Kulveer Taggar's co-founder at mobile notification startup Status, Joe Wong, was struggling with a move from Palo Alto to the notoriously tight rental market in San Francisco. The move was proving to be a major distraction, recalls Taggar.
The situation got Taggar thinking about the difficulties of that market, which eventually led him to exploring pain points of the people on the other side--the landlords. Taggar was familiar with the challenges of property ownership, having purchased a flat in Mumbai as an undergraduate at Oxford. "Renting out and managing a property is extremely painful. What if you could just go to a website and have it looked after instantly? How could I build this?" he recalls wondering.
It was this line of thinking that led to Taggar, Wong, and Srini Panguluri last September to found Zeus, a startup that manages properties as corporate rentals on behalf of landlords. Zeus furnishes the apartments, markets and rents them out, coordinates repairs as necessary, collects rent from tenants, and pays landlords from the rent collected. The company's site launched in December. (Taggar says his other startup, Status, is in "maintenance mode" though the app is still online.)
The incentive for landlords, in addition to reducing the work involving their properties, is that they have to worry less about vacancy. Zeus pays the landlord rent minus a fee for operations each month, regardless of whether the unit is occupied.
"What we're hoping that happens over time is there's a brand around Zeus," says Taggar. "There's no real brands in property management right now."
He wants Zeus to be known for its reliability: Fixing apartment problems such as plumbing issues quickly and keeping properties generally well-maintained. He describes it as solving an issue of anonymity.
A new model
What deters startups from entering real estate is the potentially high capital outlay because so many business models involve buying property. That's not an issue in the case of Zeus.
"This is one of those models where it could get really big and have software-like margins," says Y Combinator partner Dalton Caldwell, who is invested in a similar startup based in Detroit called Castle. Zeus recently closed a $3 million seed round led by Bowery Capital.
The startup's five staff members currently oversee 23 units owned by 20 landlords in the San Francisco Bay Area and have signed more than 100 corporate leases since launch. The region is an interesting area for launching a real estate startup, considering its notoriously hot real estate market has pushed many long-term residents out of town as affordable rents grow scarce. Even high-paid startup and tech employees are known to feel the sting of rising housing costs.
Tyler Macmillan, interim organizational director for the San Francisco Community Land Trust, says that while a new startup such as Zeus probably does not have a perceptible impact on the local rental markets, its business model has the potential to cause problems. Increasing short-term corporate rentals that go for above-market rent could make affordable permanent rental options in a pressurized housing market such as San Francisco's even more scarce.
However, some units rented out by Zeus were off the rental market for months when the startup started working with them, according to Taggar. That's inventory that might otherwise have continued going unused.
Taggar and Caldwell see Zeus as a model that can bring efficiency and transparency to an area that hasn't been disrupted by tech the way other industries have. While Taggar says the startup will be focused on corporate rentals in the Bay Area for at least the next year, Caldwell says the startup could have success in places where a significant percentage of housing is in the hands of individual investors with multiple properties, such as Las Vegas and Phoenix. For those types of investors--many of whom don't even live in the same city as their properties--a service like Zeus is attractive.