By IOL Property, 26 November 2016.
Revolutionary concept and growing adoption — HouseME allows tenants to bid on fair rental as the Cape Town startup brings world-class technology in South Africa.
Prospective tenants can now secure accommodation by submitting bids on their smartphones. And if they sign a lease, they will have to pay a maximum of one month’s deposit, instead of the two or three months that many landlords are now demanding. These are two of the features of HouseME, a recently launched platform that aims to challenge the traditional rental-agency approach to residential letting.
HouseME co-founder and chief executive Ben Shaw says the auction results in the rent on a property being determined by the market forces in a particular area. HouseME’s research has found that landlords often don’t know what the going rent in their area is, so they let out their properties for less than fair market value, he says.
“Some landlords do not realise how desirable their property is and how much people would be willing to pay to stay there,” he says.
The auction enables prospective tenants to secure a property they really want by paying more. In the traditional letting model, where a property is advertised for a set rent, prospective tenants who aren’t first in line lose out.
Landlords who use HouseME do not have to use an auction to determine the rent; they have the option of going the traditional route and advertising their properties for a predetermined rent.
About 60 percent of HouseME’s landlords choose the auction option, which, on average, results in them achieving yields of eight to nine percentage points above the reserve price (the price at which the bidding must start), says Shaw, who quit his job as an investment banker last year to start HouseME.
If a landlord does opt for an auction, HouseME receives 25 percent of any upside over the full term of the lease. For example, if the landlord sets a reserve price of R8 000 and the auction results in the property being rented out for R8 100, HouseME will be entitled to 25 percent of the R100, or R25 a month. The excess is in addition to HouseME’s standard fee of 2.5 percent of the total monthly rent (in this example, 2.5 percent of R8 100, or R202.50). HouseME is not, at this stage, registered as a VAT vendor.
Landlords do not pay fees directly to HouseME, but HouseME retains a percentage of the rental when it is paid every month.
Traditional letting agencies charge between seven and 15 percent of the monthly rent. However, unlike HouseME, they employ staff who can take on the responsibility of managing the property, including conducting the mandatory incoming and outgoing inspections of the property, handing over keys, finding tradesmen and supervising maintenance.
HouseME is not the first digital platform in South Africa that enables landlords to market their properties and tenants to find accommodation. But its auction mechanism is unique. HouseME also screens tenants, provides a rental guarantee, and gives landlords access to services to manage their properties and tenants.
Landlords manage their properties via a single “dashboard” on the HouseME website (www.houseme.co.za), while tenants use an app to find properties, bid at an auction and interact with their landlord. The app, HouseME SA, can be downloaded from Google Play or Apple iTunes.
Landlords do not pay to list their properties and tenants do not pay to search for places to rent.
HouseME performs a credit check on prospective tenants at no charge. Would-be tenants submit the required documents via email or upload them via the app. Would-be tenants have to be vetted only once to apply to rent the properties on HouseME.
Shaw says HouseME has such confidence in its tenant-vetting process that it provides a three-month rental guarantee. The deposit covers one of the three months, while two months are covered by an insurance policy that HouseME has negotiated with OneSure. HouseME absorbs the cost of the premium.
Shaw says HouseME creates a disincentive for tenants not to pay their rent, because poor payment behaviour will jeopardise their chances of finding another property on HouseME. With traditional letting, he says, problem tenants can move from one agency to another, and many agents don’t share their data on bad payers.
Read Full Article on IOL Here: Tenants can rent via an online auction