Wednesday, February 8, 2012/
Tony Melvin wants his business Resicert to become the national leader in property inspection, a cottage industry he expects will explode, with the introduction of the carbon tax and consumer demand for national energy standards.
Resicert, which has no head office and operates entirely by cloud computing, is seeking franchisees in Victoria, New South Wales and Western Australia. It has very aggressive franchise targets: between 90 and 120 over the next year, in addition to its existing 14.
The three-year-old business has already exceeded last year’s revenue target over seven months, and expects to bring in $1.4 million in inspection revenue this year.
Resicert wants to expand on the east coast. What are you actually offering potential franchisees?
We consider our business unique in that we do an awful lot for franchisees.
We actually call them licensees; to differentiate, we follow the Franchise Code of Conduct and disclosures, but most franchises – especially professional services –have a system and brand name, but a lot of the time franchisees are left to find their own leads, quoting, collecting money, they have to have their own credit card facilities. We do that for them.
We’ve got some online systems, being a cloud-based system. So when they come on-board and are trained, they only need to do two things: establish and maintain relationships with real estate agents, and then the other function is doing the inspections.
And once they’ve done the inspection and they’ve finish the report – which they’re trained to do at the time of the inspection – they walk out of the door, their job is done, and they simply invoice us once a week, and we pay them. So there’s no collecting of money, their job when it gets back, they’re sent an email about the job, and they go and do it.
They’ve got an exclusive area, and we pay them, so it’s very different to the normal franchise set up. We take all of the risk; the client pays us, we’ve got insurance with the client in terms of inspection being done correctly, we own the client, but the inspector gets paid commission for doing his job. That’s why it’s a little bit different to franchising.
So it’s a commission, and it’s their own business and they’ve got a territory, and it’s a sellable right. We’ve got guys that are doing 16 inspections in an area, which is generating anywhere up to $200,000 a year in income.
How much is a franchisee?
At the moment, $68,500 plus GST.
And how many do you have now?
And how many are you looking for?
We’ve had analysis done on the potential of the areas, so probably between 90 and 120. We don’t want to release an area where a licensee won’t be viable.
This is over 12 months?
Yes, I mean, we’ve had over 300 enquiries in the last month alone. There’s certainly plenty looking for their own business and wanting their own business.
And these are all certified building inspectors making enquiries?
No, this is one thing that people think, that you have to a builder or hold a certificate. The interesting thing about it is the Australian standards don’t say what qualifications are required; they just say suitably qualified.
So we get builders and surveyors but we also get a lot of tradespeople, and people who’ve maybe been dealing with property or renovations, so lots of different professionals. And then there are some people who are “qualified”, engineers or what-not, but have never done an inspection.
And how do you train people?
This is another interesting thing about the industry: there’s no real formal training for an inspector. You may be an engineer or a builder, but to be an inspector is a different thing.
Believe it or not, it’s more of a customer service role than it is a technical role. When it comes to doing a pre-purchased inspection, it’s not, “does this home abide by the building code?” That’s not what you’re doing.
It’s whether or not, is it structurally sound, which can usually be assessed by the naked eye. There’s no other way to do it. You look at things, and if there’s cracks, then obviously you’re going to flag that.
That being the case, how much are people willing to pay for something they can do themselves? It’s not compulsory, is it?
In the ACT it is. We’ve found statistically that about 30-40% of homes get a pre-purchase inspection.
But there’s different types of inspections: when you’re doing staged constructions, where you look at each stage of the building, from the slab to the house getting built to the roof getting built, that requires from technical expertise. But the franchise we’ve got at the moment doesn’t include those – it includes specifically pre-purchased inspections, handover defects, inspections, builder warranty inspections and vendor inspections, which is pre-purchased done by the vendor who’s usually auctioning their property. Those are the things we train them to do.
And what’s the standard cost? A few hundred dollars?
Yes, it varies, usually from $295; we’ve just introduced a new one that’s priced at up to $2,000. And that’s for homes that people are spending a lot of money on, and we check everything over perhaps several hours: the air-conditioning, the pool, the spa, the shed. And that’s for people spending a couple of million dollars on property and they just want to check that everything works.
Our average at the moment is $480. We’ve just introduced a new system where we’re offering other benefits so our average is starting to go up.
And the attraction for the client is legal or peace of mind?
Peace of mind. Homes rarely fall down; more often than not, it’s cosmetic or functional things. You can have some cracks in a roof, electrical sockets not working, dampness.
So our job is just to check everything and if there’s something wrong, we put it in the report and let everyone know so it can be checked by an electrician for example.
And then the onus would be on the vendor to fix it or cut prices?
That’s correct. Or it then becomes just a negotiation point in the purchase of the property.
And what does it mean for you that the property market has been weak for some time now?
We’ve been growing an average of 20 to 30% per month in the down market, which tells us that we’re obviously taking more market share.
I don’t know. I could guess. The property inspection business is rather interesting; there’s no real national brand of property inspectors. You can think of accounting firms and a company to do with most of the property transaction process – accountants, solicitors and real estate agents – but who’s your property inspector?
We intend to be the first, and that’s because a lot of property inspectors are ex-builders or ex-engineers who’ve set up, and they do their 10 or 20 a week, and make good money and they’re happy doing that, and that’s it.
So we’re coming along with streamlined systems, beautiful reports that are in the purchaser’s inbox as soon as the report is finished or at least within 24 hours, and it’s a 24-30-page report with photos – because the guys do all their photo uploading on-site – and there’s arrows and lots of explanations. So it’s very fast and professional.
Yes, but do property prices have any influence on whether people opt for property inspections?
It’s definitely in relation to the number of properties sold; the more properties sold, the more inspections we do.
What is interesting, though, is mandatory disclosure will happen pretty soon, probably this year. That’s what’s happened In the ACT; it’s been the case for the past 10 years where every house gets an energy rating. And we’ve done 250 of these, and people are starting to ask for it as well, where you don’t just check the house for structural issues but also check its energy efficiency and give it a rating.
When the Government makes it compulsory, it will change the industry, and this will triple our business overnight.
I also think people want to know about this, so we’re training our guys to know about lights, and shower heads and double-glazing. That will be interesting.
And you think this will be made compulsory to complement the carbon tax?
Yes, probably in line with the carbon tax and the fact that eventually, they’re going to say you can get a sustainability assessment with any house. I think it’ll be like in the ACT in that in order to buy or sell a house, you have to have a sustainability assessment on it to measure its energy effectiveness and there’ll be a star rating and people will start to decide based on these.
In the ACT there are guys that buy one or two star homes and improve the energy ratings and sell it for more, because they’ve noticed that a better rating house sells for more.
So it’ll roll out nationally, whether by law or demand, but the carbon tax will give impetus.