8 min read
The opinions of the employees of You are personal.
In this article, I am sharing a list of six innovative real estate business models, including company examples, to better explain the main ideas.
I focus on two central behaviors: renting rooms and their general use, ie models that generate more income per square meter than conventional businesses.
The content comes from my personal experiences and thoughts. I wanted to organize my ideas so that I hope they will be useful too s, investors and industry people.
The funniest part comes with crossing business models and sectors, which shows great opportunities in the market.
Here are the six models ordered from the most open to the most niche or upright.
Image: Pepe Villatroro
1. Open the platform
Examples: Craigslist, Cubic Meters, Zillow, Dada Room
What is it: In the past they started out as listings or directories and became matchmaking platforms or marketplaces for one or more sectors. They focus on volume and promise to “find space anywhere”. Critical market data (big data) has become a key differentiator, as in the case of property prices on Zillow.
Entry-level models: Premium offers, ads, data and services for brokers, lenders and developers.
An idea: These platforms can develop innovative investment models, similar to Angellist in the start-up world: syndicates and rolling funds, but for development or renovation projects or private mini-FIBRAs.
2. Curated or segment platform
Examples: Airbnb, Couchsurfing, all “Airbnb for X”, ShareDesk, Around
What is it: Marketplaces for a certain sector or behavior where the end customer expects a certain level of experience or characteristics of the service.
Entry-level models: Commissions to hosts and / or end customers
An idea: These platforms focus on short-term rentals, but usually expand into more lucrative and stable longer-term transactions as they build global brands and standards for user behavior. For example, I’ve been using Airbnb for rentals of a month or more for several years instead of using executive suites, hotels, or other options.
There is also a B2B option (from shop to shop) huge to push travel expense control solutions like Concur and Expensify out of the focus of end users.
3. Brokers or real estate agents
Examples: REX, Redfin, homie
What is it: In the past they are intermediaries who offer a personalized service per transaction. Their greatest added value is their contact networks and information, which is why they are quickly disrupted by software platforms and global brands. The biggest innovations in this area are the transparency of prices and matchmaking through machine learning, as well as the elimination of legal and financial complications such as the need for confirmation to rent an apartment.
Entry-level models: Commission of the landlord, end customer or both
An idea: Brokers should take inspiration from financial advisors, who also need to evolve quickly when information becomes freely available. They can become media and data companies that conduct transactions based on their curation and focus on long-term portfolio management. Or in super disruptive slogans: “Director / Real Estate As A Service Team”.
Further disruption is caused by robo-advisors and chatbots pushing traditional brokers to high-end markets and larger transactions that tend to have more complicated legal and business structures.
4. Aggregator / Franchise
Examples: Oyo, Impact Hub, COW.tech
What is it: Companies that offer branding, best practices and marketing to independent operators to become part of a global organization. They fit a common pattern or type of spaces, services, and hospitality and are mostly focused on the end-user experience.
Entry-level models: Commissions based on a percentage of knowledge, brand and standards revenue and fees
An idea: There is a great opportunity in the coworking industry. On the one hand, real estate developers are looking for experienced operators because they have already recognized that the market is moving in the direction of short-term, flexible leases and that they can earn more money with a coworking operation than with a conventional rental. On the other hand, in the face of the pandemic, many independent operators may be open to consolidating and streamlining operations to achieve efficiency and margins under one global brand.
5. Operator / management company
Examples: WeWork, Casai, Selina, Dentalia
What is it: Companies that occupy long-term spaces and add design, hospitality, technology and branding to offer flexible short-term rentals while generating a margin. They often invest together with the owners of the rooms to share income and investment risks against a percentage of the income.
Entry-level models: They rent, design and operate spaces and then rent them out with a playroom.
An idea: With the growth of e-commerce, rapid urbanization, density in smaller towns and homes, I see a great opportunity to convert unused spaces in parking lots into mini-warehouses for personal and small business use or for distribution centers from the last mile of cyber Trade. Either as an operator or as a franchise.
Examples: Selina, Ustorage
What is it: Companies that build bespoke space in cheaper areas with good access to their target market (warehouses outside but near dense areas, hotels on beaches and small towns) or in trendy areas with high-end markets (apartments for foreign).
Entry-level models: They rent or buy to build according to their brand and operational needs and then rent with a margin.
Bonus: There are two other areas worth mentioning that aren’t related to rent or general space usage.
The first is funding, The main scalable innovation was crowdfunding for development loans or income sharing. Their success depends on real estate becoming a profitable asset class for retail investors. In Mexico, Briq and 100ladrillos are good examples of platforms that allow anyone to invest from 5,000 pesos.
The second is hardware. The great promise of the Internet of Things, Smart Homes, etc. These innovations are easy to copy over time. The winners have to differentiate themselves through big data, some kind of network effect or intellectual property. The famous example is Nest thermostats. My favorite innovation in this area recently has been Casai’s keyless entry system.
Image: Gus Ruballo via Unsplash
We can quickly move on to find opportunities for startups and models.
I have two favorite methods of doing this. First, I like to cross sectors and business models, then I want to add the technology lens: big data, sharing economy, finance, marketplaces, virality, etc.
This raises interesting questions and possibilities: Who does the decentralized mini-warehouse franchise? Who will ultimately be the winning platform for flexible, curated offices? Where is the coworking aggregator / franchise with high hospitality and design standards?
Image: Pepe Villatroro
If you’ve made it this far, I hope you enjoyed being a nerd as much as I did.
Get in touch with me to create stunning models. I am particularly interested in global networks, brands and work areas.