The Rise of Mid-Term Rentals: How Furnished Finder Is Changing the Game

[Music] Hey, welcome to Classicals, Tom and your host Steve Schwab. I'm here today with Jeff Hearst. Jeff Hearst is the chief executive officer of Furnish Finder. A few weeks ago, I reached out to Jeff because I was actually walking through an airport and this young guy was talking about his success on Furnish Finder. I stopped and had a conversation with him. On that flight, I reached out to Jeff to see if we would be a good fit for Furnish Finder. He was kind enough to reach back out and had a great conversation. Today, I want all of our partners to have the opportunity to get to know Jeff, find out about his mission, and how Furnish Finder can benefit our partners. Jeff, welcome to the show. Thank you for having me, Steve. It's a pleasure to be reconnecting not only with you, but with so many people in the short-term rental industry. Jeff, you've been in the industry for years, right? Yeah, I joined HUMLWAY in 2010 as a director of strategy. That was before we were public, stayed kind of with the HUMLWAY team through the sale to Expedia. I was chief strategy officer then, who was eventually the president of Verbo for a hot minute before COVID and into COVID. And then was the chief operating officer of Expedia Group. And so it was about 13 years in short-term rentals, probably 13 years in 13 vermas. And really admired what you guys have done with Costco. And have been at Furnish Finder for about two years now, where I'm the CEO and president. Jeff, when you were getting going with Furnish Finder, what made you decide to get that business started? And what were you looking to fulfill for both guests and homeowners? It's an origin story that predates me. And so the origin story Furnish Finder, as we're 11 years old now. And so it was actually the similarities to original VRBO are just beyond me. This was started by a couple, got married, Brian Payne and his wife, Lisa, and actually her brother, or the co-founder. So three co-founders, they're still involved today. And they started it because Brian and Lisa got married and had an extra place to run out. And we're looking for a way to rid it out. And they, Brian worked in healthcare. He rented it out to a nurse in the hospital, realized there were tons of nurses in this hospital who were always looking for monthly Furnish housing. And so after he rented out this one, they added one, and they added one, and friends and family heard about it. And it was just like Dave Klaus at VRBO. You know, do it for yourself, do it for friends, do it for friends and family. And eventually you've kind of got a platform. It really got large during COVID because it had a healthcare center, our centric approach. We also operated said called travel nurse housing.com. And I found about it after I left Expedia. And kind of like, shame on me, my job at Expedia was often to find sites like this and buy. And I had no idea this existed. It had about 220,000 listings when I arrived in late 2023. And I've really been focused on hiring a technology team and a lot of industry veterans to help modernize the platform and the approach. But it really feels way more like VRBO in 2008 than it does Airbnb or Furbo today. We're a classified model. You pay an annual subscription fee. And then we try and stay the hell out of the way. And so we send you qualified leads, you close them, how everyone to close them. We're not in the booking and we're not a commission model. And so we're two years in. We think we've made a whole lot of progress. We've got almost 320,000 listings now, domestic focused. And we're all basically monthly plus furnished housing, which gets us out a lot of the regulatory crosshairs that have been, obviously, a real pain point for short term rentals over the past five years and probably close to 10. Yeah, Jeff, as you are looking at that mid-term market, the 30-day plus, you'd said something in the notes that more people are renting by the month than ever before. That's right. There are the percentage of renters in America as the highest it has been in a long time. And so home ownership is on the decline. And what you're seeing beyond that is so you're seeing more and more people turning to annual leases. And then additionally, and you can see this in the report we recently published with RDNA, you're seeing a higher percentage of monthly renters than ever before. And so it's growing faster than Airbnb's core business, the 28-day plus segment that RDNA tracks. And then you can also see it on the large platforms like zillow and apartments.com, where they're adding a lot of this inventory in particular from multi-family providers. And I think the roots of it are really well understood if nothing else through the political climate. There's an affordability crisis and so people are looking for ways not to spend money on furniture. And then there's a housing shortage. And so there's really not the same amount of available housing stock to go by. And people are definitely not as kind of willing to just throw caution to the wind and go by something to be sure they don't get left out. It's expensive and there's not a lot of it and interest rates are high. And so more and more people are traveling with monthly furnished housing as a way to accelerate their professional career, but also to make ends meet. We're very much a mass market product. This is not your high income earners and we're not tailored to those leisure destinations like you might experience in a lot of short-term rental. When you think about who your perfect client is, how does it compare to a cost of go franchise? And what should a cost of go franchise partner be thinking about if they be a good fit for furnished funder? Yeah, I'd say there's kind of two layers to that. And so our target customer is an independent landlord. And I think that independent landlord has a lot in common with the homeowners that cost ago serves. And so 85% of our landlords and we've got almost a quarter million landlords have a single property. You know, I think about these as like this is their starter investment property. For some of them, it's actually an ADU or a room within their house. But for the most part, this is how they're trying to make supplemental income. And so it's critically important to them that they go get it right and advertise it correctly and have this be a way that they could create a criminal wealth. That part reminds me of a lot of short-term rental homeowners and customers of your of your franchisees. The distinction might be that this is probably more frequently just about cash flow than it might be about some artistic combination of it's about cash flow and appreciation and usage. And so it's more straightforward. People are written, people are investing in this so that they can rent it as often as possible and really cash flow on it. And so I think that user characteristic is similar. From a what does it mean to the to the franchisees? I'd say that it's more likely to be, you know, at a minimum, it's a strategy to help your short-term rentals. And so if you're a place that has, you know, a, you know, stark difference between peak and off peak or even with shoulder season, it can be a great strategy to help get through that. You know, I always talk about kind of like Michigan and the winter is a great place to do a midterm furnished strategy because you can keep someone in the home, you can kind of keep the rent wheels turning and you don't have to worry about it, you know, occupancy gaps and those sorts of things as much. And it's not going to be great for leisure. It's okay for what I'd say a snowbird, but snowbird has enough leisure dynamic to where it may not always be great for midterm. And so it's a strategy for a subset of your inventory. And then the second thing for franchisees is it's an opportunity to add a new type of customer to your inventory. And that's probably most important for people who are urban suburban, you know, their, um, destinations where there is a real professional class, think about construction, think about health care, think about universities. Those are really the types of tenants we're bringing in. It's a lot less likely to be the case in Park City, but it might be the case that outside of Park City and some of the places are closer to the interstate, there may be housing that's a fit for this model. When you think about the, the nuances or the attributes of a property that fits just right for furnished finder, you know, beyond just regulation, right? Because regulation makes it obvious. But beyond that, what are, which homes do best on furnished finder? I'll start with just a quick reminder of who the tenant types are to help inform what those home types are. And so in rank order, our top tenant type is about a third is corporate travel. And you can think about corporate as being a combination of what it's a traditional corporate, which might be like consulting sales, um, more white color jobs. And then about half of that is also skilled trade and skilled trades growing really fast. Think about like they're building a local Chick-fil-A nearby or they're building a skyscraper. We've got a huge data center business. And so that's the corporate dynamic. The second largest is healthcare. That's about 25%. And then the third largest is actually relocating families. And so they're looking to be close to schools. Maybe they're remodeling a home. Maybe they're checking out a neighborhood and kind of a tribe before you buy scenario or maybe they've got an insurance claim and they've got plumbing the burst. So that's about 20%. And then your next fourth is academic. And that's really grad students and professors. And so as you think about those four type dynamics, then the homes that work in general, these are smaller group sizes. And so I think our average tenants per, um, per trip is just around two, you know, whereas short term rentals would more commonly be closer to four. The average length of stay is over 90 days. days. And interestingly, the book to stay Windows actually shorter than short term windows, short term. So a lot of this is happening last minute. A quarter of all of our bookings happen within seven days of arrival. And that's most likely to be the case for like work or you've got like an insurance claim or housing. The inventory that works best is two better than smaller and it's a more mass market price point. And so two better than smaller because you frequently only have one or two people. And if you're a family of four or even five, you might be willing to make do in a two bedroom when you're alternative as hotel rooms or you know expensive multifamily corporate housing. And so two better than smaller, we think our average rent is probably somewhere around two thousand dollars a month. And so that's a good frame of reference for you know, a lot of you are used to getting two thousand dollars a weekend for some of your inventory. And so you've really got to be dialed into that pretty large discrepancy. And then where it's located, it is around commuter corridors, good elementary schools, good hospitals and universities. And so I often tell people like, you know, a good indicator you're on to something is there an extended stay American nearby? You know, is there a Hilton Garden, sweet, nearby? Is there a place where you expect people to be staying long term and accommodations like that? And then you know you can beat that price point and value with a studio apartment or a two bedroom home. And it's overwhelmingly seen single family on our side. What about the internal amenities like is there, I mean, I don't think jacuzzi is probably matters as much as the doing vacationals, right? But, you know, a work area, I'm not exactly sure what, but what would it be? Super common to travel with pets, you know, maybe even more common than short term. And so I think the number is over 40%. Because, you know, a lot of people if you're traveling for 90 days and you're working alone in a hospital, like you actually want the company, you know, it's different than just kind of bring the Lavador to the beach. So pets is important, but the amenities are much more utilitarian than what you'd expect in a short term rental. You're not trying to wow anybody. You're trying to be sure they're comfortable. And so like the mattress matters, the sheets matter, blackout, blinds are often really important or even a noise machine. But beyond that, it's like, you know, you should have four sets of dishes. You should have everything you need for the kitchen to be usable. But there's not a need for, you know, jacuzzi's for paddle ball for pickle ball for, you know, the ping pong table, like they're not there for leisure. People are there to be comfortable, get to work, get back to work, be rested. And so, you know, we typically say for about $7 a square foot, you can outfit a monthly furnace rental. You know, that number might be more like $30 a square foot if you were doing something that's really competitive in the leisure space. Have you seen any sort of regulation at all for midterm rentals or is that really untouched? Very sparse. There's been a little bit of it in Hawaii where I think there are some places that even have density caps for 30 day plus. You'll certainly hear about specific buildings and homeowner associations, but overwhelmingly like the standard applied to short term rentals and most major urban and even most leisure was 28 or 30 day. And we're explicitly serving the use case beyond that. As a property manager, as you're thinking about this, okay, lower ADR, you know, for us in Arizona, midterm is very useful when it comes to the summer, right? I mean, it's like Chicago winners. You and I talked about that. It's a great way to sort of hybrid yourself. High ADR in season, stability in the off season, trying not to lose money in the off season. So that you're not giving all that back. But as you're going through the difference, you know, trying to mix and match your reservations and your reservation types, you're going to have a different commission for midterms and you are for short terms. Is there an industry standard, you know, or up percentage or fees that you see out there that are different than the short term rentals? I think that is the opportunity is to co create what the industry standard feels like. So in long term, long term, unfurnished, so an annual lease, it's closer to 10%, somewhere between 10 and 15%. You know, obviously in the short term model, it's a standard is 25, but it's kind of like a 25 plus plus because there's other ways you make money along the way in there. I think midterms will settle out around 15% and that the 15%, you know, the good news is it's 15% on, you know, $6,000 plus booking if you're doing three months, a $2,000 a month. The better news is that there's no turnover. And so, you know, you're going to go find a tenant three to four times a year and then you're not going to clean in the interim. And if you are, you're going to be able to charge for it. And so there's really a lot less work for the 15% and you're not managing the same type of dynamics you might have in short term around like constant rate optimization and thinking about like, how do you put your Tetris calendar together? In general, in the midterm space, people take one booking at a time because over a third of the bookings actually extend and it's entirely common for someone to end up with a three month booking that becomes a 12 month booking. And so you've got some interesting ways to where I think the return on time can be really interesting, but the pure just margin capture needs to be lower because there's so much less effort required to actually service the category. And when you're thinking about your property that's occupied on Furnish Finder and you're trying to figure out whether or not to release it or, you know, wait on that tenant to rebook, you know, you're hoping that you need that rebooking. How do you navigate that? I think the misconception is that it would feel like Airbnb or short term rental where you get a call on Sunday and somebody's asking if they can extend three nights. You know, keep in mind like the rental process actually feels way more like long term rental than it does short term. You're going to have a tenant screening, you're going to have a lease, you're going to be getting paid monthly and advance of the booking, you're going to be getting paid directly. And so our most common advice is that every lease should have a 30 day opt out so that the tenant has to give you 30 days notice since the majority of lease up happens within 30 days. That's your primary way for insulating yourself. And then, you know, it's kind of like the, I'd say it has something in common with like the zero cancellation terms for some short term rentals. You know, if someone's trying to get out of the next month and is already paid for it and you can lease it up half a month early, you know, you can share that with them, but you're not obligated to because you have a contract and you have a lease and they've got terms they need to abide by and you can go collect your money to make it work that way. Additionally, since we're not a merchant platform, we're not holding your money. We're not in the middle of it and we're not penalizing with it or citing with the tenant or the gas to say, Oh, you're not doing it right, given their money back or we're going to charge back that sort of thing. There's a lot more control in the hands of the franchisee, the landlord, you know, however you want to describe the management. Yeah, that's right. You know, I think that getting Airbnb in between this often creates something of an unfair situation. I know a lot of the franchisees are frustrated with that, right? I don't know if you heard about the one guy that they just took his revenue away from a booking from five years ago. Did you read about that? I read about that on LinkedIn. I mean, I can't say I was surprised, but it was even in a sea of wild stories that one was particularly wild. It speaks to your business model and I think that I like the fact that you're continuing on with the business model. So let me ask you a quick question. Is we start to wind this down. You've been in the industry for a long time. Who are some of the people that helped you along with your career path over the years? I'd say the most formative is early home life, you know, and it's a crew that for people who've been in the industry, you know, as long as you were affiliated with it, you know, it's Brian Sharples and it's Carl Shepard. It's John Gray, it's Tom Hale. And a lot of them are still involved with what we do at Foreigner's Finder and at a minimum in Formula to, you know, what would I call them and ask them how to be a CEO or what should I do next, like they're always available to be there. But I'd say that's the most formative group. And because my career was so long, like I've actually got these interesting layers of what was it like when we were subscription, what was it like when we were moving to a commission model and then what was it like at Expedia when we had hotels and flights and cars and all the other stuff. And so there's different patterns and people I can call on for where we are in the journey. You know, I think if there's, you know, the short list, like I'm most likely to get in touch with Carl Shepard or John Gray at any given moment. And, you know, there always been phenomenally available and helpful to, you know, help me think through things. Well, when I reached out to you on a DM or on a comment, Carl wrote me, he'd seen that and he referred to you as a son, you know, and so obviously there's a lot of affection from Carl to you. And if Carl considers you a son, he's sort of the, you know, he's sort of the OG of the industry. I'm a personally big fan of his, but that's pretty cool. Yeah, he's been a great mentor and a lot of what he built a humble ways, what we're trying to replicate here at Furnish Finder in terms of a culture that really promotes mentorship and development of one another to go have great careers, you know, what we're doing is like inherently and implicitly smaller than what Airbnb of our boat did. Like it's a niche within the niche. But we do think it's a, it's really ripe for this low-cost model where we're giving control, communications and value back to landlords because it's kind of the original promise of the internet. It should be cheaper. There's not a good reason Airbnb should be able to charge 10 to 15% for a 90-day rental. They haven't earned that much rent in that equation. And we think if we can charge $200 a year and help somebody may be made. $6,000 or $24,000. Like that's fantastic. We can make money doing that, and then we'll grow on volume. - Jeff, if I'm brand new on Furnish Finder, never done it before, maybe brand new to the entire industry. Don't know what I'm doing. I just have a home. I'm jumping on for the first time. What's your advice to me? - I think that the, if you're brand new and have never been in short-term rentals, it's actually easier. Because it really feels the most like, oh, I'm gonna go have a better version of Craigslist or Facebook marketplace, and I just need to get back to people in Hustle and like, I'm committed to finding a tenant, I'm gonna work this out. I think it's actually harder if you're brand new to Furnish Finder, but have been on Guesty or with Streamline or like used to all of the tools and honestly like a kutramat that's been built up around the ecosystem for the past few years, because we are such a throwback. Like, you're gonna put a listing up on our side and then you're gonna start getting emails, messages, or even phone calls, and the rest is up to you. And so it changes that dynamic and I think for a lot of people it's really refreshing, but for others it can be kind of frustrating. It's like, well, my standard operating procedures don't work the way as if I just got a booking from Burbo or Airbnb or my direct side. It's like, yeah, but we're also not charging you any commission and this is kind of the nature of the bargain. So I think for people who are joining from your ecosystem, the biggest thing is to remember that like, it's a little bit of a time machine and you're gonna be managing leads and you need to go close leads and that there's a different type of salesmanship in there. The separate thing would be really, you know, what you mentioned about Airbnb is kind of a lot of people are shopping for an entrepreneur 'cause they don't wanna pay Airbnb a fee. You know, it's got something in common with what Eric's trying to build at Savvy. It's just we're a different slice of the industry and we're more furbo than we are managed, but that's powerful. Like Airbnb's not earning that fee. They can find us on Furnished Finder. Then they're just gonna reach out to Steve and Steve's gonna collect ACH, check however you wanna get paid and we're done. And so I think that piece of like, remember you've got a hustle and remember you've gotta do something that's not just go put the commodity on the big platform and hope it works out. And there's a lot of uniqueness available here and people who are still really looking for that experience and that unique inventory. You know, we think we've got about 200,000 listings that aren't available anywhere else on the internet. I'd say really good reason to come and you know, working with Costco is this will be one of the first places where we're really trying to serve inventory that's on other platforms. Because we think there's a unique opportunity for you to not only advance the category, but also to help your homeowners. The other thing I'd say is like, I don't want anyone to think this is a good idea for 100% of your inventory. It will not be. It's probably a good idea for five to 10% and it may not be a good idea for any, but it might open your eyes to, wow, maybe there's 100 units nearby in a town that's got nothing to do with leisure that I should actually go serve. Because my observation two years in is that the biggest missing element in this space is high quality property management. The long term guys don't want to do it because they don't want to turn over more than once a year. And the short term guys are either aren't aware of it yet or are still trying to figure out that math of well, how will 15% work if I'm only turning it over three or four times a year? Some people are going to need to try it, but there's interesting businesses being built right now. And there's going to be a big category here. We think this is a, you know, in the US right now, this is probably somewhere between 10 and 20 billion dollars in the dressable market. And the short term guys should be the best at it because you have built so many systems and opportunity scale that others have not. - Yeah, from my point of view, being able to do midterms is almost like a pressure relief valve. The amount of pressure on operations and short terms can be pretty immense. Be able to take on more inventory without all of the operational pressure. Allows for some elasticity going on in there. Also helps with some cash flow chunkiness, right? Sometimes it seems like with short terminals to see they're all or nothing. Having cash flow in the nothing time of the year is fantastic. - I don't have empirical evidence here, but I think in your like, in your Michigan example, you're probably happy there's someone there in the winter, period, like someone in the house running the utilities being available, knowing that you're not gonna have the aircraft moments that can come along with vacancy is an actual benefit even if you might be, suboptimal on an average nightly rate type of perspective. - Rental nights have no shelf life. Once they're gone, they're gone forever. And if you're not going to be able to do short terms in the off season, having that midterm income for care of the property, occupancy, and just some sort of revenue for that homeowner is valuable. And it can change the dynamics of the income and even your income for the year, you know? - Yeah, even emotionally it's valuable to the homeowner. Hey, there's someone there and you're doing something, good work, or sometimes I've had plenty of occasions, I've got three short term rentals and I've had plenty of occasions where my short term rental on a lake outside of Austin. It'll be three months without a book and I'm just like, is anybody home? What's going on here? Are we trying? And I think they are trying, but that's always work out. - Yeah, that reminds me of a study I had done where a guy came in and put the stress tests, stress indicators on my homeowners and showed them different calendars. I talk about this in my book, the revenue management for the rest of us. And they showed them, he showed them empty calendars and how their stress went up. And he said, no matter what the rate is when they see empty calendars, there's an immediate anxiety, no matter how well you've performed over the year. And if you want to keep your homeowners, your homeowners, fill up their nights, even at a lower ADR when it's hard to get any reservations at all. It's literally a way to keep turned down. As we wind up, first of all, thank you so much for coming on and I want to tell you that, you talk about Eric, another great member of our industry with Sabi, he's also doing something really interesting and really cool, a different sector. What's the future of the furnace finder and you look at it over the next two or three years, Jeff? - We acknowledge we're in a valley between giants. On one side of the valley, we compete with Airbnb and Verbo and booking and on the other side, at silo and apartments.com and Redfin, we're in a tough spot. And so what we're going to stay really focused on is being the best and the niche we're in. And a lot of that is just modernizing the platform we have. Now we're fortunate in that because we've been re-platforming the last two years, we're actually like almost custom built for an AI era because we do have modern technology, modern data loops and we're gonna be able to innovate. I think a lot faster than some of the incumbents. But I don't think we're gonna end up in the short term game. I don't think we're gonna end up in the long term game. I hope we've got three years from now. It'd feel great if instead of 320,000, we had 500,000 homes instead of being 90% Verbo, we were more like 60 or 70% Verbo. And what I believe can be most unique in our value proposition is we might be the first platform that connects to the software players that are long term in nature. The turbo tenants, the rent retis, to some extent even the enterprise solutions and then also the streamlines and the guesties and the short term. And so we could build a really unique marketplace in the middle that my vision for it is it really helps solve affordable housing shortage and mobility in the United States. More investors are gonna need to believe that it's worth writing checks and converting an ADU or investing in a duplex or a quadplex instead of a house in Aspen in order to get more housing built in the US. And so my personal mission is that if we can get people to realize they can make a better cash return and monthly furnace drenals, then we'll start to have more monthly furnace drenals and it'll just be a real big boom for the US economy and for a whole generation of people who are kind of currently and I think currently is gonna go on for a while priced out of home ownership or the way Gen X and Baby Boomers really made their wealth. They've got to adapt to something new and we think we're part of that solution. - So great mission Jeff. If somebody wants to get on to furnish finder, where do they go and who do they reach out to? - So anybody who's listening to this, I would say a great start is to email partnerships at furnishfinder.com for many of you. You'll be pleasantly surprised that the other end of that will be Parker Robinson or Amanda Flores who were on the Verbo and Humoy teams forever in partner success. You can always go to our homepage furnishfinder.com and in the top right like every other website is listed property and you can learn more about how the offers work. We're just now completing connectivity solutions and hope that the Costco suite will be at the top of that list so that we can ingest rates and calendar and content. But since we're not a merchant platform, you'll go book these on your own and need to figure that piece out. We will do discounts for your franchisees in terms of that annual model but we do only offer the annual model. And my kind of line on that, it'll be less than $199 a year and for that much money, it's worth trying. Let's work together to see where it's worth trying and how it works. And I forgot to mention Steve, one more great resource at the top nav of furnishfinder is a tool called Market Insights. You can go put in any city name and by the time this podcast is potentially an ezip code name and it'll tell you So what types of tenants are coming to your area? What are the demand stats? What are the budgets for the different housing formats? And so you can really get quite a bit sharper about just what's happening by using that. And then for the people that are truly nerdy, check out the AirDNA report we co-published with Jenny Lane's team that helps you understand just the underlying dynamics of what's going on here. That's also available for free at our website. If you're interested in getting on first-finder, make sure to reach out guys. I recommend it for the properties that are underperforming, especially in the off season. Take a look at which properties fit in. Make sure to reach out to Jeff's team or check out the website furnishminder.com. A lot of great value and a great product for that place where it's not quite long-term, it's not quite short-term, but there's a demand there for it. Jeff, thanks again so much for coming on. Copycast. We got towards Crito. Copycast. Our company's need to.