Renting an apartment in New York City, the nation’s largest city by population, can be a difficult and costly undertaking, both for apartment seekers and for landlords. Owners of rental properties often must scramble to fill spaces that become vacant with little notice, while brokers earn money from both sides of the equation by virtue of their access to available listings.
Doorkee, a New York-City based startup that offers an end-to-end, peer-to-peer platform for the transfer of rental properties from one tenant to the next, is seeking to change that paradigm. The company works with landlords to disintermediate the brokers that add costs to the process, according to Doorkee’s co-founders, John Fagan, CEO, and Jordan Franklin, chief operating officer.
“We have flipped [the old] model on its head,” said Fagan.
Through Doorkee, landlords offer financial incentives — about $1,000 on average — to tenants who are planning to vacate their apartments if they give early notice of their intent to leave and offer to show their units to prospective new tenants.
“Landlords are happy to pay that because they’re saving all that money on vacancy between time, they’re saving money on advertising, and they’re saving money on the broker fee,” Fagan said.
Doorkee, which currently operates only in New York City, receives a fee from the landlord if the rental agreement is completed on the platform, but otherwise property owners pay nothing to list their vacant apartments.
Franklin said landlords end up saving about 60% to 80% of their traditional apartment turnover costs per unit, or about $5,000. Apartment seekers, who also gain the advantages of seeing rentals before they become listed through traditional channels, can save about $3,500 by avoiding paying a broker to find an apartment for them.
We were able to look at how things were done and just ask, ‘Why? Why on earth are you doing it in this wildly inefficient way?’ Most of the time there was no good answer.
John Fagan, co-founder and CEO, Doorkee
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Eyeing expansion buoyed by investors with real estate expertise
Doorkee recently received an investment of $5.7 million that it plans to use to refine its New York City operations before expanding into other major markets across the U.S.
The investors included venture capital firms with extensive real estate experience and large corporations that own apartment buildings in New York City, including Simon Baron Development, Corigin Ventures, Alpha Edison, Stonehenge NYC and Bushburg Properties.
The expertise that these investors—many of which who are using the Doorkee platform in their own apartment buildings—bring has been helpful in guiding Doorkee’s strategy, according to Fagan and Franklin.
“It allows us to get deep insight about how these players think about leasing, how they think about pricing, how they think about development and how they think about the future,” said Fagan. “We constantly are in contact with all of the players who are our strategic partners to be able to get their feedback on what we should be building next, what needs to be improved, and what they are liking, so that we can really service their needs in the most effective way.”
Fagan and Franklin met in law school and both became lawyers before they teamed up to launch Doorkee. They were inspired by a bad experience Fagan had while apartment hunting in New York.
Ripe for disruption: ‘Why on earth are you doing it in this wildly inefficient way?’
While Doorkee’s co-founders appreciate the feedback they are receiving from their partners, coming into the business as real estate novices had its advantages, they said.
“We were able to look at how things were done and just ask, ‘Why?’” said Fagan. “’Why on earth are you doing it in this wildly inefficient way?’ Most of the time there was no good answer.”
Other rental property listing platforms such as Zillow, Trulia and Apartments.com also provide a marketplace where landlords can find prospective tenants and vice versa, but Doorkee’s peer-to-peer platform, in which renters show their apartments to other renters, is unique in the fast-growing “proptech” (property technology) space, according to Fagan and Franklin.
“You can find your apartment on Doorkee, you can message the current tenant, you can get a tour, you can sign your lease, you can do your fund transfer, you can do your background check — all through Doorkee’s all-in-one platform,” said Fagan. “There’s really no one out there like it.”
Andrew Baum, professor of practice at Saïd Business School at the University of Oxford in the U.K., who has authored several research reports on the proptech trend, said peer-to-peer real estate platforms such a Doorkee are helping usher in a new model for real estate transactions, based on the public availability of data. The proptech industry is also consolidating, he said.
“More money was invested in the proptech business sector every year from 2014 to 2019, but in fewer and fewer businesses,” he told CO—. “We are now seeing consistent activity focused on digital engineering, or the nuts and bolts of innovation, as property businesses try to make sense of [and money out of] the rapidly increasing datasets emerging from platforms, as well as disintermediating those agents with a vested interest in holding back the data tide.”
The challenges for many proptech platforms lie in the revenue model and the costs of customer acquisition, Baum said.
Pandemic drives business
Fagan and Franklin declined to provide specific details about their revenue and profit metrics, citing agreements with their landlord customers, but they said their sales have been growing. Revenues were up 110% in the second quarter of this year, compared with the first quarter.
Doorkee has continued to build its business during the pandemic, as tenants showed their apartments virtually and through photos, and as landlords continued to look for ways to reduce their costs and keep their units filled.
“[The pandemic] is dramatically hastening the need for landlords to adopt tech into their business,” said Franklin. “COVID-19 is fundamentally changing the way apartment hunting is done, especially in New York City. While fewer people are moving right now, more landlords have become clients of Doorkee during this pandemic than in any other period.
“We are closing deals every single week as departing tenants and apartment seekers coordinate real time virtual tours on Doorkee,” he said. “Old-fashioned landlords who insisted previously on paper leases and certified checks are realizing … that they have to go digital or they will risk being left behind.”
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Published August 26, 2020