The portal rentals battle heats up

Rentals have long been a related, but detached aspect of the residential real estate sales industry. As the nation’s most popular portals mature and consolidate, however, they are beginning to also compete for dominance as rental marketplaces complement their for-sale business.
Authored by:
Paul Hagey
Published:
May 2021

As the residential real estate industry consolidates and matures, the operators of the nation’s most popular real estate websites have turned their sights to rentals in the quest for real estate dominance. Zillow Group, Redfin and Realtor.com are building out robust rental offerings, while a prominent player in rentals, CoStar Group, has made a major jump into the sales side.

By stitching together both sales and rentals capabilities, these businesses look to establish deep, long-tailed relationships with consumers and grow their businesses with fuller offerings and more revenue streams.

There’s a lot of opportunity – roughly 36 percent of the nation’s 121.5 million occupied housing units are rentals, according to the U.S. Census Bureau in 2018. Of the nation’s 43.8 million rental units, the majority (51 percent) are single-family homes and small buildings with from two to four units, revealing just how fragmented the market is, and the opportunity for a big player to capture the market.

U.S. Housing Stats

The nation’s largest portals are anteing up.

On April 2, Redfin, which operates the nation’s fourth most popular website in redfin.com, acquired RentPath, owner of three popular rental sites, including Apartment Guide and Rent.com, and a rental management dashboard, for $690 million. This is Redfin’s first foray into rentals and reveals the battle going on for two-sided real estate dominance by the nation’s top portals.

Zillow Group, operator of the nation’s most popular real estate site in zillow.com, has had rental listings since 2009 and has grown that side of its business over the years through acquisitions and investment. Visitors can find Zillow’s rentals on three national sites it owns and operates: zillow.com, trulia.com and hotpads.com.

Move Inc., a subsidiary of News Corp., acquired rental management platform Avail in December 2020 to supplement the rentals strategy of its listings portal realtor.com, which includes rentals on its main website and on its rentals-only site, Doorsteps. Avail provides digital tools for renters and landlords to digitize the listing, search, application and payment process associated with renting.

CoStar Group, which owns Apartments.com and has made a big jump into the real estate sales category with its November 2020 acquisition of Homesnap and its April 2021 acquisition of popular listing site Homes.com, established an agreement to purchase RentPath company in 2020, but withdrew when the U.S. Federal Trade Commission authorized an antitrust lawsuit to block the acquisition.

The trend is clear – rentals are a huge focus for national real estate portals looking to serve all of a consumers’ needs related to home. The industry now has four heavyweights competing on the for-sale and rental front – Zillow Group, Realtor.com, CoStar Group and Redfin.

The Strategy

“It’s an entry point into a long-term relationship with a consumer,” Michael Sherman, vice president of rentals at Zillow Group, told T3 Sixty.

Like the other portals vying in the rentals market, Zillow Group serves both sides of the rentals marketplace: landlords and renters. All four companies offer tools that help landlords and renters digitize the renting process. Landlords can digitally list, advertise, manage and receive applications, do background checks, execute leases and collect payments with the services, while renters can digitally search, apply, execute leases and pay rent with them.

The rentals play is part of a strategy to streamline real estate experiences for consumers, and for portals to create deeper relationships and capture more business from the visitors to their sites.

“Today’s renters are tomorrow’s buyers,” George Perantatos, a Redfin director of product focused on rentals, told T3 Sixty.

But it’s not just about capturing younger renters who will eventually become homebuyers. The strategy also involves creating the opportunity to present the consumers who visit the portals more options. Some homeowners may want to consider renting their home instead of selling it, for example. A streamlined option from one of these companies to do either creates an opportunity to capture and monetize that business.

Portals can now offer that as a service and monetize them as rental customers, but also keep a relationship with them should they decide to buy and potentially even become landlords themselves.

A broader real estate offering with rentals also improves SEO ranking for general real estate search terms. Redfin CEO Glenn Kelman explained on a conference call after the acquisition that this improved SEO performance influenced the decision to jump into rentals.

Takeaway

The real estate industry is maturing in many ways. Fields adjacent to real estate sales, from mortgage to title to insurance, are increasing centers of focus, and now rentals and property management join that group as a group of heavyweights battle it out for the future of the industry. These four companies will increasingly battle it out to attract both rental listings and a rental audience.

T3 Sixty – Trusted business advisors and management consultants.

Part of the T3 Sixty family of companies.

© T3 Sixty 2020. Enabling Intelligent Change.

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