Beyond the Box – Season 1 – Episode 4 – Rob Hahn – Managing Partner at 7DS Associates
Beyond the Box – Season 1 – Episode 4 – Featuring Managing Partner at 7DS Associates, Rob Hahn.
On this week’s Beyond the Box episode, we present to you the brilliant mind of Robert Hahn (author of the popular Notorious R.O.B. real estate blog and Managing Partner of 7DS Associates).
“It’s not enough to just resist disruption, to resist change, and then say we’re going to say the same. What we actually want to do is embrace this change. This shock, this disruption lets us get better and helps us to improve in whatever way that is. However you think of it, it improves. So, the old way was pretty great, but it could have used improvement, right??”
Rob shares with Lynette Keyowski his perspectives on how COVID has affected the real estate industry, shares his thoughts on what the future may look like and what the industry needs to strive for personally and professionally in the time to come.
Full Transcript of the Show
Lynette Keyowski – Beyond the Box Host: Today I have with
us, the esteemed pleasure to welcome to our podcast Mr. Rob Hahn, the notorious
Rob. So, Rob is a “no-holds-barred-pull-any-punch” type of figure in the real
estate sector. I’m really privileged to have gotten to know Rob over the last
few years and consider him a friend and a colleague in the real estate sector
and highly respect your views and your opinions, because they are just that;
they are well-educated, well-researched, well thought through pieces. And so,
you say what you think, but you’re also not afraid to back track and say,
“Well, I have new information and so what I thought yesterday, doesn’t really
apply today, but this is why.” I would really love to welcome you to the
podcast. Thank you for doing this.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Oh,
thank you for inviting me. And by the way, the feeling is entirely mutual
because Lynette Keyowski, is pretty damn amazing and speaks her mind as well!
Although, you do have a few more political restrictions, I think…
Lynette Keyowski – Beyond the Box Host: Well, that’s why I
hang around with you, I’m hoping I can learn how to relax those a little.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: It’s
real easy, just get really comfortable with unemployment. Especially since I’m
a consultant, I wake up every day.
Lynette Keyowski – Beyond the Box Host: Awesome, so Rob,
just to kick us off, again, your relatively well-known South of the boarder. In
a lot of different sectors, primarily in the real estate space, and all
different verticals of that it includes, but maybe lesser known in Canada. But
I think the other piece we’re hoping that our podcast really fills a bit of a
void on the commentary and the intersection of real estate, technology, and
capital in Canada.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Absolutely.
Lynette Keyowski – Beyond the Box Host: So, we’ll likely
hit a wider target than just the real estate sector up here as well, so we’d
just love for you to share a little bit of your origin story, what your
background is.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Oh,
boy. You know, we could take the whole podcast for that, so let’s give you the
readers digest version.
Lynette Keyowski – Beyond the Box Host: Sounds good.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: I’m a
lawyer by training, who decided I didn’t like money, so I took a job as a
magazine investor, but I knew the internet before there was internet, so I
started a company which I then sold to USA Networks. Went to work for Sci Fi,
left there, went to work for a start-up, then 9/11 happened and the start-up
went down. But then went into real estate industry starting in the commercial
state so it gives me a bit of an interesting perspective. Worked in realty for
four years, then went to a small data company and then went out on my own. And
I’ve been doing strategy consulting since 2009.
Lynette Keyowski – Beyond the Box Host: Awesome.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
I’ve been unemployed since 2009.
Lynette Keyowski – Beyond the Box Host: Officially
unemployed.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: The
other word for consultant is we are “con man.” Con-sultant…
Lynette Keyowski – Beyond the Box Host: You know, I always
seem to see you with a high-end cocktail and a good meal, so [inaudible 3:01].
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Yeah,
it’s been good. It’s been fun and you know, I stay in the real estate industry
mostly, but obliviously I’ve crossed sections over into technology. Been doing
more and more stuff with the finance world as I’ve started to… and we’ve talked
about this before, I’ve talked about it at presentations. I think we’re
entering the age of capital. Covid, I think is a bit of a curveball, so I’m
thinking through a lot of those things as well. And yeah, like you mentioned,
for whatever reason I’ve been fortunate where I can just speak my mind.
Lynette Keyowski – Beyond the Box Host: Right.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: And
that’s good, because I don’t know how to do anything else. I find it very
difficult to…you know…say things I don’t believe in.
Lynette Keyowski – Beyond the Box Host: Yeah, and first of
all, I wish more people would take that approach. But again, what I’ve always
appreciated about your approach is that you do think through things, and you
inform yourself. You rely heavily on research and thought, and really your
connections. This is where I love to kind of start honing in, and you mention a
couple of things. You mentioned your current thinking on the age of capital,
and I would love to circle back on that and tie that into the whole
conversation around Covid, and how that’s shifted. But what I’d love to lean
into the conversation is really around your focus on connecting yourself with
the people, to learn their perspectives. So, your research isn’t just “go and
research papers, and write papers, and see what others are saying,” it’s
literally connecting with the people on the ground, getting perspectives,
connecting those dots. And it’s what I’ve appreciated about your approach is
it’s a very practical approach. So, I’d love to hear from your perspective, and
obviously the whole world has shifted over the last few weeks, and it’s
impacted people across the board. I think more so, maybe than any other time in
history. It’s categorically impacted the world.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Yeah.
Lynette Keyowski – Beyond the Box Host: So, I’d love to
know from your point of view from these conversations you’ve been having, what
is the vibe out there? I’d hate to say it’s all dismal, but is it categorically
dismal, or are there pockets of bright light?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: First
of all, I appreciate your praise; I’ll take it! But yeah, a lot of it comes
from the fact that…. I know people think I’m an expert, right? I think I’m an
expert in some ways, but the more you get to know something, I feel like the
more you realise you really don’t know anything. So, I’ve never been a realtor,
I’ve never sold real estate, my wife has. But I know things about business, I
know things about business cycles, or corporate finance. I know a lot of
different things. I try to be as humble as possible, if you will, because what
you said is true. I have strongly held opinions, but they’re based on
information and facts. If those change, then I’m going to change opinions,
because then I’m wrong. I’m happy to be wrong, but what I’m not happy about is
people just kind of do the PR, and the spin. Like, stop. Let’s just start with
the facts, if we disagree, we disagree and that’s totally fine. So, from that
standpoint, when this thing popped, I know I’ve had a certain perspective and
how things would happen and how things would be, but I’m not on the ground. I’m
not a broker, I’m not an agent, I’m not seeing that. So, the only way to
correct that, is to try and get that. Data helps, so I try to look at the
showing time data, I try to look at MLS data, I try to look at all the data,
but I felt like early on, the thing to do was to talk to agents. Talk to people
on the ground, now. I took a very particular slant to this. By the way, I’ve
been interviewing 16 of the top agents and brokers that I could round up in a
very short period of time. This was probably the second week in March, right
after these lockdowns were sort of coming. And I just sort of got their
perspective on it. And I wrote a report based on that, and I’m modifying that
report so it can be sent to the industry, because I wrote the report for the
finance world.
Lynette Keyowski – Beyond the Box Host: Ah, okay.
Rob: Yeah, for the investors. They appreciated it, but now
I’m going to modify it and do it for industry folks. So, the things I’ll say is
because I chose to speak to top producing agents, and top brokers, the
perspective I got was rather different. It’s not dismal at all.
Lynette Keyowski – Beyond the Box Host: Interesting.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: I
think it’s actually a lot more positive and optimistic. So, that’s helped me
think about what I think is going to happen based on their feedback. Now, if I
had spoken to a wide cross-section of real estate professionals, I might have a
very different perspective on it. So, I just want to caution that. Everything
is based on folks who are really at the top 1%. We’re talking about really big
agent team leaders; we’re talking about dominantly local brokerages; people who
are really smart and who really know what they’re doing. So that changes things
a bit.
Lynette Keyowski – Beyond the Box Host: So, let me poke on
that a little bit. It’s does come back to one of the theses that you long held,
and that is “who really makes up the practitioner population.” So, correct me
if I’m wrong, there are 1.4 million realtors in the US.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Roughly,
around 1.4 million.
Lynette Keyowski – Beyond the Box Host: Roughly, 130,000,
140,000 in Canada. And you and I have had multiple conversations on this, and
on what makes a realtor, which has a real brand behind it, and needs to
demonstrate some quality behind that, to retain that trademark. And the
different between real estate agents, or people that hold a real estate
license.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Right.
Lynette Keyowski – Beyond the Box Host: So, I just want to
qualify that that’s the conversation that we’ve had, so it’s interesting to me
that you’ve talked to the top 1% of agents, teams, brokers. Tell me why you
took that tactic instead of a cross-section.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
my reasoning was, and this came out of the fact that I was starting to see some
of the real early survey results and pulses and so on. And seeing people be
like, “this is a disaster, we’re all going to go out of business” and all of
that. And I kind of felt like, what’s the point of talking to an agent that
does three deals a year? Because if they lose one, that one third, their income
is gone.
Lynette Keyowski – Beyond the Box Host: Right.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
you know, it was sort of like that. And again, you and I have talked about this
many, many times. I’m fairly convinced that somewhere between ten and fifteen percent
of the agent population does 85% of the business. I’m fairly convinced of that.
Now, it’s interesting to me that we don’t have any actual data behind this. I
think it’s driven by politics, because MLS’s don’t want that information
getting out, but it’s out there. We all know it, right? If you’re in the
industry, you know it, so it’s like, why aren’t we talking about this? So,
given that, if I want to know what’s really happening on the ground, I need to
talk to the people who are doing the transactions.
Lynette Keyowski – Beyond the Box Host: Fair, yeah.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: You
know, people who are doing four to five hundred transactions a year, not four.
Right? So, when the four to five hundred people say, we’re going to lose 10%,
40 transactions. That’s something.
Lynette Keyowski – Beyond the Box Host: Right. So, then tell
me about this. So, thank you for clarifying that, because I think that’s an
important distinction as to why that’s your sort of test population. I think
that’s really helpful. So then, tell me a little bit about what you’ve learned
from those conversations.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
what I’m learning is essentially, the top producing agents, the top producing
brokers, they are… I mean they’re worried, they’re concerned. But they are far
more optimistic than they are pessimistic. They all think they’re going to gain
enormous market share through this.
Lynette Keyowski – Beyond the Box Host: But why? Why do
they think that?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Because
they’re better run; they have cash. So that’s the other part of this right, and
maybe that connects the whole agent capital thing. Every single person I’ve
spoken to, well, not every single person, but just about every single one I’ve
spoken to has been like, we are just fine. We have more than enough cash, we’ve
got lines of credit we can tap if we have to. They’re not laying off staff,
they’re cutting the “nice to haves” everyone is doing that. But these people
are saying, “listen,” and now I’m just giving an example. I spoke to a broker
in Atlanta, who straight up said, “If you’re cutting staff, if you’re laying
off staff, because of this, I’m going to eat you.” I mean, that’s basically
what they said. “I’m going to buy you out and if you don’t want to sell to me,
I’m going to take your market share.” And his reason made perfect sense to me.
Now this is a gentleman who had been through the last bubble, so 2008. So, he
remembers what happened, but what he says is, and this is so… this is the kind
of stuff that I feel like you can only get by talking to actual practitioners
on the ground. What he said essentially is, “the hardest thing that you do, as
a real estate broker or team leader, is hiring people.” Because you hire the
right person, then you have to train them up, get them in the culture, get them
productive. He’s like, that’s the hardest thing to do.
Lynette Keyowski – Beyond the Box Host: It’s a huge
investment.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Right.
The easiest thing you do is write checks. So, his thing was, is I’m just not
writing checks. I’m going to keep my staff, because when we come out of this,
and we will come out of this. Because that’s the other point that people have
said, is that this was not a real estate problem, this wasn’t a general “the
economy is turning sour” problem. The economy is booming! I think we had the
best first quarter, potentially in history, up until this hit.
Lynette Keyowski – Beyond the Box Host: Absolutely,
absolutely.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
yeah, this wasn’t a real estate problem, this wasn’t a demand problem, this
wasn’t an economy problem. This was a pandemic and then the government reacted
to the pandemic, and that’s caused this cascade. So, we’re going to come out of
this, and what all of these guys are saying is, “When we come out of this, I’m
going to have all of my staff, I’ll be able to hit the ground running while my
competitors have to go and think about trying to rehire those people, who have
now been out of work for three months. Oh, and those people that you laid off,
they resent the hell out of you.”
Lynette Keyowski – Beyond the Box Host: So, I actually
don’t want to go down this rabbit hole, because this could be another hole we
get into. So, what I’m going to do is, at the end of our recording, I’ll get
you to tell people how to find you. But you’ve just wrote a great piece around
open-door, and their decision to have to let people go. [inaudible 13:56] and
what those implications might mean. So, I’m going to encourage people to check
out that piece because you’ve nicely articulated what’s kind of this point
around hiring people. But, you’re absolutely right, this does provide a nice
little Segway into the conversation into the age of capital and what this
means. Because, I think two points out of what you just articulated really hit
on my radar. One, is that 2008 wasn’t that long ago in memory for a lot of the
people that are in this space.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: That’s
right.
Lynette Keyowski – Beyond the Box Host: I think the
difference though, that you also highlighted, is that this isn’t the economy
going sour. So, this is literally just a “shut the lights off.” The economy is
going to have to almost stop, almost essentially, and I know I’m over
emphasizing that. But it is again, categorical. So, I’m curious, sorry, one
more thing I want to weave in there. In 2008 we also didn’t have this mass
injection of capital in the real estate technology sector that we had
experienced over the past, 18 to 24 months. Talk to me about that and how that
could be differential, and how that could maybe benefit the sector coming out
of this space? How capital is going to react to this, and does it help or
hinder?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Yeah.
That’s such a good question, because… alright. I’ll try and answer it this way.
So, I actually think that real estate technology is in deep trouble. With a few
exceptions.
Lynette Keyowski – Beyond the Box Host: Okay.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
let me talk about all this capital that went into real estate tech. I mean,
most of it is venture capital. And the problem with venture capital, and just
by its very nature, venture capital’s invest in unproven companies. Otherwise,
they don’t need venture capital, right? I mean, they’re proven, what do you
need venture capital for.
Lynette Keyowski – Beyond the Box Host: True, yet, they
made a big play in that regard.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: That’s
true.
Lynette Keyowski – Beyond the Box Host: There’s a lot of
foolishness around unproven technology.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: That’s
true, that’s true. So, what I think’s going to end up happening, let me try to
answer the question first, and then I’ll talk about it. I think it’s going to
help. No question about it because we are moving into this new world, and
it’s…who the hell knows what’s going to happen. But right now, it’s looking
like we’re moving into a world where society is finally leveraging a lot of
these technology tools that we’ve had for a while. Like, Zoom’s not new.
Lynette Keyowski – Beyond the Box Host: Yep.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Internet
telephony is not new. Slack is not brand new. It’s just because of this crisis,
we’re having to utilize it.
Lynette Keyowski – Beyond the Box Host: And they’re there
and they’re available, and they’re widely enough known that they can easily
proliferate.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Correct.
So, I do think that’s going to help in that sense. But, on the other side of
things, there are a lot of companies that have started in the last four or five
years, I’d say. They’re venture backed, and they have a great idea, and they
need to prove it. I don’t know that those guys will have the runway to prove
it. And I’m basing that, based on those interviews with those 16 people. Cause
again, those are real optimistic, aggressive, “I’m going to take market share”
type of people. Event they’re saying I’ve cut every sort of speculative
technology product. That doesn’t have a clear ROI, even those people are saying
that. So, they’re keeping it if it has a clear ROI, in their mind they can look
at this piece of technology and say, “This is generating 3x what I’m spending
on it.” They’re keeping those, but “Hey, I wanted to try this new, whatever, AI
big data thing to see if it’s going to work.” All of that is getting cut. And
I’ve heard from some of my friends and colleagues who are in the technology
vendor space in residential real estate, who are telling me that all new orders
are dropping off.
Lynette Keyowski – Beyond the Box Host: Interesting.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: No
more new orders. And all of their existing customers are asking for deferments
or asking to renegotiate. So, we’re not hearing that right now, too much,
because let’s face it, real estate tech is like, this big. And you know, no
entrepreneur is going to come out and say, “Yeah, so our revenues are down 82%”
I mean, nobody is going to do that, but it’s stuff that I’m hearing. On the
flip side, there’s a flip side. The bigger tech companies that have substantial
capital.
Lynette Keyowski – Beyond the Box Host: CoreLogic, Zillow,
[inaudible 18:22].
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Redfin…
I used to count Open-Door in that mix, but….
Lynette Keyowski – Beyond the Box Host: [inaudible 18:32]
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: But
with new information, I have to revise my opinion. This is the example, of “Hey
I was wrong, I didn’t have the information.” Maybe a company like Compass.
Those guys are going to be such big winners out of this, it’s hard to wrap our
heads around, and I think that’s kind of where the industry is right now. Like,
everyone wants to sort of say, “Well, look, Redfin laid people off, so clearly
it means they’re on the way out.” I’m like, Redfin has 400 million in cash. You
don’t. And they only laid off 7%. You’ve got to look at the details.
Lynette Keyowski – Beyond the Box Host: I totally get it,
but here’s the question that I have: If the proportion… so if I think of a
Zillow, or a CoreLogic, they’re not going to venture capital.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: No.
Lynette Keyowski – Beyond the Box Host: I mean, they’re
internally capitalized; great. And they’re going to do well because they have,
and they have the infrastructure, they have the market share, and they have the
runway, to your point. So, some of these…the companies that venture capital is
engaged with, may or may not.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Correct.
Lynette Keyowski – Beyond the Box Host: So, how will this
massive direction of capital into this space help the sector? Not just through
and survive, but where do you think this sector goes after this? In some way,
and is technology a piece of it? Or is technology going to happen despite it?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: I
think the way I think about that is, I don’t think it’s really all that
worthwhile to talk about technology, as some sort of a separate thing. And what
I mean by that is every company is a technology company now. Do you know what I
mean?
Lynette Keyowski – Beyond the Box Host: Yes, I totally
know!
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Yeah,
so it’s talking about well, this technology is going to be… it’s almost like
saying, well our office space is going to… It’s just part of the deal. Like you
cannot be a company without technology.
Lynette Keyowski – Beyond the Box Host: Right, so really
then the question, and this was a bit leading, because I wanted you to
categorically say that, right?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Right.
Lynette Keyowski – Beyond the Box Host: Capital, you know,
all of this VC money, or whatever…
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Or
private equity or public funds, yeah.
Lynette Keyowski – Beyond the Box Host: It doesn’t matter.
The fact that it’s important to the sector doesn’t necessarily mean it’s
driving technology. So, I’m curious, from your perspective, where is this
capital on the same trajectory or is it going to be rediverted? Drawn back?
What’s going to happen?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So…
nobody knows.
Lynette Keyowski – Beyond the Box Host: What? Rob Hahn,
could you even take wild guess?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: See,
I’m going to give you a wild guess, I have opinions, I’m just putting out that
nobody knows. I don’t care who you are, if you’re Ray Dallio, if you’re doesn’t
matter to me. You could be the most successful venture capitalist in the world,
nobody knows, because we’re still in the midst of this government enforced
lockdown. So, keep that in mind, and the capital markets are in turmoil right
now. But my guess is this, when I think ahead, when I look say, two years out,
three years out, we’re past this, something happens. What I kind of envision
capital doing is I think we’re going to see a massive restructuring of the
industry, and a massive wave of consolidation.
Lynette Keyowski – Beyond the Box Host: So, go ahead and
talk about that.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
right now, it’s so cheap to buy companies because they’re going bankrupt, it’s
fire sales. So, anyone that has capital right now, you’ve got to be going like,
“this is a buying opportunity like there is no tomorrow.” If you have capital,
and the issue is, do you have to have capital?
Lynette Keyowski – Beyond the Box Host: So, potentially,
this capital is a short-term opportunity that’s presented itself. Which you’d
have to have capital to redivert, at least in the short term.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Yeah,
so I kind of think of it this way, remember when ’08 happened? Blackstone and
BlackRock all of these private equity funds start saying, “Hey, we can buy all
these single-family residents and turn them into rentals.” I could see some
smart fund managers going, “Hey, you know, real estate is super fragmented,”
because we know this, right? It’s hyper-fragmented. We think there’s going to
be a cleansing; we think a lot of these companies are selling for pennies on
the dollar because of their cash crunch. Why don’t we fund a really great
company, with really great management, give them a hundred million and see if
they could buy out 40% of their competitors. Because then the economics change
on the other side of that, right. So, I mean I can see something like that
happening. I could see tech companies just getting gobbled up. Venture capitals
could be like, “okay, we’ve valued this start up at 25 million, and gave them 2
million bucks.” They lost all of their customers.
Lynette Keyowski – Beyond the Box Host: [inaudible 23:22]
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: New orders
have dropped off the cliff. Old customers are saying, “we want to renegotiate.”
Zillow comes out and says. “Ahh, we’ll give you 2 million for that company.”
The investors are going to go sell. I mean, they’re like, “get me out of this
position.” They don’t care. So, I could see something like that happening. And
you know, to the extent that new technologies are… I guess we’ll call it
transformative. I could see that actually getting… so as an example,
Blockchain.
Lynette Keyowski – Beyond the Box Host: Yeah.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Look,
I think Blockchain is ten years out, who the hell knows, right? Because there’s
all these other things around Blockchain. But is it a transformative
technology? Of course, it is. Could some capital, you know some well-managed
funds, look at that and say, “Hey, with all the turmoil going on in real
estate, let’s invest in Blockchain.” And throw 50 million at it, throw 100
million at it. The thing to keep in mind about this right, and I know your
audience is more than industry people, but I do have to make this point. We in
the real estate industry, really have very little idea of what big capital is
actually like.
Lynette Keyowski – Beyond the Box Host: Totally.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: We
think like, “Oh my god, so and so company raised 20 million. They’re like this
big new star now!” I’ve talked to fund managers where they’re like, “If the
investment is not like 500 million, we’re not interested, because it doesn’t do
anything for us.”
Lynette Keyowski – Beyond the Box Host: Yeah.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
yeah, it’s crazy. So, you got to think bigger.
Lynette Keyowski – Beyond the Box Host: Totally, and you
and I have had this conversation, and we’re on that page. I think relatively
speaking though, when you look at this sector, it’s a baby in terms of capital
and investment, and where big money actually flows and the impacts where big
money can really have. Which frankly has always kind of blown me away, given
just the asset class that real estate is globally.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Correct,
correct.
Lynette Keyowski – Beyond the Box Host: So, I think in
general this is where the sector was feeling pretty good coming into the
pandemic. Thinking, “Wow, the investment into our sector is finally starting to
pick up, you know, starting to evaluate the asset class that we represent.”
Then this kind of hit, so I think it’s going to be interesting to see here it
goes. One of the other notions that I know you have really been reporting over
the last number of months is the transformation of the industry and what that
really looks like. And are we on that trajectory, and what’s that going to look
like? I’ve read a couple of your pieces lately, and I’d love to hear you
articulate in your view what that’s going to do to some of that transformative
change that’s already going on.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Sure,
so my theory on this is that what Covid does; what this pandemic does, is it
just accelerates all the trends that were visible before that. So, I’ll give
you an example. I think one of the biggest restructurings in the industry that
we will see, is agent teams will completely dominate residential real estate.
So, I’ll step back. A lot of folks in the industry in the last 10 years or so,
even today, are still talking about these big tech companies want to put real
estate agents out of business. So, it couldn’t be further from the truth. What
they’re going to do is empower select agents, and then have those agents put
everybody else out of business.
Lynette Keyowski – Beyond the Box Host: And we see that
with examples like Zillow, not their premium agent, but when they’re selecting
the agent teams to represent their I buy program.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: The
“Zillow Offers” for example. But here’s the thing, that’s on the tech company.
If you look at the ground level, at the local markets. What you’re seeing is
the agent teams are increasing their market share before any of this happened
by double digits ever year.
Lynette Keyowski – Beyond the Box Host: Yeah.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Meanwhile,
the average realtor is doing like, seven transactions… So, I’m saying okay.
Lynette Keyowski – Beyond the Box Host: [inaudible 27:30]
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
that trend is already in place. What Covid says, is “Do you have cash?” Agent
teams have cash. A lot of agents don’t. I mean, a lot of agents here in the US
are applying for unemployment insurance for the first time because of changes.
Like, okay you’re not going to come out of this investing and start you know,
it’s just not going to happen. So, what’s that going to do? I’m saying the
restruction comes, maybe we go from something 80/20, 90/10 to something like,
98/2? I mean, that doesn’t seem completely unrealistic to me. It could go in so
many different directions. But that fact to me, that’s the most important
disruption that’s come out of this. That’s the most important trend that’s
happened in the last 10 years in real estate. Everyone’s focused on technology
and CRM and the biggest fundamental transformation over the last 10 years is
the rise of the agent team.
Lynette Keyowski – Beyond the Box Host: And again, I know
you’ve talked about that a lot and really, what that has, to your point around
Covid accelerating some of those transformative changes, I think really what
I’m hearing is, across all sectors, cash is king. Whoever has cash, whoever has
capital at every level is going to be the winner in this. And it’s simply a
waiting game, it’s waiting this out, and who’s able to finance the down period
the best.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: That’s
right. That’s right. And everyone’s come to realize that, and that fact in turn
then has consequences because for 10 years we’ve had the hottest real estate,
non-stop expansion. And brokers and agents, a lot of them just have not
realized the importance of cash flow. Look, I do consulting for a living. I
work with brokers often, and I’ll get a broker call me and I’ll say, “So,
what’s your balance sheet” and they’ll be like, “I don’t know.”
Lynette Keyowski – Beyond the Box Host: “I don’t have one.”
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: “I
think my accountant knows.” And I’m like, really? So, then I look at their
balance sheet, and we’re talking about some pretty sizable brokerages, like
over 1000 agents. They have like two weeks of cash in the bank. I’m like, how
do you operate? You have two weeks of cash! “Oh, well look at our accounts
receivables.” Yeah, but you can’t pay the bank with accounts receivable. And
what we’re seeing is stuff like, deals that were under contract, fall out
because the buyer lost his job. Now what? Now that cash that you were expecting
is not going to show up, now what? So, it’s things like that.
Lynette Keyowski – Beyond the Box Host: So, do you think
this is, and I’m just watching the time and I’m wanting to be respective of
your time, so we’ll wrap this up, but I have one more question before we go. Do
you think this is just an opportunity and maybe a forced opportunity, for everybody
across the sector, to sharpen their pencil? Like, is this really about
sharpening the pencil and deciding what’s really important versus what we would
like to have? And maybe starting to, and again, this divide in my mind has
always been so massive. The value of the asset class in this sector, versus how
sophisticated the sector looks at their own investments at every level: At the
agent level, at the broker level, at the association level. There’s something
very colloquial and unique around this industry of likeminded people; almost
kind of like that family approach and the co-competition approach. Versus,
there is massive opportunity to be had with those that actually want to
get real. Do you think this is going to force the industry down this path?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: I
think so, but here’s what is unknown right now. Because to me, one of two
things will happen. One, we are going to, because of changes in psychology,
changes in culture, changes in government, changes like in these big, big
picture stuff. All of these things that we consider fundamental in real estate,
will no longer apply.
Lynette Keyowski – Beyond the Box Host: Give me an example.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
I’ve just given an example; the idea that relationships. Real estate has
existed for about 100 years, and it’s all about relationships. Relationship,
relationship, relationship. We don’t know if that’s going to be the case going
forward, because, right now, we’re all living through this, 24/7 messaging that
other people are bad for my health.
Lynette Keyowski – Beyond the Box Host: Being around other
people are bad for my health.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Right.
Other people are bad for my health. Does this change how consumers react to
this notion of relationships? I don’t know, right? Nobody knows. Things like,
the best way to sell a house is the traditional route: you find the agent, they
go list it, then buyers have a buyer’s agent, then the buyer’s agent brings
those people… I don’t know how many sellers are going to want 50 strangers
walking through their home going forward. I don’t know, right? So, either
things are going to change fundamentally and we’re going to have to look at
restructuring the value proposition, the way things get done, etcetera,
etcetera. Or, they’re not going to change. Because human beings don’t like
change. So even consumers, once we’re out of this, this is going to be a
short-term little blip, and we’ll all forget about this year from now, and
things will kind of go back to the way we’ve always done things. I actually
don’t know the answer to that, nobody does. And anyone who claims to know, I’m
calling bullshit, because there’s no way to know. Having said that, my opinion
right now leans more towards the fundamental change side, because I think the
thing that’s changed is psychology. Like, yes, you’re spending trillions, yes,
all of this is horrible. To me, the bigger impact is psychology, and it really
reminds me of 9/11. That is was a one-day thing. We were attacked once, but the
reverberations of that, the psychological change, that’s raught in the American
people, and really, globally. It’s like Canadian’s are not affected by it. It’s
been fundamental. So, I kind of think we are going to see some real massive
changes.
Lynette Keyowski – Beyond the Box Host: Interesting.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: As
the trends that have been going accelerate, then these real massive changes
happen, the end result to me feels a whole lot like even more domination by the
agent teams, even more domination by the big, large, well-capitalized companies.
I mean, 10 years from now… because real estate is the kind of thing that
there’s no start-up capital required, you just have to hustle and have a
sphere.
Lynette Keyowski – Beyond the Box Host: Right, that’s
right.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: I
don’t know if that’s going to be the case 10 years from now, do you know what I
mean?
Lynette Keyowski – Beyond the Box Host: Well, I think we
actually already have seen that change, right?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Correct.
Trends!
Lynette Keyowski – Beyond the Box Host: The trends, right?
And to your point, does this accelerate some of those trends. I think that’s
what’s going to be interesting to see is, if it does, and then how it does.
That’ll be pretty cool. Okay, two last quick questions.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: And I
do what to leave this for the hopeful upbeat note by the way.
Lynette Keyowski – Beyond the Box Host: That’s okay, that’s
what I’m hoping! So, here’s my first question: Rob Hahn’s predictions for the
top three opportunities that come out of this?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Okay,
okay. Number one: Teams, that should be obvious. Expand like crazy. Number two:
I actually wrote a post about this, and it’s public so you don’t need to subscribe
or anything like that, so go check it out. I really believe what this is going
to do is the rise of the ex-urbs. Because again, we’ve gone from a situation
before Covid where you had to get in a car, and drive to work. Which meant that
you wanted to live within a certain distance of your office.
Lynette Keyowski – Beyond the Box Host: Yes!
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: There’s
going to be a lot of jobs where you don’t have to do that anymore.
Lynette Keyowski – Beyond the Box Host: We’re already in
that! Like, some people are now saying, “Why do I have to go to my
‘workplace?’”
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Correct.
And it almost, more importantly, the bosses, the owners are saying, “Why am I
paying 2 million dollars a year for rent?” So, if you no longer have to drive
to work every day. Even if you have to go into the office once a week,
periodically. Now all of a sudden you can live three hours away. So, you take
major metropolitan areas like Vancouver, like Toronto, and you say, “Okay, now
I can live three hours away. What does that open up?” It opens up some amazing
properties.
Lynette Keyowski – Beyond the Box Host: Absolutely.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: An
acreage, with mountains, and streams!
Lynette Keyowski – Beyond the Box Host: It’s almost the
reverse urbanization.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Correct.
But I think in my mind, they’ve skipped the suburbs.
Lynette Keyowski – Beyond the Box Host: That’s right.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Like,
you go from city, to country.
Lynette Keyowski – Beyond the Box Host: Right, the ex-urbs.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Because,
again, the way I think about it is I picture myself at thirty-two. Newly
married, have a young baby and a second one on the way, lived in the city. “Oh,
it’s so convenient; it’s awesome, close to dining, culture.” We need to move
somewhere. So, we moved to suburbs, because I have to be close to work. If I
could have just telecommuted, I’d be like, let’s move two and a half hours
away, where my backyard is a mountain, not 5000 square feet of whatever. I
think that’s an opportunity that people are kind of missing out on. So, what
should I do? If I’m an ex-urb in the city, I’d start marketing in cities like
crazy! If I’m an urban agent, I’m going to want to build some relationships
with some people out in the ex-urbs, and say, “Hey I might send you some
clients, can I get a referral?”
Lynette Keyowski – Beyond the Box Host: Yeah, I like that.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So
that’s opportunity number two. Opportunity number three. Ahh, this is just real
speculative, and who the hell knows, but I think there’s going to be a major
opportunity around the MLS, because the MLS systems are really old, really
creaky, really ancient, and really bad.
Lynette Keyowski – Beyond the Box Host: So, are we talking
the MLS as the organization, or are we talking the MLS as the technology?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Well,
let’s put it this way. It’s kind of neither. What I’m saying is real estate
data. And if the organizations technology do not support what the overall
economy is going to need, and especially what these top tiered teams, these
institutions that will come to dominate real estate. What they’re going to need
for their own purposes, then they will get replaced. So, to me, the smart thing
to do is get ahead of that curve, think through what does someone like a Redfin
actually need in terms of real estate data? Are we providing that? If we’re not
providing that, you’re going to get replaced.
Lynette Keyowski – Beyond the Box Host: Well is this the
category of ex-urb real estate and how do we really support that?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Correct,
correct.
Lynette Keyowski – Beyond the Box Host: What do we put in
place to make certain that our agents are relevant.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Right,
and so the problem with that and why I’m kind of hesitant about it is because,
I mean, you know this as well as anybody, we’re steeped in tradition. We’re
steeped in existing infrastructure; we’re steeped in this investment. Which is
emotional investment, that MLS and associates are talking about we exist for
the benefit of every single member. Really? I mean, you exist for the benefit
of the part-timer who does one deal every three years. I mean does that even
make sense? Like, those tough questions are going to have to get asked, and my
point is, if we’re moving to an environment in the industry where we’re going
to have fewer larger, more institutional, more professional companies; which I
include agent teams in, kind of dominating, and you’re not providing services
and data and whatever they need, at some point somebody is going to come in and
fill that gap. To me, like I tell my clients who are MLS associations, let’s get
ahead of that. Let’s start thinking now about what they’re going to need, and
what do we need to do, in our service for what they need. So, we’ll see what
happens. I think there’s massive opportunity there because if, let’s take
Canada for example, because you guys are a tenth of our size, and we’re
dominating by certain urban areas. If you could have a single real estate data
slash rules organization, what’s the value of that organization? It’s in the
billions.
Lynette Keyowski – Beyond the Box Host: It’s a lot bigger
than even the sum of the collective today.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Correct.
It’s in the billions! Like, that becomes one of the most important data
companies in the world because, like you pointed out, the underlying asset
class is so valuable! And giant, multi-billion pension funds are making big
bets based on that asset value. If there’s a company that could say, “we know
everything there is to about this asset class,” that company is worth enormous
amounts of money.
Lynette Keyowski – Beyond the Box Host: I love it. So, you
know how I didn’t ask you what your predictions were, just for the [inaudible
41:20].
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: That’s
right. None of these are predictions because nobody knows!
Lynette Keyowski – Beyond the Box Host: [inaudible 41:26]
exactly, because the opportunity has to be followed up by the action, it has to
be executed on. And you know, I would agree with you that at least on your
number one and three, two I hadn’t considered, but it’s a great one. That there
are massive opportunities that this opens up, and frankly the period of time
that we have is also unprecedented, where we actually do have a moment to catch
our breath and really contemplate, where we’re not in the midst of the hustle,
right, and the cycle. And I think that’s a piece that people have either taken
for granted, or not recognized. You know, you don’t have to hold your breath
and wait, you can actually be productive in this time and there’s a lot of
productivity about envisioning and imagining and putting all of those pieces in
place for the eventual piece of time when we come out of this. You know, that’s
the one thing that I continue to support is, are we thinking about the world
and how we want it to look. How we want it to look, as opposed to just waiting
and seeing how it’s going to look.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: I
mean, I would agree with that, but I would just add one other thing. Because this
has been a consistent theme of most of my presentations, and a lot of my
writing. What I think a lot of folks in the industry want with the world that
they want, is the world that we had.
Lynette Keyowski – Beyond the Box Host: Yeah.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: In
other words, they want to defend this shock. Like, “Oh my god, this Covid thing
happened. Pandemic shut down. Let’s just survive it, let’s just defend against
it.”
Lynette Keyowski – Beyond the Box Host: Had it not
happened; we were already going to be so amazing over here.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Correct,
so they just want to go back to what we had. And I think my point is, we’ll be
much better with that concept that I talked about with Toronto, for example,
anti-fragile. That team [inaudible 43:17] thing. It’s not enough to just resist
the disruption, to resist the change, and then say we’re going to say the same.
What we actually want to do is, this change, this shock, this disruption lets
us get better and helps us to improve in whatever way that is. However, you
think of it, improves. So, the old way was pretty great, but it could have used
improvement, right?
Lynette Keyowski – Beyond the Box Host: Always.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: So,
is there a way to get that? From whatever your perspective is. If you’re a
traditional 70/30 split broker, who I happen to think is in deep trouble, or do
you look at this and say, “Listen, does this opportunity, does this crisis,
give us ability to go to 50/50 split brokers somehow.” Explore that then! Just
whatever it is, think about how do we improve as we come out of this, not just
how do we get back to the good ‘old days of the way things were. That’ll be the
one thing I’ll say about.
Lynette Keyowski – Beyond the Box Host: Thank you for
making that point, because I 100% think that, that is the missing piece that a
lot of people are going to regret when looking back at this piece of time is
that. Did we think creatively enough about how to move out of this even if we
liked where we were? That gave us the moment to take a breath and really
consider is there an opportunity to do better, so I appreciate that. Okay, so
last question for you.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: Alright.
Lynette Keyowski – Beyond the Box Host: A year from today,
you are on Inman stage, or at Realtorquest in Toronto. You’re on any stage.
What are you talking about?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: The
fact that I’m there, because it means that physical conferences are back.
Ha-ha!
Lynette Keyowski – Beyond the Box Host: Ha-ha! That’s a
good point. And are you missing those?
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: I
mean, look, I don’t miss the travel, but I do miss seeing friends. Like it was
such a pleasure to see you at the REA event. Such a pleasure. So, I mean that
part I do miss. A year from now, what am I talking about? You know, I hope I’m
talking about all the things we just kind of mentioned, and how we’re starting
to see it come true. How we are seeing a wave of consolidation. How we are
seeing that we went through an incredibly painful period and jobs were lost,
and things were restructured, not to mention the lives that were lost. It was a
real tragedy what this disease is doing to the world. But, having said that, I
hope I’m talking about looking at all the amazing opportunities that are coming
out from innovators and in people who are adapting. Real estate is filled with
those people. Like, I don’t want it to seem like real estate is all
conservative. No, it’s filled with innovators, it’s filled with people who are
always asking, “How can I make this better? How can I provide a better
experience? How can I do those things?” So, hopefully we’re talking about
that.
Lynette Keyowski – Beyond the Box Host: Love it. I love it.
Thank you so much my friend. I really appreciate it.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: You’re
so welcome! Thanks for having me.
Lynette Keyowski – Beyond the Box Host: Before we close
off, I’d love for you to let people know who are listening where to find you,
where to find your work. Rob has a ton of amazing commentary.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: The
best place is my blog, “The NotoriousROB.” You can google it, I’ve finally
have started ranking above this rap blogger who’s also named notorious Rob, so
now I’m ranking above him. But you can find me on Facebook, you can find me on
Twitter.
Lynette Keyowski – Beyond the Box Host: We’ll put all of
your handles and the link to your website in the show when we post it! Well, I
appreciate it so much, take care.
Rob Hahn – Author NotoriousROB, Managing Parnter 7DS: I
appreciate you, Lynette. Take care, stay healthy!
Lynette Keyowski – Beyond the Box Host: Yes, you too!
— End of Podcast —
Beyond the Box: Conversations with real estate executives, venture capital partners and technologists on what lays ahead for the real estate industry in a world after COVID-19.
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