London based property management startup Airsorted has raised £1.5m in a funding round led by Concetric and the ever present PiLabs.
What could this be telling us about the future of the wider property-management market?
Airsorted is just one of many Airbnb property-management companies, but in the past six months they have increased their number of properties fourfold. Now, with 1,000 properties on their books, they claim to be the biggest in the business.
This week, partly in a bid to extend their reach to Australia, Airsorted announced they have raised a further £1.5m in funding.
It comes as no surprise, this rise and rise of Airnbnb property-management companies. The California-based company is now so enormous that the success of property-management startups is as important to them as it is to anyone.
But I think there is more happening here, something that threatens to disrupt the wider property industry. You don’t even have to take that close of a look to see that Airsorted’s business model features many services and features that traditional property-managers need to take serious note of.
To start with, the Airsorted business model allows for a more flexible tenancy durations, doing away with the traditional 6 or 12 month contracts. Looking to the future, it seems clear to me that such freedom will evolve into what you could call an essential luxury; something that all renters will come to expect.
With more and more of the population – especially in towns and cities – becoming transient, the demand for flexible letting durations in on the rise. Speaking with Airsorted CEO, James Jenkins-Yates, he told me that they currently have 277 long term (longer than 28 days) bookings. For a business model built mainly upon holiday goers and city breakers, 277 out of 1000 bookings lasting over a month should be a shot across the bow for traditional agents.
“It might be people moving to London for the first time, wanting to try out a few areas, three months at a time, before choosing where to settle. Or it could be someone new to the UK who just needs a place to stay for 90 days while they find their footing,” says James.
So the short and mid-term demand is already present, but what about the real long-term? What about the people looking for rented homes? Could Airsorted theoretically disrupt that area too?
It is no theory. It is beyond that, and Airsorted are already looking into the long-term market. James tells me that they have a product close to completion that is aimed at fusing the long and short-term rental markets, which may be real gamechanger. He’s reluctant to speak too much of it now, but I will be sure to bring you more as and when I learn it.
The more traditional property firms, those who handle most of our rented homes, do already offer a full property-management service for long-term. Foxtons, for example, will take full responsibility for management in return for 17% of all annual income.
But 17% is a lot of money, and it’s because of this that, as James says, “...people think that property-management is just a rip-off...but by outsourcing all of our cleaning and maintenance etc. to small contractors rather than large ones, we are able to make savings that can be passed down to the customers.”
This leads to the next aspect of Airsorted that agents need to be aware of. They offer a choice of two payment plans; the first is a 14% fee of all rental income and the second is a set monthly fee, varying from one property to another, which guarantees monthly income for the owner. The magic of these pricing structures is that they allow for a three-way win for the landlord, the tenant and Airsorted themselves.
My take-home message here is simple; it would not (or will not) be a massive pivot for an Airbnb property-management company to become commercially viable in the long-term lettings market. Because of this, traditional agents need to look at Airsorted’s business model and measure it against their own. This also means reviewing their pricing structure and, ultimately, their geographic and demographic market.
If Airsorted, or any company like them, make the pivot towards long-term rentals before traditional agents have taken heed of the lessons already being taught, we might see another mighty blow to industry as we know it.