Market Study & Business Strategy

Transcription

1 Market Study & Business Strategy Last Edited February 2018 RntX 1

2 Contents 1 Introduction 3 2 Snapshot 3 3 Market: Real-Estate Rental Landscape in Market Size Market Growth Strategy Blue-Ocean & Point of Entry Roommates & Early-Adopters Onboarding Landlords Adoption

3 1 Introduction Many people are highly unsatisfied with the roommate finding process. Complaints range from it s creepy when referring to classified sites like Craigslist, to it s time-consuming, followed by frustrations surrounding the difficulty of gauging whether someone will be a dependable roommate. When RentHoop was founded in 2015, its principal mission was providing a safe and social experience to those searching for roommates. To date, our app has onboarded over 33,600 unique users in all 50 states and in 106 countries. We ve worked hard to determine what roommates need to know about each other and how to drive engagement, and have been recognized for these efforts every year since founding on NBCNews (twice), Forbes, USA Today, MTVu and many other regional and local publications. Forbes recently cited RentHoop as one of the Most Promising Housing Apps To Watch in 2018 and NBCNews ran a piece on the front page of their website introducing the app as Tinder for Roommates. As the RentHoop mobile application entered a stage we were confident in throughout 2017, two years of great insights extracted from large volumes of data and analysis combined with the expertise we had developed in the rental space compelled us to begin asking bigger questions surrounding the lack of transparency and deep fragmentation of the real estate industry. Several RentHoop team members had already been following the development of decentralized technology, and our experience building community-facing platforms from the ground up allowed us to dive deep into the conceptualization of solutions to the very problems we had been studying for years prior. RntX is being led by RentHoop, and was born as an endeavor to tackle a broader set of universal problems, with the potential to introduce unprecedented disruption to a market that is just beginning to open up to technological advancement, relying on processes that are neither agile nor lean, and struggling to keep up with the emergence of the sharing economy and the prioritization of access over ownership. 2 Snapshot 3

4 XRNT 2016 LAUNCHED 33,600 UNIQUE USERS 106 COUNTRIES 50 US STATES 10 COLLEGES 25 PRESS HITS 1 START-UP PRE-ACCELERATOR BASED IN LOS ANGELES

5 3 Market: Real-Estate Rental Landscape in Market Size There are over 110 million renters in the United States alone. RentHoop s target demographic has been young millennials under 30, since they are most likely to live with roommates [15] - this represents 55million millennial renters in the US market, around 25million of which live with roommates [5]. Furthermore, these 110 million renters are spread throughout 45 million rental properties, owned or operated by 23 million landlords [1]. Many rental properties are managed by professional property managers, and there are over 247,000 property management companies that produce $77 billion in revenue [11]. These numbers reflect US demographics, which were RentHoop s initial target - RntX targets the rental markets of the entire world. 3.2 Market Growth There has been unprecedented growth in the rental market over the last decade in the United States. The number of rental households has increased 19.2%: from 37 million in 2005 to 45 million in 2016 [7]. This increase in demand has fueled additional development: over 300,000 new units in the most new-supply growth since the 1980s [7]. With historically high levels of rent-burdened tenants, the number of people living with roommates or relatives has also increased drastically in the last decade. In 2005, only 39% of adults age lived with relatives or roommates. In 2018, that number has risen to 55% [15] - data that served as validation for our go-to-market strategy at RentHoop: catering to a younger audience that is in need of roommates. 4 Strategy 4.1 Blue-Ocean & Point of Entry The rental market is highly fragmented due to the supply of rental properties being spread throughout the hands of over 23 million landlords in the US. Due to the magnitude of the market, many companies compete for market share in the rental advertisement, payment processing, application processing and digital lease-signing sectors. The competition is often so intense that firms cannot sustain themselves. This type of industry is typically referred to as a red ocean. Our go-to market strategy at RentHoop is often referred to as a Blue Ocean strategy. To avoid costly competition, we ve focused on building solutions for an underserved population 5

6 - renters - through an innovative mobile app aimed at facilitating the roommate-finding process. This strategy is well-regarded amongst startups and has led to some of the most influential and innovative products (Expedia, Sales Force...). Because younger audiences to be more receptive to technological innovations than other groups, we found that the most efficient entry strategy for a product like RentHoop would target renters, who are generally younger, rather than landlords, who are on-average older. 4.2 Roommates & Early-Adopters The primary function of a marketplace is to connect supply and demand. In the rental marketplace, landlords and property managers own or manage the supply of rental houses and apartments and want to connect with renters who demand a place to live. The rental marketplace is particularly interesting as it contains a supply/demand function within the demand - or as we like to call it, displays demand inception. Consider these two scenarios: 1. You go to school at UCLA in Los Angeles, California and live in a four-bedroom house. One of your roommates graduates and is moving to a different state, leaving one bedroom vacant in your house. As one of the renters living in that house, you have a room that you need to fill so as to not get stuck with an additional rent burden. Around the same time, an international student who may be transferring to your college is in need of a bedroom. 2. You are moving cross-country to go to community college and want to find an apartment close to campus. A 2-bedroom is far cheaper than a studio so rather than live alone, you look for a roommate who you can go apartment hunting with. These are the kind of connections we have been facilitating through our mobile app. Our app has seen great adoption amongst a younger audience, specifically college students. Since we started collecting data, we ve had students sign-up in over 20 colleges. 4.3 Onboarding Landlords One of the major difficulties that companies in the rental market face is registering and onboarding landlords. Through hundreds of hours of interviews and research, we ve thoroughly studied the landlord market and broken it down into three categories: 1. Landlord Owned and Operated Typically, these are investors who own between one and four properties. They are responsible for sourcing and screening tenants, tending to repairs and maintenance, 6

7 collecting the security deposits and rent, as well as drafting and enforcing the lease. These landlords are hard to reach, as there are few updated and comprehensive databases that can be used to contact them. The plethora of landlords owning a small number of properties is a driving reason for which the rental market is typically referred to as fragmented. In fact, even the largest manager of apartments (Greystar) own or operate less than 1% of the total inventory (400K of 43 million rental units) [10]. As a result, the cost of acquiring these landlords is extremely high, which is why RentHoop chose to focus on providing a platform that targets renters looking for roommates in its initial expansion efforts. Renters are more likely to introduce network effects that organically funnel landlords into the platform. 2. Landlord Owned; Property-Management Company Operated There are more than 250,000 property management firms that make a combined $77 billion a year [11]. According to DoorGrow, landlords are most likely to turn to property managers in order to operate their rental units if they own more than four properties. Property managers will generally assume all responsibility for the tasks mentioned in the previous section. While the cost to landlords varies, the most common pricing structure is one month s rent upfront in addition to 8-12% of the monthly rental price. Property managers are far easier to reach than the first category of landlords. Most can be found through a Google or Yelp search and have generally developed some sort of web presence to aid in filling vacancies. As such, they can be contacted through phone calls, and social media. 3. Corporate-Owned Large real estate firms such as Greystar fall into this category. They own and typically manage apartment complexes constituting thousands of units. These firms are easy to find and contact. According to Zillow [15], corporate real estate firms experience a high amount of tenant turnover, namely 52% a year. This is coupled with high tenant-acquisition costs: $159 per unit are spend on advertising and approximately $206 per unit a year are attributed lease concessions. Overall, Zillow estimates that over $5 billion a year is spent on attracting and retaining tenants, and $2.9 billion a year is spent on advertising rentals. 4.4 Adoption Our data has helped us come to a few conclusions about onboarding landlords to the network: While small landlords are harder to reach, they are also the most in need of digital tools that streamline the rental process. These sales cycles are also likely to be the 7

8 shortest given only one actor is required to approve of the network. Many property managers already rely on third-party software but could unlock major benefits and reduce costs by joining a decentralized ecosystem. Sales cycles will be relatively fast - ranging from one decision maker to a small handful to approve the implementation of such a change. Corporate real estate firms are easier to reach and generally the most technologically advanced. They seek to rely on digital processes that allow them to standardize as much of the rental process as possible. It will require longer sales cycles to onboard this category to the network, as there are many decision-makers at play, and greater liability in the event the implementation fails to suit their need. Corporate real-estate firms are therefor likely to perceive more risk in a decentralized world. References [1] Rental Protection Agency. Rental statistics (rental clock), [2] Bloom, [3] United States Census Bureau. U.s. mover rate remains stable at about 12 percent since 2008, [4] Jason R. Dinse Christoph U. Schmid. A compilation of the national tenant?s rights brochures from the tenlaw project, [5] Mark Obrinsky & National Multifamily Housing Council. Quick facts: Resident demographics, [6] eurostat. People in the eu? statistics on geographic mobility, [7] Mary Salmonsen & Multifamily Executive. Housing market trends: 2017 year in review, 2018 outlook, [8] Mary Salmonsen & Multifamily Executive. Yardi: Rents rise 2.8% year over year through january 2018, [9] Mona Chalabi & FiveThirtyEight. How many times does the average person move?, [10] Greystar. Greystar tops 2016 nmhc 50 list as largest manager of apartments for sixth consecutive year, apr [11] IBISWorld. Property management (us) - industry research reports,

9 [12] Urban Land Institute and PwC. Emerging trends in real estate new market realities (europe 2017), nov [13] Vojtech Petrik David Marek Miroslav Linhart, Petr Hana. Overview of European Residential Markets. Property Index. Deloitte, sixth edition, jul [14] Charles Lane & Washington Post. Why the decline of the homeownership rate is good news, [15] Lauren Bretz & Zillow Research. As rents rise, more renters turn to doubling up, [16] RentPrep Stephen Michael White. The best landlord guide to charging rental application fees, [17] New York Magazine WILLIAM BRENNAN. Worst roommate ever,