Synopsis
The COVID-19 pandemic put a heavy dent on the Airbnb short-term rental business. But Shiv Gettu was able to pivot his business model into a real estate technology business that revolutionized the multifamily space. We find out how he was able to turn around a huge negative by solving a common problem through AI.
Key points
The Start Of His Real Estate Journey
Shiv got into real estate back in 2018. He saw real estate as the best way to build a passive income stream. In a year and a half, he was able to build an Airbnb business that brought in $2M in revenue. But then COVID-19 happened.
The Pivot To A New Business Model
As the pandemic wore on, Shiv realized that while he was making money from a proven business model, he was now stuck with paying leases when his units were unoccupied. Shiv had taken out master leases for the units he had been subleasing. Now, he had inherited a ton of inventory risk and needed to find a way to keep them occupied.
He and his partners thought about a product that would help them with their own problems. Their investors were also very interested in it and even referred someone to be their Chief Technology Officer.
They honed in on the tasks that took up a lot of their time in their business. And this paved the way for their new tech company, Resident Boost.
Solving A Common Property Management Problem
Their AI, Kelsey, is able to do several administrative tasks that often take up the time of property managers. It can engage with leads 24/7, schedule tours, and makes follow-ups multiple times through text.
Kelsey was made to streamline the leasing process allowing property management companies to get more tour schedules.
How Does It Work?
First, any potential lead sending an inquiry would trigger a message to be sent by Kelsey. Kelsey is available all hours of the day and immediately responds to inquiries. It is also able to continue the conversation by answering common questions.
The benefit offered by Kelsey is that leads are engaged as soon as they come in. Kelsey also qualifies a lead based on credit score. If ever a lead asks a question that cannot be answered by Kelsey, a human will be pinged and brought in.
Leads also get nudged over the course of the week and next weeks for 5-7 times. This means property managers get more tour schedules and in-person meetings without dealing with all the time-consuming work.
The AI can be integrated into many property management softwares (PMS) like Yardi, Realpage, etc. It works as a plugin within a company’s existing PMS.
Right now, they have a subscription-based model of $2 per unit per month to get the full AI functionality that saves companies thousands of manpower hours a month. Their target clients are large-scale management companies handling 1,000-30,000 units.
The Greatest Challenge Of Starting A Tech Company
For Shiv, starting from scratch was difficult. When he was running short-term Airbnb rentals, his business model made money from day 1. With a technology company, the real value is at the tail end of their build when they have 1,000 customers.
This means there are 6-12 months of runway in the early days when there is no strong opportunity for them to make money. The upside is it pushed him to do better.
What’s Next
Shiv shares that they are planning on adding new features to their AI. By Q3 or Q4, they are considering adding functionality that streamlines maintenance-related process tasks.
What About His Airbnb?
Luckily, a lot of his landlords let them out of their leases early. Shiv just kept a couple of the high-powered units to feed revenue into their new business.
Deferred Sales Trust As An Alternative To 1031 Exchange
Shiv shared how his parents were able to sell their Bay Area home and put the money in a trust, a Deferred Sales Trust (DST). It works similar to a 1031 Exchange in that it defers paying for the capital gains tax.
This is helpful for those who don’t want to buy something immediately but want to invest in real estate when there’s a downturn. Unlike a 1031 Exchange which has a 180-day rule, the DST does not have a time limit.
His parent’s agreement allowed them to put their money in a DST for 10 years and earn a passive income at 7%. The agreement can be extended, but once you buy your next property, you have to pay for the capital gains tax.
Final Tips
Things could have turned out differently for Shiv. He could have just gone back to working full-time. So he advises people to hang out with positive people and to think positively to be able to come up with a way to pivot when things go bad.
References
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Reach out to Shiv at shiv@residentboost.com.