Will Airbnb enter the long-term rentals space?
Airbnb penetrated the short term rental space without having to hurdle over hundreds of thousands of Realtor leasing agents. There is no money in short term leases, therefore there are no middle-men flocking to it. Leasing agents don’t exist in response to a market need, consumers and homeowners are quite capable of transacting directly, as they do on Airbnb’s platform. Sales agents and brokerages show up where there is money to be made, and then crowbar their way in-between transacting parties.
You can stay in an Airbnb for a year, people do it all the time. Its a month-to-month feature many homeowners offer that cumulatively turns into twelve months.
That’s a 1 bedroom apartment close to Temple Hospital in Philly. No Realtor involved.
Here’s an identical unit close to Temple Hospital from the MLS with a Realtor involved:
Commission for this unit is half of one month’s rent:
If you increase the duration of stay from 1 week to 1 year, from a process and paperwork standpoint, nothing changes.
However, there is one obvious difference between a short term stay and a long term stay. This difference exists for residential resales as well, perhaps you’ve already thought of it.
If you’re going to live somewhere and change your address, you likely need to see more than one property, and boy oh boy, aren’t real estate agents happy to convince homeowners that only they can attach a lockbox and let people in. Showings are trivially easy to work out, but nevertheless, it is a routine task fulfilled by agents for a disproportionally high fee. But the peer-to-peer communication synergies we see working in short term leases could absolutely extend itself to long term leases, and even sales, entailing lots of showings. We would see prospective tenants, buyers and homeowners scheduling or communicating directly through the platform as they currently do with the click of a mouse:
The reason Airbnb hasn’t entered this space is one of branding consistency. They are the category leader in hospitality platforms and incorporating residential leases into their current UI/UX may be too inelegant, and pose a risk to the brand greater than the potential financial gain.
The two-sided marketplace platform revolution
However, doing so would benefit homeowners greatly as their 3% fee against the 12 month gross lease would be dramatically lower than the half month’s rent homeowners pay agents to oversee the transaction. And that highlights the financial advantages intrinsic to a platform. They give homeowners, guests, tenants or buyers the tools and capability to quickly and seamlessly carry out routine functions like scheduling showings and paperwork, whereas the agent, similar to an analogue technology, has to charge dramatically more money because it takes them longer. Its akin to paying someone to cut your lawn with a pair of scissors. Its going to take longer and cost more for a worse outcome. In a middlemen setting, if you want a question answered about the property or you want to schedule a showing, the buyer asks their agent who asks the homeowners agent who asks the homeowner. Peer-to-peer communication creates efficiencies and cost savings that are passed onto the end user, and render the agent insanely unnecessary and expensive as a consequence. It isn’t only the agent that is made superfluous by platform technology, but the brokerages with massive overhead, and all the trade groups as well, all adding ungodly amounts of time and cost to an otherwise perfectly amicable, speedy and affordable transaction.
Agents are not better than platforms at managing transactions or carrying out routine functions.
The value platforms create for people desperately needs to be extended to long term leases and residential resales, which is why I am launching inlyst, a platform for homebuyers and homeowners to communicate and transact directly.