Small Landlord Property Management Software Landscape in 2020

[Editor’s note: These are the conclusions from the category product review series for the small landlord property management software sector. Originally published in the Geek Estate Mastermind.]

From the outset of our category product review series—a test of the value of business intelligence as a service—we took an optimistic, yet thorough, perspective. We observed, questioned, and examined a sector we’re bullish on—property management software—from an objective and strategic lens.

Five diverse products were chosen to better paint a broad category view rather than a narrow software comparison: Zumper Pro, Airbnb, Avail, Cozy, Zillow Rental Manager.

Checks, spreadsheets, Craigslist, and email have been the norm for DIY landlords for years. As software takes over the world, property management software does as well. Each featured product offers streamlined digital solutions to the historically analog practice of property management, while at the same time making renting easier/better for tenants. With a massive chunk of single-family landlords owning fewer than 10 properties, each platform is racing to convert them from analog to digital. 

Given that the target audience fragmentation and geographic diversity make customer acquisition extremely challenging, each featured product leverages some combination of two primary marketing approaches.

The first strategy, which is obvious, is marketing tools and solutions directly to landlords. The second strategy is less obvious but has been proven effective in other industries: pull-through marketing that promotes benefits to tenants and encourages them to champion services to their landlord.

It’s abundantly clear: Of the nine categories we focused on, moving, compliance, and communications were the least built out by the majority of the platforms. Thus, these present the next frontier—aka opportunity—for property management software providers. I’ll go out on a limb and say the biggest area of innovation will be property maintenance, which requires utilizing a mix of all three. Oftentimes this is done while turning over a property, scheduling maintenance fixes is a huge headache, and execution of that work (in a timely manner and at affordable rates) is an even bigger nightmare.

Without further ado, let’s get into further specifics … starting with a strategic analysis of each product reviewed.

AIRBNB

Read Full Review → (members only)

Summary: With the most polished front-to-back user experience (for both renters and landlords), robust trust and verification features, and unmatched engagement–Airbnb is poised to upend the entire category for landlords IF they enter the long-term market.

AVAIL

Read the full review → (members only)

Summary: Although its the most complete offering targeted at landlords, Avail faces an uphill climb on the customer acquisition front.

COZY

Read the full review → (members only)

Summary: Although it’s a great platform for the price (free!), Cozy has been slow to innovate since adding a corporate overlord with a market cap of $20 billion.

ZILLOW RENTAL MANAGER

Read the full review → (members only)

Summary: With unparalleled demand, the reality is it doesn’t matter if they are late to the game with features or products. They are on the throne until someone usurps them.

ZUMPER PRO

Read the full review → (members only)

Summary: It’s a formidable foe with the best chance to unseat Zillow’s place as king of rentals.

THE WIDER PACK

The five products included in this mini-series are only a few of the options on the market for small landlords to consider. A few others:

Buildium: Software that caters toward larger landlords and property managers (100+ units) and slightly more expensive than the DIY software offerings. Recently acquired by RealPage. Based in Boston. Learn more.

Rentec Direct: Serves more than 14,000 landlords. Based in Oregon. Learn more.

Rentler: With landlord tools and a full search interface serving over 100,000 landlords, this platform’s presence is heavy in Utah (its HQ). Learn more.

TenantCloud: Focused on larger landlords and real estate agents who operate numerous units. Based in Austin. Learn more.

TurboTenant: Serves over 250,000 landlords and more than two million renters. Based in Colorado. Learn more.

REFLECTIONS

We posed several questions in the introduction, so we cannot end this series without addressing them.

• How are property management software companies impacting the small landlord business model?
• Are backend landlord tools and front-end rental search products in conflict with each other?
• Will Cozy and Avail end up adding a search experience or syndicating to more partners?
• Are online rental applications becoming mainstream or are they still mostly on paper?
• Will Airbnb make a play at the long-term rental market?

A GAZE AT LANDLORD TECH’S FUTURE

While the category is advanced from a product lens, it’s not complete as of yet. The marketing, advertising, payments, application, and screening components are robust across the category. Signatures aren’t quite standardized, but are table stakes to serve this category well—we’re not going back to paper and fax machines anytime soon. The other three are still to be capitalized on: moving, communications, and compliance.

Outside of screening, which can be delivered as a specialized service, small landlord property management requires a Swiss army knife approach. DIY landlords aren’t going to use three to nine separate tools to handle each specialized task—not only because there isn’t a frequent use case for each, but because the vendors offering them would go bankrupt trying to acquire customers. It’s my belief that vendors charging tenants for screening fees can scale more rapidly by keeping their software free: zero cash friction is generally a solid onboarding strategy for cash strapped DIYers. Meanwhile, it’s possible for providers who charge landlords for screening services to deliver a stronger product by aligning best interests with their primary customer.

There are a few themes vital to the future of this sector: payments, audience/syndication, compliance, and the transactionalizing of rentals.

Payments
In 2017, more than 56% of landlords were still collecting rent in person according to Zillow’s Housing Report (via Avail). Zillow didn’t report that same number in its 2019 report, so it’s hard to assess how quickly the figure is rising.

Monthly rent payments and acquiring/qualifying tenants used to be the bane of the landlord’s existence, but that is waning as digital payments adoption continues. I don’t believe the original hypothesis that whoever figures out how to deposit payments instantly will ultimately win. I struggle to believe the investment needed to move from next-day (Avail FastPay) to real-time would prove fruitful to the bottom line. It’s not dissimilar to how I view listing update frequency on the sales side of the industry. Is an update cycle of every 15 minutes rather than once an hour going to compel buyers to switch search interfaces? No.

Cozy and Avail both offer Rent Reporting, which helps tenants build their credit history. As the responsible thing to do as a landlord or property owner, that will become standard and an even bigger draw for vendors/tenants to go digital. But instant deposits are not a requirement for success.

Audience/Syndication
It’s true that those who own the marketplace (demand) and own the tools have an unfair advantage. Thus, Zumper and Zillow do hold a strategic customer acquisition advantage compared to Cozy and Avail due to traffic and brand goodwill generated from their rental search products.

This section of the summary was turned into its own blog post, which was previously posted here.

Compliance
As Kenneth DePaul argues, managing and controlling costs are the missing pieces to today’s property management software. A revamping of antiquated offline rental property management applications and converting processes to online applications won’t help if investors don’t control costs. A streamlined expense management system, connected directly into both a P&L and tax software, is the Holy Grail that landlords will flock to were it to exist. We’ll see vendors partner with the likes of Avalara in the coming years to make it so.

Transactionalizing
Like so many other categories, bundling will reign king in landlord tech in 2020 and beyond. Part of that bundling will be insurance, rent guarantees, move-in/out, and even loyalty programs. All integrated with one fell swoop, this would include all the necessary legalities to remain compliant across the board. Similar to how tech-enabled operators such as Lyric, Domicile, and Sonder competed against (and advertised on) Airbnb, we’ll see a similar breed of operators break into the long-term sector. Landlord tech vendors will be forced to partner with boots on the ground to compete with tech-enabled operators.

WRAP-UP

One big question is whether an independent titan will be built or whether future leaders will emerge from (or be swallowed up by) existing titans. Beyond Craigslist (we all know they aren’t selling anytime soon, nor will they invest heavily into software for landlords), Avail, TurboTenant, and Zumper are the largest independent platforms on the chessboard. With its $60 million Series D, it seems clear Zumper catapulted itself into the lead (if it wasn’t already there).

At the end of the day, we’re in the midst of a land grab of a fragmented-beyond-belief customer base. Switching costs are a nightmare, especially once payments are set up—that’s the big moat vendors are racing to build. With all this work behind us, it’s now clear beyond a reasonable doubt that those who gain a defensible foothold in landlord tech, particularly with small independent customers, will become significant industry power brokers in the years ahead.

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