Big property firms are the golden goose of the PropTech industry. One of these clients can single-handedly make a technology vendor profitable. Plus, the adoption of a technology by a well-known firm can make the sales process a lot easier and can whet the appetite of potential investors. For these reasons, many real estate related technologies have been focused on the problems facing large portfolios.
But these companies are not the majority of property owners. This was the revelation that Heath Silverman had before he decided to start his company Stessa. “We did some research and it turns out that over 70% of apartments are owned by individual investors,” he told me during a phone conversation last week. Heath is a property investor himself and his experience optimizing one of his properties led him to create a product that would let others do the same, “We were able to double the value of one of our properties that was on autopilot for a long time within a few weeks. It wasn’t only on paper either, we were able to take our building’s new performance to the bank and refinance, putting this money right into our pockets.”
As a long time entrepreneur and product person Heath went about finding out what some of the main pain points were for other individual investors like himself. “What we found out was that some of the owners didn’t even know if their properties were making or losing money until they got their statements from the accountants once a year,” he said. To change that they designed a reporting system with a KPI dashboard, income and expense tracking system and tax ready reports. These are all functions that big firms are able to do with teams of accountants but individual investors often get bogged down by.
To further help small portfolio owners automate annoying and time-consuming processes they have just announced a receipt scanning product that employs character recognition to automatically track and analyze expenses. This, along with automatic categorization of expenses from bank statements, can cut down the time it takes to do expenses to virtually zero.
So focused is Heath on individual investors that he has made the decision to offer this functionality for free. Users only need to pay for LP management and reporting features, something that is generally only needed for larger portfolios. “We want to grow with our users,” he said in defense of this strategy. “We think that as small investors see our value and grow they will be great paying customers,” Heath said. This strategy has helped them on-board around 10,000 properties worth over $5 billion onto their platform with very little promotion.
One of the important things to remember about Stessa is that they were acquired by JLL Spark as their first strategic acquisition. While big management and brokerage firms like JLL generally doesn’t cater to property owners with small portfolios it shows that they see a lot of growth in this market as well.
Stessa’s technology represents a new era of PropTech that includes property owners of every size. It is easy to see why many technology companies are looking to solve problems for major real estate firms but it is important to remember that this way of thinking leaves out the majority of the properties in the country.