INSUBCONTINENT EXCLUSIVE:
Missing out on a month rent because you can''t find a tenant is a huge loss
Searching for someone to fill a home takes work, while property managers are incentivized to price your place too high, leading to costly
vacancies.
But new startup Doorstead wants to take on the risk and the work for you
It acts as a property manager for single-family homes, but guarantees you rent at a specific rate starting in a certain number of days, even
if it can''t fill the house or apartment
It also handles all the algorithmic pricing, advertising, tenant interviews, repairs, maintenance, leases and online payments in exchange
Owners just sit back and receive the money, making it much easier to profit off of distant real estate
The startup claims to earn users 3% to 9% more than other property management models.
Doorstead approach to the hot sector of &iRenting&
has attracted a $3.3 million seed round co-led by M13 and Silicon Valley Data Capital, and joined by Venture Reality Fund and SOMA Capital
They&re betting on co-founders Jennifer Bronzo, whose parents ran a construction and property management firm, and Ryan Waliany, who worked
in product at Uber after his recipe platform Kitchenbowl was acqui-hired.
Doorstead co-founders (from left): Jennifer Bronzo and Ryan
Waliany
I grew up going to job sites and learning about construction,& Bronzo says
&In the recent decade, my family purchased a lot of properties in the Bay and they needed help filling capacity
I saw so many opportunities in property management because of how antiquated the industry is.& Doorstead is now operating in five cities
around the San Francisco Bay Area.
As consumers grow accustomed to zero-friction services, that approach is branching into bigger and bigger
sectors like the trillions paid for long-term rentals
Waliany, Doorstead CEO, tells me, &We&re in the process of Uber&izing each step of the property management life cycle.& The startup is
hoping to become the OpenDoor of rentals.
How Doorstead works
First, property owners contact Doorstead and provide some basic information
on the home they want to rent out
They receive a preliminary offer before the startup does an inspection and takes professional marketing photos while digging through reams
of data on local pricing, availability and demand to pick a rate its algorithm believes it can fill the home for quickly
Owners then receive a final offer agreement saying they&ll be paid $X per month starting in Y number of days (typically 21 to 45 days), with
Doorstead absorbing all the risk if it can''t find a tenant.
From there, the startup does approved maintenance and cleaning as necessary,
and then methodically lists the home on all the top rental platforms
It handles open house walk-throughs and runs background checks on potential tenants to find who will most reliably pay rent
Doorstead prepares a lease and gets it signed by a tenant, but even if it doesn''t, owners still get their guaranteed payments
Rent is collected online, and if a move-out or eviction is necessary, Doorstead takes care of the transition to finding a new tenant.
There
plenty of margin for Doorstead to earn if it can consistently fill homes faster
Most property managers charge at least 50% of the first month rent, but instead, Doorstead keeps all the rent of any extra days if it fills
the spot before the guaranteed due date
From there, it charges 8% of monthly rent with no tenant placement fee, which is close to or under the common 10% fee on single-family home
And if it manages to secure a higher rate from tenants than its guarantee, it gives 70% to the owner.
Doorstead claims to be less risky
than alternatives
Property management incumbents have a 43-day vacancy average which leads to $86 billion in economic waste in the United
States alone,& Waliany tells TechCrunch
&This means that landlords could earn the same money and lower rents by 12% for tenants with an efficient market.
The rise of iRenting
With
Doorstead, even if the owner lives far away, the turn-key service lets them efficiently rent their home
That not only important to them, but to overcrowded cities like San Francisco that often see apartments left vacant by overseas owners
because they&re too much effort to rent out
To date, Doorstead algorithm has allowed it to recoup 100% of its guarantees and it shooting to stay above 90%, while maintaining its NPS of
80.
But if the startup is working that well, it only a matter of time until incumbents try to barge in.
It would be a no brainer for
Airbnb to enter this market and Zillow to open this,& Waliany admits, given their existing pricing algorithms and popularity as rental
But Bronzo says ''the biggest barrier is the operations piece that an Airbnb and Zillow haven''t stepped into.& It would be a big departure
from their lean software-based marketplaces
Other property management startups like Mynd, OneRent and BelongHome only offer guaranteed rent once tenants are found, absolving themselves
They&d have to take on a more precarious business model.
What about Zeus, Sonder and Lyric, which offer property management of homes they
then use for corporate housing or as boutique hotels? &An owner of ours considered Zeus versus Doorstead and went with Doorstead because: 1)
our offer was ~12% higher, and 2) they didn''t want the wear-and-tear that comes with having people move in and out of the property every
few days or few months,& Waliany explains
&Sonder and Lyric have 300 move-in and move-outs over a six-year period
Doorstead has ~4 move ins/outs and that results in significantly less wear-and-tear and a much easier operations to manage
Not only that, the long-term rental market is 42x larger and has 12x more addressable revenue.& Doorstead will have to build a brand and
product moat to defend against inevitable direct competition.
As iRenting is still a fresh concept, Waliany warns that &with any new
business model, there will inevitably be ‘unknown unknowns& that we cannot predict, black swan events and things that we might only be
able to learn through calculated bets.& Luckily, because it doesn''t hold the leases for very long, and home rentals typically increase in
an economic downturn, Doorstead liability is manageable in the event of a recession or other crisis.
There are three large trillion-dollar
industries — food, transportation and housing
At Doorstead, we have an opportunity to completely redefine the housing value chain by creating a new class of property management that
eliminates unnecessary vacancies
In the end, this redefinition of the value chain allows ourselves to become the Blackstone of the future,& Waliany concludes
&It seems like we&re giving everyone free money.& That will prove either the startup downfall or a powerful growth tactic.
