Daily bite-sized proptech and property news in partnership with Estate Agent Networking.
Is the lettings industry having an Airbnb moment?
This week, a casual exchange with a colleague returning to the UK and looking for rented accommodation made me ask the question, has the Airbnb model replaced lettings? If so, why?
The colleague said he had been browsing major property portals for a place to rent, but was surprised to find only a handful of properties in a large area. How could that be? A reasonable budget of £1000 per month in a southeastern seaside town returned just a dozen results. An Airbnb search in the same area returned hundreds.
I was aware that during the UK holiday staycation period, before we could jet off and the testing for covid-19 was in full swing, areas such as Cornwall had almost zero rental properties for domestic tenants with Airbnb being the rage.
I had assumed though that later in the year, and hundreds of miles away in a more industrial area, there would not be a paucity of rental property. Having done some research, I was wrong. There is very little inventory anywhere.
Despite as many as 600,000 tenancies in the UK where tenants are not paying or have not paid the full rent, rental costs are still rising. Two months ago the average tenant in the UK was paying £1,051 if London was in the index, £869 if London was excluded. Now the average rent has crept up by 4%.
With Rishi Sunak about to deliver his Autumn budget, thought should be given to the beleaguered private landlord, hit left right and centre with raised taxation, increased bureaucracy and a government that seems hellbent on giving the institutional landlord a leg up.
Also it is always the bottom of the pyramid who pays. In this case, it’s the tenant, and an increase of any kind passes directly to this demographic. There are pressure groups that shout loudly for the rights of the tenants, but if a person or an institutional landlord has an asset that people want and need then market forces will determine the rental value.
If more private landlords sell off their stock, this will dilute the amount of property available. Build to rent may well be a hot topic, but the scarcity of raw materials in the supply chain – bricks, and blockwork materials now on a twenty-week wait – could mean that it is not just toilet rolls and turkeys that the government needs to be worrying about in the next six months.
If a basic right and need for the UK nation is in short supply, like housing, and you add in the other austerity forces, we could be in for a bumpy ride.
As the latest chief economist at the Bank of England, Huw Pill, is right, then it’s time to don our thinking caps. Huw Pill was recently quoted as saying that the “rise in wholesale gas prices threatens to raise retail energy costs next year, sustaining CPI inflation rates above four per cent into 2022 second quarter.”
If that happens, will the spectre of the Bank of England upping the base rate from its 0.1% start to haunt all of us again?
As ever, out of every problematic situation there can be a huge unseen benefit. In this case, JLL reported in Bisnow that it may just be about to cash in on this topsy turvy moment where supply is driving innovation.
“Airbnb is seen to have weathered the coronavirus pandemic better than traditional hotel firms since it can pivot the types of lodging it offers according to demand — in 2020 and 2021 more of its revenues came from staycations rather than international travellers. Its 2020 revenue was down 20% year-on-year, compared to a 50% drop at Hilton, for example.
Asset owners and traditional real estate service firms have responded to that. For its offering, JLL has teamed up with proptech firm Lavanda to create JLL Short Stays, a platform that offers units from its real estate-owning clients for short-term rent, with stays ranging from three days to 12 months.”
Maybe proptech is once again holding all the answers, as the traditional, stodgy and conservative property asset marketplace of real estate realises that it’s in a shared economy service industry space, rather than simply in property.
Given that JLL has a market cap of over $24 billion and is in eighty countries, my guess is that it has plenty of oversight as to what is really going on in the proptech and real estate space.
Lendlord solves a huge problem for landlords
Targeting the semi-professional and unprofessional landlord space, Lendlord is getting a huge amount of traction. As Aviram Shahar, Landlord’s co-founder puts it: “We’re very good for newcomer landlords because we have the ability to analyse new opportunities to make better decisions when you start to build and grow your portfolio. Also, Lendlord works well with portfolio landlords with more than five properties because they have many things to do and to manage in terms of the data and the cash flow.”
For context, Lendlord is a free app and online platform that gives landlords oversight, allowing for smarter management and greater optimisation of their portfolio, managing their tenants, tenancies, tracking expenses and income all in one place. Landlords can determine their best financing options, ideal when analysing new property acquisitions.
Out of all the pain points for landlords, they started the deck around the opaque problem of getting finance for investment properties; mortgages and re-mortgages for landlords.
“This was the first problem that we found, like the property investor or landlord, it’s problematic for them to get financed, because there’s so many rules, so many lenders, and each lender has its own approval criteria. And there are thousands of products out there. So how can they know which product is the best product?”
The Lendlord founders reasoned that if you wanted to automate the process of searching for the best finance for the landlord, there were a number of issues to overcome. Issue one, they would need to build the tech to profile each landlord in a bespoke manner.
Shahar said: “The most difficult problem was this, there was a need to collect all the data about the landlord so the personal information about the income and expenses, employment startups, all the things that debt lenders look at. And then on the other side we can collect all the property information. So if he owns a portfolio and he has some properties under a current limited company and some in private ownership.”
Issue two, just having data in a structured manner was not enough, so the founders had a brilliant idea to supercharge the service.
“We can take this data and do all the tests that the lenders do using the software we designed. So basically, we can stress this, the portfolio, we can take a look on the loan to value, the aggregated balance per lender, all the things we can do automatically with an algorithm that analyses the portfolio. And then we can match to the products that are now available; because lenders release new products on new rates every week.”
Shahar continued: “Because we have collected the data on his portfolio, we also know any penalties that he’s supposed to pay. So we can also calculate if it’s worth swapping finance around, you know, breaking the current deal. I think that the mortgage piece, was the original vision of the company. But then we realised okay, but we have a product that answers, all the other needs of the landlord. So, when the initial users started to onboard to the platform.
“They liked the idea that they can store all of the property details in a secure way in the cloud, which they can access it from anywhere. It became the dashboard of their portfolio in real time. And of course it was free.”
As I spoke with Aviram Shahar, I put on my proptech analyst hat and looked at the app and it is a great piece of kit. By my judgement, good fintech and proptech creates efficiencies, saves time and should be a source of truth. Lendlord does all of this.
It knits together transactions to each unique property in a portfolio and its dashboard helps manage cash flow as banking transactions update in real time.
Importantly, it gives landlords an ongoing profit and loss spectrum across the whole business. And, of course, it will digitally and gently prompt users on all things finance wise, like alerts as to when mortgages are ending, the best options on the market, who is the lender of choice, the rates, and even how much you can borrow.