determined by your, the quality of your data and your tech stack, and making sure that you’ve got everything up to date. The first thing I would do would be database integrity. So making sure that you know right now. If I said to a principal, can you tell me how many active tenants you have? How many have been with you for over two years? What’s the average rent per property? If you can’t understand these questions accurately and fairly instantly, then you have a data problem that needs to be fixed. 

Another thing is system integration. Is your property able to be integrated with another acquirer? So do you have good systems and are you running about jumping from system to system all the time? Instead of having something that has a workflow with it? And that would stop some inefficiencies, both with time and with risk. And the other thing is compliance. It’s a really big thing to demonstrate that you’ve got a compliance history these days and that you’re doing everything right, audit trails on all properties, all of that mechanism will help you be stronger to the market and get a better result. 

Rob: So, I mean, rent rolls can often be attached to a sales agency business or detached. When it’s attached to a sale agency business, how much value is put on the size of, say the CRM, the prospect database, and the quality of that database. 

Nikki Katz: We’re looking at everything. We’re looking at the principal, the touch points of the principal. The staff that are there, the key staff on that, revenue streams of the staff. It then just blows out to have lots and lots of points that will make the difference between a good valuation and bad valuation. 

Rob: When you look at some of the agencies that have been up for sale and others that will be going up for sale, it’s generally the principal is the lead. They built it up and now they’re looking to move on, pass it on to the next person. But of course, they’ve done it off their gut and they have a small sales team that they’ve trained up themselves. So what you’re saying is if that is a course that they’re looking at, creating some documented procedures is a real game changer for them. 

Nikki Katz: Absolutely. Just anything that’s a business where you have to look at in the eyes of the purchaser and what they need to do, a nice, smooth transition or acquisition of smaller agency into larger agency. You have to be able to provide as much, and of course you’ve got to get through due diligence as well. 

So this is all important in the sales process that you have to make sure that your due diligence is going to stack up. So yes, I mean, database integrity system integration, compliance, documentation, all of these things are really important. 

Rob: Well here’s one for you. How do you value a principal’s personal brand if that principal’s exiting as part of the sale, or how do you manage that? Because surely someone who’s got a big character in an area has a long track record in their area and they’re looking to retire, their personal brand would be very much connected to the success of that agency. How do you work with that? 

Nikki Katz: Personal brands are slightly different. I would be looking at the agency’s branding and what they offer to the marketplace rather than the principal. I deal with rent rolls specifically, and it’s property managers that are on the day-to-day. Most of, and I say this and you’re not all going to shout at me down the podcast, but lot of principals do not go near the property management. They tend to err on the sales side of the agency and they leave a really gun property manager to run that show with their other counterpart staff. 

So, it’s funny, I ask principals all the time, if I can have the data and they go kind of sheet white on me and say, I don’t know how to get that. And I say, well, you have to ask the property manager to download it for you. And they say, but I don’t want them to think that I might be selling. And I say, well, you are the principal. You’re allowed to ask for any information about your business that you see fit. So you just go in and say you’re doing a review on everything, on the business wholeheartedly, and ask for that information. 

Principals. It is hard when somebody is retiring and they’re well known in the industry, but generally, whatever reputation they have with the industry should then be able to be carried across with the rent roll of the agency moving forward. If they’re an agency and have a very good reputation for excellent service, then that should be a buying signal for a buyer as well, because hopefully they’re buying a part of that. We can do an ease and an ease out of liability so they can stay with the business for a period of time and do a sort of diminished role as they go. 

And I quite like that. Transitions are really good when you don’t, you know, it isn’t just a kind of knee jerk reaction. It’s somebody where the principal might go from five days a week to four days a week, to three days a week and go into retirement in a slow mode, that way allows everything to transact in a nice, smooth manner. But that’s not always the case. Doesn’t always happen. 

Rob: Just as an aside, does an independently branded agency earn a different price point to one that might be assigned or part of a national franchise. 

Nikki Katz: No. It’s not based on their positioning, there might be some kudos in into that, but as far as rent roll transactions are concerned, I’m totally only looking at what the transactional value of that business is and then moving it across into a different hand. So you do have a consolidation market at the moment where you have a lot of the groups or the larger scale real estate agents who will just try and grab every rent roll that’s coming onto the market because they’re going for growth. 

And of course you can do organic growth, which takes a lot longer or you can do acquisition growth and that’s a faster way to move up and turn that revenue up a notch. So that’s kind of what I specialise in. 

Rob: Well that, lets now move to an individual agent, whether they’re a property manager or a sales agent. What portable assets separate just a run of the mill agent with one that really stands out and the other agencies would want to chase down. 

Nikki Katz: Yeah, well, let’s flip that perspective, right? If you’re an individual agent watching a consolidation in the market happening, you might be wondering, how do I transport myself? How is my career portable to what’s going on in the industry? And I think the answer is that you do have to look at valuable, transferable resources that you can enhance the value regardless of where you work. So I think, sales agents have to, and property managers have to think of their career like a business within a business. They have to understand they’re running their own business and therefore profiling themselves is really important as well as the agency. 

So, for example, I run a company called Business Sales Agency, which is my overriding company, and I have a couple of different brands within that, but I also have my own website. Out with those companies which they know about, which is promoting, it’s my show real. It’s me showing them what my capabilities are as an operator, and I can’t understand why we don’t have more of that. 

So you’ve really got to position yourself, your personal database. If it’s your agency’s database, obviously that’s their records, but you’ve also got to build your own records of relationships, preferences, and interactions that you’ve got with people and build compliancy around that and consistency around that. So you’ve got valuable contacts, and then you need a digital brand. So your social media presence is really important. You need some content creation and some thought leadership and doing things where you become that go to expert in your field of wherever, whatever it is that you specialise in is really important. 

Doing events like this, so podcasts and writing, blog and doing your perception on the market and being interactive with your market is really important. And staying on trend for any arrangements that you might be looking at as far as career enhancement is concerned, and then your referral network, other agents, service providers, past clients who know and trust you, who you’ve done a good job for in the past. That’s like an insurance policy for growth as far as you as an individual. 

So as an agent asset, you want to be looking at your personal brand. You want social media, you want to create content. So that builds your authority as the go-to person referral network development, and thank your referrals. You know, be grateful and gracious to anyone who does refer into your network. Professional development and certification. People really admire if you go down the route of self-development and you will put yourself through further courses, whether that’s an MBA, it might not even be something, it might be business courses or management courses or something, but you really have to develop yourself. 

Like you are developing, if you were a business, technology skills, massive right now, the more you are investing in that, and we’re going to come onto AI in a minute and basically do a personal brand audit. Look at who you are. Sometimes it’s quite interesting to Google yourself and find out what people say out there about you and have an understanding of what you’re offering out there in the marketplace so that you can pick that up and move quite strategically, even if you’re moving up or down in different departments or within different companies. Different agencies. 

Rob: That is a good answer. Thank you for that. There’s some real lessons in there for anyone really in business, irrespective of industry I think. If we’re looking at teams, how do buyers assess whether an agency’s teams will adapt well to new systems or to change? Is that part of the conversation that you have with them? 

Nikki Katz: It’s a real pain point, isn’t it? I mean, one of the biggest challenges I see when agencies try to upgrade their tech is the team adoption. And knowing whether that integration is going to work you have agents who are naturally gifted at digital movement. Generally, the younger they are, the quicker they are to pick up any new things that you put in. Whereas you’ll have your older demographic who still want to work with pieces of paper, right? 

So the agency succeeds at tech implementation, not just by buying software but also the change management processes within that. So, you know, its all very well having a CRM that’s got 47 amazing features, but if people don’t know how to work it, they’re not going to get the best out of that. So I think it’s about training champions and not crowds I think you have to work quite hard with your team and work out who’s your tech savvy members of the team, and maybe then make them the advocate for somebody who’s less tech tech savvy and have some peer teachers within your environment that can help jog people along. 

But I think the biggest challenge really is the diversification of that we have within our industry. You’ve got the Young Gen Zs, and then you’ve got the older manager, principals who do things a certain way and always have done and feel comfortable continuing to do it like that. And then you get the young kids coming in saying, what are you kidding? 

Rob: Yeah. And we see that with the adoption of different platforms that get released by agencies. The management love the idea of it, and there’s always a few people that are the champions and then there’s a lot of people that are resistant. And that’s in any business. To be fair, it’s not limited to real estate. 

Nikki Katz: It is in any business. I’ve come across things in businesses where people just haven’t been able to cope by a new owner, and they’ve had to move along only just because they, I believe it’s a shut brain mentality though. I think if you want to learn, you will learn. And I think there are people who have shut down that concept of, I’m too old to grasp this now, or I’m not interested in doing it a different way. And I think that’s a personality thing. Unfortunately, you can’t do very much about that. 

Rob: No. Well, speaking of things, changing AI and its impact I mean we’re still at early, early days with ai, but how do you think AI will impact agency value over the next few years? 

Nikki Katz: Well, AI, it’s the elephant in the room, isn’t it? Artificial intelligence. So I’m seeing AI impact real estate transactions in lots of different ways. I’m not sure I’m maybe going off piste here when I talk about it, but, you’ve got wave one, which is just the automation of all your routines and your general tasks and getting them all systemised and integrated and whatever. 

And then you’ve got wave two, which is the predicting of the analytics. AI now being able to predict which properties may have maintenance issues, which tenants are likely to renew, what increases the market will bare and all that competitive edge stuff emerging. And then you’ve got wave three, which is your decision support. So AI can evaluate investment opportunities, recommend portfolio strategies, even market prediction of movement in the market. And so there are so many different things now that are coming out of ai. The question is whether AI will impact your business. 

And I think data quality with ai, I think sometimes you need far easier know how to ask the questions with AI to get the quality that you’re looking for of the data. And I think this is where people are going wrong, where they’re not seeing it as an evolving learning tool. They’re seeing it as something that they pop a random question in and they expect a random answer. Sometimes when I’m doing things for research or whatever, I’ll put that question back in again in several different ways. And then take, because it’s a machine, it will give you the answers that you’re looking for based on quality of the question. And so I think it’s really about knowing what prompts to use to get the best out of ai. But yeah, it’s definitely happening. It’s already making a difference. 

Rob: Well, we’ve covered a fair bit. Have you got any key takeaways that you’d love for agents and principals to go away from today’s episode with? 

Nikki Katz: Oh, well yes, of course I have. I can not stop talking I’m Scottish, right? Let me leave you with this. Whether you’re a principal preparing for an exit or an agent building a career, the fundamentals haven’t changed: it’s relationships, it’s service and quality and it’s market knowledge. They’re still hugely important. But the multiple effect now comes in when you leverage the data and the technology on top of that knowledge and skills and service and quality of service and relationship building. 

So, I would say there’s three things that I can give you as a takeaway. First, audit your data quality. Access comprehensive information about key relationships and transactions. Secondly, assess your tech stack integration. Are your systems working harmoniously together or against each other? And thirdly, start building portable assets where you’re cleaning up your personal database, creating valuable content and strengthening your network. So the takeaways are just to make sure that you are doing the very, very best out there because the cream always rises to the top and it doesn’t matter how good AI is or how good your last sale is, at the end of the day, it’s consistent quality performances that win through. And I think that’s probably enough for me. 

Note: This transcript has been edited for clarity.