Why Real Estate Tech Is So Attractive For Founders

http://blog.ezliu.com/why-real-estate-tech-is-so-attractive-for-founders/

by ezl • 13 years ago

117 112 13 years ago

blog.ezliu.com

mrfusion4• 13 years ago

I'd be interested in hearing concrete ideas we can do today. Apartment search just doesn't strike me as a viable new startup. Am I wrong?

rfnslyr2• 13 years ago

Aggregation. Aggregate services. Guy who made padmapper.com just aggregated all listings from various sites.

ezl7• 13 years ago

Padmapper is really awesome. I think one of the reasons it were so successful was that it gave an alternate (better) UI for apartment search.

People are visual and they know maps, but seeing lists is harder to parse.

The fact that nobody else at that time had put apartment search on a map is a great example of how low the bar is for excellence in this space (no offense, @padmapper).

ezl7• 13 years ago

I completely agree.

Apartment search is, in my opinion, the hardest rental vertical to try to tackle, mostly because solutions the 2 sided market traction problem have been elusive.

It also seems to be the most common one that founders attempt.

In contrast, rent applications, management software, online rent payment portals are value providing from customer #1.

leknarf• 13 years ago

Online rent payment. Rent and taxes are my only regular expenses that aren't automatically deducted from my credit card or bank account. And even the IRS accepts online (albeit manual) payments. In fact, rent is the only reason I have a paper checkbook at all.

It's an easy win on both sides. In exchange for letting me schedule automatic payments, my landlord could get much more timely payments. I think I'm reasonably responsible as folks go, but still occasionally forget to mail a check on time.

ezl7• 13 years ago

FWIW, I recommend www.rentshare.com for this.

I use them to pay and receive rent (I'm a landlord and I rent my residence).

Additionally, whenever landlords who use Rocket Lease (my rental application company) inquire about rent payment online, I typically recommend Rent Share.

They'll even accept electronic payment from the tenant and mail a paper check to the landlord on your behalf, so if you want to have it autodrafted for your rent, you don't even require landlord opt in.

pbreit• 13 years ago

Rent payment companies are a dime a dozen. The problem is no one wants to pay to process a rent payment (landlord or renter) and renters appreciate the control they have in writing a check each month.

Plus, your bank probably offers free bill payment. Have you checked that out?

simoncion3• 13 years ago

Have you thought about opening an account with a bank or credit union that will automatically cut and mail a check on your behalf?

If you haven't, you really, really, should. Finding such an institution is life changing.

kzahel• 13 years ago

My landlord uses PayLease. It lets me setup autopay and stuff. $2 per payment, not too bad. Just low enough where I use it instead of mailing a check. If you use a credit card you pay something just over 1% of the payment, which almost cancels out sorta if you have a 1% cash back credit card.

joshuaheard4• 13 years ago

I have six rental properties as a landlord and I use Bank of America small business accounts which have an email payment system using ACH. The tenant receives an automated email invoice and can pay the invoice by ACH with a few clicks after a one-time setup. I receive an email from the bank when they have paid. It's completely paperless. No other bank was offering this at the time I set it up a few years ago. It's been working great except for the few luddite tenants who can't seem to get the simple setup to work. For them, I have them send a check to a B of A PO box and the bank processes the check for me.

grosbisou• 13 years ago

I think you need to think larger than real estate is only finding a place to live.

Who are the actors of this market? Tenants, property manager, property owner, super intendant, etc. What do they need to do? Pay their rent, ask for maintenance, send paperwork, track their tenants, track their expenses, etc.

Their is plenty of stuff that could be done. Now I'm pretty sure some or all of these are already addressed by some company.

lnanek2• 13 years ago

I've talked to a few startups doing interesting things like loading building designs into 3D game engines and letting real estate agents meet and talk with potential investors/buyers in the space itself. This sort of thing normally gets done by phone, Skype, pre-rendered videos, or rare and difficult to arrange trips to the site or design offices. If an investor is visiting from China and only in the US for 10 days and is checking out a dozen different hotels to fund building, there just isn't much time on the trip side of things. So there's lots of room for improvement.

jwoah122• 13 years ago

Personally, having moved twice so far in the crazy, corrupt rental market of Manhattan, I've been dying for someone to solve this problem. For those who aren't familiar with renting an apartment in NYC, the turnover is so fast and vacancy so low, that you can only start looking for apartments the month before you want to move.

In addition, the landscape is filled with predatory brokers that add no value to the process. In some cases landlords hire them because they don't want to deal with the process themselves, and in some cases the brokers will re-list apartments they find on Craigslist or other websites to make it seem like they have an exclusive listing, then try to get you to pay their fee if you rent the apartment. In almost all cases, the renter winds up having to pay the broker fee of one month rent to as high as 15% of the annual rent. Finding a no-fee rental is extremely rare. I would love to have a transparent system that was easy enough to use for landlords/management companies that resulted in two things:

1) Owners don't feel the need to retain brokers to deal with prospective tenants, passing the ridiculously high bill onto them. 2) The market for these no-value-adding middleman brokers that re-list no-fee apartments and other brokers' listings dries up.

I believe that the only case that a renter should have to pay a broker fee is if the renter him/herself retains the broker to show them apartments because they don't want to do the work.

/rant

hkmurakami• 13 years ago

The situation obviously sucks for tenants, but do the owners have any incentive to invite change, given the current supply demand situation and the fact that they are able to pass on 100% of the cost to tenants?

pavel_lishin• 13 years ago

For what it's worth, http://rent-direct.com/ lists no-fee apartments, and will pay the broker fee if there is one for a listing.

(I don't work for them; we signed up, but ended up finding a great place through someone else.)

acconrad• 13 years ago

It sounds like you could figure it out by simply asking a local real estate agent what their pain points are.

incision• 13 years ago

1.) Kill LendingTree by creating a service that actually lives up to their slogan "When banks compete, you win". In reality, signing up with LendingTree will just get you aggressively harassed by "Boiler Room" salesmen offering terms worse than whichever bank holds your checking account.

2.) Anything to simplify / make comprehensible the mountain of paperwork that accompanies every transaction around mortgages.

3.) Online payment services for rent, HOA fees and whatnot that aren't painful to use. As a rule, the existing services for this are expensive, ugly and dangerously unreliable.

4.) Home / Apartment search that does more than just dump information on you.

The typical search offers little more than a price range and a zipcode.

I want to be able to provide your search with info about what I do for a living, how old my kids are perhaps a few things that are important to me and get recommendations that consider all of these things.

I don't need to be told about the options in the places I know about it. I need it to reveal the ones I haven't considered.

nitroscott2• 13 years ago

1) "Carwoo for mortgages" I like it. LendingTree is analogous to TrueCar in this situation.

spokenn2• 13 years ago

A hardware/software solution that improves the current notary journal by adding location data, biometric identification & backups. Right now, title company notaries go through multiple journals a year and journals have been lost.

joshuaheard4• 13 years ago

I like this idea. However, the money notaries make is so low, I doubt they would purchase a dedicated device. However, if you made a touch-screen app where the client could sign it, take a picture of their ID, and the rest, you might be on to something. Build it, then get one of the notary associations to adopt it.

rfnslyr2• 13 years ago

You're missing a closing ")" on p class="pad"

secabeen• 13 years ago

The other big win is the amount of money in Real Estate. When most transactions have fees on the order of 6%, there's a lot of money sloshing around to pick up.

ezl7• 13 years ago

To put a number on it:

6% transaction fees you're talking about are probably in home sales. About 800B a year transacts in the US in home sales (existing home sales data: http://www.realtor.org/sites/default/files/reports/2013/emba...). In practice, that 6% number often is a bit lower for the brokers. Also, FWIW, on top of broker fees, you'll be paying attorneys, government taxes, etc.

In Chicago, to transact in and out of a house, you should expect to pay between 10 and 11% (so if you buy a house for 100k and sell it for 110k, you will break even if you're lucky).

beat5• 13 years ago

This is a classic case of where the kinds of technical founders that cruise HN shouldn't be trying to invent their own thing, but rather find a boring "business" subject matter expert as a co-founder. There are lots and lots of these things, where businesspeople see a gap that can be solved by tech but don't have the skills to do it.

My advice to all the kids out of college who want to be startup founders - don't try to come up with your own idea, because you don't know enough about business or the world to get a good one (hence the plethora of cheap social knockoffs that will never go anywhere). Instead, go find some older, experienced businessperson who wants to solve a problem in a non-technical space they understand deeply, and work with them. You're much more likely to succeed that way.

fleitz2• 13 years ago

Yeah, it's the Dirty Jobs of tech, fuck what's cool, do what pays the bills.

The best part about doing what pays is that the next generation of college kids are trying to disrupt Facebook (Snapchat/IG, God I'm getting old), rather than fuck with your massively profitable app doing lead gen for mortgage origination, that no one outside of your outside sales team has ever heard of, nor do you have to deal with whether VCs like your biz plan, and you don't have to give up equity because you can actually pay your fucking employees and they don't even cost that much because what you're doing isn't exactly rocket science.

The future is not evenly distributed, drive 100 miles from the coast and it's 1979. Go inside any office park and it's 1985.

Btw, this is why I LOVE the idea of FarmLogs, those guys are going to make a killing IMHO.

beat5• 13 years ago

Something I've said for many years, long before I decided to do my own startup... "Jobs suck. That's why they pay you. If it didn't suck, they wouldn't have to pay you." It's advice I would give the friends of my teenage children, and friends of mine in their 20s who were trying to decide what to do when they grew up (lots of them artists/creatives who were frustrated with poverty).

So if you're doing a startup, the question you need to ask yourself is "Why?". Why not just get a job? It's not hard for smart IT people to get good paying middle class work. A good place to start is Noam Wasserman's question "Rich or King?".

If your goal is to get rich, then think seriously about doing what I'm recommending here, and latching onto a solid, reliable businessperson with good ideas to disrupt an existing business.

graham17764• 13 years ago

So the funny thing for me is I'm the one who works in commercial real estate, know the problems deeply, and have little technical experience other than reading HN. So how do you reverse cruise HN to find the technical cofounder to build out the solutions to our RE problems?

I literally sit within a company run by excel spreadsheets, talk on a phone with brokers, manage market information via printed pdfs of comps, mark up site plans by hand and scan them, and conduct all reporting via email and word docs to multi-billion dollar pension funds.

At nearly every step of the way I see opportunities without the technical expertise to execute.

gaustin• 13 years ago

I'd suggest adding contact info to your profile and talking about your problems here. Hopefully you'll pique some interest and have some email waiting later.

beat5• 13 years ago

Cruising HN probably isn't the place to find founders, honestly. Where do you live? Is there an established startup community there? Make friends in IT, and get introductions. Go to meetups.

Meanwhile, narrow yourself down to a single problem that you think offers maximum opportunity and minimum scope and risk, something that can be tackled with a MVP (minimum viable product). Design workflows. Learn wireframing. Create a business entity. Do everything you possibly can on your own that advances the project without actually writing the code. The farther along you are and the more viable it looks, the easier it will be for you to get a coder to help you.

moizk• 13 years ago

Learn to code. At least enough to prototype ideas.

silverbax882• 13 years ago

I've done a ton of this type of stuff for the medical and insurance industry. I'm not looking to be a technical co-founder but if you need input I could definitely tell you what you need and what to look for.

lallysingh• 13 years ago

Commenting on two things here.

First on beat's comment: In ~2001, I wrote a Palm Pilot app for real estate agents. My mom's one, and I watched what she did during the day and tried to make a simple, easy to use app that managed the entire sales process for her. <list-of-mistakes>It had a workflow for the entire sales pipeline, from prospects to closing. It kept every detail of every stage, with a field for everything, and even had a built-in mortgage calculator. I even put the majority of the stuff in a library, and made the app a thin configuration of the library's components, so that I could launch similar products to other kinds of sales agents. It had customized widgets that made great use of screen real estate.</list-of-mistakes>

Sales were terrible (total in my life was $50). I learned, too late for me to listen, that most real estate agents at the time, in my area, were over the age of 50. Many couldn't read normal-sized text on the Palm Pilot without glasses, and few were likely to spend $400 on a handheld device when they could take notes with pen and paper.

On the list of mistakes: First, clearly, I over-engineered against a very low-fidelity model. I only had one sample of data (my mom), and built too large a product against a small amount of data. Second, my data was biased, my mom didn't want to discourage me when she couldn't read the screen. I should've noticed that she had to stop and put her glasses on every time. Third, having over-engineered, I went further and tried to generalize the code to a library, even though I didn't know how applicable any of it was to even one market, much less the larger class of markets.

Second comment. On the pegged webserver that's preventing me from reading the article: First, really, just loadtest your webserver. It's not hard, try apache bench ("ab") as a starting point. Second, shut off unnecessary parts when they're being slow (like analytics), a database access for comments, etc. Load them asynchronously from JS (putting the CPU load on the client), and let the page render when you get back an error or timeout. Unless the primary content on the page is dynamic, the page should get to the client without any I/O except for the NIC.

1986v2• 13 years ago

Could not have said this any better myself!

jimnatel2• 13 years ago

I would add that with tablets and smart phones, it is now possible to bring your apps on the fields. A few year ago, it was very difficult to bring your computer on a construction site. Some startups (for instance Aproplan http://www.aproplan.com ) are already jumping on these new possibilities.

ezl7• 13 years ago

To reinforce your comment:

Some of our customers have been bringing iPads to showings and asking prospective applicants to fill out digital applications on the spot.

uptown• 13 years ago

Fieldlens is also tackling that space.

http://fieldlens.com/

simoncion3• 13 years ago

A few year ago, it was very difficult to bring your computer on a construction site.

Pardon? Rugged computers (like business Thinkpads and Toughbooks) have existed for far more than a decade. I would more readily take such a thing to a construction site than an iDevice or an Android tablet.

jimnatel2• 13 years ago

Yes, of course, you could bring your computer but it is not at all the same to carry an heavy computer or to have a smart phone in your pocket. For instance, you can use your phone or your tablet all along the site during a handover to take notes and pictures. It is a lot more difficult to do that with a computer

markkanof• 13 years ago

Sure they have, but I imagine what the parent was referring to is the portability aspect of tablets and smart phones. Laptops are certainly easy enough to carry around, but to use them they really need to be put down somewhere. A construction site may not necessarily have an appropriate surface in an area that is convenient. A tablet is more like a clipboard that you can use as you move around the site.

mtmail• 13 years ago

Apartment discovery is already well served. There are a dozen new startups that apply innovative methods to search. http://www.apartmentlist.com/, https://livelovely.com/, http://42floors.com/ come to mind.

Software for estate agents needs to be become more modern though. http://nestio.com/ just rebranded themselves to do that for example.

There's a German property portal (number two in the market) which released an iPad app for estate agents. Property management, contact list, calendar etc. Something like 50 USD/month for the app or $100/month for the hardware&app. Website is in German, but there are screenshots and video http://immonetmanager.de/produkt/

triangleman• 13 years ago

You know what's great? The Craigslist map search for housing.

selimthegrim• 13 years ago

Do people not use Zillow anymore?

sputknick• 13 years ago

Buying and selling real estate is up there with the most miserable experiences I have dealt with as an adult. I think there is definitely a lot of room to make a lot of change, improve people's lives significantly, and make a lot of money. But I think it will be much harder than you realize. 1. Regulations: this is a HIGHLY regulated industry. Anything that is regulated doesn't have any motivation to improve, because the regulations artificially keep their margins high. 2. Entrenched parties: Improving the technology behind real estate transactions will but lots of people out of work. Lots of people who will likely find it difficult to match their current salaries in other industries. These people will fight against your technology like Luddites. I wish you all the best and please for the love of God make this work!!!

Edit: spelling

ezl7• 13 years ago

regulation can be a pain as you say -- there are a lot of highly regulated components of real estate, but some of them are pretty easy to get into as well. For example, crafting rental property management software like maintenance ticketing systems.

Some interesting companies in the residential home sales game are trying to streamline the process. Off the top of my head, paperless pipeline & dotloop are both trying to reduce the paper volume.

there was also a brandery.org (cincy incubator) company in the last cycle that was doing something similar.

swalsh• 13 years ago

I recently bought a house using RedFin. They had tech for pretty much every step of the way. The whole process was fairly painless actually. Now the loan process is a different story, but that wasn't terrible to. Just a lot of paper work.

crazygringo• 13 years ago

The counterargument is that there are so many financially entrenched interests, you'll find you can't make any headway against them.

I can't count the number of tech people I've heard say they want to create a website that will get rid of the horrible broker system of renting apartments in NYC. But that requires convincing landlords to do something different, and so far they have had zero financial incentive to do so, since it's the landlord who uses the broker, but the renter who has to pay the cost of the broker.

So ten years goes by, and still you usually have to go through the ridiculous process of paying brokers.

robrenaud• 13 years ago

If the renter isn't paying the broker, they can spend more on rent.

I am living in my 6th apartment in the NYC area, and my 4th in Manhattan proper, and I still haven't paid a broker. Thousands of dollars is too much to pay people for opening doors.

nl• 13 years ago

The author isn't trying to disrupt the industry, they want to build software for the entrenched players. That's what makes it easier.

mrfusion4• 13 years ago

Ok, here's a real estate start up idea I just had. (BTW I'd actually be interested in working on this, so contact me if you're interested in joining forces.)

Use the Oculus Rift to let potential buyers and renters take a virtual tour of properties.

Think how much time is currently wasted driving between properties. And many people probably end up with non-optimal purchases since they can only reasonably visit < 10 properties.

Is there some kind of 3D scanning equipment that would let my potential startup create a virtual environment by walking through a house with it? I guess there might be a technology gap there. Anyone know?

jamiequint• 13 years ago

Matterport (YC Company) - http://matterport.com/

mrfusion4• 13 years ago

Thanks. I wonder how that one compares to this one which will cost an order of magnitude less?

http://www.kickstarter.com/projects/occipital/structure-sens...

encoderer• 13 years ago

As a buyer, first: I saw way more than 10 homes. Way more. Buying a home is a process that usually takes months. You see a lot of homes in that time (if you want to).

Second, there is just no substitute for the real thing IMO. The best you could do with a virtual tour is disqualify homes.

Domenic_S• 13 years ago

Part of the "charm" of real estate is deceptive photos. Everyone knows they're deceptive and a halfway decent photographer with a wide-angle lens can make a 1-bd hovel look like a mansion.

When have you heard someone say "The place was so much better than the photos!"? Not often. That's a problem for a 3D experience in a few ways:

1) if the 3D experience is pitched as "more true to life", then no buyers will think that the house could be better than the experience presents.

2) if the 3D experience doesn't capture the greatness of a property, the buyer/viewer would be underwhelmed vs. seeing the place in person. Properties with spectacular views for example would take a hit because that emotional experience of "I could wake up to this every day" is replaced with a 1-dimentional texture.

3) If the 3D experience is too good, buyers will be disappointed when seeing the property in real life.

IMO sales like this -- houses, cars -- are a visceral experience that require in-person shopping. That's why internet car sales haven't really taken off. You really have to take the house for a "test drive", see how you think your furniture would fit, imagine your kids playing in the yard, all that stuff.

Now if you were making some kind of holodeck... ;)

cpwright• 13 years ago

If you're rental hunting, you might look at 10 rentals, because you probably have a fixed amount of time (the end of your current lease). If you're hunting to buy, you can take pretty much all the time in the world until you find the right thing. And it makes a lot more sense to take more time. The two bedroom apartment I had before buying a house was $2000/month, if you assume a 1 year lease, that is a $24,000 commitment. A house in the same area would be at least $500,000, you're also on the hook for taxes every year after that (which can easily be $12,000 or more on that $500,000 house).

Given the much larger commitment in terms of money and the duration, it makes sense to take longer.

The biggest mistake I think that we made while house hunting is not leaving crappy houses fast enough. Why spend 15-20 minutes looking at the rest of the house, when 2-3 is enough to tell it isn't going to be something we'll buy. We weren't interested in a fixer-upper, and from the pictures posted you can't always tell. Any Oculus Rift tour is going to have the same problems as selective picture taking.

gatsby• 13 years ago

Check out floored.com. They have an awesome team and their products work with Oculus.

cornellwright• 13 years ago

One of the ways I like to think about good start-up ideas is find a business stuck in the '90s and bring it to the '00s using this decade's tech that's already been invented.

agentultra• 13 years ago

Handling the paperwork in a secure, regulation-friendly way would go a long way to improving the experience of purchasing property.

I was surprised that my realtor, lawyer and mortgage broker all asked me to email sensitive financial information without any encryption and believed that a signature on a piece of paper is better than the cryptographic alternatives available today (which they don't even know about).

Especially with all of the intelligence-community BS that gets involved in the process today! I was flabberghasted that my lawyers office had no idea what an encryption key is. "Oh just email those bank statements over," they'd say. "No thanks," I replied, "I'll hand them to you myself."

And what a pain in the ass. I don't get paid to courier all that paperwork around.

And they have no idea. Think your insurance information is safe? I'd be surprised. These people just email sensitive documents around in the open. It's crazy.

fnordfnordfnord2• 13 years ago

I initially felt the same way as you about emailing documents and stuff when buying my house; but I figured that no matter how much trouble I put myself through, it wouldn't stop those others from emailing and faxing my stuff to here, there, and yonder.

lancewiggs• 13 years ago

At 200Square.co.nz we are using web tools and an enlightened approach to sales to improve the real estate sales process. In short we sell properties, and with much lower costs than all of the old school real estate agencies.

Our key founder combines real estate and Valley backgrounds - as someone mentioned it's really important that we understand the industry we are trying to disrupt.

We have a suite of tools, focus on effective promotion techniques rather than self promoting and wildly expensive newspaper and industry glossies, and sell far more houses per agent than the norm.

We put together a site (watchmystreet.co.nz) that lets people flip the buying search process, but struggle for now accessing what should be openly available data from regional authorities.

Happy to discuss help with expansion or entry into other markets.

thatthatis• 13 years ago

#6 -- the value per transaction is enormous.

5th percentile spend per year on an apartment is about $6,000.

95th percentile hobbyist spend per year on photo stuff is probably less than $6,000

michaelochurch• 13 years ago

Residential real estate is decidedly unprestigious, a business that hurts people-- just look at what house prices and rents have done over the past 20 years-- and the major benefit of working in it, as the OP argues, is that it lacks hard technical problems. There will still be hard problems to solve, but they'll be people problems: dealing with incompetent but powerful management companies, blowback from very rich entrenched interests, etc.

Smart competition isn't that scary. I'd rather have smart competitors and learn a lot even if I lose, than work in a world where stupid people have all the power. If you go into the dark recesses of residential real estate, you'll find that it's not smart-people-friendly. Residential RE might be one area where average-to-stupid people have an edge, because they're closer to the animalistic instincts (i.e. the 86th floor being twice as valuable than the functionally equivalent 85th because it's "the top") that drive it.

It might be attractive to business co-founders looking to build something boring and flip it, but it's not going to get class-A technical co-founders.

This space has the lack-of-upside that would cause VCs to deride it as a "lifestyle business", but because of all the un-fun shit that humans throw up when it comes to land and housing (people get really ugly when that stuff is at stake) it wouldn't have the subjective benefits.

1986v2• 13 years ago

Man, thank you so much for posting this. For a while I have been pondering on a few real estate based ideas, sadly I even half-assed a mobile cms for real estate, collected prospective agents and then let it all go.

Time to get moving!

eff3x4• 13 years ago

Very true, I'm currently experiencing the same problems. I am a medium size landlord in NY, owning a nice mix of 1-4 family homes, a few mixed use commercial buildings, and an apartment building. I mostly buy homes, renovate, and rent out, but occasionally resell as well.

My technological needs as a landlord are completely unmet with affordable and worthwhile solutions. It is unmet to the point where in the last year I have gone so far as learn html, php, and sql, create my own website with its back end for tenant management and rental payments.

As a property manager, I would gladly partner with a vendor for property management software. But the problem is that a lot of the current worthwhile solutions as geared and priced towards larger property managers... 100+ units. But for a landlord serving around 25 families across 14 properties at the moment, there is not much out there.

This might be a more of a niche market, but there are tons of smaller-medium size landlords out there to make a real market for efficiency products.

If any developers out there are interested in a discussion, let me know.

codegeek• 13 years ago

What is your contact information ?

blooberr• 13 years ago

Sounds interesting. How do I get a hold of you?

charliecauthen• 13 years ago

I would love to discuss your needs with you. Please let me know how I can reach you when you have a chance.

malyk• 13 years ago

I currently work at a Real Estate startup. It's a very interesting space with an enormous amount of opportunity for innovation including search, mortgages, notaries, inspections, document delivery/storage, legal, moving, CRM, etc.

If any ruby/rails engineers in the bay area are looking for a new gig send me an email. I'm trying to hire people!

ChrisNorstrom• 13 years ago

BTW, I've got some real estate themed domains (and a logo or two) left over from a failed project if anyone's startup is looking for a name & logo.

⌂ DomainEstat.es

⌂ FindHom.es

⌂ FindProperti.es

⌂ FindEstat.es

They use the .es tld so you can do things like FindHom.es/chicago or FindProperti.es/newyork

nychacker133• 13 years ago

Couldn't agree more that innovation is coming fast to the real estate industry. Check out Rentista, an IT portal for brokers and tenants to better manage the apartment application process in NYC (particularly the document aspect)... www.rentistanyc.com

FollowSteph36• 13 years ago

Firstly I'm the founder and owner of LandlordMax Software (http://www.LandlordMax.com), a property management software company. The company has been in business for over 10 years now and has been growing quite well over the years: http://www.followsteph.com/2013/08/07/landlordmax-2012-2013-...

The real reason you don't see many new flashy new trendy apps is that creating real estate related generally a hard problem to solve. Sure it's simple to create a simple accounting system that's like personal accounting solution, but when it comes to managing properties you need a lot more than that!! And even the accounting system is not that simple. You need to link the properties to buildings, tenants, manage late rents, fees, and so on. Then you also need to realize that many payments will be late. Some payments may be spread over multiple properties, such as things like computer hardware where the costs are spread over many properties. This doesn't even include security deposits which is a special class of accounting data.

Then you need some pretty extensive reporting features. You can't assume just one property owner, so you need to deal with that. Also when it comes to taxes, tenants, etc. you'll need a significant number of different reports to support this. You'll basically need a pretty extensive list of reports as a minimum.

Now we haven't even started talking about managing leases and rentals. Basically what tenants live where, which units will be vacant, which units have leases, which leases are coming due. What about security deposits (also related to accounting but a special case).

From there you need to manage tracking workorders, regular maintenance that needs to be done, and everything else that comes with managing properties. Lists of vendors, which vendors work on which properties. This can be especially tricky if for example you sometimes use say a specific plumber for some properties and another for other properties.

And of course I haven't even started to talk about managing the tenants themselves. Keeping track for example of when a tenant was given a notice, was told to turn down the music, and so on. Then you also need to track all kinds of info on the tenants, things like employers, contact numbers, references, you name it.

And then there's the tenants themselves. Not all tenants are people, some are companies. Properties are not all buildings. There are different types of tenants and properties. And the software needs to be smart enough to not only present the user with the proper screens and data (and store it all), but also have the proper interactions between these different data types. And of course be able to run reports on them. So you can't just say multiplex buildings go in one table because if you do this good luck creating a report grouped by building (single and multi) for a single property owner (as well as per unit for a building), which is something all property management companies will require as a report for their own clients.

But there's more. You need all kinds of additional functionality and integrations. For example most property owners want to integrate their systems with emails. They may want to incorporate images of the units pre and post, for legal purposes. Then what about documents such as leases and so on, you need a file management system.

And then there's all the logic and validation. It's not just foreign keys and relationship tables. Some data may be somewhat cyclical. And everything of course needs to be performant.

In all this you also have to remember that most users are not technical, so you need to anticipate this and prepare accordingly.

And we haven't even talked about security and other issues such as just plain old usability. So that also has to be taken into consideration.

Then there's whitelabelling. A property management company doesn't want records to come from the software company, it has to have their own logo/letterhead and so on.

Beyond that you'll eventually have to start dealing with large amounts of data. Most customers who use software for example will have more than a handful of tenants and buildings. Possibly hundreds. So how do you present a drop down menu to select tenants? It's easy for say under 50 tenants. But what about someone who has 200 rentals? Now what if they have 5 years of data on top of that. It could be a 1000 tenants in their database. And in case you're wondering you can't really archive data because of the nature of the beast: http://www.followsteph.com/2009/02/09/sometimes-simple-thing... So for us that meant we had to create special custom drop down menus that have custom sorting and coloring when prsenting tenants, so that all current tenants appear at the top alphabetically before the older non-current tenants. This might seem like a small details, but what you quickly learn is that there are a LOT of them!!

Basically creating a property management software solution is a complex task, and it's not something you can just create in a weekend or month. The minimum viable product is quite large. In the years we've been in business I've seen a lot of companies come and go. Most barely last more than a year or two. There's a lot of data, situations, and features that are required to manage properties.

And that's one of the benefits of being in this less sexy industry than say social media, at least once you get your foothold. It takes at least 2-3 years to get a good product going. Also because there are so many companies that disappear quickly, many customers are only interested in purchasing from companies that have been in business for a while. Another bias in your favor.

And this is why you don't see many people from here jump into it very often. It's not something you can do as quickly or easily, there is a pretty high barrier to entry. It might seem simple, but it's not. And that's an advantage with time.

Now this isn't to say that old solutions shouldn't improve, there is room. And someone like us has definitely disrupted the industry since we started. But please realize that a LOT of time, effort, and money is spent on implementing the functionality that you can't just re-skin your app every 2-3 years because it's trendy. That's not where the value is, it's in helping people effectively manage their properties!

PS: I'll also shortly discuss why rental payments is also similar in another comment.

In any case, please feel free to ask me questions and I'll try to respond. A mini AMA if you will ;)

wpfDotNet• 13 years ago

How did you get your foot in? Since you said there is a moat in this industry.

FollowSteph36• 13 years ago

The most basic answer, time and effort. It takes at least a few years to get into that market. You may be able to shortcut your way by spending large amounts of money, but otherwise it's just time and effort.

A good analogy that I like to use, as imperfect as it is, is a car company. Getting your first car takes time, there's no way around this. You can't just slap together parts and expect to be a major industry competitor right away. It takes an investment of time and/or money.

You also can't slap together parts so that it looks all nice and shinny but miss many glaring functionality. Sure I can build a vehicle with an engine, but how many people will buy my nice and shinny vehicle if it doesn't include say temperature control? Or if you can't go faster than 20 mph? Or if it has no headlights? Even simple things as not having wipers can be problematic if you don't live in a desert location.

So you have to do much like Kia and Hyundai did. It takes a large effort to get going. You build a good car, sell it at an affordable price, and continue to develop it and improve it over time. There's no shortcut, you can't just build a car over a weekend or a few months. It takes some time to get going.

And of course a lot of the lessons need to be learned along the way. Until you start, you might not realize that you can't use say part x because although it's nice in a simple car, it can't handle temperatures below say 40F, which means that although it can work in California, the car is completely useless in the northern parts of the world.

In other words you have to be willing to invest time and effort. A shinny new car will only go so far if it doesn't work. New cars that are branded lemons quickly get eliminated from the market, no matter how new they are. And those cars that are really good continue to sell year after year. They do get refreshed from time to time, but you definitely don't refresh them every 2-3 years.

cfontes• 13 years ago

Nice it's working for you. IN my home country (Brazil) we are still making them use the computer.

I tried to build something that would lead to a better real estate search but I didn't even get an answer from most of them.

ezl7• 13 years ago

@followsteph: a ton of respect for what you've done.

How do you acquire most of your customers?

What channels have been most effective for growth?

FollowSteph36• 13 years ago

Thank you!

And in terms of customer acquisition, it's the same general stuff, SEO, Adwords, etc. I would like to say there's nothing special, but a lot of it comes from trial and error over time. Knowing what works and what doesn't. What has the highest ROI, etc.

The biggest thing for us though is that word of mouth is really strong, and that's something you can't just buy through normal channels ;)

That's means building a good product, making sure it works, basically taking the time to develop your product rather than just being a checklist of half baked features that are barely working.

It also means you need good customers service. You can't just outsource it to the cheapest provider and throw it over the wall. This is a great differentiator, especially earlier on in your business lifecycle.

jeffmess• 13 years ago

Hi @FollowSteph. You mention that it takes at least 2-3 years to get a good product going. Curiously, how many developers did you have for those initial 3 years?

rverghes• 13 years ago

I worked for a small real estate company for a couple years, developing a software solution for them.

The biggest problem is that real estate is very "exception-based". I.e. There are no "absolute" rules. Every rule you can think of will have an exception somewhere that you have to account for. Some of these exceptions may even contradict each other. 99% of properties will follow any given rule, but 1% of properties will not.

In some respects, this is why Excel is perfect for real estate. You can pick a specific row, and adjust that row for that specific property's exceptions without altering the other deals above and below.

morganb180• 13 years ago

Thousands of startups have been saying this _exact_ same thing for 10+ years in real estate. Out of all those that tried, only two have had major success.

Why?

Entrenched interests that don't want to give up control or data for fear of being disintermediated.

Regulations and association control that makes it tough to get traction & adoption.

Real estate is like anything. The vast majority of transactions are done by a fraction of the actual base. Getting traction quickly enough is very challenging.

So while it seems like a great space, and there is tons that _should_ and _could_ be done, it's a helluva battle to get things to change.

FollowSteph36• 13 years ago

Rent payment processing is another hard business to enter. It's not so much technically a difficult problem as a fraud problem.

The problem with online payments is chargebacks. Except now instead of say a few hundred dollars, what happens if you have a tenant that does a chargeback for half a year's worth of rent? That's a LOT of money!!

And unlike say a retail company where you can vet your own customers, you cannot vet the tenants of your customers (the property owners). Therefore if someone is renting to lower quality tenants, and there are chargebacks, what happens? Who's responsible? How long will it be before you start to have problems with the credit companies? How long before the payment processing company will require all kinds of hoops before they accept people into their systems?

You basically need to become a Paypal for online payments. And so most of your time ends up being spent dealing with fraud because the amounts are so big and as a result the impact is so large. That's the hard problem you have to resolve to stay in that business.

All the while remember that payment processing is a low margin business. You cannot charge more than 3-5% for accepting credit cards. For many property owners paying an extra 3-5% to accept rents is a non-starter. remember that real estate renting is often a business built on leverage, so when you make 5%, that's 5% of the leveraged amount and can be quite significant in comparison to your cash investment. It's a double edged sword, and getting hit with an addition 3-5% can have a significant impact.

During all this time remember that there are tenants who are actively looking for these kinds of rentals, to take advantage of this possibility. They aren't the majority, but at the same time the majority of rentals don't accept credit cards for rent payments.

What we tend to see people asking for this are trying it for the first time. Most will eventually find a way to try it, and after a short while the vast majority stop because of the above. You generally only see the bigger companies offer it over time, and that's because they are bigger and can more easily absorb the issues. Not only that but they have processes in place, have better negotiating power, and so on, so it's easier in comparison for them. But that generally means you're dealing with companies with thousands of units, and they aren't the bulk of investors and/or property management companies in the market.

It's a tough business. It's really a subset of a Paypal/Stripe type of business, but with larger amounts and biggest potentials for fraud...

newleaf• 13 years ago

I don't think many (any?) landlords accept payment by credit card. Usually these payment solutions are tied to a bank account where the rules are much different.

FollowSteph36• 13 years ago

Some do. And we get many requests from people who want to. As such we tend to try to inform them about the potential costs and risks associated. In many cases they had no idea, so it usually ends there.

But yes some landlords do. But it rarely tends to last long. All it takes is one bad tenant to fully appreciate the potential risks you're exposed to, because remember that rent is generally applied against a mortgage.

FollowSteph36• 13 years ago

I've noticed that most people here when thinking about real estate related business focus on finding rentals. That's because that's what renters tend to see and therefore know.

Unfortunately happens to a very saturated business. Not only that but it's extremely hard to make a profit. Who pays for the service? I've yet to see anyone but the property owner that's lasted.

But more importantly is it worth paying for? Is the website big enough to have enough people looking on it for rentals? Maybe craigslist, but what about a new website?

It's a chicken and egg problem. Until you have enough rentals no one uses your website to find rentals. So what these companies tend to do is scrape content, or load it from somewhere. But is it sustainable?

It basically falls into a winner takes all type of business. And sadly I haven't anyone get big enough to take a commanding lead, so most look like sites that were slapped together and eventually had to fall back to ads, and then have been left to slowly rot. Not all but that's the majority...

mottey• 13 years ago

We're a new start up trying to make a difference here in Australia with real estate listings that provide ad free, clean and simple design but also build a community for discussion of the best places to live: http://www.homely.com.au/

davemel372• 13 years ago

For those that think real estate tech is wide open, here is a guide of 101 tech startups (and some established ones) I found in the Commercial real estate space...

I found these by browsing tags in angellist, crunchbase, and attendee and exhibitor lists of CRE tech conferences, etc...

None of this touches the internal tech many large brokerages build for their own workflows...

http://www.papershare.com/paper/101-technologies

tim333• 13 years ago

My papershare asks for a stupid bunch of stuff before it'll let you read anything. For twitter it demands the right to edit my profile and tweet on my behalf for example.

tmzt• 13 years ago

For anyone doing payments in the rent payment space, please offer an every 2/4 weeks option for people paid bi-weekly.

tk999• 13 years ago

If anybody interested to work together on a software project, ping me as well. I am interested to work on a real estate based project.

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