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The Changes In Proptech In 2022 | Emir Dukic

PTVC 157 | Changes In Proptech

 

Proptech has been steadily growing and expanding into new industries, but how will it change in 2022? In this episode, we'll look at the future of proptech. It will be an insightful session with lots of information and tips.

 

Rabbu is a flexible asset management platform that provides property investors higher returns on their portfolio through short, medium, and long-term tenants. Its services include: procuring the best properties, evaluating your return on investment, getting the property ready for tenants, listing and marketing the property, handling support and operations, and coordinating all financial aspects. By providing end-to-end property asset management services on your behalf, our goal is to unlock your property's potential and enable you to earn higher returns hassle-free. 

 

Know More https://rabbu.com/

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The Changes In Proptech In 2022 | Emir Dukic

 

In this episode, we have the Founder and CEO of Rabbu, Emir Dukic. Rabbu helps investors acquire and help manage short-term rentals. I have followed Emir for some time. He did pitch me once and one of my regrets is not investing in the company, but Rabbu is doing very well. We will be learning a lot about the property management industry.

 

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How are things going, Emir?

 

Zain, first of all, thanks for having me on. I loved the conversations you mentioned we had prior. I appreciate some of the feedback you gave me when we talked back then. I am so excited to be back on and chatting with you. Things are going well. It is an interesting time in prop-tech and the real estate world. We are digesting that information on a daily basis. It is a fun time to be doing what we are doing.

 

I would love to dive into your story. How did you end up as the founder and CEO of a very fast-growing startup?

 

I was born in Bosnia, ex-Yugoslavia, and lived there until I was six. Unfortunately, when I was six, a civil war broke out and my family was forced to flee. We fled to Germany and lived in Germany for six years. I started school in Germany. I consider myself more German than Bosnian just because that is where I started school. A lot of my formative years happened there. We won the lottery to move to the United States. We were on temporary visas in Germany.

 

We got to the point where we either could move back to Bosnia, which at this point was a war-torn third world country or we had some family that had already made it up to the States that volunteered to find a sponsor to put us in a lottery pool to potentially become eligible and come move to the United States. Somehow, God willing, we won the lottery. We went through a pretty extensive vetting process. I moved to the States when I was twelve in 1998.

 

This is a Green Card lottery, right?

 

Correct. I won that lottery and got the Green Card. I met those eligibility requirements and eventually became a US citizen. I have been here now for 24 years since 1998. My lifetime has been spent here. I am more American patriotic than anything else because I have been here the longest. I have only been back to Bosnia once since we had left.

 

Short-term rentals are much more flexible assets. They can be rented for a couple of days, weeks, or months at a time and can serve multiple purposes.

 

I got my citizenship, went to school in Charlotte, North Carolina, got an Engineering degree, and did the engineering thing for a handful of years. Honestly, I became depressed and was not happy. I felt like I was not taking advantage of the situation I presented to myself. There is nothing against engineering and being a civil engineer but I thought I was leaving an opportunity on the table.

 

I reached out to a tech startup in Charlotte that had been founded by a gentleman named Matt Clocky. It was a soccer technology platform from Europe. Soccer is my blood. I reached out to Matt and offered to work for free for him as an intern. He took me on. I eventually was brought on as a business analyst and worked my way up to be the VP of Ops at Kik, which is the name of that startup. That company was acquired by NBC Sports.

 

I started thinking about the full expectation that I need to now start something on my own. I thought I would be at NBC for a year as part of the acquisition for contract, so I started playing around with ideas on what that would be. Right at that period, my wife and I purchased a house in Charlotte that had a detached garage and a room above the garage. It is basically a 200-square foot room that has an attached bathroom to it.

 

Ideal case scenario, I would imagine a man-cave, watch the game, and split my video games up there. At that point, I had two little kids, and there was no way it was going to work out. I would go to a separate dwelling away from my wife and hang out in my man cave while she was in the main residence with the kids. We decided to put it on Airbnb for some discretionary income hoping to make a few hundred dollars for travel money, basically. The next thing you know, this 200-square foot room above our garage was paying the mortgage on our house.

 

We are like, “There is something here. Let’s see if we can replicate this.” We went out and found a couple more properties in the Charlotte area, set both up as Airbnbs, and found them to generate significantly more revenue than traditional long-term rentals would have. We knew we were onto something and I brought on a co-founder for the company. His name is James Strong. He is a full-stack developer and coder engineer.

 

Even at three properties, I was bogged down in the day-to-day because I was sending out messages. It was very proactive communication. I knew technology could solve this. I tapped James on the shoulder and said, “This is what I am doing.” At that point, the idea is to build out a hospitality brand for short-term rentals, similar to what Saunder and a few other groups are doing right now in the space.

 

James started building out the backend tech. Acquisition at that point for us was a master lease. We lease it from somebody but the idea is to turn it into a short-term rental. As we started talking to more and more investors, they kept saying, “I do not want to master lease this to you. I want some of the upsides. Will you guys find a way to operate it for us?” As a startup that was still being bootstrapped up at that time here, we are like, “The acquisition cost is much lower. There are very limited startup fees. The owner is going to pay for most of that. Let’s see where that can take us.”

 

Changes In Proptech

 

We took a turn in that direction and realized the big opportunity that we had in front of us, which was creating a new, shorter stay, short-term rental asset class because people wanted to participate in the space. They did not know how to and needed the tools to be able to do so, so we started building technology and our own operations teams around doing that.

 

When people think of property management and operating rentals, could you give us a breakdown of the landscape? What types of different opportunities are there? I know you touched on the short-term but how do you look at the world, including long-term and short-term? How do you break it down?

 

First of all, there are commercial and residential. We are primarily focused on residential. That is the world that we are in. There are three types of residential management in our minds. There is traditional long-term residential management. That are single-family homes that are rented out for a year at a time. You also have long-term large Class A multifamily management. Those two, you would be surprised, had very different fee structures like a long-term rental owner of a single-family home pays his property manager is completely different than what a Class A multifamily building owner pays their property manager or their asset manager.

 

You have vacation rental management as well. This has been around for a long time. It is a vacation destination, and those are the second homeowners with a property. I know you are on the West Coast, so let’s say they have the property there and want to spend a week every few months out there. They buy the asset and hire a vacation rental manager to operate that asset for them to limit their liabilities or offset any liabilities that have been possible. In our mind, Airbnb is such a juice by becoming more mainstream and going more urban. It is this thing called Short-Term Rentals.

 

People still think at short-term rentals and vacation rentals are one of the same. To us, they are different. Vacation rentals are in vacation destinations where people stay for a few days, maybe up to a week, depending on the market. Short-term rentals are much more flexible assets, usually in more of a market.

 

What I mean by that is these are assets that can be rented for a couple of days, a couple of weeks, or a couple of months at a time. They can serve multiple purposes that COVID has accelerated people to work, live, and travel from anywhere. It has gotten a little bit more complex but I think that is to the benefit of proactive property managers. There is a lot more opportunity out there than there was prior.

 

Where do you think the opportunity is? What should they have known to do with the single-family home they have? How do they decide whether they should put this on Airbnb, let it sit and appreciate, put it on a long-term lease, or whatever other model is out there?

 

Changes In Proptech

 

That is honestly the first question that we get all the time when we talk to potential partnerships and clients, “How much money can my property make?” It is because people do not know. Often, it is not very easy to figure out. We always advise other operators and owners to look at data available to them from a realtor, the property management company, or even through some third-party technology that they can use.

 

A lot of times, we will recommend a checkout rental meter to look at what long-term rentals will go for. That data has been a lot harder to find for short-term rentals. There are some decent platforms out there like AirDNA and Mashvisor that, if you dig in, will give you enough information on how much a short-term rental can generate. We launched our own free product at data.rabbu.com, where you type in an address that tells how many bedrooms, and we give you an immediate estimate on revenue potential by columns and allow you to select a column so that you can get a good idea of what your property could generate.

 

A lot of times, we encourage other operators to provide as much handholding as they can to their partners and the owners they work with. This is still a little bit of Wild Wild West, so we have built tools ourselves to educate investors. We primarily work with investors on the opportunity of each strategy so that they can make the best decision possible for their assets.

 

Can you give us a case study as an example of the type of yield you can generate by having something long-term versus flipping it into something that is more short-term Airbnb-focused?

 

It depends on the market and the location. After all fees, short-term rentals will make upwards of 60% more net operating income for the owner themselves. It is not across the line. It is not every home. There is data out there that you can find that will help you dive down to the numbers. There are also some municipality restrictions that, as a property manager or an owner, you need to be aware of that. You need to check with the city that these types of rentals are allowed. On average, we are seeing about a 60% lift on short-term rentals versus long-term rentals.

 

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The Number One Mistake Real Estate Beginners Make When Searching for Real Estate Properties - https://www.youtube.com/watch?v=CReicXz8844

 

Fair and Transparent Renting: Is it Possible? - https://www.youtube.com/watch?v=OqKlQuW61vk

 

Does Nature Improve Human Health? How Rural Property Investment Can Improve Your Mental Health - https://www.youtube.com/watch?v=zIY89be1y74

 

About Zain Jaffer:

 

Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780M.  

 

His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as "Forbes 30 Under 30," "Inc. Magazine's 35 Under 35," and the "SF Business Times Tech & Innovation Award." He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.

 

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