The only constant these days seems to be change.
This is certainly true in the real estate ecosystem. Technology is being relentlessly applied to market inefficiencies, and the traditional brick-and-mortar property management industry may be next with the emergence of property management marketplaces.
Setting the stage
Homeownership is at a 50-year low in America. Conversely, there are more than 26 million landlords in the nation. This rather large, attractive audience actually represents a sector with massive market inefficiencies.
Developers are rapidly creating tools and services meant to make landlords’ lives easier and absorb a little of their profit margin in the process.
The first wave of disruption in this space was modestly led by the brick-and-mortar firms. These were companies that were best able to make the jump to online presence and position their brand in their local markets.
Next was a wave of software as a service platforms (SaaS), which aimed to aid landlords in working more efficiently with existing providers or in self managing their rentals, often without the need of a property management firm.
While SaaS tools have been effective in empowering landlords, they are an imperfect solution. Managing properties, even with the aid of sophisticated software, is at best hard work. At worst, well, just Google landlord horror stories (and feel free to share yours below)!
Despite all the software available, landlords still end up turning to more expensive brick-and-mortar management firms very often. These firms can be poorly staffed and, more importantly, do not nurture the sort of long-term tenant relationships that really benefit the owners’ bottom line.
Enter property management marketplaces
It should come as no surprise that we are starting to see a new breed of tools that, instead of just offering software to manage the properties, are also starting to offer software to manage the professionals who are managing the properties.
They are, in effect, creating property management marketplaces.
What may come as a surprise, however, is that in any given multiple listing service (MLS) market, roughly half of all real estate agents made no MLS recorded real estate income in any given year.
Talk about the 80-20 rule!
This means that in any given market, there are knowledgeable local agents struggling to carve out real estate-related income. Often, they try their hand at property management to provide a stream of steady income. Without a platform to help property owners focus in on the best performers, the results can be hit or miss, both for the quality agents and owners.
Enter property management marketplaces, where you can shop for qualified local property managers.
This is not a referral service (those have existed for quite some time). This is a new service that creates both a technology platform for managing properties and a marketplace for landlords to connect with real estate professionals.
These platforms aim not only to bridge the gap between landlords and agents, but also to nurture and maintain their relationship within the application.
Landlords — especially those who are not local — are starving for reliable and responsible property management options. These are agents equipped with the market knowledge, client and tenant connections, and brokers license needed to professionally represent their properties.
Agents, on the other hand, are looking for ways to supplement their income in what is often a cyclical market with long dry spells between listings.
On demand property management?
In many ways, this new breed of software solutions will be like an Uber app for landlords, giving them the ability to find a local professionals on demand. This is increasingly important in the new economy where so many owners — especially foreign investors — are not near the properties they own.
This new breed of property management marketplaces will keep track of managers’ responsiveness to maintenance requests; performance can be tracked as they upload time-stamped, geo-located photos and video; and inspections and maintenance visits become permanent records available to landlords at any time, with efficiency reporting baked right in.
Real estate has always followed the 80-20 rule. New technology and business models, as well as market cycles, are further separating these extremes. Agents are increasingly forced to diversify to make ends meet.
Conclusions
The recurring revenue stream of managing properties has been a stable source of income for many agents. These emerging application environments allow them to showcase their effectiveness to property owners, which gives them a mechanism to easily scale their successes.
These systems can also act like a buffer between the property manager and the tenant/owner. The platforms themselves can help to limit the property managers liability. This may make it more comfortable for some brokerages to allow or even facilitate their agents’ participation as property managers.
Eventually, these sort of property management marketplaces may replace brick-and-mortar property management firms. The tools they offer will help a new property owner easily source the most reliable, highest rated local property manager, while keeping costs as low as possible through the use of technology.
Michael Seguin is the senior manager of technology at Contra Costa Association of Realtors and proud father to Ava and Ella. Connect with Michael on Twitter and Facebook.