I was grabbing drinks with a buddy of mine earlier and we started chatting about “brick and mortar” businesses that for whatever reason weren’t being disrupted by technology. As we were throwing out ideas, one of the business that really captured both of us was rental real estate brokerages. Specifically, we were talking about those typically scummy brokerages that constantly post on Craigslist, show you a few apartments, and then follow through by putting you through a painful experience to actually rent the place. I’m admittedly no expert, but out of the four apartments I’ve rented every experience has been terrible to a varying degree.
What makes them so bad?
The entire process of finding an apartment is pretty terrible but ultimately most of the frustrations boil down to dealing with brokers being lazy or incompetent, inaccurate or incomplete data, and then the absurdity of having to drop of paper forms…in 2014. Venturing into specifics gripes wouldn’t be useful since they’re anecdotal but my general sense is the majority of Boston/Cambridge renters aren’t thrilled with their broker experiences.
A playbook for a better brokerage
At a high level, being successful at this will be driven by building a company culture of excellence and customer service. You’ll have to take Tony Hsieh’s playbook from Zappos, adapt it to running a brokerage, and then feriously build a culture to support it. Concretely, that’ll translate to hiring individuals with high emotional intelligence, trusting them to make decisions, and then buying or building the right tools to make it happen. Ok great, we’re knocking off a famous management philosophy and hiring “awesome people” how are we actually running this thing?
Don’t just pay on commission: This is entirely 2nd hand but my understanding is that most of the brokerages in Cambridge/Boston pay agents entirely on commission. It seems like the net result of this is that agents spend a lot of time chasing crappy deals, and have no incentives to actively help the brokerage. We’re going to pay an hourly rate along with a lower commission based on a combination of factors beyond just the number of deals closed.
Pick a price tier and own it: At all the brokerages I’ve interacted with, they were trying to move apartments throughout the entire pricing spectrum. From $800/mon studios in sketchy neighborhoods to premium 2 bedrooms at $3200/mon in desirable locations. From the brokerage’s point of view it makes perfect sense, since they’re paying on commission they really don’t care if their agents burn hours on low margin apartments – a rental is still money in their pockets. We’re doing it differently, pick a price range and own it. Intuitively, it seems like the best range to focus on would be moderately high priced multi-bedroom apartments in order to optimize both demand and fees captured.
Qualified lead gen: As an outsider looking in, a significant challenge for the strategy we’re outlining is going to be how do you keep a pipeline of qualified leads? Instead of waiting for people to “drop in”, we’re going to be pro-active and be identifying, meeting, and connecting with potential renters before they’re actively renting. From attending startup events to sponsoring events for graduating seniors, we’ll be top of mind for potential renters that certainly will have a future need.
Social and email: None of the brokerages I’ve used ever asked for my email address, guess how many got repeat business? It’s 2014, social and email are critically important channels for winning customers, driving referrals, and building a brand. We’ll start small, with Twitter and Facebook to connect with potential leads and then leverage email to send follow up emails, ask for potential referrals, and then hopefully win repeat business. After that, start experimenting with Faceook ads and display ads.
High quality photos and accurate data: Photos matter, a lot. We’re going to source our own, high quality photos of every apartment that we show. After a year or two, we’ll end up with the best sets of photos for some of the most expensive apartments in the city. On top of that, we’ll be gathering clean, structured data about all of the apartments we’re showing and renting. With this data, our listings will be the most attractive and we’ll also be able to place clients using only our own internal datasets.
Make the paperwork not suck: We’re going to end the frustration of dealing with paper forms. Renters will be able to pay their deposit with a credit card (+2.5% fee) online, fill out the MA renters agreement online, and we’ll actually have them credit checked before they get this far. Close faster, less deals fall apart, and everything is digital. I know companies like RocketLease are already playing in this space and they’d be a perfect partner.
Access better inventory: Unfortunately, this is an exercise for the reader. Beyond hooking into the public MLS feed and tapping into syndicate services like You Got Listings I’m not familiar enough with the real estate market to speak to how to get better listings. Would love to hear any ideas in the comments though!
Anyway, there’s obviously more to running a successful brokerage but looking at my experiences renting and techniques that have worked in other industries I think it would be possible to build a customer focused, technology powered brokerage that was extremely competitive.