Few industries have received more attention over the past two years than the residential rental industry. A global pandemic, lockdowns, record unemployment and then employment, exploding home prices, government stimulus and the emergence of a work-from-anywhere society have all played a role in fundamentally changing the dynamics of how, why, and where we live. You can hardly turn on a news program or browse sources without seeing something about rental rates, home prices and the housing crisis.
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Yes, it is an interesting time to be in the rental industry, and especially in Prop Tech (property technology.) But it was interesting well before COVID put it front and center in the public eye. The residential rental industry has all the characteristics of a great place for entrepreneurs to dive in. It has the four key ingredients I always look for in an industry when evaluating an opportunity.
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The rental industry is huge
Of the over 128 million housing units in the US (think apartments, condos, single-family homes), over 30%, or approximately 44 million, are rentals. Each year, Americans pay over $290 billion in rental payments, with that amount increasing each year as rates and inventory rise. So, there is a lot of money at stake.
The business of managing rentals is highly fragmented. There are over 63,000 property management companies and individuals managing properties in the US. The top 100 property managers oversee 4.4 million units, which means that tens to hundreds of thousands of units can be under a single management company. That leaves 40 million units managed by approximately 63,000 managers across the country. Of these, there are over 11,000 who are managing five or more properties, which leaves 52,000 who are managing fewer than five. The addressable market is both huge and highly diverse in terms of needs and sophistication.
The process of renting is complex
Especially for property managers. From finding renters to fill vacancies, answering questions about the property and scheduling tours, to doing background checks, signing a lease, collecting rent payments and managing service calls, there are literally hundreds of activities and touchpoints in the process. Until recently, and still in many cases today, all but the largest property management companies managed any number of these activities manually or on spreadsheets. Fortunately, over the past decade, technology adoption has increased to solve problems along the rental lifecycle; in most cases through point solutions focused on eliminating friction and increasing efficiency (read: lower cost) for specific activities. And in fact, technology adoption is now mainstream and a massive growth area, drive an influx of new entrants into the prop tech space. Which brings us to the last factor: technology adoption.
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Technology adoption is mainstream, but still in the early innings. Everyone knows Michael Porter's Crossing the Chasm, which is the stage at which any new innovation or product "crosses over" from the early adopters to more mainstream and is therefore on the precipice of massive growth. Though this is certainly true, with software and technology there is another key stage in adoption that provides significant opportunity. That is where the proliferation of discrete point solutions in an industry begins to create problems in the form of too many vendors to manage, too many integrations to maintain, increasingly fractured visibility, poor data access, and too much complexity to manage what to the buyer is a single business, not discrete problems. At this point, the technology adoption goes from solving problems and reducing complexity to a negative efficiency factor. This stage is often the most interesting to me because technology adoption is mainstream, so the willing buyers are there, but also set for disruption through simplification.
Prop Tech is entering the next big shift.
The rentals industry, and property management companies specifically, have embraced technology to manage their businesses more efficiently while also improving the renter and staff experience. And while penetration of technology and software still has a long way to go (changing deeply engrained operating models is hard, especially in a distributed business), there is little debate that software provides a better path to higher NOI, staff engagement and resident satisfaction. The challenge facing the industry now is as more options are available and needs are identified, the complexity of administering all the "solutions" has increased. Much like the advent of computers didn't actually decrease the hours an average person worked per week, as had been forecasted in the 1950s, technology makes it possible to do far more in the same time and budget.
Starting in the 1970s, and until not so long ago, advertising in a print publication or website (as evolved in the 1990s) was the only game in town to attract renters and fill vacancies. Today, marketing properties is exponentially more complex and competitive. From listing on an aggregator website, like Rent.com, to promoting their own property website through SEM and SEO, to engagement through social channels, email and retargeting, not to mention nurturing prospective renters through voice, text and email, property managers need to manage across every digital channel. Until recently, this was nearly always accomplished through a mix of in-house, on-property and a multitude of third-party vendors.
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This was the opportunity I saw when I joined Rent. Much like the retail industry went from brick and mortar to online to omnichannel, property managers' marketing needs have evolved to require an omnichannel approach to potential renters; engaging them where and how they want to be engaged.
Building on our position as an industry leader in online rental listings, we set about to develop a full suite of integrated software and services to enable property managers to attract, engage and nurture renters through every digital channel on one platform with one vendor, for all of their properties, simply. From building and hosting the property website itself to marketing through search and social channels, email marketing, chat, phone and everything in between. The operational, administrative and financial efficiencies gained by harmonizing and coordinating marketing and communications across all channels are immense. More importantly, it returns technology to being a simplifier of business, not the cause of more headaches.
Jon Ziglar joined Rent. as Chief Executive Officer in August 2021 from ParkMobile, where he was CEO and a board director since 2015.