South San Francisco, CA · Member since 2016 · 3 posts · 0 votes
Hi folks, I'm a software engineer trying to brainstorm and evaluate financial products that landlords would find helpful. I'm hoping to outsource the idea generation part to you guys. I've listed a couple half-baked ideas below for comment, but am totally open to new suggestions as well. Generally, I would love to learn more about challenges you face that could be solved by new financial products. Thanks!
-Long-term lease purchasing. We would enter into a multi-year contract with you and negotiate a flat monthly payment. We would take care of sourcing tenants (subject to your approval) and deal with all the related logistics. Sort of like a property manager, but we would take on financial liability.
-Rent continuity insurance. If your tenant moves out, we would pay the rental cost until we find a replacement tenant for you (subject to your approval). This way, you have essentially guaranteed continuous cash flow.
-Corporate co-signing for higher-risk tenants. If tenant doesn't pay rent or is evicted, we cover the losses. It's already a big thing abroad, but hasn't made much headway in the US.
Specialist · Milford, ME · Member since 2016 · 630 posts · 378 votes
10y
That sounds like it would be very expensive for you and thus to owners. I think if you developed a software for management that was under $500 as a one time fee and had the following features, there would be a huge market. Open ended in terms of volume, 10 rentals or 10,000, all the necessary reports, network capabilities. Also a late rent report that a tenant can easily understand. I know I have spent as much as $2000 for a management program that I finally couldn't use. Most of them charge per unit and monthly fees. I would think that a one time fee program would take a lot of market share. It would be interesting to know what others don't like about their software and fill a need. Or if there is one already, lets here about it.
South San Francisco, CA · Member since 2016 · 3 posts · 0 votes
10y
@Ed Emmonsthanks for the input. There are a number of excellent, affordable property management tools out there--for example, Cozy is free and (I believe) has an automated late rent report. If Cozy doesn't solve the main pain points for you, I would love to get more information about what you currently find frustrating about the property management process.
@Percy N. agreed that price point will matter. Obviously the numbers will depend on a number of factors, but I've included some ballpark estimate prices below. Would love to get your feedback on the value provided.
-Long-term lease purchasing: ~85-95% of existing rent roll.
-Rent continuity insurance: ~.5-1 month of rent for each unit insured, per year. We would also source new tenants at no additional cost.
-Corporate co-signing: .5-2 months of rent, depending on the credit risk of the renter. We anticipate that the renter will pay for this service as opposed to the landlord.
Rental Property Investor · Winslow, ME · Member since 2008 · 826 posts · 281 votes
10y
I think rental continuity type of insurance / corporate cosigning would be a very lucrative thing to get into. I'm thinking back to when I first started...I searched high and low for stuff like that. I've talked to many investors who pay the oil company a flat fee to cover anything that goes wrong with the furnace, and they buy liability of course, etc. Why not rent continuity? Let's say the premium gives insurance that pays the rent on the vacant unit, with a limit, of course (4 months?) with deductible choices of .5-2 months, and maybe up to $500 for cleaning and damage beyond the security deposit. Obviously this is a risky proposition. The premium has to be low enough to make sense, but high enough to keep out the low income landlords with high turnover and damages. That's where client screening would come in of course.
Broomall, PA · Member since 2016 · 85 posts · 28 votes
10y
Risk pooling is a great thing now to have a decent pool of clients would be key here. I wonder what types of regulations exist for this type of insurance
South San Francisco, CA · Member since 2016 · 3 posts · 0 votes
10y
@Kenneth LaVoie I like the idea of tying in vacancy and deposit insurance into one product. Seems like the major thing that landlords want to protect against is an unexpected disruption in cash flow. Would love to get more context on how an ideal product would work.
@Jason D. risk pooling would be a nice way to lower cash flow risks for landlords. I am going to look into regulations for this sort of product.
At the price points I posted above, would the products currently be useful to you? What kinds of landlords would be the best target customer for each of these products, and how do I find them? I've gotten a lot of generally positive responses, but it's been challenging to find a specific landlord who is in the position to buy a financial product like the ones we are discussing. Thanks again for the help.
Broomall, PA · Member since 2016 · 85 posts · 28 votes
10y
@Nathaniel Becker insurance is based on trust and what you're essentially offering is decreasing the financial risk of investing. I think instead of selling to individuals now you may benefit from marketing to a turnkey company. It will be less frustrating and easier to streamline. You can also adjust for moral hazard and selection bias easier if you had a larger client pool. Pricing would be dependent on property value and income. You haven't given any details on extent of coverage. how many months would you cover, what if there is a natural diseaster in your insured area, how will you insulate your investors, what government backing would you be actively trying to obtain? As an investor trying to figure out those things would be done prior to doing business so if you addressed all doubts and established trust you could have a thriving business.