In this article:
- PadSplit is reinventing shared housing with a modern marketplace that’s laser-focused on aligning incentives – providing good outcomes for residents and property owners. COO Frank Furman explains three ways the company delivers a high-value product.
- Location is always important in real estate and especially with PadSplits. The company carefully chooses its markets based on regulations and unit economics, and works hand-in-hand with property owners to select the best properties to convert into PadSplits.
- PadSplit’s ratings and redress system builds trust and accountability among Hosts and Members. There is a 24-hour call center for managing interpersonal issues, and the company facilitates transfers to other properties for residents when desired.
- PadSplit offers two management models so that investors can choose their level of involvement. In both cases, it manages collections and lease-up for fast and painless turnovers.
Co-living may seem like a modern trend, but it’s actually been around for longer than we might think. Years ago, singles often lived in boarding houses rather than renting their own apartments, and even today many people live with roommates as students or young professionals.
But it’s only recently that co-living has emerged as a viable and much-needed solution to the affordable housing shortage. In fact, thanks to PadSplit’s innovative technology and platform, it has now become a profitable investment opportunity as well.
“We’re laser-focused on getting good investor outcomes,” PadSplit COO Frank Furman explains in a conversation on the How Did They Do It? Real Estate podcast. Specifically, PadSplit Hosts can expect to see a 100% increase in net operating income and over 10% unlevered return on cost. How? It all comes down to “delivering a high-value product,” says Frank.
The company does this with innovative features and services that help get property owners interested in starting their own PadSplits off on the right foot and being set up for success.
This includes choosing the best markets in terms of regulation and unit economics, helping property owners choose the right assets to convert into PadSplits, providing a robust system of ratings and redress to build accountability, and offering two management models. PadSplit also handles all collections, complaints, and the entire “lease-up” process, which involves finding tenants and establishing leases for the units.
Want to find out more about how PadSplit is reinventing co-living by creating an attractive investment opportunity? Read on to learn three ways the company delivers exceptional value for both residents and property owners.
Location, location, location
PadSplit is currently located in nine markets, mostly in the Sun Belt and the Midwest. It chooses carefully, opting for areas where regulations are more amenable to shared housing.
The company believes the PadSplit solution could work anywhere in the country, but being aware of regulatory and market conditions in each location ensures that early Hosts have gotten off on the right foot as the company expanded.
But PadSplit goes even further by working hand-in-hand with property owners before they acquire potential shared-housing assets. Choosing the right property to convert into a PadSplit, in Frank’s words, “is a little bit of art and science.”
For example, having street parking, accessibility to public transportation, and proximity to employment centers are all big pluses for PadSplits. On the other hand, certain factors that are more highly valued in the traditional rental market — like good school districts and quiet streets — are less important for PadSplitters, who are all working single adults. The company makes sure to support Hosts throughout the process.
This type of informed decision-making and support goes a long way toward setting PadSplitters up for success.
Ratings and redress build trust and accountability
Putting a group of strangers in a house to live together may seem like a risky proposition. However, Frank explains, just a few years ago nobody would have considered taking rides from strangers, yet now we do it all the time with Uber.
What has changed? According to Frank, what Uber and other modern marketplaces provide is a system for building trust and accountability through ratings and reviews, and for redress in the event that something goes wrong. “What people are really buying is the fact that there’s recourse,” Frank says, and the “confidence that bad actors will be weeded out.”
That’s exactly the type of value PadSplit delivers for shared housing. Hosts and Members are able to rate and review each other, and can turn to the company’s 24-hour call center for help de-escalating any situations that may arise. The result is a better experience for all.
Frank points out that most issues between PadSplit residents tend to be minor. However, “people aren’t perfect and people living together aren’t perfect,” so if things don’t work out, the platform has a network of properties available to residents and will facilitate the process of moving them to a different home.
“That’s a big part of the value we deliver for Hosts: managing the interpersonal stuff. That flexibility is also a big part of the value proposition for Members,” Frank says.
Property owners choose their involvement
PadSplit also offers flexibility in the form of two different management models that allow owners to choose their level of involvement in the process.
The first is a pure marketplace platform, similar to Airbnb, but “instead of being fractional in terms of time, we’re fractional in terms of space,” Frank explains. In other words, instead of one room with multiple short-term rentals, PadSplits have multiple rooms with longer-term residents.
Under this model, the company supports property owners in choosing properties as well as handling collections, doing lease-up and managing interpersonal disputes. But the owners, or their property managers, are the ones who buy and manage properties and create listings on the platform.
The second model is a turnkey offering for Hosts who prefer a more hands-off approach, albeit with lower returns. In this situation, Padsplit does all the work of sourcing, renovating, and managing properties, and the only thing owners have to do is “get insurance and write the check,” Frank says.
In both cases, turnover costs are dramatically reduced compared to traditional single-family rentals, because only one room needs to be cleaned and prepared for a new resident. PadSplit’s rating system makes it easy to find trusted new Members to move in quickly. Lease-up and collections are also managed by the platform, making the entire process as painless as possible for Hosts.
Learn more about becoming a PadSplit Host by contacting our Host Specialists. They can walk you through the entire process and provide important guidance to set your PadSplit up for success.
This article is based on PadSplit COO Frank Furman’s interview on the How Did They Do It? Real Estate podcast. Check out the full episode to learn even more about how PadSplit is reinventing shared housing.
Want to learn more about managing your PadSplit? Visit our Help Center for everything a Host needs to know about PadSplit onboarding, listing, and operating procedures.