The new real estate model

PropTech has the ability to transform how real estate functions. Advances in blockchain technology will reward early adaptors to this emerging technology, as they will be able to better serve their clients by offering them quicker transaction times and lower fees. More importantly, tokenisation will make fractional ownership of real estate commonplace. This will result in the liquidity and globalisation of real estate.

Within the next 10 years there will be a completely new real estate model. As the world comes to terms with the digitalisation of assets. Esper Wealth aspires to become the market leader in this rapidly evolving market.

Conventional real estate models

Typical real estate models have three main revenue streams.

• Property sales. Property sales have traditionally been the main way for estate agents to make their money. Some agents like Hunters still make the majority of branch income from property sales.
• Property rentals. Property rentals have become increasingly important. Though the past few years this trend has reversed slightly due to a surge in property prices. That said, agents like Foxtons have made considerably more income from rentals compared to sales. In 2021, Foxtons generated £74.3m in lettings revenue, averaging £1.3m in lettings income per branch, according to the research. In the same year, its sales revenue totalled £42.7m, averaging £748,649 per branch.
• Third party referrals. Agents make considerable kickbacks from third parties for making referrals. Typically, larger agents can negotiate a 25% fee from mortgage brokers and solicitors. This has allowed agents like Strike to sell property for free.

Online and hybrid models

In an attempt to lower fees, we have seen various new models enter the market. Some of these offer online services where there is no branch. However, the majority of new entrants offer hybrid models as buyers and sellers prefer to visit an agent in person at branch.

• Purplebricks. This was once the franchise of choice for most new agents. Agents were lured by the idea that sellers wanted lower fees. More recently agents have moved away from this model as sellers are realising that there is little motivation for agents selling property once they have received fees upfront.
• Strike. This is another emerging model which promises zero fees. Instead, agents only make money from referrals. consequently, this model is gaining traction fast. However, like Purplebricks there is little incentive for sellers to attain the best market price.

Esper Wealth

As a company, we are also targeting a franchise hybrid model. This reduces fees compared to traditional branch models, but it still offers customers the ability to have a face-to-face service. Unlike Purplebrcks and Strike, agents are incentivised to sell property at full market price, this makes it better value for the seller. Though our main competitive advantage lies in our PropTech.

• The use of smart contracts will result in quicker and cheaper fees as savings are made by streamlining the administration of all parties. This includes mortgage brokers, solicitors, and other stakeholders. These savings are all passed on to the seller giving them better value, whilst not compromising on the property selling price.
• The use of our blockchain technology is not limited to smart contracts. Tokenisation allows for the digitalisation of real estate. This opens the door to increased revenue streams for agents whilst offering investors increased flexibility in investing.
• Through PropTech, we have partnered with the UK’s first ever property development company which is funded exclusively through the blockchain. This partnership ensures exclusivity for franchisees, resulting in increased revenue streams.

SEIS and EIS approved

Our business model rewards early stage investors by allowing them to invest in a forward thinking company that uses fintech solutions to improve the service to the end user whilst simultaneously increasing profit margins.

For qualifying early-stage investors we are raising finance through the Seed EIS and then the EIS scheme. This investment offers considerable tax benefits, resulting in lower risk and higher returns for qualifying clients.

If you are either a ‘high-net-worth’ or ‘sophisticated investor’ you can find out more about our disruptive business model by contacting a member of investor relations who will happily send you the full investment prospectus. Alternatively, if you are interested in finding out more about property franchises then we recommend reading some useful tips to ensure you select a franchise that is best suited to your individual needs.