You may think that you lucked out by bagging a swanky Manhattan skyline-view apartment at a great bargain. But is it really the right place for you? Could it be creeping with bed bugs and rodents? Does it have a regular supply of hot water? Worse still, is the owner Ebenezer Scrooge personified? Ultimately, ‘to rent or not to rent’ – that is the question. As for house-hunters struggling with this conundrum, New York-built Rentlogic emerges with a potential solution to eliminate the guesswork – independent building certification.
Today, ‘proptech’ companies in the USA are attracting a significant amount of investor attention. The independent first-of-its-kind rating system, Rentlogic, measures the quality of multi-family residential buildings in the city that never sleeps. Rentlogic currently ranks more than 1 million properties in New York. These rankings are based on tracking of previous tenant complaints (verified) and city-issued violations, physical inspections and objective health and safety checks. The startup’s website then offers the building grades up for those looking to rent the property.
Rentlogic raised $2.4M in seed funding in Aug 2018. Investors, involved in this funding round, include the Urban-X accelerator, Urban.Us, and managing partner at private equity firm Accretive, Edgar Bronfman Jr.
The company expects to use the funds to achieve two goals. First is its planned expansion to other cities, such as San Francisco and Chicago. And the second goal is to grow its sales and operations team.
Ire of a Wronged Tenant
As with most tech start-ups, Rentogic too was born out of a disappointing experience faced by the founder. Yale Fox, a Canadian living in the US, happened to fall sick soon after moving into his beautiful apartment in West Village. After many visits to the doctor, he was diagnosed with a mold-related illness. When the landlord refused to fix the situation, Fox took him to court.
Unfortunately, in the interim, having paid to fix the mold problem on his own, Fox didn’t have any evidence to incriminate the house owner. So he presented to the judge, a model that depicted the complaints filed against his landlord, from public records, and other public assessments of the building. To this presentation, the judge is known to have laughingly responded, “Welcome to New York and I’m sorry this happened to you… and you should definitely build an app because New York City needs this.”
Suffice to say, Fox won the legal battle.
Rated ‘A’ for its Business Model
In 2013, he went on to put the judge’s recommendation to action and build the Rentlogic app prototype (called: RentCheck).
“Every industry has bad apples,” Fox said in a Bloomberg interview. “This is about exposing them in hopes that they adjust their behavior.”
At the same time in big cities where people pay almost 50% of their salary as rent, Rentlogic offers a credible means for them to conduct background checks on the property.
Though loaded with good intentions, Fox soon realized that Rentlogic still did not have a sound revenue model. After several algorithm iterations, he designed a unique, yet thorough, rating system for buildings.
Similar to a credit score, Rentlogic Ratings are A through F letter grades – based on 150 different variables from scrupulously collected data. The rating is a normalized measure of an apartment’s living condition, as compared to other buildings in the city.
This unique proposition was thereafter marketed to property owners as a super-affordable service, which needs to be renewed every year. And this meant that the startup could finally make money. It also marked the transition of RentCheck into Rentlogic.
“It’s the same way a building would get LEED-certified,” Fox told TechCrunch. Rentlogic employs neutral third parties to deliver objective, fact-based reports to landowners who request for Rentlogic Certified Building Program. He believes that it’s a good way for landlords to differentiate their property from others in the neighborhood.
In the current zero-transparency property marketplace, Rentlogic also protects owners from fabricated complaints and tenants from bad tenants. In fact, Rentlogic has even partnered with private equity firm Blackstone to rate their $5.5B Stuyvesant Town purchase.
Independent Ratings Bring Home the Bacon
While it was initially a challenge to get landlords to accept this rating system, the scenario is very much different now. Owing to the overcrowding of New York’s housing market with new luxury apartments, currently, there has been a drop in demand for rentals. Naturally, the rents have also fallen by 3% from a year earlier to $3,400. That’s where Rentlogic works its magic by helping property owners really set themselves apart from others. The seal of reliability that Rentlogic offers gives landowners have a greater chance of securing that elusive tenant.
Owing to the currently astronomical cost of new tenant acquisition (up to two months’ rent) that owners need to bear, investing in an affordable and trustworthy independent building certification would be most prudent. Rentlogic’s building certification starts from just 20 cents per unit per month. So, if the certification helps property owners get even one long-term tenant, then that is immediate ROI.
The Vision for a Profitable Future
Fox is focused on developing a loyal following of apartment-hunters who are thoroughly dependant on Rentlogic for its unbiased building certification. Once this happens, landowners would automatically see merit in regularly reviving their contract with the startup. And that’s it, the business model becomes profitable.
At the same time, Fox is intent on creating supplementary paid tools that help landlords market their apartments better – without compromising on the fairness of the platform’s ratings for renters.