Consumers who leave home for months often waste thousands of dollars by paying for accommodations elsewhere while still covering the rent or mortgage on their primary residence.
But a new startup piggybacking on the short-term rental website Airbnb says it can help many of those people avoid shelling out for a home where they aren’t living while helping landlords boost their rental revenue.
Flatbook will pay certain renters or homeowners leaving for the summer their full rent (or mortgage) and utilities for the months they’ll be away, and it will also provide them with up to $10,000 in property damage protection. The startup makes money by sprucing up a home and renting it out to guests for fees that add up to more than the housing costs paid by the long-term tenant.
“If your apartment is on par with your neighborhood, we actually are going to come in and make it look spectacular so we’re able to justify the increase” in rent,” said Eyal Toledano, digital marketing director for Flatbook.
After a client hands their keys over to Flatbook, the startup gives the home a complete makeover, storing away lots of existing furniture and decor, and replacing it with an ensemble proven to boost value. A regional manager, interior designer and local artists all collaborate on improving the look and feel of the home, stocking spaces with a mix of luxury furnishings and local flavor.
“We always bring in a Flatbook bed,” Toledano said.
Once Flatbook has whipped a unit into shape, it uses a professional photographer to capture flattering images of the home and then markets it on short-term rental websites, Airbnb being first and foremost among them.
Flatbook charges visitors daily rates that far exceed what the long-term resident was effectively paying.
“Let’s say your rent is $2,500 per month: we might be able to charge $250 a night,” the site says on its website.
The firm ultimately turns a profit by pocketing the difference between what a long-term tenant pays on a rental and the revenue it generates by subleasing it to short-term guests.
The service is only available to people who rent full apartments in highly desirable areas, such as the downtown regions in major cities.
Flatbook says it received 5,000 bookings last year and plans to double that number in 2015. The startup claims to serve 11 U.S. cities and others in Canada, Europe and the Middle East.
Since Flatbook piggybacks on Airbnb, it faces the same pitfalls and legal hazards as the short-term rental website.
Some landlords and neighbors bristle upon discovering that a tenant has used Airbnb to turn their home into a revolving door for strangers. Critics also say many Airbnb rentals are flat-out illegal. A report released by the New York attorney general in October 2014, for example, found that nearly three-quarters of Airbnb rentals in New York City violate zoning or other laws.
Promotional video for Flatbook
Flatbook says it avoids problems by only working with tenants who get permission from their landlord to use the service and carefully adhering to laws governing the use of short-term rentals.
“We’re treading lightly and making sure that the regulations that might exist — we become aware of,” he said, adding that he believes “subletting should be made legal on the basis of how much pain this service is removing from anyone.”
Realizing it could provide savings to landlords, not just renters, Flatbook recently rolled out two property management packages.
Under the first option, Flatbook guarantees the rental revenue previously generated by the unit, and covers the $10,000 cost of furniture that Flatbook needs to work its magic.
The second option “typically” yields the landlord a rent around 120 percent of what was previously generated by the rental, according to Flatbook, but requires the landlord to cover the $10,000 cost of furniture.
If Airbnb is magnifying housing shortages and price growth as some claim, might Flatbook add fuel to the fire?
Perhaps, but Flatbook only services rentals that are already “upper high quality” while providing certain landlords and consumers (tenants, homeowners and short-term visitors) with savings, Toledano said.
Flatbook said its only real competitor is Pillow. The startup charges short-term rental hosts 15 percent of a booking fee for handling listing, cleaning and management of a short-term rental, and providing support to guests.
Pillow competes directly with Flatbook in offering a guaranteed monthly income to a host. Like Beyond Pricing, Pillow uses an automated valuation model to maximize rental rates for hosts.