What We Can Learn from the Failure of Detroit’s Castle Property Management

The Property Management Show Case Study The latest event in the property management industry is quite significant. Castle Property Management, a VC-backed, technology-first start-up in Detroit is closing their doors. Let’s talk about what we can learn from the failure of this property management start-up as an industry and as entrepreneurs. Our guest on the podcast today is often the smartest guy in the room. He’s the founder and president of RentWerx, which is growing by a door a day: Brad Larsen.   The Story of Castle Property Management Max Nussenbaum, the co-founder and CEO of Castle, spoke at last year’s PM Grow Summit. His talk was inspirational, and his message was on point. Take a look at the start-up’s TechCrunch profile: “Property management is one of those industries that typically lags behind the rest of the US economy in terms of technology, customer service, and transparency. Castle is trying to bring the industry up to date with its automated property management platform.” Is the assertion correct that technology and customer service are lagging in property management? Perhaps. Property management is an industry that started in the back rooms of real estate offices, and for years, property managers did not get any resources, attention, or technology. Let’s face it: the only people who went into the property management field were the ones who had failed at selling real estate. So, technology and customer service have room for improvement, especially in the property management field. What about the third part of Castle’s statement: transparency? What Transparency Means to Property Managers Brad argues that many management companies are as transparent as they can be. Everything just short of the company books is online. Companies mean a lot of different things when they call themselves transparent. Being open about fees and costs is very common already. A lot of property managers are doing that. Are transparent at every level? Do your communication practices make people feel good about renting with you? Many owners who hire a property manager can’t be reached or don’t want to be reached. They hired a property manager to take the work off their hands, and because of this, the drive to be transparent can sometimes have unintended consequences. Brad and his company constructed a unique, state-of-the-art portal that told owners everything they wanted to know. Statements and inspection reports and leases were uploaded and available. However, rather than helping owners, it seemed it was only inviting them to complain or point out mistakes. It wasn’t worth the time or the effort anymore, and he realized it was just easier to provide things to owners when they needed it. Alex looks at transparency from the perspective of an investor looking to hire a property management company. He says he’ll want to see all the accounting and all the forecasting and all the documentation right there in front of him; neat, organized, and accessible. He also believes that while Brad works with the best of the best in the property management field, not all companies are as transparent as they could or should be. Transparency for its own sake may not be impactful. However, implementing meaningful transparent practices has the potential to create a better user experience industry-wide. Castle may have missed an opportunity there, or perhaps they simply weren’t ready for the specifics of their market.     Property Management as a Service Business: Castle’s Team Property management is a service business, and there’s a bit of a modifier to that service when a company calls itself tech-first. Alex and Brad both run companies that are tech-focused. But. The tech should enable the service. Some technology is built and some is bought. Castle tried to combine technology with on-demand labor by hiring 18 people domestica...