Why Tech Startups Are Disrupting Property Management
Property management has been one of the last frontiers of real estate to be touched by the technology revolution but it's an exciting time for both property owners and tenants as startups now turn their focus to the outdated industry.
Where did property managers come from?
With the industrial revolution in full swing at the end of the 19th century, the demand for housing in US cities skyrocketed.
The level of competition for the few available rental properties meant the job of the owner was simple - collect the rent. There was little need to worry about the comforts of the tenants with a replacement so easy to come by.
As more housing was developed and renting became more in-vogue the role of managing a property expanded. Owners now needed to invest in improving their properties as well as nurturing their tenants.
Those with large portfolios began using Caretakers who lived at the residence rent free to take care of the management.
When the Great Depression hit, though, things quickly turned sour. Many owners went into foreclosure, their properties seized by the banks to repay their mortgages.
All of a sudden banks found themselves with large portfolios of rental properties on their hands and no means for managing them. Not wanting to lose the rental income they looked for an alternative.
In 1933 the Institute of Real Estate Management was conceived along with the first professional property managers.
Why have we continued to use property managers?
With continued urbanisation and as people have become more transient over the last century, renting has become increasingly more common. As a result, the management of rental properties has became increasingly more elaborate.
Laws and regulations were put in place that needed to be adhered to. Increased supply of rental properties created a need for marketing to attract the best tenants. Tenants expectations for property standards increased which meant more time and money spent maintaining the property.
As the majority of owners have other occupations outside of their investment properties they have continued the practice of utilising a property manager as a ‘middleman’ in order to make their rental portfolio a hands-free income stream.
The idea being the owner wouldn’t need to spend time on the ‘admin’ of renting such as managing the tenants, getting to the property for inspections or organising maintenance. They were paying someone else a portion of their return to take that burden for them.
Why hasn’t property management adapted?
The use of a property manager as a literal ‘middleman’ made perfect sense for a long time. Along with paying bills, banking, shopping, and sending letters - renting was a service carried out by people.
And then came the internet. And smartphones.
Over time, these human industries have been transformed by technology making them cheaper, faster, more accurate. Things that once took hours, days or weeks are now possible in an instant from the comfort of one’s sofa.
Yet, property management doesn’t seem to have really changed.
One reason for this might be because doing so would involve removing human elements which create a bottleneck of information and action, effectively writing a lot of people out of a job.
Instead, in an effort to keep up with the pace of the rest of the world and reduce labour expenses property managers have merely been given astronomical workloads, managing anywhere up to 200 properties at a time.
Not surprisingly, this approach hasn’t led to an increase in value for investors.
Growing numbers of owners are reporting having to intercept at more frequent intervals to ensure their property is being managed properly.
Sourcing their own tradespeople to ensure quality and cost-effectiveness, chasing agents to chase the rent, checking in to make sure leases are renewed or rent is raised.
There’s a sense by both owners and tenants of being kept at arm's length by a property manager who has their own agenda - to reduce their workload per property.
Owners are handing over a large slice of their rental income to hire an expert to take care of things but finding themselves spending half their time managing the property manager.
Does traditional property management still offer the best return for investors?
Tech startups delivering better value for everyone
In the last decade, tech startups have become the champions of innovation, using technology to provide better solutions for consumers at more reasonable price points.
One of the greatest examples of a humble startup revolutionising the real estate space is Airbnb.
Airbnb has now hosted over 200M guests since 2008, by providing a solution for owners around the globe looking to get a higher return on their investment property using short term stays while also offering travellers a cheaper alternative to hotels.
Property management has been one of the last frontiers of real estate to be touched by the technology revolution but it’s an exciting time for both property owners and tenants as startups now turn their focus to the outdated industry.
With the recent development of web-based platforms and services, owners and tenants can now connect directly and be guided without agenda or the need to rely on one person for all information.
What was once a battlefield between owner, tenant and agent, is slowly become a mutually beneficial relationship based on transparency and finding common ground.
Cubbi was founded by former real estate agent, Michael Gilbert, and business and marketing strategist, Jason Gilbert, to solve a key problem: allowing owners and tenants who are fed up with the typical property process to bypass agents and work online.