Business founder wants to cut real estate agents out of the rental market

About a third of Australia’s 2.2 million residential rentals are now being leased out without a real estate agent, according to property platform RentBetter, in a trend that it says is accelerating as the market tightens in the wake of the federal budget.

The platform has raised $5 million from venture capital firm EVP as landlords attempt to cut back on costs, including the 5 per cent to 9 per cent of rent that real estate site LocalAgentFinder says is typically charged by agents to manage a property.

RentBetter founder and chief executive Jeremy Goldschmidt, whose platform lets investors find tenants, manage expenses and organise repairs online, said investors had found real estate agents were not delivering value for money. Real estate agents are consistently ranked among the least trusted professions in the country, including by a 2023 survey from research company Roy Morgan.

Goldschmidt, who founded the company in 2018 after concluding the agent managing his own investment property was not worth the cost, said property owners were more likely to have an incentive to care about their asset, resulting in it being managed better than if an agent was in charge.

Rentals were an “unloved part of the industry” for real estate agents, he said. “I think if you spoke to real estate agents, a lot of them would say that the value of the rental book is often to produce leads for the sale.”

But there are no guarantees that the cost savings from cutting out agents will result in lower rent for occupiers of those units.

“The landlord will certainly be able to save on a chunk of fees that they’re paying out, particularly in a tighter environment,” he said. “I think where the relationship is strong with the tenant, it means that they can have more sensible discussions about what’s going on in the tenancy, and naturally, one would believe that that’s a better outcome for everyone.”

Despite falling property sale prices this year, housing and unit rental prices have continued to rise, according to a report issued by property portal Domain, which has commercial agreements with this masthead, for the June quarter.

Median house prices have fallen following the changes to negative gearing and capital gains tax unveiled by the federal government in May, dropping 5.3 per cent in Sydney since January and 5.1 per cent in Melbourne since November.

But the Domain report recorded rent prices almost 8 per cent higher in Sydney year on year in the three months ending June 30, in part as landlords upped rents to counteract lower than expected capital gains.

Cutting out agents and property managers can save a landlord on average $2400 to $5000 in annual costs per property, RentBetter says.

Real Estate Institute of NSW chief executive Tim McKibbin said it was important to have an agent select the right tenant. He said there was no evidence of owners passing on savings from cutting out agents to their tenants.

“I can’t see why a landlord would say, ‘well, I’m saving on the agents’ commissions, I’ll share it with the renter’. I may be wrong, maybe some people will do that, but I think they would be in the minority,” McKibbin said.

Tenants’ Union of NSW chief executive Leo Patterson Ross said “some landlords may feel less pressure to increase rents where they don’t have an agent encouraging them to increase it”.

But he said that in general, new rents were set not by costs but by what a renter was able to pay. “We would be pleasantly surprised to see owners passing on savings, but we will believe it when we see it,” Patterson Ross said.

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