A San Francisco start-up called Bungalow that matches roommates with landlords just raised $75 million in a Series C funding round. Shared-living rental platforms are becoming more popular as people -- particularly millennials and Gen Z -- are moving around to have new experiences and adventures, especially if they can work remotely. Some landlords are also benefiting by using Bungalow.
Deer Park Road led Bungalow's Series C funding round. Other investors in this round included Atomic, Founders Fund, Coatue, and Khosla Ventures. Bungalow has now raised $150 million since its inception.
Bungalow experienced a 108% increase in traffic in the second quarter of 2021 compared to the same time last year, which was during the height of the pandemic. Bungalow was hurting at that time, sometimes missing payments to its landlords. You'd expect growth for this year when compared to that. But growth has also surpassed pre-pandemic levels by over 40% in all its key markets.
What's the shtick?
Renters have any number of ways to find rentals, of course. But finding roommates can be more difficult. And in these post-pandemic days that allow for many workers to work remotely, people (particularly young, white-collar workers) are moving around to experience new cities, and they often don't know anybody in the new locale. A co-living marketplace helps make this lifestyle possible.
Owners of properties can use Bungalow to find tenants. It probably makes the most sense for owners of large homes with multiple bedrooms to use Bungalow. In addition to renting their entire home as they can on any listing site, they can also rent individual rooms.
If an owner has a property with five bedrooms, for example, by renting each room, they potentially have a larger market, and they can possibly better monetize their investment this way. The market for a family who can pay $7,500 a month to rent an entire home isn't as big as the market that can rent a room in a home for $1,500 a month.
Bungalow currently operates in 16 areas:
- Austin, Texas
- Bay Area
- Los Angeles
- New York City
- Orange County, California
- Portland, Oregon
- San Antonio
- San Diego
- Washington, D.C.
It plans to use the funding from this latest round to expand to more markets. Next on the list will be Atlanta; Houston; Miami; Phoenix; and Tampa, Florida.
How investors can use Bungalow
Bungalow is focusing on mom-and-pop landlords who own single-family homes, although Bungalow CEO Andrew Collins told The Real Deal that he's in talks with institutional owners who have moved into the single-family market.
Homeowners who want to monetize their homes can sign a master lease with Bungalow, which then acts as the property management company. Besides conducting regular property management duties, Bungalow makes suggestions to homeowners on how to renovate their property and furnish it to suit Bungalow's market of mostly younger renters.
How Bungalow does business
Rent terms are between four and 24 months, with 12-month leases being the norm. What differs, Collins told The Real Deal, is renters can move between Bungalow rentals without breaking their lease. (Landlords can offer this service since Bungalow pays the landlords.) "The flexibility provided by these arrangements is key," said Collins.
Bungalow's FAQ page, though, reads like any standard landlord-tenant lease, namely, if the roommate wants to break the lease, they can if they find a suitable replacement; otherwise, they can still move -- of course -- but they're liable for rent until the lease is up.
The Millionacres bottom line
Before landlords use any sort of property manager, which is what Bungalow would be, they should factor in all the costs. Sometimes it's better to do this business on your own.
Bungalow could be a solution for mom-and-pop landlords who want to buy or who currently own houses in expensive cities. This company says because it can get apartment landlords 30% more income and single-family homeowners 50% more income than they otherwise would get, the cap rates work. If that's true, Bungalow might be worth looking into.