Will the Rise of the iRenter Be a Top Trend for 2020?

By: , Editor

Published on: Jan 08, 2020

The iRenter concept is new, but it may transform the rental marketplace.

The rise of the iBuyer has revolutionized real estate over the past several years. The term is short for instant buyer, referring to the fact that a seller can receive an instant offer from an institutional buyer who purchases the home "as-is." That buyer will then update the home and put it back on the market.

While iBuyer sales currently only represent a relatively small section of the real estate market, and iBuying is not available in many areas, it has already had a profound impact on the market. Large, publicly-traded real estate companies such as Zillow and Redfin, along with some well-funded start-ups, are leading the way in accelerating the adoption of this new process.

Recently a new "i" term has surfaced, an iRenter. The term refers to a new business model that has started to attract major venture capital. Companies in this space lease and operate rentals to appeal to people who want to live in short- or long-term rentals without the hassle of a lease. These companies are "instant renters" because the landlords turn these properties over to them as long-term leases. These rentals are then turned into turnkey properties generally aimed at those who want to move in and not worry about furnishing and stocking a home. In this way, the iRenter model overlaps with co-living options such as Starcity and Common. These models allow owners and lessors to attract more value from each square foot by minimizing personal living space and maximizing the value of shared common spaces.

Let's take a look at a few of the start-ups in this emerging vertical:

  • Domio recently raised $100 million in equity debt financing. Its business model involves leasing units through long-term contracts and then subleasing them to short-term guests. Think Airbnb property manager on steroids.
  • Bungalow, an iRenter for single-family homes, has a different model. It leases single-family homes from owners and then reconfigures them so that it can rent out individual rooms. It raised $47 million in November 2019.
  • Blueground, an international iRenter with over 2,800 units in Athens, New York City, San Francisco, Los Angeles, Istanbul, Chicago, and other cities, picked up $50 million in funding last year.

What iRenting tells us about the market

In recent years, the amount of people who rent their homes has surged dramatically. According to the most recent U.S. Census Bureau numbers, the U.S. homeownership rate is 64.8%, down from a peak of 69% in the years preceding the Great Recession. New rental models are emerging because of a confluence of factors including the rise of remote work, an active gig economy, and the proliferation of other on-demand services that focus on shared resources.

Millennials have been dubbed "Generation Rent." Much of their adoption of renting has been a function of the rising cost of homes over the past decade, but some of it is driven by generational demands. Even though homeownership rates among millennials are starting to rise, many millennials are opting for the flexibility of renting.

Furthermore, the line between apartments and hotels is increasingly blurred, and many apartment complexes now offer an increasing array of community experiences and amenities as well as concierge-style services from housecleaning to errand-running on demand (leading to the rise of companies that provide these services such as Hello Alfred).

The angle for investors

Most of the co-living companies are private companies that are venture capital-backed, meaning that there isn't a lot of opportunity for the average investor to participate in their growth. Individual property owners can lease out their properties through these programs. Lease rates may vary, and you will likely be trading some rental income in return for the stability of a multi-year lease. LIke iBuyers, which generate instant offers, some iRenters including Domio and Bungalow will provide you with an online rental income estimate if you lease with them.

It's too soon to tell if iRenters will remain a service for a small cohort of well-heeled peripatetic remote workers or if it, and co-living as a whole, will be increasingly embraced in larger numbers. As with iBuying, there will certainly be growing pains as the model transitions toward the mainstream, but amenity-rich living experiences may be here to stay.

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