Really want that house? Try SA’s first rental auction platform
National average rental inflation is a lowly 2.89% according to the latest TPN Market Strength Index. This means that as a landlord, if you on average were charging a tenant R10,000 per month, your rental escalation would be R289 – hardly enough to cover above-inflation utility expenses, levies, and rates and taxes.
But what if you could set your desired rental at R10,000 and still yield an additional 10% when securing a tenant? In the example above, the landlord would request R10,000 per month and end up securing a tenant for R11,000 instead.
This is possible through a new rental app called HouseMe, which links up verified tenants with vetted landlords and allows prospective tenants to bid against each other for a rental property.
It’s the brainchild of Benjamin Shaw, ex investment banker and participant in the Allan Gray Orbis Foundation’s Fellowship Opportunity.
“Banking teaches you to solve problems in the most efficient way possible,” he says, noting that the current rental process where landlords list their properties and tenants apply is outdated and not transparent. “Searching for rental accommodation is hugely inefficient and so I wanted to solve it.”
Shaw mentions a number of factors that he says are inefficient for tenants and that need solving: Securing a fair rental price, proving to landlords that you are a good tenant, having to reproduce your relevant documents every time you apply to rent, and dealing with rental payment administration and late payment issues.
“Sometimes what happens is a tenant may be out of the country on business and due to various circumstances, misses his rental payment by a day,” says Shaw. “He’s not a bad tenant, but this can become a problem for the landlord. Which is why we manage the rental payments and guarantee the landlord’s rent.”
Shaw believes HouseMe should answer the concerns of tenants as well as landlords which, he says, are paying too much to rental agencies because their systems are expensive and inefficient.
“We charge 2.5% of the monthly rental as well as 25% per month on any upside yield generated through the auction process,” says Shaw, noting that all tenants are screened and credit checks done. “Tenants who sign up on HouseMe also build up a rating thanks to the company’s regular interaction with landlords.”
Tenants, too, are protected due to every landlord screened and verified, minimising the risk of rental scams. “Tenants get to rate their landlords too, so the process is fair and transparent,” says Shaw, noting that landlord-tenant spats do not open up the system to abuse. “Landlords and tenants score each other on a quarterly basis so if one quarter in particular stands out where either party rated the other badly, we call the affected party and ask what the situation was and what caused it.
“We will not tolerate bad behaviour by either party. But neither tenants nor landlords can abuse the system by rating the other poorly without merit.”
HouseMe is currently only operational in Cape Town and Stellenbosch, but Shaw plans on rolling out the system nationally by the end of next year.
“We have built a tech platform that scales up easily,” he says, noting that operational costs are a fraction of the traditional rental agency. “We can pass on these cost savings to our landlords.”
Shaw says HouseMe is not exclusively aimed at private landlords, and he is not closing the door on traditional rental agencies which have approached him to look at how they can work together to improve their own efficiencies.
Shaw says he hopes that as his platform rolls out nationally and begins to influence the market, rentals will be fairer and the entire market and process more transparent.
“The landlord has the right to set a reserve price,” says Shaw, noting that if prospective tenants don’t meet it, the rental was probably too high to begin with. “The landlord can either hold on or reduce his reserve price. This is the most efficient and transparent model which accurately reflects supply and demand dynamics.”
Shaw also foresees HouseMe contributing to a better pool of landlords and tenants because they know they are being rated, and negative reviews can hurt their chances of securing a rental property or a good tenant in the case of landlords.
For more, visit HouseME