Lee Lin had a full-time job, three rental properties and a problem: he had no time to find tenants to live in them. He tried advertising on free-listing Web sites like Craigslist, but found it too time consuming, so he created an alternative.
Lin and co-founder Lawrence Zhou, both former programmers, spent nine months and $20,000 in personal savings to build RentHop.com www.renthop.com. The Web site showcases available apartments in New York, predominantly ones that don't charge renters expensive broker fees.
Broker fees, which usually amount to 15% of a year's rent, are a holdover from those heady days when vacancy rates in New York were virtually nonexistent and landlords held the upper hand.
Lin said U.S. Census Bureau data showed there are currently 4 million vacant apartments across the country, which he said amounts to $50 billion in lost revenues for landlords and brokers. The latest report by real-estate research firm Reis Inc. showed apartment vacancy rates in New York had jumped 14% over the last three years, rising from 2.5% in 2006 to 2.9%. This is all good news for RentHop's aspirations.
RECESSION DRIVES NEW BUSINESS MODEL
"Landlords and property managers are very desperate now," said Lin, who added that when the rental market tanked it forced landlords to absorb broker fees as a way to try to entice renters. These "no-fee" apartment listings have become extremely popular with New Yorkers.
"The bottom line is the recession is driving landlords and brokers to work harder to find tenants and that makes room for a new site and a newer business model, such as RentHop to come along."
Lin said RentHop is a "better" answer than Craigslist because it has a richer search engine that allows renters to more easily browse listings and compare properties based on essentially the same criteria, such as price, neighborhood, amenities and number of bedrooms and bathrooms. While it may share the same information as Craigslist, RentHop displays it more effectively and incorporates a handy customizable Google Maps feature that lets users physically sketch out their own search areas.
There is also a feature that allows renters to schedule appointments directly with landlords. Lin said he hopes to add an online schedule so renters can check a broker's availability and co-ordinate a viewing.
RentHop is free to browse and to post listings, but landlords are charged half a month's rent for every signed lease the Web site helps bring in. Since RentHop gets its listings directly from landlords, it virtually eliminates fake or bait-and-switch ads that lure renters in under false pretences in order to try to sell them on other properties. This is something Lin said is one of the most frustrating aspects of many free options like Craigslist, where he estimated as many as a third of the ads are bogus.
After emerging from venture firm Y Combinator's summer incubator program, where they received mentoring and a check for $15,000, RentHop launched in July with 1,500 listings from approximately 500 landlords. Lin said RentHop made $15,000 in revenues in its first month and since then its listings have nearly doubled.
The site is now averaging about 25,000 visitors a month, which Lin said puts it on par with the Web sites of established New York-based brick-and-mortar brokerages like Anchor Associates (www.anchornyc.com), Ardor (www.ardorny.com) and Bond New York (www.bondnewyork.com).
"I don't want to suddenly start expanding to other cities without first locking down New York," admitted Lin, whose primary goal is to establish RentHop as a "dominant player" in the New York rental market over the next 12-18 months. That means becoming an "indispensable tool for the property managers and brokers to use."
The Y Combinator money was sufficient to get them launched, but Lin and Zhou are currently looking for additional angel investment of between $200,000-500,000 so they can hire a few people to help with sales and marketing and start scaling the business.
"What's really going to make us stand out and prove to everyone that we have a lot of traction is when everyone thinks of RentHop as the place they go when they need to rent, find an apartment or lease out an apartment."