I recently spoke with Michael Foundos, CEO/Founder at TheCapRate (www.thecaprate.com), a really unique site that has developed a cutting edge tool to create a cap rate for commercial properties. Users across the country, property owners, banks, investors and brokers have found TheCapRate to be a highly effective tool in understanding the cap rate formula. To date, TheCapRate has valued in excess of $6 billion in commercial properties since their recent launch in markets like New York, New Jersey, California, Chicago, Boston or Maryland.
Michael Beckerman: Whats the background of TheCapRate?
Mike Foundos: TheCapRate is the culmination of many years of expertise in the commercial real estate industry. The current system is really a pivot from a previously unsuccessful product called, the Real Estate Stress Test. It was designed in response to the collapse of the real estate market in 2008. The plan was to sell the service to small banks that had large CRE portfolios, but not the manpower to perform sufficient analysis. After hearing, “Mike, we are already stressed enough, we don’t want to know what your product has to tell us” one too many times, the project was shelved. After a few years, it was re-purposed, adding the valuation component, which has proven to be more valuable to users.
Michael Beckerman: How was the site built?
Michael Beckerman: Who is using the site and what’s the feedback you have received?
Mike Foundos: We have owners, brokers, lenders, investors, and everyone in between using the site so far. The feedback has ranged from “wow, this is really cool” to “Why is this useful?”. Needless to say, the latter comment is frustrating, but to be expected when you offer a new way of doing something. Especially an industry that is as traditional as CRE, you are bound to get some naysayers. Which, is ok with us. This is all about learning what works and what doesn’t.
Michael Beckerman: What is your expansion plan?
Mike Foundos: We have really just launched. So, the majority of our initial efforts are site and brand awareness. Educating users on what we do, how it can be useful in their day to day. We are establishing our voice. Our Pro service launches this month, which will allow us to begin generating initial revenue, and more importantly generate deeper engagement with the industry. However, to date our site has valued $6+ billion in commercial properties with more added each day.
Michael Beckerman: Is there a revenue model?
Mike Foundos: The initial plan was to sell advertising. However, you need to drive a ton of traffic for that strategy to be effective. This led me to the development of my pro service, which launches soon. It takes our cap rate quantification system and adds a number of new features. There will be search, social, stress testing, analytics, customizable reporting. Users can subscribe at various levels: $0, $50 per month, and $150 per month. I wanted a product that was good right out of the box. That didn’t need “traffic” to be useful, and got better the more people who use it.
Michael Beckerman: Whats next for TheCapRate?
Mike Foundos: We aim to be the tool industry professionals use throughout the day. From performing analysis on properties, to discovering new products and services, it is our goal to be one of the most valuable tools in the CRE professionals toolkit. The site is designed to be very simple to use, and rich in images and graphics. We are currently developing a marketing platform via our Cap Trends that allows for native marketing versus traditional banner advertising.
Michael Beckerman: What other tech sites do you personally follow?
Michael Foundos: We follow all of the hot CRE startups. But, Spencer Rascoff (@spencerrascoff), the CEO of Zillow is one of my personal favorites. What they do is amazing. I think they are one of the most innovative companies out there. CREOutsider (@creoutsider) is also another good one. Chris Clark writes about tech and real estate.