March 9, 2018
An Interview with Rented.com CEO – Andrew McConnell
Rented.com offers to set up owners with successful property managers who will pay a fixed monthly income for the right to rent their homes on a short term basis. Instead of becoming an expert in hospitality, allow someone else to take it off your hands and pay you a guaranteed income for the privilege.
Who is this for?
Anyone who would rather take a “hands-off” approach and let someone else manage their property.
BG: How did Rented.com come to be?
AM: The day before I came up with the idea for Rented.com, I had never really known what VRBO or Airbnb was. I was on a family vacation and we had just played a round a golf and these two guys just started talking to each other about VRBO.
They talked about everything that went into it. “It was great because you could make this money and you could keep it and control your destiny.” And the reason these people could afford the homes was, one was a physician, one was a dentist. And so you’d think their time was very valuable. And yet, they were spending their nights and weekends doing something that indicated they weren’t valuing their time.
I suggested “Why not make property managers bet against each other to buy all those weeks from you?” And they looked at me like I was the dumbest person in the world and said “Well, clearly that would be way better. If there was a way to do that, everybody would already be doing that”. Well, “everybody” sounds like a good section of the market. Is this actually a big industry? I knew nothing about it. So I emailed my co-founder, a friend from college who had gone into real estate. I said “Have you ever heard of anything like this?”
He said “I’ve never heard of an auction where you would have a competition like this.” And so we were just trying to flesh out this idea. We had this theory that a homeowner has typically just one home, so couldn’t take financial risk on that one asset. They had no diversification in their portfolio. If it didn’t rent, they’re wouldn’t be able to pay the mortgage or the taxes. And the thought was, managers have several properties. They’re going to be able to create a diversified portfolio. But even then, the vast majority of managers (99%) in the U.S. have less than 100 properties.
We have since accumulated thousands of managers that we work with. “What if we create this master diversified portfolio across all these managers?” So, we take the managers that we are willing to back and say “Hey, we’ll do the guarantees for you. We’ll finance them because we’re going to bet that you will pay us more.” So I’ll tell the homeowner, “Every single month, Homeowner, we’re (Rented.com) paying you $4000 a month and you are not going to have to do any work.”
“We’re going to put in our favorite manager in Hilton Head. That manager is going to do all the cleaning, all the guest services, and then they’re going to pay us on a commission basis. If we’re right, instead of getting $4000 each month on average, we may get $4500 a month. If we’re wrong, maybe we only get $3000 a month. But you don’t have to worry about, Homeowner, because we are offsetting this property in Miramar Beach with 10 others in Miramar Beach. And then with 2000 others in Europe, Africa, Asia, South America.”
So, we truly create this diversified portfolio. If they’re in Orlando, there are 500 managers and every manager tells every homeowner “Hey, I’m the best. I’m going to make you the most money. I’m going to take care of your home the best”. And how is a homeowner going to compare that and say “OK what does ‘best’ mean? How do you prove that? What is the objective criteria you’re using here?”
Because we have their data, our managers can say to a homeowner “Don’t guess. I am the best because I’m going to pay you $5000 a month”. When they do that, instead of one in a 1000 homeowners signing up with them, it’s 10 in a thousand. It goes up 10x on how many homeowners they’re able to sign up. So managers love it. Homeowners love it and these transactions happen a lot more frequently.
BG: Is the highest bid that you might offer almost always higher or about the same as what I could make doing it myself?
AM: You’re going to make more than if you put in a long term tenant in most locations. Comparing our bid to what you could make on your own depends on a couple of things: 1. Do you value your time anything greater than zero? If you value your time at even $10/hour, then yes, you make a lot more. If you value it at $20/hr, you make a whole lot more. If you don’t value your time, sometimes it still ends up being more because, even though you like doing it, that doesn’t necessarily mean you’re good at it. So, if you’re not good at it or if you don’t like doing it or if you value your time, we’re going to give you a better deal. If you don’t value your time, you’re really good at it and you love doing it, keep doing it yourself.
BG: And you have a simple way for a homeowner to get a sense of how much Rented.com might be willing to pay them for the use of their home as a vacation rental?
AM: We have a tool on the site. Within 60 seconds you can get a rough estimate of how much we can pay you per month. We’d put in a professional manager who is cleaning and maintaining that property every single week. It’s actually maintaining your asset value better than if you were trying to do it yourself. So we give you this turnkey service plus guaranteed income.
BG: Tell me about your short-term rental report.
AM: We’ve just put out a new report* on the top markets for ROI purposes and it’s not the markets that you would think. It’s not in the markets that return the most money. It’s the most money relative to your costs, because those are two very different things. In Aspen, you can make a lot of money. But if the average house price is $4 million dollars, it’s not actually returning you much (relatively), compared to a $100,000 condo in Panama City Beach that can return 20 percent on your investment.
BG: What are your thoughts on the industry as a whole?
AM: We’re still in a huge upswing. I think we’re going to continue to see it grow at extremely high rates. Because of that growth and the attention that growth brings in, competition is actually elevating. So, yes, there’s this huge opportunity, but you’re not the only one seeing it.
BG: That’s the biggest lesson right? You can’t just put up a generic rental on your own and think that that’s going to beat anybody. You have to come up with a brand, a story, a niche, and be different in a way that nobody else can be.
AM: Right. What is it that only you can offer? So, what I say is “You can’t be everything to everyone but you have to be everything to someone”.
*The Ultimate Guide to Vacation Home Ownership by Rented.com:
If you want to read additional insights from vacation rental experts, check out Vacation Rental Jumpstart’s expert guide.