Unbundling happens when technology breaks up a business that used to handle multiple functions into specialized groups focusing on one area more efficiently.
An example is the newspaper:
Previously, newspapers provided diverse content, including news, localized ads, commentary, personals, classifieds, and job postings, all within a single entity. However, with the advent of technology, each category has become a significant market, with individual companies specializing in that vertical. This trend has been observed across multiple industries.
Property managers handle a vast array of responsibilities:
In the past, companies were required to have a high level of expertise in multiple areas, which posed significant challenges. A decade ago, SFR property managers self-managed remodeling and construction exclusively with in-house employees using a local vendor rolodex because other national solutions were rare. Flash forward, Lessen, a company that exclusively handles remodels and construction, does 2.5 million orders annually through a network of over 25,000 professionals.
Lessen’s advantages are clear to its customers:
By outsourcing remodeling and construction tasks, operators have gained the ability to decrease their headcount and shift their focus towards growth while simultaneously increasing their profit margins and improving the overall customer experience. Even the largest SFR (single-family rental) REITs (real estate investment trusts) have chosen to outsource significant portions of their remodeling and construction operations.
Today, you don't shop for leasing independent of property management. They are purchased together as a package. A property manager could be great at repairs and maintenance but has poor leasing metrics. The asset manager’s only option is to settle with the poor leasing performance because the property manager is doing many other positive things for the portfolio. That’s a problem because leasing is arguably one of the most important factors to do well since it’s responsible for the top-line revenue of the portfolio.
Even the largest national property managers are using antiquated tools and a network of realtors and are struggling to build new systems for savvy asset managers. The gap between these legacy processes and the tech/service stacks offered by emerging leasing and revenue optimization companies is widening. Asset managers are becoming more sophisticated as portfolio sizes increase and expectations around reporting and performance have moved beyond the capabilities of the old leasing model.
Large REITs have full teams of engineering, design, marketing, brokerage, and vendor management; all focused on leasing. This is incredibly expensive to build from the ground up and is simply out of the question for most emerging and mid-size operators.
Achieving success in leasing requires attention to the fundamentals. However, obtaining this information can be challenging, particularly when property managers are overburdened with daily tasks and tenant communication. A clear understanding of listing performance, optimal listing techniques, and identifying critical issues requiring attention is essential for success. Failing to identify issues such as appliances needing replacement can result in a significant loss of potential rent revenue, particularly when operating at scale.
The financial impact of better leasing is clear. For instance, one of Sunroom Leasing’s customers saw a 6-day on average reduction in days on the market, accounting for a six-figure change in annual top-line revenue and a 2.1% increase in net operating income.
A specialized leasing partner offers real-time portfolio reporting and audits poorly performing listings to ensure proper leasing processes are followed. This results in a faster escalation of property condition issues, minimizing vacancy times.
Balancing technology and personalized service is crucial in the modern leasing landscape. This is where overwhelmed property managers often need to catch up. Outdated systems fail to meet the demands of the modern leasing landscape, leading to a subpar experience for tenants and investors.
The investment and continual improvement to create Leasing 2.0 requires deep focus and investment. Sunroom Leasing, for example, has already invested over $12,500,000 into product development and design.
Simply put, there must be an option to purchase leasing independently and still have property management covered. Sunroom Leasing accomplishes this through its alliances with leading property managers.
Some operators weigh if the switch is worth the effort. It could mean revising existing management contracts, switching from existing providers, and changing workflows. The switch is becoming standardized and within the next year will become as common as funds using specialized acquisition tools.
A few of Sunroom Leasing’s customers, including Flock Homes, Doorvest, and Green Residential, have already realized the benefits of decoupling management from leasing. Some customers employ management in-house to control the process, whereas others have elected to use third-party managers.
Scattered-site leasing will go through a revolution and look dramatically different than it does today as it unbundles.
