Nine Four Insights

Property Management: The Gateway to Future Growth Verticals

Successful property management plays a critical role in the efficient operation of every property’s lifecycle. It increases tenant satisfaction leading to increased occupancy and decreased turnover and prevents deferred maintenance that can lead to larger, more avoidable capital expenditures. However, operating a well run property management company, no matter the asset class (SF, MF, office), is much easier said than done, and startups are taking notice!

Property management is not only a major pain point felt by millions of landlords but also a terrific foundational platform from which many future products can naturally grow out of. Let’s dive a bit deeper. First, property management is really hard! Particularly at scale. It is logistically and operationally complex and typically includes a wide range of responsibilities including everything from marketing properties (screening, showing, leasing) to collecting rent to servicing maintenance requests and ensuring quality control. This is why very few landlords actually enjoy managing their own properties and prefer to outsource it. Second, property management, particularly in the SFR space, presents a massive, fragmented market to support large, fast growing startups. Third, and most importantly, property management provides a “gateway” to many natural growth verticals and monetization strategies for startups later in their lifecycles.

Traditionally, property management companies have been paid with property management fees, typically a percentage of rent collected. Absolute dollar fees scale nicely as the number of units increase. So, the recurring nature of property management fees is actually close in nature to annuity SaaS revenue, albeit with different margin profiles. Why? Typical property management companies usually rely heavily on inefficient paper, pen, excel, email, fax and phone workflows requiring significant human-in-the-loop engagement and judgment causing costs to increase and making it difficult to scale units under management. All of this is changing as startups turn their attention to digitizing the industry. With the advent of digital workflows in the cloud, new tech-enabled property managers, with software in their DNA, can do a lot more with less. For example, smart access technology enables self tours, AI bot and SMS technology to receive maintenance requests and dispatch and route technicians without requiring humans.

Tech-enabled property management startups with tech infrastructure backbones can not only scale more quickly and efficiently but also capture market opportunities way beyond the capabilities and offerings of traditional property management firms. For example, property management software tools present a formidable “mousetrap” to build a marketplace on top. Marketplaces are notoriously challenging to start because of the chicken before the egg problem. Without supply or demand, it’s difficult to attract the other. So, property management helps solve the chicken before the egg problem by aggregating supply side density of the marketplace and jumpstarting marketplace liquidity. As a result, marketplaces to buy or sell primary residences or investment properties, as well as, marketplaces connecting tenant or landlord demand with service providers can be built on top of foundational property management software platforms. Marketplaces are only the tip of the iceberg. Lots of other monetization opportunities exist including brokerage for buyers and sellers, financial products for tenants and landlords and even institutional buying and selling off balance sheet. As a result, if you’re a startup building property management software tools, we would love to connect and discuss how your business can evolve into a SaaS enabled marketplace.

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