[Editor’s note: These are the conclusions from the category product review series for the small landlord property management software sector. Originally published in the Geek Estate Mastermind.]
From the outset of our category product review series—a test of the value of business intelligence as a service—we took an optimistic, yet thorough, perspective. We observed, questioned, and examined a sector we’re bullish on—property management software—from an objective and strategic lens.
Five diverse products were chosen to better paint a broad category view rather than a narrow software comparison: Zumper Pro, Airbnb, Avail, Cozy, Zillow Rental Manager.
Checks, spreadsheets, Craigslist, and email have been the norm for DIY landlords for years. As software takes over the world, property management software does as well. Each featured product offers streamlined digital solutions to the historically analog practice of property management, while at the same time making renting easier/better for tenants. With a massive chunk of single-family landlords owning fewer than 10 properties, each platform is racing to convert them from analog to digital.
Given that the target audience fragmentation and geographic diversity make customer acquisition extremely challenging, each featured product leverages some combination of two primary marketing approaches.
The first strategy, which is obvious, is marketing tools and solutions directly to landlords. The second strategy is less obvious but has been proven effective in other industries: pull-through marketing that promotes benefits to tenants and encourages them to champion services to their landlord.
It’s abundantly clear: Of the nine categories we focused on, moving, compliance, and communications were the least built out by the majority of the platforms. Thus, these present the next frontier—aka opportunity—for property management software providers. I’ll go out on a limb and say the biggest area of innovation will be property maintenance, which requires utilizing a mix of all three. Oftentimes this is done while turning over a property, scheduling maintenance fixes is a huge headache, and execution of that work (in a timely manner and at affordable rates) is an even bigger nightmare.
Without further ado, let’s get into further specifics … starting with a strategic analysis of each product reviewed.
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Based in San Francisco.
Airbnb is similar to Zumper and Zillow in the fact its core focus remains search traffic rather than landlord tools. A portion of customer acquisition savings can theoretically be passed through to the host’s TAC (tenant acquisition costs), furthering its strategic advantage against its competitors without “free” traffic to direct to listings.
Verification of listings is a massive focus and, hence, advantage: They even announced a goal of having 100% of its properties verified by the end of 2020. The Airbnb Plus category, which consists of properties “verified for quality” and includes a set of amenities one might typically find in a hotel, is a sign the company is doubling down on raising the standards for accommodations. Further, it acquired UrbanDoor (furnished apartments) and is also an investor in both Lyric (creative suites for business travel) and Zeus (corporate housing).
The platform is focused on short-term rather than long term rentals. But it does have what no one else in the industry has: engaged homeowners (and landlords) who use the platform to make financial ends meet on a weekly basis. That presents the chance to put additional products and services in front of landlords at a significant discount compared to others. Engagement, teamed with robust trust/verification features and massive demand/traffic are its biggest advantages.
The company has been a major marketplace for mid-range accommodations for more than five years given sublets account for more than 20% of the business. The more short-term regulations that are enacted, the faster Airbnb will move toward long term rentals. I suspect they will eventually enter the rentals category via a joint venture or acquisition: bringing Zumper under their wing would be a wise forward-thinking chess move.
In Paris, Aribnb cut a deal with Century 21 that means agents can offer a lease to Parisian renters allowing them to “…sublet their apartment on Airbnb, so long as the landlord and Century 21 get a cut of 23 percent and 7 percent, respectively.” This is a fascinating development that the real estate industry would be smart to deploy more broadly. Niido and Loftium are further evidence that landlords and owners are able to share in the upside in short-term rental revenue.
Investing in the preparation of P&L statements for hosts would cement its place in host’s financial outlook. Particularly if those statements encompass both short- and long-term regulatory/tax requirements, it would become indispensable for landlords aiming to maximize yield by mixing both.
Airbnb was down in Q4, “report[ing] a loss of $276.4 million excluding interest, taxes, depreciation and amortization, compared with a loss of $143.7 million a year earlier,” according to Bloomberg. And it’s going to get far worse as COVID-19 decimates the entire travel industry in Q1 (and beyond)—Airbnb’s Extenuating Circumstances policy now allows hosts and guests to cancel eligible reservations with no charge or penalty. While great for guests, this is as un host-friendly as it gets and risks piercing Airbnb’s armor.
Summary: With the most polished front-to-back user experience (for both renters and landlords), robust trust and verification features, and unmatched engagement–Airbnb is poised to upend the entire category for landlords IF they enter the long-term market.
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Based in Chicago.
Used by over 150,000 landlords and 400,000 tenants, I have the most firsthand exposure to this product since my landlord uses it to manage my rental—I admit bias in that I use this software in my personal life.
Avail’s major advantage is that its passionate and experienced team has focused on serving landlords with between 1 and 20 properties. No other company has the unique mix of team, sizable client base, funding, and product capabilities.
The freemium model fuels growth by allowing many landlords to first use the product for free. I actually believe the team should lean into charging its worth from the get-go: It would further align them with their core customer and, as I’ve argued before, friction has its merits.
The team is banking on syndication, which is smart unless they have confidence and aspirations to compete in the organic traffic game Zillow and Zumper engage in. The average listing generates 18 leads directly to a landlord’s inbox using Avail’s platform.
Its partnership with Steady, a Fortune 100 backed insurance company, smartly addresses customers’ largest concern: whether their tenants will pay the rent. It now provides financial protection in the form of rent guarantee insurance—especially valuable considering some cities are banning evictions (Seattle from Dec-March and COVID-19 related temporarily).
After helping landlords acquire and screen tenants, Avail offers customizable, state-specific (some even city-specific) lease templates. It is the only product on our list that offers this compliance functionality, and seamlessly incorporates Lemonade renters insurance.
They have invested heavily in making payments as near real-time as possible (next day) with FastPay. While I applaud the effort, getting to real time deposits (instant) is not a needed additional investment despite some landlords’ current use of Zelle and Venmo. Seasoned professional landlords have reserves in the bank and DIY part-timers have a day job covering essentials.
Avail also integrates Redfin estimates for properties. I’ve long thought they are in a prime position to make it easy for a landlord to sell their property—either directly to their tenant via an attorney (an iBuyer of sorts) or on the open market with an agent.
Summary: Although its the most complete offering targeted at landlords, Avail faces an uphill climb on the customer acquisition front.
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Based in Oregon.
Cozy came out of the gates fast following its founding in 2012—it was a clear leader at the beginning of the DIY property management software growth spurt a few years ago. After its acquisition by CoStar, however, Cozy lost its innovative roots somewhere along the way, which is not uncommon when a corporate titan initiates a once innovative startup into the stifling oversight of corporate bureaucracy. With its founder, Gino Zahnd, stepping away, getting its mojo back will be especially hard.
That said, the acquisition of RentPath is a positive sign and solid indicator CoStar isn’t going to ignore rentals. RentPath controls a huge segment of the apartment rentals market and adds a significant customer base primed for Cozy’s product marketing initiatives. And I still view the actual management of the units and collection of rent as a vital piece of CoStar’s encroachment into Zillow’s territory.
Cozy Pay was an unbelievable pull through marketing strategy. It was the smartest marketing tactic for the rentals vertical I’d seen to date. But it will become less and less effective as landlords shift to digital rent collection.
Digital lease creation or digital signature is a void they need to fill. Landlords are left finding a paper solution or another online lease provider—adding friction where none is needed. Without digital signatures, its renters insurance is disjointed. The ideal experience to ensure the tenant actually gets the insurance is to have the insurance baked right into the product experience upon signing the lease. Cozy offers credit and background checks at a pretty good price, but it doesn’t list eviction checks as part of its service offerings. Both seem to be gaps in its offering—one that Avail spotted and has now lapped Cozy in the race to win in the DIY property management space over the past five years.
Cozy strategically acquired Landlordology several years ago, and it still appears it holds an advantage in the content marketing arena as a result. Brands can only be known for one thing, and Cozy shouldn’t be diluted. It’s a smart angle for the education side of what Cozy is doing for the market (Geek Estate Blog was a similar strategy from Zillow to brand for real estate tech back in its origins).
Privacy is a huge bonus for Cozy applicants. No private information is shared with potential landlords at any stage of the application process. I would hope and expect them to play this up in their marketing going forward to take advantage of the rising privacy tide.
Only Realtor.com and DoorSteps.com are listed on Cozy’s site as syndication partners. Several other competing services offer quite a few others, including Zillow, Trulia, Facebook Marketplace, and Zumper. Eventual syndication to CoStar’s Apartments.com and RentPath’s network of rental sites (ApartmentGuide.com, Rentals.com, and Rent.com)—with a combined rental audience now north of 20 million—will close this gap.
Summary: Although it’s a great platform for the price (free!), Cozy has been slow to innovate since adding a corporate overlord with a market cap of $20 billion.
ZILLOW RENTAL MANAGER
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Based in Seattle.
The audience size, technical expertise, industry relationships, and access to capital make Zillow the favorite to reach category king status. Further, other business lines—Premier Agent, Zillow Offers, home loans, and cash in hand—afford it the chance to hold off on monetization of payments in a way other competitors cannot.
It was very peculiar that Zillow removed its renter profile feature allowing a renter to share their situation and financial qualifications with any landlord. I thought this was among its best and most strategic features that was hard to match given its trusted brand and reach (a startup’s attempt would lack trust).
Its machine learning and AI capabilities are on another stratosphere compared to competitors. It’s more relevant on the demand side, where it has more renter data and can gauge intent to qualify and screen faster than the competition. Further, data security is a value proposition that startups can make, but Zillow can back up.
Its weakness is being stuck inside Zillow Group, which is clearly prioritizing its Offers business right now. That said, rentals will inevitably benefit from the increased transactionalizing of its iBuyer business. I can envision a future where rentals come with renter’s insurance, lease guarantee, and maintenance, among other things. If Zillow successfully transactionalizes the sale, you can bet it will turn its sights to rentals.
When Zillow Rental Group eventually steps on the gas, I would be fearful. From a content perspective, it already has a rent affordability calculator, income and expense worksheet, and move-in and move-out checklists that could be used by both renter and landlord/property manager. These aren’t integrated or easily findable, but I don’t expect that to last. As it slowly chips away at delivering a full front to back experience, it will eventually productize its content offerings.
Zillow would be wise to acquire Avail, and leverage its team and expertise to create a deeper moat with renewed focus.
Summary: With unparalleled demand, the reality is it doesn’t matter if they are late to the game with features or products. They are on the throne until someone unsurps them.
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Based in San Francisco.
While 13 million monthly visits pales in comparison to Zillow’s more than 150 million, Zumper’s traffic is targeted and much more qualified. Having started with creating supply side liquidity in San Francisco and New York, the team has leveraged that into the search side of the market and has more recently started building out advanced tools for landlords to manage all aspects of their business. I saw Zillow’s ascent from zero to overtaking Realtor.com from inside, so I know it can be done with religious focus and the consumer as the North Star.
Since our original review, Zumper has added rent payments to its repertoire (using Stripe). IT also accepts Apple Pay, which I haven’t seen from others yet.
Zumper is clearly invested in becoming the trusted authority on rental prices nationwide through content marketing: Producing monthly market reports nationally (March 2020) as well as across multiple markets (Seattle March 2020) is no small feat.
It’s worth noting that Zumper emphasizes apartments more than any of the other products, and that’s where its monetization is focused.
A few compelling data points mentioned in Zumper’s recent $60 million Series D funding news:
- 80 million annual visitors expected for 2020
- 13 million visits per month currently
- Most are looking for one-year leases
- 1 million listings analyzed monthly
Viewing itself as “Airbnb for long-term rentals,” it’s clear that Zumper will continue to go deeper into the transaction (Anthemos Georgiades mentioned this on the recent This Week in Startups podcast). I expect them to move heavily into the compliance space soon, as productizing any transaction for 1-year leases will fundamentally require customized local leases.
Summary: It’s a formidable foe with the best chance to unseat Zillow’s place as king of rentals.
THE WIDER PACK
The five products included in this mini-series are only a few of the options on the market for small landlords to consider. A few others:
Buildium: Software that caters toward larger landlords and property managers (100+ units) and slightly more expensive than the DIY software offerings. Recently acquired by RealPage. Based in Boston. Learn more.
Rentec Direct: Serves more than 14,000 landlords. Based in Oregon. Learn more.
Rentler: With landlord tools and a full search interface serving over 100,000 landlords, this platform’s presence is heavy in Utah (its HQ). Learn more.
TenantCloud: Focused on larger landlords and real estate agents who operate numerous units. Based in Austin. Learn more.
TurboTenant: Serves over 250,000 landlords and more than two million renters. Based in Colorado. Learn more.
We posed several questions in the introduction, so we cannot end this series without addressing them.
- How are property management software companies impacting the small landlord business model?
- Are backend landlord tools and front-end rental search products in conflict with each other?
- Will Cozy and Avail end up adding a search experience or syndicating to more partners?
- Are online rental applications becoming mainstream or are they still mostly on paper?
- Will Airbnb make a play at the long-term rental market?
A GAZE AT LANDLORD TECH’S FUTURE
While the category is advanced from a product lens, it’s not complete as of yet. The marketing, advertising, payments, application, and screening components are robust across the category. Signatures aren’t quite standardized, but are table stakes to serve this category well—we’re not going back to paper and fax machines anytime soon. The other three are still to be capitalized on: moving, communications, and compliance.
Outside of screening, which can be delivered as a specialized service, small landlord property management requires a Swiss army knife approach. DIY landlords aren’t going to use three to nine separate tools to handle each specialized task—not only because there isn’t a frequent use case for each, but because the vendors offering them would go bankrupt trying to acquire customers. It’s my belief that vendors charging tenants for screening fees can scale more rapidly by keeping their software free: zero cash friction is generally a solid onboarding strategy for cash strapped DIYers. Meanwhile, it’s possible for providers who charge landlords for screening services to deliver a stronger product by aligning best interests with their primary customer.
There are a few themes vital to the future of this sector: payments, audience/syndication, compliance, and the transactionalizing of rentals.
In 2017, more than 56% of landlords were still collecting rent in person according to Zillow’s Housing Report (via Avail). Zillow didn’t report that same number in its 2019 report, so it’s hard to assess how quickly the figure is rising.
Monthly rent payments and acquiring/qualifying tenants used to be the bane of the landlord’s existence, but that is waning as digital payments adoption continues. I don’t believe the original hypothesis that whoever figures out how to deposit payments instantly will ultimately win. I struggle to believe the investment needed to move from next-day (Avail FastPay) to real-time would prove fruitful to the bottom line. It’s not dissimilar to how I view listing update frequency on the sales side of the industry. Is an update cycle of every 15 minutes rather than once an hour going to compel buyers to switch search interfaces? No.
Cozy and Avail both offer Rent Reporting, which helps tenants build their credit history. As the responsible thing to do as a landlord or property owner, that will become standard and an even bigger draw for vendors/tenants to go digital. But instant deposits are not a requirement for success.
It’s true that those who own the marketplace (demand) and own the tools have an unfair advantage. Thus, Zumper and Zillow do hold a strategic customer acquisition advantage compared to Cozy and Avail due to traffic and brand goodwill generated from their rental search products.
This section of the summary was turned into its own blog post, which was previously posted here.
As Kenneth DePaul argues, managing and controlling costs are the missing pieces to today’s property management software. A revamping of antiquated offline rental property management applications and converting processes to online applications won’t help if investors don’t control costs. A streamlined expense management system, connected directly into both a P&L and tax software, is the Holy Grail that landlords will flock to were it to exist. We’ll see vendors partner with the likes of Avalara in the coming years to make it so.
Like so many other categories, bundling will reign king in landlord tech in 2020 and beyond. Part of that bundling will be insurance, rent guarantees, move-in/out, and even loyalty programs. All integrated with one fell swoop, this would include all the necessary legalities to remain compliant across the board. Similar to how tech-enabled operators such as Lyric, Domicile, and Sonder competed against (and advertised on) Airbnb, we’ll see a similar breed of operators break into the long-term sector. Landlord tech vendors will be forced to partner with boots on the ground to compete with tech-enabled operators.
One big question is whether an independent titan will be built or whether future leaders will emerge from (or be swallowed up by) existing titans. Beyond Craigslist (we all know they aren’t selling anytime soon, nor will they invest heavily into software for landlords), Avail, TurboTenant, and Zumper are the largest independent platforms on the chessboard. With its $60 million Series D, it seems clear Zumper catapulted itself into the lead (if it wasn’t already there).
At the end of the day, we’re in the midst of a land grab of a fragmented-beyond-belief customer base. Switching costs are a nightmare, especially once payments are set up—that’s the big moat vendors are racing to build. With all this work behind us, it’s now clear beyond a reasonable doubt that those who gain a defensible foothold in landlord tech, particularly with small independent customers, will become significant industry power brokers in the years ahead.
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