Apologies if this is a little bit ranty and opinionated - can't help myself.
I am not a fan of this latest investment. For full disclosure, my profession is a Real Estate Agent and I have had dealings with this company in the past.
A $12m investment in essentially a real estate company is ludicrous and seriously brings into question my holding in BTI and support of Wilson/Kirk where I have been a long term holder.
Bull case - an anomalously high number of individuals will pay a buyers agent to source property for them. They get sucked into this 'AI' theme and Prophero can ride the next wave of the property cycle.
My expected case and opinion
Making significant money in property cannot be done by just looking at 200+ data points. It assumes rationality and a perfect market without taking into consideration actual people and the human element. AI (or in my dealings with Prophero, an outsourced international virtual assistant aggregating info from real estate agents asking them ridiculous questions and qualifying inputs) doesn't have the capacity to understand the nuances around long term movements and drivers of value in property. Yes it can look at census data and median house prices and yields and trends, but there are markets within markets and there are mountains of data points which are not readily available.
AI doesn't know there's a new cafe down the road which is run by a really slick operator, or the local bowls club becoming the next big thing because the new chef is a legend. It doesn't know the council is planning on redoing the pedestrian bridge over the busy road which opens up an entire pocket of houses to be more desirable to young families walking to school. It doesn't know that farmers have had another stellar year with their crops and that they all go and purchase off farm investments in the form of an apartment by the beach.
Looking at the statistics as well doesn't help. A computer doesn't know if a property has been renovated. It doesn't know if it was renovated by an owner who has no trade experience or if it has the best quality marble benchtops ever created!
It is amazing how many people think they are property gurus because they purchased a house for $1m, spent $100k on a reno by painting and gardening, maybe removing a wall, putting in some furniture and then selling for $1.5m thinking they are the best thing ever. What they fail to realise is that if they did nothing to the same property it would have been worth $1.4m and they've just ridden the market in the 2 years it's taken them to do the work.
The only way this investment in Prophero can fly is if BTI have picked the bottom of the market and see a significant rise in transactions combined with some incredible marketing to get people to sign up to their platform.
There is no substitute for doing your own work and local knowledge of a local area. These companies a predatory and inject themselves into a process without adding superior value.
phew - rant over and I feel better now.
