The Top Problems with the Rental Search Market Today

There are many problems with the rental market today. This episode will discuss the top issues with the rental search market today, like huge fees, a seemingly endless list of places to choose from, no way of narrowing down exactly what you're looking for, and more.

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 Dwellsy, 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 Top Problems With The Rental Search Market Today

We were talking about the renter search experience and the fact that they are generally not finding what they're looking for with the pay-to-play classifieds platforms. Not because those platforms are bad in any way. They're great at what they do. It can, by and large, generate high-quality leads for those upscale landlords. That's something that serves those landlords well. For your average renter, looking for that single-family rental or that walk-up unit in the West side of Chicago or whatever that person might be looking for, they don't have that inventory. Most renters that I talked to are looking for and considering a wide variety of potential options.

They're thinking about a single-family rental, a small format multifamily, something owned by an individual landlord. They're willing to consider the large multifamily properties as well in many cases, but they're considering all those options. The dynamic doesn't allow them to consider all those options in one place and look at them side-by-side

Is fraud still pervasive? We talked about Craigslist, but is fraud still an issue now within the testified these students, or not even classified listings, the rental marketplace.

It is. It's everywhere and it's staggering. The scary thing about it and the thing that's harming everybody in this ecosystem is this professional class of fraudsters that has been created by Craigslist ultimately. Now they're looking for other homes. I presume Craigslist is less productive for them than it was in the past because so many fewer people are using it these days. They're looking to other platforms. It's a constant battle here at Dwellsy to keep fraud off the platform. There's a constant everyday effort to try to make sure that they don't make it into the platform. I know others are fighting that same battle as well.

You could build the best platform in the world, but the renters won't come. You've got to go out and get them aggressively.

It seems that in a world, and I'm wearing my PropTech VC board member hat here, when you have other companies who rely on monetizing the renter as aggressively as they can and they can't do that. The renter doesn't have much money to spend. Maybe you can charge application fees or we take a cut of that, but you've got to focus on the landlord. The landlord, you're going to go after the ones that have the money to spend. The incentives are misaligned.

The renter's needs are being ignored. As a company, you have to focus on your core customer, which is your luxury class A, B, or companies that are willing to spend money on their listing. If you have five listings and you only have enough money to promote two, you're going to go for the two best, especially if the price to list is the same.

If you've got a $3,000 rental and $2,000 rental, which one you're going to promote? You're saying this is the problem. This is why companies are being run the way they are. The end result is the consumer. The renter is being bombarded with a bunch of listings that don't fit them. Probably a lot of our audience here can afford the higher end. These platforms are great in that way because they're getting what they want. They're willing to spend on amenities and all that showcase but not your everyday mass-market consumer.

You said something there that I want to challenge, which is the renters can't afford to buy products that help them. That is fundamentally not true. The average renter in this country is paying almost $1,100 a month in rent. That's $13,000 a year that they're spending. Would they be willing to spend $50 or $100 to have a dramatically better search experience? I think they would. It’s just nobody's ever offered them a product that they want before. Everybody's always focused on, “We can do enterprise sales and sell to the REITs or sell to the big property managers.” That's a quicker path to building a platform and a faster, easier path to that.

If you offer a compelling product to the renter, they'll buy it. You look at markets like New York, where people have no choice but to pay a full month's rent or more to a broker to find their place. They do it because that's the way the market works and because they have no choice. That tells me they're willing to pay if the value is there, if they feel like it is a better choice to do that.

Renters don't because renter’s can’t. There isn't a solution except hiring a broker to help you find a place.

There's been nothing between an incredibly expensive broker, a full month's rent or more, and nothing. Those are your two options in terms of getting help. There's a lot of help that renters can get that are in between that makes a huge difference for them and help them be much more successful with their search.

In PropTech, there are some parallels to maybe even health tech. B2C-focused companies have failed historically and are focusing more on the B2B side. This trend was pretty big in the medical technology industry when people pivoted and started selling to insurance companies, health systems, and hospitals. In PropTech, too, there are a lot more companies targeting the B2B side because it's very hard to reach consumers. You’re trying to build the next Craigslist killer, but Craigslist, where it was at its peak, without the issues, obviously.

The residential marketplace is a big opportunity within proptech.

How on Earth are you supposed to reach that many consumers? Often, tech people think you build it and they'll come. I'm sure you could build the best platform in the world, but they won't come. You've got to go out and get renters aggressively. It's not just that. Look at consumer companies like Facebook, LinkedIn or Google. I'm always looking to search for things and connect with friends. I always have a need for business.

For renting, I'm only renting once every few years, possibly, if I'm a renter, not a homeowner. This is a hard market to reach, I would think. It's hard to reach them at that point when they're looking to rent an apartment. How are you supposed to get people to your platform? I know, by the way, you've done a great job. Your traffic's growing like crazy if you're able to share it, but how do you reach that?

It is hard. You have to natively understand and meet the renter where they are. The thing we have going for them is nobody else is trying to reach these folks. Nobody else wants to be in front of every renter in the country. We do. We want to work with every renter in the country and help them find their next place. That's a huge advantage. Folks in property management always talk about water and the dangers of water. Water always finds a way in a building, finding a way to create problems for you. We joke internally that we're like the water. We'll find the easiest way to reach the renter and find a way to get in front of them and start building that experience set and building that brand.

The reality is we think there is somewhere between 3 million and 5 million renters in the market at any given time, depending on the time of the year and whatnot. That's an enormous audience to go out to and to Dwellsy and to give them that great first Dwellsy experience. We have been able to reach them by working closely with renters and talking to renters constantly, understanding how they do their search and getting in front of them in that process, and being there when they are doing the work to find a place. That has led to 40% per month growth in our renter audience, which is fabulous and continues now as I speak.

To take a step back, the whole industry around how you find a home and the residential marketplace is a big opportunity within PropTech. That's why we brought you on. I wanted to share something interesting. You'll agree with me that existing investors have looked at this category differently. They've called this category, Classified Listings. In PropTech, even I have to correct myself when speaking with you because you're disrupting the category. You balk at the time classified listings because that's what's wrong with the category, but existing investors have called this the classified listings industry.

I quote here Dana Stalder with Matrix Partners, a very big venture fund. They invested in ApartmentList.com for $50 million at a $600 million valuation. Here's what they were quoted as saying, “Rentals is the last remaining classified category not yet won by a modern-day startup. Apartment List is well-positioned to lead to charge. A strong and fast-growing disruptor that's only been accelerated in the pandemic.”

Apartment List is a great company. They're focusing on the higher-end vertical and they can disrupt the classified listings market. Your argument here is stop calling it classified listings. By calling it classified listings, you are putting the business model ahead of a problem. The problem here is the renter experience sucks. By calling it classified listings, you're actually making the problem worse.

This case study or example is here to explain to our readers that there are many opportunities in PropTech. The way we look at opportunities itself perhaps might be the very problem with what's preventing us from seeing the core nature. If you bring the business model first without understanding the problem, you miscategorize an entire industry and you miss the big opportunity.

I completely agree with you. It's funny. Talking to folks, they often ask about our competitive set. I've learned to answer that and talk about the legacy classifieds folks within that context because that's where people are coming from. The reality is I don't see us as a challenger to the classifieds folks. I see us as moving in to occupy the space formerly occupied by Craigslist. To your earlier point about being a Craigslist killer, we wouldn't be doing this if we needed to be a Craigslist killer. The fact that Craigslist is already on a deathbed or worse at this point means that we can go after this opportunity.

The folks offering classifieds are going to continue to offer classifieds. That lease up is going to keep buying services from Apartment List or Zumper down the line because they're always going to need more traffic and they're always gone see the value there. Your average run-of-the-mill landlord and renter who's out there looking for a place don't have anywhere to go now. Classifieds is a tiny slice of the universe of helping people find their place. It is not the market or the business.

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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.