Let's seek more balance in our rental game
There's art in taking a step back and redesigning how we work.
For the longest time, rental investing focused entirely on building wealth or income through that appreciating property asset. To build that wealth, you unfortunately couldn’t purchase the property and leave it unoccupied if you wanted to create income. Though your focus is to protect and build that property, you still need renters…. dang it.
Clearly, no one will care for that property as much as you, the owner/investor will. You have to rent it out. The dang thing won’t product income on its own. So guard it with your life, right? In comes the “conditions”. We put restrictions on who can rent, for how long they can rent it, for how much, is there a deposit, can they have a dog, what penalties do we impose if the renter screws up, fees if they want to change the deal and so on.
All of this is for good reason of course, but it’s a slippery slope that limits the quality of the renter-owner relationship and erodes any incentive for the renter to ever be loyal or appreciated.
Current Rental Market
It’s clear that there’s a good business there or else we wouldn’t be able to support the 1/3 of population that rentsacross the US and owners simply wouldn’t buy properties as investments. It’s also clear that most renters out there are doing what it takes to keep the roof over their head and to keep the landlord happy. Still, the rental model is broken, solely focusing on making sure the property is guarded while doing nothing to maintain a relationship with the renter-consumer.
This lack of appreciation results in renter turnover reaching 61% year over year. This is a killer when already dealing with low margins. For third party management companies (those managing properties on behalf of the owner) fees of 12% of the gross income and services, used to be common-place but are now getting as low as 4%. As contraction of potential profits gets tighter, there’s a limit what they do for the consumer as well. In the market, we understand that retaining a renter is typically 3X more profitable than the expense of turnover, marketing and setup of a new renter.
What Can We Do
It is foolish to keep looking to our renters to change without us changing how we treat our relationship with the renter or without taking another look at how we operate overall. We must strategically revise the terms, services, fees, amenities and very business model we subject the renter and our businesses to.
Without it, the idea of a balanced rental ecosystem is an impossibility. It would be impractical to ask for anything beyond paying their rent on time.
Despite the fact that renters today spend trillions of dollars on products, travel and services of convenience (AirBnB, Uber/Uber Eats, Molly Maids, Etc), the money spent on rent leaves them with nothing to show for it. In today’s commerce market, models that remunerate the consumer for money and time spent are countless. Even more, loyalty programs have found a way to direct added capital away from competitors nearly 7 out of 10 times. Rental platforms currently don’t/can’t accommodate for this however.
The long term renter goes through a number of challenges to land a new place to stay. They submit background checks, pay growing deposits and will continue taking their “business” elsewhere unless we find a way to further empower this relationship.
Tear It Down So We Can Build It Up
Sometimes you have to start over. A new platform built with an insightful view of the future is not only going to be important but potentially imperative to serving tomorrow’s modern rental market. There are a great many directions we can go with this but to keep in line with this post, here are a few points that will change moving forward.
Property management tools that make a property managers life easier will become status quo. If your tools aren’t making management easier and your day to day workflows shorter from marketing, to lead gen, to leasing, to maintenance as well as reporting and accounting, it’s time for change. I’ll go a step further to say that due to these services becoming expectation more than luxury, you should also expect that these tools should be incredibly inexpensive. They shouldn’t be hitting hard to your bottom line and should possibly be adding to it given the costs of what you’ve been using in the past.
Your business model needs to be adjusted.. it will improve and stabilize your business as a property owner. By creating a growth model that covers your renter and not just you or your investors, you will see significant improvements to systemic challenges typically faced in the past. Working with our consumer-renters should be a seamless task. The way you operate your property should be bringing the consumer into the center of your day. If it isn’t, you should reevaluate things. Consumer demand is no longer a silent issue and will increasingly affect you more over the next several years. Concessions no longer solve the issue of finding the strongest applicants and frankly they hurt your bottom line anyway. Why not continuously show your renters that you care about them and get them to care more about your property or possibly you? We’re seeing increased retention and renter LTV through this effort like never before.
Cooperation across service groups and leveraging knowledge/data, will help us maximize the business of renting. Technology allow us to not only decrease costs and increase efficiencies in our own business but also bring together others that will help us further that effort. Consumers are already purchasing products and services that improve access and build convenience. We can help them do more of this by working with these organizations. When we do this, we not only please our renters, we also bring services like house cleaning and dog walking to them that improve or maintain our property. Many of these services are a win-win. Others simply help our consumers win. Both make the overall business we operate run a little smoother in the long run.
We’re more than happy to talk about all of the other incredible things we’re doing on the consumer front that help us win including loyalty, travel opportunities, ratings, donations, affordable housing assistance and more. In the end, we have to take a big step back and remodel the way we do business just as we might remodel the property. After all these years, things are looking pretty run down and out of date. It’s not too hard and the payoff is incredible.
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LEASERA is the only property management platform available offering a unified renter loyalty system. We integrate connected travel accommodations and direct to door services like dog walking, food delivery and ride share. We serve fast moving property owners and the incredible renter demographic with benefits and options. By serving our client partnerships including property management companies, hotels, travel rentals, investment groups and more, LEASERA is a change agent.
LEASERA offers our clients value and customer-loyalty with an intelligent leasing-as-a-service platform with an ecosystem of supportive tools and service providers. Consumers gain rewards and empowerment and flexibility. LEASERA was recently named on CREtech’s Hot List as one of the “Top Companies to Discover in Real Estate” and as a “Leading tech site to discover” and dubbed years ahead of the market by industry investors and insiders.