Many tech guys on HN often ask: what use are business co-founders?
Superior domain knowledge would be one thing. If I'm going to team up with a business guy, I want him to be a top notch expert in his field.
There's a tendency for tech guys to discount domain knowledge, believing that it's just a matter of "hacking something out in a weekend, after all it's just a matter of shovelling data" (I used to fall into this trap myself - now I know the value of domain expertise).
Domain knowledge is money-printing sauce in so many industries.
I think the reason young hackers often dismiss domain experts is because they associate the idea of domain knowledge with old people who don't get tech. It's true that most old business people don't understand technology, but it's also true that most young hackers have no clue how to make money.
Now if you can combine domain knowledge with the ability to recognize the potential, and have a realistic vision for the novel application of technology, then you have gold. It might not be the most grandiose idea, but it's 3 or 4 orders of magnitude more reliable than trying to be the next Google or Facebook.
One thing that isn't very clear from the writeup: we went through a LONG trough of sorrow before finding our current pivot. That's a story for another day...
It looks like you guys currently own the SERPs. Congrats on that. There is no way to do that without a ton of patience persistence, and not pivoting far.
I used your service 2 years ago to find my current apartment (I found it without a broker, and sight unseen). It worked great for me, and I am glad to see you guys are doing well.
But since this last pivot, year over year growth is ~10x! You guys are an example of sticking around long enough and trying enough things that one's finally catching good traction. Congrats Lee, well deserved :)
Good timing, I'm just now beginning my apartment search in Manhattan and will be checking out your site.
It's really great to see an HN article with an emphasis on the importance of domain expertise. As someone who has worked in the real estate industry for years, managing ~1,000 units, personally owning rental property, having a real estate license and partially completing a M.S. in Real Estate, I can say with confidence that there is plenty of room for disruption in the industry.
After teaching myself front-end development and the LAMP stack, lack of domain expertise in programming is probably my biggest concern as I prepare to launch my next startup (even after a successful exit from my prior venture).
Thanks for the article and the insight, Lee. I'm planning on building something for real estate as well and have some target users working with me but I probably might not have enough insight on the pains of the process. I'm tempted to go your route and get a broker license as well.
I spent 5 years in commercial real estate brokerage (multifamily) and closed some signifigant deals. What you are building is radically different that what I am working on, but they are both in the real estate space. I'd be happy to talk to you sometime about it. My email is my HN name at Gmail.
New York real estate is a system. You have to learn the system to hack it.
A lot of real estate start ups are trying to "Avoid the Broker." The system isn't as broken as we may think. Landlords enjoy minimal vacancy. Brokers get paid generously. Tenants find apartments.
Complaining about a 15% broker fee is like complaining about the gas for your Lamborghini.
They are the "1-click" brokers. The experience doesn't mean that they aren't a part of a complex system. We usually applaud efficient systems don't we?
more significantly, the major NY brokerages have managed to keep a real MLS from forming. every other US market has multiple listing service, but in the city its been killed and any attempts (like VOW) have been effectively squashed. this is for sales. rentals are small change in comparison.
Its horrible finding an apartment in NYC. Especially if you're a working professional. Most people don't have cars, and apartments aren't helpfully near each other, so you're spending a lot of time hopping on trains and walking streets. If its the weekend, you're spending a whole day just to see a few places if you need to wait for trains. As you can imagine, any place where giving the super a six pack gets you a set of master keys, people aren't very reliable. Half the time you show up and the apartment is gone, the listing is wrong, or the place is a heap.
If you work during the week, you're either running around at night looking for apartments, or by the time you get to the weekend, all your research is out of date. This is why brokers exist in NYC.
Funny, that's exactly what I thought 3 years ago...
I think the root of the problem is there are too many available apartments but most of them are a waste of your time to view. A great broker previews every listing and only shows the best deals.
Similarly for the landlord, most renters who come see the apartment will not take it, so having brokers do the showings saves the landlord a lot of time and effort.
> A great broker previews every listing and only shows the best deals.
But that's exactly the problem -- the best deals get taken on the spot. Luck, not a good broker, makes you the first one in. And in the end, finding a good apartment, and finding a good broker (with that kind of access) are equivalent problems.
In NYC last year it took me almost 3 months to find a decent apartment. I found the broker on Craiglist (of all places), he pulled a bait and switch on the apartment he'd listed, but it turned out to be a switch for the better. I was the first one who ever saw the apartment, because it wouldn't even be officially listed until the next day, but he was friends with mgmt, and I said yes on the spot. I grudgingly paid the broker's fee, despite only having spent 20 min with him. But I'd already met with probably 15 different brokers (some of them just horrible) showing 25 different apartments (most of them just horrible) before that. In the end, it's certainly not like any broker saved me any time or money. I just kept at it until I got lucky -- most apartments, esp. the good ones, just seem to come with brokers "attached" that you're required to use, and very often exclusive brokers, which means it's not like any other broker has access to them anyways.
All of the brokers I ever talked to in NYC were "in" with management, I was always the "first" to see an apartment that "wasn't listed" and it inevitably wasn't the one the broker put up on Craigslist with the awesome pictures because it just got taken "yesterday."
I'm currently living in an apartment that never went on the market, because my roommate (a broker) knew the management company and he gave us a great deal. Brokers who frequent buildings get to know which apartments are coming on the market before they are listed because the supers tell them.
Brokers are compensated for their market knowledge, not just opening doors. The fast that he was "in" with the management company is hugely valuable, and you were able to take advantage of that. 15% is a lot of money, but brokers meet tens of clients each week that don't rent with them, so they are compensated for that low hit rate as well.
And yes, many apartments are exclusive so you have to pay a full 15% fee (split between the broker who has the listing and your broker).
You could have the greatest collection of listings in NYC and still not solve the "rental issue" because you'll always have landlords that only work with certain brokers, exclusives and apartments that are rented on the spot (with no real-time updates). It is nearly impossible to get a real-time feed of data. I've been in the business a year now and I've seen apartments get rented as I was showing my [interested] client the gym. I've showed up to apartments with clients and, embarrassingly, found out that they've been rented between the time I called to make the appointment and the time I showed up.
The entire system is outdated, and the real fix is one that incorporates brokers to make it easiest for clients to rent.
What market knowledge are you talking about specifically? I haven't met many brokers who wouldn't sell/rent you a place because they felt it wasn't worth it.
Your argument that the 15% broker fee is to make up for a "low hit rate" is pathetic. Many people working in retail see just as many clients with low hit rates, yet they don't make exorbitant six figure salaries.
Market knowledge is gained by hitting the streets and knowing which buildings are decent deals. 50% of the time, the renter has a special situation - bad credit, international, needs a guarantor, etc and brokers have to know the buildings and which are flexible. When you go to a broker and tell them you are looking for a $3500 Convertible 2 bed in Murray Hill, they are going to rattle off 5 buildings that have availability. If everybody could do that, there wouldn't be a market for brokers (see lawyers, consultants and just about any other service industry for a comparable).
Most brokers don't make exorbitant six figure salaries, which is why the turnover in the industry is close to 80%. In fact, most make about $40k and leave the industry soon after they enter. Only the top 5% of brokers in NYC are making six figures. Brokers are certainly compensated for the low hit rate, just as bankers are as well. This may be a controversial comparison, but in both industries the professionals work on a success-based transaction fee with a very low probability of success.
Hmm...does that mean that dating sites might be able to improve the user experience of 'fit' users by banning/hellbanning the 'unfit' users? Maybe that's what OKCupid is doing with the whole "Congrats! You're attractive" feature.
I had similar experiences. Some brokers don't really put much effort with rental and showed whatever they had. One broker 'forgot' our scheduled viewing since he was out in the Hamptons showing a house.
I did find a nice apartment with good view (craigslist), but ultimately decided against it due to busy street and location. Also hated the fact I did all the searching, but I still had to go through broker and pay their fees. All the buildings managed by this particular management company used a single RE and there was no way around it.
I suspect a major factor is that the fee, when paid by the tenant, acts as a filter to shut out less desirable (i.e. poor) tenants and those who might not stay long. This is possible because demand vastly outstrips supply.
At least it's like that here in Germany - the broker fees for good apartments are almost always paid by tenants. Any apartment where this is not the case has probably major downsides. In other cities, where the supply/demand situation is different, broker fees are paid by the owners and the broker's added value is marketing (i.e. finding good tenants at all)
broker/makler fees in Berlin are usually paid by the owner as far as I have found. this may change now that demand is so much higher than supply. it certainly wasn't like this 5 years ago.
Yes, Berlin still has (or at least recently had) an oversupply of living space. Look at Hamburg or Munich, and you'll see that nearly every listed apartment has the broker's fee of 2.38 monthly rents (legal maximum) payable by the tenant.
My mother is a real estate agent and worked in both NY (westchester county) and NC (raleigh) and I grew up helping my mother with myriad activities necessary to list and sell a house
You'd be surprised how much work is required to keep the real estate market liquid. I'd say half the work is necessary, some automatable, some not so much. However, a lot of the work doesn't even have much to do with work necessary everytime a home goes on the market, but rework that is repeated every time a listing goes on the market. A listing that was on the market last year that goes on the market again this year needs all the same work done to get it sold.
Here's just a sampling of the types of things that need to be done on every sale:
-- finding inspectors and getting inspections done
-- getting radon tests done (difficult to schedule since house needs to be vacated if I recall correctly
-- showings (how to show a house, how to talk about it. how to sell a lifestyle, especially in a home with no furnishings)
-- fixing things, which is often dependent on contract negotiation. Sometimes things that need improvement will be deducted from the price, other times fixing them will be a requirement to close the deal.
-- home staging. for homes with no furnishings, companies exist to stage the home, especially for open-houses.
-- disclosures (near an airport? did someone die in the house? carcinogenic chemicals on site before construction?)
-- proper photographing, which is hard for most people because photographing homes that will generate interest isn't as trivial as you may think. One of the biggest issues with photographing was lighting both inside and out. Most agents don't carry lighting necessary to photograph homes. Some homes have built in lighting, some have lamps. Those that use lamps may not have any because furniture has been removed. Most agents aren't technically competent enough to handle a camera more complex than a simple point and shoot. Outside lighting for homes requires planning to make sure the weather was nice and that at least the front of the house was lit, which itself depended on which direction the house faced (north, south, east, west). Getting the photos from the camera to MLS and creating brochures with them is complex for many people.
-- MLS management
-- Searching of the myriad criteria that people evaluate a house on (schools, commute, etc.) Everyone has different lifestyles and needs. The criteria for one client will differ dramatically from the criteria for another client.
-- centralized showing
-- lock box management so other listing agents can show a house.
-- scheduling
-- Knowing whether a house is a good deal or not. Your agent is essentially your negotiator. A good agent will not only find you a home that fits your lifestyle, but they will help you negotiate with the seller/buyer on your behalf. This is probably where the fees are most valuable.
-- Negotiating with a bank. You have no idea how many deals these days get blocked by a bank, especially if the home is underwater.
-- floorplans (bonus points if any startup makes it easy to mash up floorplans to room photos, the same way that people mash up photos with latlng data and maps).
-- ability to simulate your current belongings in the new home? Do you have too much stuff? Not enough stuff? What fits? What doesn't?
-- Architectural vocabulary enlightenment. What's the difference between a victorian and an edwardian? What are dorian columns?
-- Energy efficiency of a house? What are the bills and utilities the previous tenant paid?
-- Hooking up utilities in a new place. Can it be streamlined?
-- etc. etc. etc.
This is all just the tip of the iceberg. I don't think there is a one size fits all solution that can automate all of the above, but there is definitely room for a few dozen startups and that you could essentially create an entire VC fund with real estate as your thesis. TBH, I think that is the only way "real estate" will ever be solved. There are way too many moving parts to have everything solved by one company. APIs are necessary for solving the problems above.
Finally, NYC and SF are very very very weird markets by real estate standards. Most markets are fairly balanced, but both NYC and SF are heavily skewed in favored of sellers. This makes them very unusual and I can't imagine a solution that works for those two markets working in other markets.
Most of the work that you are referring to pertains to real estate sales. I believe the original comment regarding the $3K and NYC brokers has to do with leasing agents/rental brokers.
I was a leasing agent before; there's really nothing to the job.
True, I realized that it was rent-centric after I posted this comment. However, I felt it was worth leaving up because it highlights that there are a lot more activities involved than people imagine. I will agree though that more than half of the items above are real estate centric. On top of that NYC and SF agents have to do less than anyone else insofar as actual tedium work is concerned. Apartments practically sell themselves in those markets, so agents really only have to work to stay "in the know" to be able to show you the best apartments before it goes on the market.
Even though I understand your point about real estate brokers, there is a huge difference between a broker who is helping you buy a home vs. a broker who is helping you rent. You are talking about the buy part which of course involves all that work. But when it comes to renting, I doubt any broker has that much on their plate.
From what I understand Toronto is a fraction of the craziness of the New York market, and here any listing would get snapped up pretty quickly no matter where you might post it.
Most real estate startups are complete and utter crap. I've used dozens of pieces of software targeted at real estate agents and I can't think of a more broken software market. It's truly shameful.
Usability is among the worst you will find. This is particularly egregious since RE is filled with some of the most technically incompetent people you've ever met. Some real estate agents are fantastic and have found their calling in that job, but the overwhelming majority of the ones I met ended up in that industry by accident. I tend to joke that if you're too incompetent for all other careers, go ahead and get a real estate license.
One of the biggest problems is that not one solution I've ever used considered flow. They solve small pain points, but none are workable into the more complex workflows that need to be accomplished.
Do you think it's actually crucial to go out and obtain a broker license myself to understand the pain points? I'd love to avoid the pitfalls that most startups have already made.
You won't see 90% of the pain points above without one. However, with the list above and access to real agents, you can probably work your way through being aware of and understanding many of the pain point.
If you really want to understand how an agent works, focus on their calendar. 90% of their work involves coordinating many activities for a listing. You can also try to get ahold of sample files for east listing that brokers will keep (they are legally required to keep them for 7 years in NC. I expect a similar requirement elsewhere).
In short, no you don't need to get a license, but you need to be a Sherlock and know what questions to ask to gather all the evidence you need.
Redfin and Trulia are both the exception. There are dozens of businesses that target real estate that you've never heard of, mostly because they aren't B2C like Redfin and Trulia.
Great site! I have just discovered it from the post.
One thing I immediately noticed:
If you are looking for 2br apartments, you will get a lot of results that are not actually 2br, but 1br that could possibly be converted into 2br. They are not yet converted, the renter has to do all the work himself.
Is there a way to filter out such listings? They usually mention it in the listing description. Maybe a fine-grained selection of apartment types would help: studio, junior 1br, 1br, "1br big enough to convert", 1br converted, 2br, etc.
No. The best way to disrupt an industry is to do something unrelated - something crazy and something different. You'll never break the mould and explode by copying incumbent industries line of thought.
For example the real estate industry has been upset most in New Zealand by trademe, a company started by someone who wanted an easier way to buy a used toaster. The industry here is still scrambling to catch up, instead of competing with a startup trying to emulate their business model.
By doing what the article suggests, you'll be above mediocre at best. Think different (tm).
Engineers have a tendency to underestimate anything outside their discipline. "How hard can it be!?"
You would do well to remember that, when looking at an unrelated industry and decided that you, having zero knowledge of that industry, are obviously the best-positioned to completely revolutionize said industry.
Really, the biggest breakthroughs appear to come from someone who mixes expertise in two disparate fields. Expertise in the one field teaches you about the constraints on that field, and expertise in the second field gives you new tools to attack the constraints of the first.
You'll never break the mould and explode by copying incumbent industries line of thought.
No-one said that having prior knowledge means you have to copy lines of thought. Working as a broker will give you valuable insight into how the process works, which gives you two things: the ability to identify easily solved pain points, and the knowledge of potential problems down the road.
Working in an industry is a very good way of acquiring contacts and potential customers - it also allows you to REALLY get to know its problems from the inside. "Thinking different" with data and customers is usually better than taking random guesses in an industry you know nothing about...
I'd say that that's more of solutions to one domain being applied to a different domain. But you still need to know what problem to solve in that new domain you're trying to disrupt first.
Superior domain knowledge would be one thing. If I'm going to team up with a business guy, I want him to be a top notch expert in his field.
There's a tendency for tech guys to discount domain knowledge, believing that it's just a matter of "hacking something out in a weekend, after all it's just a matter of shovelling data" (I used to fall into this trap myself - now I know the value of domain expertise).