Peter Lohmann's Newsletter - Issue #142

I'm raising the alarm about rental listings.

Third-party property managers operate small, local marketplaces.

We sit in between a supply of housing (which is provided by our rental owners), and demand for that housing (tenants). Our entire business model is to smoothly operate this marketplace and ensure that there is a steady stream of both supply and demand. You may have heard people talk about this in a different way—sometimes they like to say we have “two customers.” That's exactly right and is also true for any marketplace like Amazon, eBay, etc (buyers and sellers are both customers for those businesses).

Now, you may not be used to thinking of your business in this way, because typically there is effectively unlimited demand for any new supply that you bring to your little marketplace. That is to say, barring highly unusual circumstances, all listed units eventually get leased. That's great news for us, and it means we mostly get to just focus on the supply side, i.e., finding new owners to sign up.

But we've been so focused on the supply side, for so long, that we have completely ignored the demand side. Other than making sure our rental listings are showing up properly with good photos, and maybe trying out a new self-showing vendor, we mostly just go about our business and assume that when we have a vacant unit, there are going to be tenants who are interested in it and we are going to be able to reach those tenants.

And how do we reach those tenants? Actually it would be better to ask: How do those tenants find out about the vacant homes that we have available?

Zillow.

Zillow has slowly and quietly taken over rental listings.

The Q1 RentEngine leasing report found that 60% of new leases signed came from a Zillow Networks lead. And this number is increasing every single month.

It used to be the case that tenant leads came from a variety of sources including Craigslist, Facebook Marketplace, one’s own website, the MLS, and a bunch of other small independent rental listing websites. Those days are mostly behind us. Zillow and their networks have taken a monster lead in the race to dominate resident mindshare. It’s the first place they think of when they decide to look for a new place to rent.

All other rental listing competitors have either been acquired, crushed, or are increasingly irrelevant. And look how fast Zillow’s rental business is growing:

So why is this a problem? Why should you care?

Some of you (myself included) have already experienced Zillow's flexing of its leverage here, in the form of monthly listing fees which vary wildly. I don't know why Zillow's rollout of these fees has been so inconsistent and even rolled back in some cases. But I would not take it to mean that we are safe. The fact is that Zillow has extraordinary leverage over every single small landlord and property manager in America right now. And you can be sure that they will eventually find ways to use this leverage in ways that benefit their primary customer, which is the consumer (famously, the consumer is their north star). Zillow is not afraid to make enemies in pursuit of its goal of making things easy for consumers (and making money). Just ask any realtor.

What might that look like in our world?

• Monthly listing fees (already in place in many areas). These will become mandatory and will go up over time.

• Mandating the use of their standard and universal rental application (currently optional)

• Disallowing any and all tenant fees (recently they forced disclosure)

• Disallowing criminal background checks (a simple modification of their existing “Respectful Renting Pledge”)

• Disallowing credit checks

• Mandating the use of their standard lease

• Mandating the use of their standard security deposit terms

• Mandating the use of their security deposit program

• Mandating the use of their rent payment platform

If you think these things are impossible, look no further than Airbnb. Airbnb already has all of these things and more in place on their platform. If you want to list your vacancy with Airbnb, you must comply with all of these rules, or you don't get to list with them. Why do landlords put up with it? Because Airbnb controls the demand (people looking for a place to stay). Airbnb aggregated the demand. After a company has done that, they are in control—not the fragmented owners of supply (housing).

Obviously, if Zillow rolled out all of these things overnight, there would be a total revolt, and it would flop. Of course they won't do that. Instead, they are going to boil the frog and introduce these things slowly over a period of 5 years or so. As a consumer, these things are amazing, and it will be an awesome time to be a renter in America if/when all of these things are standardized and controlled by a consumer-friendly company. In the same way that Airbnb made it so much easier, faster, and cheaper to find a cool place to stay when you're traveling and feel safe doing so, Zillow has a vision to make that true for leasing long-term rentals as well.

To summarize:

1. Zillow has quietly aggregated the demand for long-term rental housing in the United States by slowly acquiring ALL the relevant SFR rental listing platforms over the last 10+ years (e.g. HotPads & Trulia) and investing heavily in their existing platform (which is, frankly, awesome for renters).

2. They now control the flow of interested renters (our lifeblood).

3. This means they’re the boss now. They say jump, we say “how high?”

This is an existential threat to our industry.

Zillow is effectively the nation‘s largest residential property management company, who has all of the residents, and does none of the hard parts of property management. They will slowly suck out all the value of industry leaving only the worst, lowest-value and hardest parts for us poor property managers.

I heard a long time ago that at one point, NARPM tried to create a rental listing platform but it never took off. I wish it had. Now our entire industry is reliant on a platform we have zero control over.

What to do? I can think of 3 options:

1. Raise a bunch of money and buy Zillow’s SFR rental listing platform. Give control of it to some type of rental housing coalition that must operate it at-cost for the benefit of our industry.

2. Go to war with Zillow and accuse them of operating an illegal monopoly, and using illegal means to stifle competition (no idea if any of that is true). Force a breakup and the reintroduction of real competition.

3. Start a competitor and convince half of America’s landlords and property managers to switch (never going to happen IMO).

The fact is, I don’t know what we should do. But I need to let everyone reading this know what is going to happen if we do nothing — it will be Zillow’s world and we’ll just be living in it.

New Owner Leads Down 79% in April

RentScale has been doing an awesome job of tracking industry sales & marketing data, and updating their figures monthly. We now have good data on average lead flow going back to the beginning of last year.

They just released the figures for April—and the average lead-per-BDM figure dropped to 7. Compare that to April of 2024, when the average was 33! That’s a 78.8% year-over-year decrease, which is INSANE. I had to talk to someone from RentScale and get more details as to what exactly is going on, so I rang up Jennifer Merritt their COO to talk about it:

New Property Management Companies For Sale This Week

Generously sponsored by the Data-Driven Process Design team at ProfitCoach (I use ProfitCoach in my business)! Chat with them now to learn how to optimize your PM processes, so you can manage more doors with the same team.

• Here is are property management accounts for sale in Hawthorne, CA ($1.2M gross revenue, no asking price, 100 clients with over 700 doors)

• Here is a commercial management company & brokerage for sale in Utah (asking $1.5M)

• Here is a property management company for sale in Los Angeles, CA (asking $2.4M, 260 homes)

• Here is an HOA management company for sale in San Antonio, TX (asking $50k)

• Here are property management accounts for sale in Texas ($60k gross revenue, 25 contracts, no asking price).

Industry News & Events

• Don’t forget to register for Thursday’s Peter & The Wolf show — we’re doing our first ever call-in episode. Questions will be taken live, so bring us your hardest PM struggles and challenges. We’ll discuss them with you and attempt to solve them live on air!

• Speaking of RentScale, they are co-hosting a webinar with LeadSimple on Tuesday, all about transforming your client onboarding experience to reduce churn. I highly recommend you register for this if you operate a 3rd party property PM business.

• Check out the NARPM Southern States conference happening in a few weeks; I’ve heard great things.

• LAST CALL for you to submit your company to the list of Largest Property Management Companies 2025. If you have over 1,500 doors of 3rd-party SFR & small MF, you can submit here. If you submitted last year, you must re-submit for inclusion!

Closing Thought

A very warm welcome to the Spring ‘25 cohort of new Crane members!

~ ~ ~

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