The Struggles of the Rental Market for Both Renters and Landlords

The rental market is tough on both renters and landlords alike. This episode will discuss the challenges of renting and how it affects landlords and tenants.

Dwellsy is a site for residential home rentals, built on the radical concept that true, organic search in a free eco-system creates more value than the pay-to-play model embraced by all current rental listing services.

With Dwellesy Renters should be able to find ALL of the rentals, all in ONE place. They should be able to trust that a listing is not fraudulent. And they should be able to quickly distill down to rentals that meet their preferences -- not be driven toward irrelevant listings from paid placement.

Owners and Managers should be able to list and lease their vacant units for free. Not free with an asterisk. Free. (You can never create a true, organic search on a play-to-play model.)

We are on a mission to transform the home rental market for everyone involved.

Join us!

https://dwellsy.com/

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The Struggles Of The Rental Market For Both Renters And Landlords

On this show, we're joined by Jonas Bordo. He is the Cofounder of Dwellsy, a residential marketplace with twelve million-plus listings. That's two times more than any on the player. Jonas, welcome to the show.

Thanks so much. It's great to be here.

You have quite some strong views on the current listings and classification of the marketplace. Why don't you give our audience a sense of what your strong views are?

It's brutally tough there for renters and landlords. There are no great tools available to folks to get your place rented at a reasonable price. If you're a renter looking for a place, it's like going to the worst flea market you could imagine where all your friends seem to be able to find something and you can't. The number of renters I've talked to feels like everybody finds something great and they don't. The reality of it is so happenstance and luck-oriented in the market.

Years ago, Craigslist dominated the market and it was terrible but functional. In the absence of Craigslist, you have to walk neighborhoods and look at yard signs. There's not a good tool available prior to Dwellsy. That's why we found Dwellsy to help those renters and landlords get their places rented as well.

According to The Washington Post, in 2014, Craigslist was the market leader with eleven billion-plus listings. However, they removed a factored in the removal of duplicate listings stand and other filters. That 11 million dwindled to 1.5 million verified listings. It is shocking the amount of spam and duplicate listings out there. How did Craigslist go from being the way rent found places to coming to this website full of scammers and losing its relevance for how renters find places?

I had a front-row seat for this and I was running a portfolio at the time across our multiple properties and multiple states. We could see the performance of Craigslist. Every month, we saw how it got worse and worse. From about 2015 to 2018, it went from our most important lead source down to almost nothing. As we dug in, we saw a couple of things happening.

Number one, the form of scam that had always been prevalent on Craigslist had gone through the roof. It had got to the point I saw an industry study and unfortunately, I wasn't able to take it with me when I left my last job but that study showed that 70% to 80% of the listings on Craigslist were fraudulent, which is at a level, you can't wonder if you're looking at a fraudulent listing. You are probably looking at a fraudulent listing on Craigslist. That professionalization of fraud on that side and that fake landlord scam was the number one thing that hurt them.

Number two was a scam that emerged in the mid-2010s, in around 2014 and 2015, which is a fake renter scam. This is your classic, “I've got a bunch of money for you. I need some money from you to free it.” Prospective renters would reach out to landlords and say, “I can pay the full year's rent in advance and I'll pay you an extra $200 a month for the courtesy of allowing me to do that. I need you to pay my moving expenses.” The landlords who got taken in and gradually those two scams throughout a couple of years undid any semblance of trust that was there. All that was left were fraudsters.

You're saying the fraud became bad and pervasive that it was two-sided both for the renters and the landlords. You talked about there being telltale signs of fraud at all, perhaps rent or not knowing if they're dealing with fraud. You would think that fraud sounds obvious. I'm sure we'll get these emails from a Nigerian prince. We get text messages from somewhat in Saudi Arabia who need some help and are willing to give you a share of their cut. How obvious or not obvious is it when you're a renter? You would guess as a consumer that there's very little information on the listing so it was probably fake. What was the reality like?

Even when you’re in a tight spot, don’t suspend your rational disbelief.

It all seems obvious in hindsight. When you look at it dispassionately and when you're not involved, it all seems painfully obvious and there were patterns along the way. The reality is for most of the folks who get scammed, the fraudsters are sending out a huge number of opportunities to scam people. They are creating thousands of opportunities for themselves. What they're looking for is that person who's in a pickle and a tight spot for whom their appeal is so valuable that they are willing to suspend their rational disbelief at that moment.

I saw somebody who was defrauded on Craigslist. We looked at the whole fact pattern and they were embarrassed about it because there were multiple steps along the way where they should have known, not to make that next step, whether it's sending a deposit via Venmo. The landlord offers them a discount on the rent to pay earlier and upfront and things that landlords never do.

Not allowing them to see the place, “It's occupied. You can't see it at all. The current tenant is a handful. I can't get in there to show you the place myself.” None of those things map with how it should work but this person was desperate for the place and this place met all of their needs. They'd been looking for months and here was the perfect place at the perfect price. They went for it.

We live in a society where it's based on trust. Unfortunately, some bad actors can abuse your trust but sometimes, even the wisest of people can get scammed without realizing it. I don't know if you've heard of the case with Bernie Madoff. There was an author called Stephen Greenspan who wrote a book called the Annals Of Gullibility: Why We Get Duped and How to Avoid It. This came out in December 2008. It's interesting timing because he wrote the book on how to avoid getting scammed but he's the one who ended up getting scammed by Bernie Medoff.

It could happen to all of us if the circumstances present themselves. The key is trying to find somebody dispassionate to look at the fact pattern for you, somebody who knows and understands how the situation should work or at least can look at it dispassionately and say, “This smells wrong to me,” and then to have the courage to step away, even though it looks like a great deal. I talked to a landlord who'd been scammed with the fake renter scam on Craigslist.

She was in a pickle because she had some capital needs. She had to do some work on the place and here was a renter out of nowhere who wanted to lock down the place and make sure they had it and would pay two years' rent upfront. She needed that. She was like, “Normally I never would have fallen for something like that.” Here was a situation where she had an extreme need and that corresponded with an offer that seemed fabulous. She was willing to overlook things that she wouldn't have normally been willing to overlook and got scammed, unfortunately.

There are a plethora of rental listing platforms out there. CoStar owns a bunch. You got Zillow and Redfin. What's the problem that you're solving with Dwellsy? How does that impact the renter? There’s a naive consumer amongst us but there are many different websites that all seem to have the same down listings.

I have tremendous respect for the CoStar, Zillow and Redfin platforms. Those guys all do a great job at doing what they do. Each one of those has 10, 15 or more brands. There's an illusion of choice out there. Lots of people were like, “I won't use Zillow but Trulia is great.” I'm like, “You know they are owned by the same company sourcing the same inventory.” They are both doing their thing but people have their preferences. They express those preferences freely and that's great. The reality of those platforms is that they have a product to sell, which is classified ads. They sell classified ads to landlords.

Overwhelmingly, the landlords who are willing to pay for those are your large multifamily platforms and typically, classes A and B products. It is a higher-end large-scale property. You're talking about 12% or 15% of the US rental inventory. Fully 70% of the US rental inventory is in 4 units and smaller properties. Nobody is serving that market except for Dwellsy. Nobody is going after that and trying to serve that space.

There's that in-between, those 4,100 units that are another 15%. The CoStar said in their most recent earnings call that they have 50% market penetration and 100-unit plus and 4% market penetration in Florida in 5 to 100-unit space. They haven't gone after that. They're leaving 85% of the market on the table for others to go after. I probably shouldn't be saying this but we're going to start going after it.

When something feels wrong, dare to step away even though it looks like a great deal.

Let me replay what you said. The current way that renters find listings is based on the fact that these listings tend to be focused on classes A and B because they have more money to spend. The entire rental marketplace industry is full of pay-to-play promoting classified listings. Inevitably, there's a search problem and a user experience problem because if you're favoring the listings that pay the most, those are the listings that will be shown to the consumer. It's like the first page of Google or the first ad you see. It’s the thing you're more likely to click on. Eventually, after clicking, you were getting frustrated because this isn't targeting me. Is that what you're saying?

Yes. The average renter is out there looking for a single-family rental or a walk-up unit somewhere. That's what most people want. Generally speaking, you can't find that on those big platforms. It's because those landlords don't have to and are willing to pay for listings. The lease-up down the block for the brand new upscale 400-unit community is always going to be able to pay the most and show up first in every listing search that that renter does.

Ultimately, what I hear from renters over and over again is they search their region. They end up at one of the big legacy classifieds platforms. They search and don't find what they're looking for. They start going out and finding other places. They ask friends, walk the neighborhood and post on Facebook saying they're looking for something and asking for help. If they're lucky, they find Dwellsy and we can help them with that stuff.

They apply and they're left with a situation where they don't qualify because of the credit requirements or even worse the listing has been removed.

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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.