Getting $1.1 Million Funding For Rental Platform in Sydney Properties
The founders of property management service MadeComfy, Quirin Schwaighofer and Sabrina Bethunin, discuss how they transferred their entrepreneurial idea into a successful start-up with substantial backing from the ex-owner of LinkedIn, among others.
Follow their journey from diversified backgrounds to the point of collaboration, how they merged their talents to create a common vision for their brand, how MadeComfy fits in with the popular service Airbnb and what they did to secure funding from high profile investors and advisors.
-Quirin Schwaighofer and Sabrina Bethunin
My company is MadeComfy, I founded it together with Sabrina about 2.5 years ago.
My background is South American. Today with Quirin I’m running our company MadeComfy.
How did you both meet and start this business?
We met in 2014 through common friends. So at the time, I was working for Kellogg’s, I was commercial finance manager for Kellogg’s and a common colleague of mine introduced me to Quirin at a time when I was looking for a change in my career and I think I met at the same time as well.
I was then working on my very first start-up and was working in a role where I was travelling a lot and when I met Sabrina, I was renting out my apartment in Cremorne Point, I was struggling to make a bit more cash for the other start-up. And it was when we started talking about business opportunities and things like that, it came up that I had quite a few challenges with my apartment. It was a bit of a challenge for me to manage it when I wasn’t there – and that’s how we started on that.
Quirin was enjoying renting out his apartment on AirBnb, but it was a lot of work when he was travelling. So one day he asked me for a favour to manage his apartment when he went away. I started doing a few things for him with the guest communication, helping, and one day I just saw that he had his apartment advertised with the colourful where he met with theirs – his apartment was looking like a monkey. It was a beautiful, beautiful environment with harbour views, had a lot of potential and guests loved it because the view was amazing in Cremorne Point. But I think it needed a little help on the way the apartment looked.
So what I did is I went out shopping and restyled his bedroom. So in the past, I also studied photography, so I took new photos of the place and I listed the apartment again. So what happened was with the new styling of the place, the views doubled as well as the booking that he was getting. When we saw that, we identified the business idea we were looking for.
In order for their business to flourish, Quirin and Sabrina both moved into smaller places in cheaper suburbs.
The thing is when you have a start-up, your cash and your income goes down. So I guess one thing is that you see all the shiny things of being an entrepreneur and you hear about the success stories, but the path to that is really a long one. You need to look at what expenses you need in life and whatnot and what I did was focus on bootstrapping the company at the beginning to ensure we can afford and survive whilst building that business. So that’s why both of us moved into the inner west, away from the beaches and give us more of a shot to make sure we are in a position to work on our joint dream.
Prior to MadeComfy, Sabrina hadn’t taken part in any start-up businesses yet. However Quirin had some experience as a restaurant owner in Germany.
My very first start-up was English and I was studying, I was waitering originally to make money. I had a few different ideas to the owner of the restaurant and I thought I could do it better and opened up my own restaurant and bar in Germany. It went really cool, really well, I loved it so much but when I got to the end of my study. I grew up in a small village with 200 people, everyone Catholic, every one of them had a proper job – a proper job meaning you are employed by someone. I hadn’t had a lot of external inspiration and things, I thought like, ‘I didn’t study and go to school to be a bar owner.’ I knew that I had to open up more than just that one, but it was back then not in my mindset to literally do that. I had joined a large company, but they were in business and development.
Then I came to Australia, that was great, but for 10 years I was trapped in that loophole and it got to the point that I couldn’t develop myself in the capital and had to relocate and thought, ‘Actually I can do things myself, I don’t have to be employed by someone.’ When my eyes opened again, it was about 2013 when I finished my MBA here and together with a few inspiring entrepreneurs, that’s when I realised that there’s more than just working for a company.
Beginning his first start-up wasn’t easy, which meant a lot of lessons to be learned along the path to success.
It was a digital start-up to capture time and attendance in the music industry. We saw the opportunity to to streamline that by having a product that’s tailored to the needs of the industry.
There was a lot of loathing for that. It wasn’t part of the attendance for the mining and construction market where I used to work and I did it together with a former business colleague. It was a lot of learning. We thought we could build the perfect product, because we needed the market we raised money in the way that money was important, but we maybe we needed to look into the big picture. We didn’t look into the culture of the company, the company values. A lot of things were great, but a lot of things didn’t go so well for me personally.
So I learned a lot of lessons. Number one is culture values: in your company, if you don’t focus on that and make sure everyone’s aligned, it is almost impossible to have a great company. No one is to up the money that raises about the people who get on board and support you, which is so important. You could be the best person in the world but if you don’t have a network around yourself that nurtures, helps and supports you, it’s really difficult to be successful. And the last one is all about fun: you need to have fun and it’s about of course growth and targets. It’s finding a passion for what you do; if you’re not passionate for what you do – especially starting a company – it is really difficult to keep on pushing when it’s dark and those are the three main lessons that I learned.
The inspiration for MadeComfy was born from Sabrina and Quirin’s combined skills and the idea to create a company, which provided a way to cater to travel-happy property owners, who rent out their investments, and need someone to manage their property while they’re away.
With MadeComfy it’s a bit like in a relationship, you see the partner that you like for the first time and think, ‘She’s incredible, she’s the one!’ and it was a bit like that for both of us. When we discovered the potential of MadeComfy, we thought it was a great idea as a way to build a company so much around that that we have all those situations of property owners to have a more flexible, higher-income solution with their property.
Not only will they get to travel and have our amazing experiences, but it’s also not like living in a hotel or in a service apartment, you live like a local. When you book an Airbnb, you pick a room, you meet the owner. But if you book a house or apartment you give us a shout and the owner is either somewhere on holiday in a different timezone and you don’t really have this experience; we give our guests that experience to be close. And it’s an amazing space in the sharing economy, it’s sort of grounds every week, every month that we are able to innovate and discover new ways for owners or for our guests.
As you can probably tell from my background I’m not necessarily into property or hospitality. I think to create something new, you need to have a different point of view and a different perspective to solve new problems. If you look into my background it is in finance, so most of my career was working for fast moving consumer goods, I was mainly working for Colgate, Palmolive and Kelloggs, all amazing companies. I see my corporate career as a pathway to be ready to kind of run the business as well and I think when you are solving a new problem, you need a fresh perspective.
Quirin and Sabrina’s experience in property investing has also made a positive impact in the way they view things.
I have a property in Perth and I can feel the pain of property investors when you have a negative cash flow. So I purchased a new property in Perth back in 2012. At the beginning my cash flow was great but in the last few years, I have been cash-flow negative because the property value in Perth has been in decline. I can empathise with property investors when you see property prices in Sydney going up but in Perth, it is still decreasing. Through that you can still get into capital gain, today you really need to have a solvency to cover for that gap. So these are problems we solving at the moment, increasing the gear for property investors and then a positive cash flow in property supply.
We were using Airbnb for a while, we’d been hosting for a while, we had over four years experience in total on hosting and the majority of the work lies in managing the guest side and the guests paying their return.
So what has been their experience with this, from a property owner’s perspective?
When I started it was 2013, launched the year before and it was pretty new. There were not that many people booking and they booked almost anything, like I made my man cave with a cardboard box as a side table for my bed and I got five-star reviews then and that was great. But what did that do for me personally? It did help me to significantly increase the return that I had, to cover most of my life at that point. So the way we started MadeComfy allowed us to not only pay the bills and also rent and our own properties on the Airbnb, we had lots of finance to finance the whole thing. We now have a team of about 35 employees, at the end they have a job because we were able to obtain all our properties on Airbnb to have a higher return not to raise it but to reinvest it back into the economy. So you have to ask for that a lot and what we see with other customers we have is it helps them to try to have a bit of a less stressful time regards cash flow, or to simply acquire another property. It’s one thing when you when you’re wealthy and you don’t know where to put your money, another thing is really when you have another job and you want to build your property portfolio, you only have a certain cash flow available to you to finance that. And at the moment the interest rates are not going to go down, it’s going to essentially up again in the next couple of years then everyone is equipped for that. So for those, some of it is a great opportunity.
Now when you said about the certainty of money, one thing is if you don’t know what you’re doing and you have a fixed price then, of course, your occupancy might be average and you might not get a booking. It’s a bit like if you are selling on eBay you have no idea about how much you’ll get on it. So if you sell a laptop and you know it might get $1,000 for that, you have no idea of how much you can get. It is a learning curve really. Then there are other things you have to manage, you have to do it every day. Every day you have to understand how much your property is worth because you don’t want to leave money on the table and also you don’t want to leave your property empty.
That’s one part that we developed over the last couple of years, is the data that they collect that we could predict the way that we advertise a property on Airbnb or book one on TripAdvisor in a way that it is likely to be booked and has a good rate. It helped us to achieve returns that were 40% higher than Airbnb is able to do simply by knowing that. There’s so much about understanding the market, pricing and having a property like not like my main case but a property that looks great is sort of inspiring when you have a guest trying to book your property.
In managing people’s properties and tenants, many different challenges arise that Sabrina and Quirin need to overcome – even simple things like tenants losing their keys.
We do have tenants pretty much every day with problems that you need to solve and that’s like simple things from losing their keys, or when the oven stops working or the dishwasher stops working.
Wow, really simple stuff.
Yeah, all these things you don’t think about when you go away. I had one great story that was a bit of a turning point for us and that’s maybe more of a special thing. We needed criteria to raise capital money to provide the services and the infrastructure that is required. So we’re delighted with our vision that we have was our process of raising capital and it is a really tough game when you’re out there asking people for money. It was very important for us when we had 40 pitches to high net worth individuals that we used that new system because when we got these two investors involved, some of those we met at a coffee. And one thing that happened is one of them asked, ‘What do you expect from this coffee?’ We were just so keen to get some advice from him and keeping on what he thinks about MadeComfy. I said, ‘Look, it’s an honour to sit with you and take a look.’
Rosenbach for those who don’t know is the ex-CEO of LinkedIn Australia, he founded LinkedIn Australia with one employee. He did the same for Yahoo and has been on the board of companies for Disney, Maps, Afterpay, so he was a successful, credible person. And we totally did not focus on raising money or asking for money, as it seems to change the whole thing of identifying where he could help us. He’s a very empathetic person. He’s the best mentor and the whole discussion was a lot around what we had, why we were doing it, how he could help and things like that. The whole thing naturally turned into a conversation about how he could perfectly fit in at my company as an investment. And what we learned at that point is money is ready for all of us that are thinking about maybe his own start-up. If you focus on raising money in the early stages it’s maybe the wrong thing; but you should really focus on how can you and how can that person help you get further. That was a turning point really – who can help us on a personal basis to try and make things a bit better? Then money is the title of an add-on, that is very important. But that combined with the right alignment in business, culture and evolution is incredible and that’s been a major turning point to turn MadeComfy into what it is today.
On securing their financial backing for MadeComfy, they also identified their core values – empowerment, agility, trust and the ‘wow’ factor – which allowed them to align their values with potential investors’.
We had spoken at that point, it was late last year and then we pretty much met a few people and was fun. Then previous founders, CEOs and ex-chairman of amazement have been incredible. They invested half as well, especially on building a culture and values and they helped us get our full-day workshop with only this very close charismatic, very passionate person and an incredible guy. And we actually said, ‘Look we need this to be like a maximum of 4 words.’ And just to really align our personal values of the vision of the company as a market, we needed to get to the values that we now have which is agility, empowerment, trust and wow. Everything we do now is aligned around those four values. Major decisions that we do, recruitment that we do that really impact with our customers and align with those values. So we don’t trust many people, because assets are about transparency and often about mistakes or who’s telling the truth.
The a-ha moment for Sabrina came when MadeComfy began to make an impact as a business. She says they are constantly looking for ways to improve the company, to better provide for their customers.
We have been continuously improving the service, getting the service more sophisticated, improving how we manage by getting a lot of knowledge based on how the difference of our care, whether it’s fair then to have short term renters, long term renters. Also including the look and feel of their property and how we manage and how that impacts cooking and cleaning. The key thing here is the way we have been in a process of continuous improvement – I think we will continue to get just better and better. The big game is constantly evolving and to monitor is there are any empty holes we need to provide for.
The Key to Making $2,000 A Week: Generating High Sydney’s Rental Returns with MadeComfy’s Quirin S. and Sabrina B.
Quirin and Sabrina’s company MadeComfy is made for people who want to rent out their properties. Styling and housekeeping is also part of their service, making the property more attractive to potential tenants.
The target audience of ours are investors that are maybe not yet on the Airbnb or are perhaps not sure what is behind that and what you do when you rent out a property that you haven’t rented out long term and it’s empty and you’re going to get into that. What we do, from the beginning we give you a 12-month value prediction based on our data that is surrounded by similar properties like yours, so you get to see what your cash flow over the next 12 months compared to long term and compare it to if you manage it yourself on Airbnb. So that was the very first thing we do to reduce the risk and if you see there are big gaps in the trading of our potential like if we could do better in the long term, we would drag out that stage.
The next one is that we finance the property. So we need to look at things like the location, the type of property, that’s very important. We always advocate about the importance of the way you furnish and style your property, because that’s the product that people book and then pay for. So we do the furnishing and the styling, we provide a 24-month interest-free financing for that so there’s no doubt that any investor can afford that. We focus on making the property stand out in the market.
So how can property investors tap into this service?
The way it gets booked, you have to understand as well, is when you are on Airbnb or Booking.com, you have a location and you have a rough budget. And as we all know when we travel we always have a budget range that is bigger than what we wanted to spend initially. So that’s what happens first, then you see a lot of listings and you look for a listing that is making you dream. And that’s where your property has to be, it has to be up in that listing and it has to be the kind of thing that make people think, ‘That is incredible.’ Get people to dream, then they click on it and then they read the first couple of paragraphs, look at the photos and this is when you pretty much sell them the apartment or the house. They look at the reviews and when that’s all great they look at the price and at that point, they are so close to book that you’ve pretty much got the bond on your property.
So all that part is what we do – we make sure it stands out, we take amazing photos… We then do all the pricing. The pricing is a thing we have in the back of our system that communicates through the portal to make sure every time we advertise it at the highest rate where we get a booking. And then we do all the guest communication, guests will ask a lot of questions I will reply to that and make sure that they book. We do all that, then when guests book and arrive, they know how to check in with them. When they check out, we show them the adequate time, we then turn around everything and do the cleaning, housekeeping, we provide little chocolates, shampoos and things like that for the next guest.
And for the homeowners, we of course provide full transparency on the bookings and on the income that you’re going to have, they get a statement and to make sure they are pretty much aware of what we’re doing. So we are achieving returns that are around 30% to our best properties 140% of our long term and they are consistent. So this is what we are achieving.
Where there are travelers booking an Airbnb from overseas and the property is located further from the CBD, data comes into play to determine the likelihood of your property getting rented out.
It all depends because we have a couple of properties at Arncliffe, which is near the airport, we have a house in Esprit – they’re maybe suburbs where it would work, but what you see there is no hotel in that area, there are not many Airbnbs because people think that it doesn’t work. You have quite a few people that are staying there for local businesses or local families, also it’s a bit cheaper as well. So especially with houses, you get families that don’t have the budget to spend.
So I would say it depends. The hot suburbs are definitely the inner city in the West, decent suburbs in the Lower North Shore, beaches. It doesn’t mean that your suburb won’t work out, it always depends on what you will do in the long term and again what the potential demand in your area is; we use data to tell us that.
For those thinking of becoming a potential landlord on Airbnb, utilising MadeComfy means added value to your property.
It doesn’t always matter how much we get paid, the main focus of that is that we increase the net return of the landlord and we work on a commission, we take a 20% commission on the revenue that we generate and on average it’s around 40% higher than what you would achieve by yourself on Airbnb. So you’re better off paying us and using us than administrating yourself, plus you have no work. And that’s the other thing we have is a small fee that is paying for the photography and for the listing which is $250, but that’s about it. When you look at the returns that we generate, for example if you search a property in Bondi, two-bedroom – incredible place, she made $900 long term and that’s gross before paying the agent. And now we’ve got bookings for the first two months and she’s making $2,000 average a week with that property; she wouldn’t have been able to do that without our pricing and without our furnishing services.
To ensure there is a consistent cash flow, Sabrina and Quirin undertake a financial analysis to gauge the potential of the property in the long and short term.
We have been in the market for almost three years now and we are generating consistent returns for our property investors. So I know that a lot has a stake on seasonality so it’s not always as stable, but that is not what we are experiencing with our current customers. Of course a lot of what we do is on data, data from the whole short rental market as well as the data from the properties that we manage. So the first thing we do is a financial analysis on what can be generated with the property – we wouldn’t take on board a property that didn’t have their pretensions to yield a higher return. So we also reject properties if we see that the data we can achieve in the long term and short term is not high enough. I think that is key for the success of achieving high returns and generating consistent cash flow. Another thing that is really important, we have mentioned before that the pricing is properly managed based on supply and demand, so to achieve the highest occupancy rate as possible and based on experience, we can generate the best returns for our investors.
But what makes us do well at the demand side, we a lot of research as well on travellers. So in 2010, there have been 2.7 international visitors in Sydney – that 2.7 million is excluding anyone who comes from interstate, just as purely international. Now last year 2016, we had 3.7 million international visitors, so a million more! So if you’re looking to increase the demand on that side that have not been hotels and apartment built to really capture that demand, so it gives us a lot to attract more guests. And it’s the same in Melbourne and Brisbane, tourism is a big industry in Australia. So it’s a growing demand and you just need to make sure that you are advertising to those tourists and make sure that your price is where it should be that you get that booking.
Yeah, it’s also important that it’s not only Airbnb, it’s having a proper marketing strategy and marketing through the right channels because Airbnb is just one of many platforms. To mitigate that way, you have to be across multiple platforms as well, Booking.com, TripAdvisor, Estate, Home Away Group as well.
In terms of growth for MadeComfy for the next few years, they are looking to increase their asset base through appealing to a wider target audience.
We’ve got now about $5 million in assets that we manage, that is from our small studio in Newtown up to like $10-15 million houses in the eastern suburbs or lower north shore. And that’s currently growing with a rate of over 20% a month. We are opening up in Melbourne in two weeks which is a major step as well and in the Central Coast in November as well, so this is where we are growing at the moment. Growth is also on making sure we provide the service that members require and also expect, that all our property owners have heard from our guests. So the role of investment going into our customer service side onto the data side to ensure we are continuously providing the best investment strategy and the best return for our owners.
We are aiming to grow our asset base by four times over the next 12 months and that’s pretty much with the growth rate that we have and what we’ve seen. As we’ve just been at the Buyers Expo on the weekend, it’s given an incredible interest to a lot of investors that don’t know, they didn’t connect the line between the two. It’s actually something for your property in the inner west, or like a lot of people think they have to be in Bondi or Manly because you get people that want to be out there on the beach; some of the other reasons why people come to Sydney is for work, for family, business – wherever your property is there’s a great potential for you to tap into a higher return and also the flexibility to use your property. So if you have a property in the long term, some of the customers are quite lucky they travel all around the world and are here for six months or only three months and then leave their houses empty. And for them it is a great way to get some cash from the time the property is not used and use that to either buy another property, or to have a nicer lifestyle.
And for owners who wish to treat their property as a holiday house, that is possible too.
We have a certain amount of time we need to build to manage it, it depends on the size of the property but if you go away for like four weeks plus it’s a great way to make sure you round out your holiday or pay off that mortgage quicker, or pay for information that you wanted for a long time. So it gives you just a bit more flexibility in your life, using that asset that you have and making sure that other people can enjoy it as well.
In disrupting the industry through their business, Sabrina and Quirin have conditioned their mindset through resources by Tony Hsieh and Tim Ferriss.
One book that we have both read and loved is Delivering Happiness. It’s the book of the CEO of Zappos, Tony Hsieh.
He’s awesome, that’s a great book.
Yeah, we love it.
The way its written is really interesting as well, but you learn so much about why are they becoming successful and why he’s doing this and all about the importance of culture and customer service and what customer service should mean. If you read this, anyone who is in some kind of customer service business, it’s an incredible book. So Delivering Happiness from Tony Hsieh.
In terms of podcasts for entrepreneurs, people who want to get inspired on kick-starting their businesses or how to confront the challenges of dealing with business they can also enjoy the podcasts of Tim Ferriss, the author of The Four Hour Work Week. They’re inspiring lots of great entrepreneurs and sharing their stories and their journeys as well.
A personal habit which has contributed to their success is to consider their failures as blessings and lessons learned.
One big mindset thing is to look at failure and mistakes in a different way. But when you look at any mistake you do or you say something like you get to elaborate and you realise there’s a wall and you can’t continue and it’s actually telling you that. So it’s a great way to say, ‘OK, it is an amazing learning experience that I will not continue and make this mistake again.’ So if you look into the whole thing about startups or continuous improvement it’s all about the mindset of what failure means and communicating and being open to mistakes is something we learned from MadeComfy because it gives us a great opportunity to learn from that, to improve from that.
And personally I learned so much more from the things I did wrong in life and the mistakes I did because it not only forced me to look at my mistakes like it allowed me personally to get to the point where I am today and I’m a different person based on the mistakes I’ve made in my personal life, in business and with myself. And I think that’s a big thing to look into mistakes and failure in a different way and to try and see the positive and what you can learn from that.
The opportunity to help others with their investment properties is an exciting prospect for the future of MadeComfy.
There are three things that are exciting – there are opportunities to help property owners’ ability to access financial aid with their assets and really enable all of Australia to really tap into that side of thing. For guests to go away with as well and have an amazing stay, an amazing time and they really enjoy staying here in Australia with MadeComfy.
The other big thing, I’m a big believer in this whole discussion at the moment around short term rentals and the positive and negative impact it has with their communities. And one big thing I personally believe is that there is a place for short term and for long term, but in the end, it’s all about people and it simply is all about the way long term and short term rentals are managed and regulated – you can’t just do what you want with your property and do things the same with it. There are certain rules you have to comply with and I think that’s currently lacking with short term, a lot of grey areas, which is causing a lot of fear of the unknowns with everyone.
And to give you a great story for example, when we started in certain building complexes and the owner is engaging us, we always let the neighbours know, ‘Hey, this is what MadeComfy is and this is what we are doing’ and then at the beginning people worry that there are going to be loud music and noisy parties and things like that. And I’ll say, ‘Look there is no parties, we have a strict no party policy. However we are scanning every gap, we have IDs, so if everything is wrong you’re obviously free to contact us.’ There was this neighbour in one of the apartments in Darlinghurst who I recall the very first week called up and said, ‘Hey, your guests were loud the whole night.’ And he was calling to complain, they didn’t expect us to do anything. What we’ve done, that morning we contacted the guest and asked what happened. And he said, ‘We had a bit of a loud time,’ and we said, ‘Look, you can’t do that.’ The guest didn’t really see that, so we asked the guest to check out simply because we had had the rights to do so because they violated our house rules. Now the neighbour when he realised what had happened that the guests had left was really impressed by those guys actually doing something about this. And he said, ‘If I had a long term tenant next to me, I would have been stuck with them for the next 12 months, but now that person is gone, it’s great.’
This made a good impression on the neighbours, which prompted them to help out another guest themselves.
About two months later we had a guest, she locked herself out. And it was just amazing, the same neighbour realised what had happened, saw her being about and she was very emotional and she had a meeting and she literally had closed to go to the meeting and we couldn’t get out in time. They were so frustrated and then the neighbour said, ‘It’s OK, I’ll give you money to buy clothes to be able to go to the meeting,’ and said we can sort it out later. When you come back and see how it was initially when there was this negative thought about what it did for that person, simply because he knows that we care as much about the community as he does, that he’s so supportive to a guest just blew us away.
To really realise what you can do when you manage it properly and when you are there. Because we are all human and we all like our late nights and sometimes we don’t like the rules, but it’s clear what the rules are and people follow those. It’s a great way to listen, to experience things, to experience the culture. And that’s just one of those stories that made us think like, ‘Wow.’ It’s amazing to see what is really possible and very often you hear about, ‘You hate me, they hate me, etc.’ Who hates people? It’s simply about making sure everyone can have a great time and be able to live there and there shouldn’t be parties, there shouldn’t be those behaviours, there shouldn’t be overcrowding the same way it shouldn’t be in the long term and making sure that those rules are followed.
It’s an important thing that has to happen in the next couple of years and being able to support that process is one of our big goals at MadeComfy – to make sure that our communities are not disrupted and welcome guests and make sure they have a great time. Just appreciating that they have an amazing time in Sydney, in Australia, that they haven’t had before because they truly live like a local.