Kylie Davis: 00:00 Welcome to the PropTech podcast. It’s Kylie Davis here and I’m delighted to be your host as we explore the brave new world where technology and real estate collide. I passionately believe that we need to create and grow a sense of community between the innovators and real estate agents, and sharing our stories is a great way to do that. So the aim of each episode is to introduce listeners to a PropTech innovator who is pushing the boundaries of what’s possible, and to explore the issues and challenges raised by the tech and how they can create amazing property experiences.
Kylie Davis: 00:32 Now my guest in this episode is Adrian Yong, the co founder of Rentality, a very new Australian startup that’s seeking to create a mid-term rental market. So yes, we’ve all heard of Airbnb and stays in the short-term and holiday rental disruptors, but Rentality believes that there’s space for something in between a holiday and a long-term lease. So let’s dive right in. Adrian, welcome to the show.
Adrian Yong: 00:58 Hello Kylie. Thanks for having me.
Kylie Davis: 01:00 My pleasure. So let’s go straight to it. What does Rentality do? Give us your elevator pitch.
Adrian Yong: 01:08 Sure thing. So elevator pitch is Rentality is an online marketplace for affordable mid-term or monthly home rentals. That’s accommodation between one month to 11 months. We’re essentially targeting the gap between short-term accommodation, Airbnb, Booking.com, and long-term rentals, real estate agents such as REA or All Homes.
Kylie Davis: 01:27 Right. So what are the pain points that you’re solving? Why do we need a mid-term rental market?
Adrian Yong: 01:33 And that’s a great question. Why we need a mid-term rental market is because on a short-term space, we can see tourists have plenty options with Airbnb and Booking.com. Long-term residents are playing options with real estate agents. But when it comes to people in the middle, these are blue collar, white collar, fly-ins/fly-outs, international, interstate students, medical professionals, and migrants, it is extremely difficult to find and secure an affordable temporary home rental. So Rentality makes it possible for these individuals to virtually inspect, book, pay, and just move in, just like that.
Kylie Davis: 02:05 So it includes a virtual inspection element as well, does it?
Adrian Yong: 02:09 That is correct.
Kylie Davis: 02:10 Okay. So how big is that as a market? Especially somewhere as small as Australia.
Adrian Yong: 02:17 So in Australia, according to Tourism Research Australia and the AVS, $11.9 billion was spent on accommodation between one month to 11 months. And that’s in Australia in 2018. But when we look in the APAC region, according to World Bank data, that far exceeds $180 billion.
Kylie Davis: 02:36 Right. So just to summarise, a mid-term rental is not just a quick escape or just a week or two away on school holidays. It’s time where you are looking for somewhere that feels like a home, but you’re only going to be there for a couple of weeks to a couple of months. So you don’t want the hassle of a long-term lease and trying to furnish it, or all of those problems, I guess.
Adrian Yong: 03:02 Correct.
Kylie Davis: 03:02 Cool.
Adrian Yong: 03:03 So it’s for the people in the transitionary market, mainly people who are subcontracted or got project or even the internal grad going there for a few months for a job, project, or in pursuit of one of their passions. So it make it possible for someone to easily stay in a place that’s fully furnished, utilities all set up, and you can stay in it at an affordable rate in months at a time.
Kylie Davis: 03:23 Right. So I guess so we’re talking sort of doctors and nurses because they often get sent on Secondment to different medical institutions, don’t they?
Adrian Yong: 03:36 Correct. Specialists especially. So either when you’re picking a housemanship as a doctor after graduating or when you’re seeking a specialist’s role, you’re forced to reposition in different hospitals for six months at a time. So even we work with the Australian Medical Association to help their doctors find temporary accommodation across Australia, urban and rural.
Kylie Davis: 03:56 Great. Okay. So we’re not talking here about just student digs. These are quite high quality tenants that you’d be happy to have in a property shorter term.
Adrian Yong: 04:06 That’s correct. So based on the customers that we’ve already processed through, about 82% of the customers we process are professionals. These include doctors, software engineers, or architects.
Kylie Davis: 04:17 Wow. Okay, great. So are you a disruptor that’s working with agents or are you working directly with property consumers or both?
Adrian Yong: 04:32 So at the beginning, how we wanted to structure Rentality was to build a standard of the property we rent out. So we initially contacted and partnered up with real estate agents, property developers, and the new developers who go to rents. So these agents were interested in tapping into a new market and want to be away from the saturated long-term market. And they also want to earn a higher rental yield than long-term. So when we pose the option of a mid-term rental market where they get professional tenants and high rental yielding at their longer-term, they were happy to jump on board.
Kylie Davis: 05:03 All right. So can you give me an example of a two-bedroom apartment in Sydney or Bondi or something, that how much would it rent for on the short-term holiday market versus how much it might rent out for on the longer normal property rental and then how much where Rentality fits in that gap.
Adrian Yong: 05:26 Sure thing. So in terms of the pricing model, it’s a bit difficult to, in terms of the rates and stuff… I guess the best way to indicate is by rental yield or how much more you can earn. So let’s say a property in the CBD of Sydney, on Airbnb, a homeowner or real estate agent on average can earn rental yield of around eight to nine percent. On the long-term market, that’s around four to 5.8 percent, and in the mid-term market, we’re around the 7.8 percent rental yield. But when you include all the expenditure, the cleaning fees and all that, we actually help our real estate agents earn a higher rental profit compared to a shorter-term because they have to constantly clean up, housekeeping and all that.
Kylie Davis: 06:08 And that would put off a lot of homeowners or property owners, I guess, from renting out their property while they’re actually going to be away. Just the maintenance or the management that goes with change over.
Adrian Yong: 06:23 That’s correct. And it’s slightly disruptive. So let’s say you’re going on holiday for two, three months internationally and you want to rent your home literally for two, three months. On Airbnb, you probably get guests that comes for a week or maybe a few days, but you can’t rent out the whole time. With Rentality, we make it possible where your real estate agent can now rent for the few months when you’re gone. And the real estate agent wouldn’t even need to do much work. It’s just find a tenant, look after tenants, maintenance and whatsoever, and you get your whole rental for three months.
Kylie Davis: 06:51 And so you’re still protected under state laws that govern property management?
Adrian Yong: 06:57 Yes, that’s correct. So under the laws that we’re governed by, we are governed by the Residential Tenancy Act in every state. So we ensure that properties with a minimum of three months of rental require residential tenancy agreement. Anything less than three months, it’s a flexible option where the tenant can choose to go with RTA or a flexible short-term rental agreement.
Kylie Davis: 07:18 Right. How does this benefit real estate agents or property managers as being able to offer this as a service?
Adrian Yong: 07:27 Sure thing. So real estate agents and now competing with one another to attract more customers and more homeowners basically. But when they pitch to their homeowners, “I can get your rent to yield around 5.2%.” It’s nothing special to the real estate agent next door. But when you’re able to pitch, “I can get your rents to yield 7.8%,” the tenant is now professional, and you can get them more money. So that gets them more properties and that gives us an opportunity to provide more accommodation for the tenants who need it. So that’s one plus. The second plus is that real estate agents never want to go into the short-term rental space. The reason being is because short-term rental space are quite disruptive where they do not have the manpower or time to constantly check-in the new guest, check-out the new guest, clean it up, and stuff like that. They wanted a middle ground where they could just look after the guests coming in three times a year. But in a higher rental unit long term.
Kylie Davis: 08:17 Right. So I guess we see too when the market’s down, and we’ve just sort of coming out slowly now I guess from that period where properties maybe aren’t selling, or have been on the market for a long time, this could be another tool in the toolkit of agents while you’re waiting for the market to pick up. They’re all, “Why don’t we put it on the rental market,” sort of mid-term rather than long-term so that you can act in a couple of months rather than a year if that.
Adrian Yong: 08:46 Yep. I’m glad you brought that up. So that problem surrounds property developers quite a bit, actually. Property developers who built quite a large substantial amount of properties who are unable to sell it. They like the option of renting it for a few months at a time, and when there’s a high peak season of sale again, they try to sell it during that few months. And if they can’t, they rent it back out. So it’s an opportunity for them to earn a rental income to cover the interest of their loan whilst not losing out on the sale. Whereas when you do that with short-term, generally the guests that stays in the short-term would generally damage their property. Whereas in mid-term, when you have medical professionals, they won’t really stay in their home much of the time because they are out working and home is generally left dormant. So it’s a great opportunity for them.
Adrian Yong: 09:30 The second part to that is, this is also popular with developers who built to rent. So developers who built to rent are now faced with the issue of competing with other long-term property rates. But because their rates have to be predominantly higher to please their investors, they are forced to charge at a higher rental rate, but yet they can’t compete with the other options available. So when I pitched to the developers who built to rent the mid-term rental market space, they’ve got the rental yield they wanted, and they’re not competing with the rates that they are unfavor to.
Kylie Davis: 10:43 So, where are you guys in your startup journey? I hate the word journey, but where you guys at the moment in terms of your development? How long have you been going for, and how many properties have you got on your platform?
Adrian Yong: 11:00 Yep. So we started Rentality about August last year actually.
Kylie Davis: 11:07 Oh wow. That’s very new.
Adrian Yong: 11:09 Yeah. We started August last year, we’ve built Rentality for a bit, and then we’ve gone to an accelerator to validate our business model, our process, and helped us with our connections. After the accelerator, we built our MBP and launched it in February, 2019. So quite recently when we launched our MBP, and from February to June we’ve built it, we’ve tested it, and we’ve made over half a million dollars in rental revenue. So we’ve processed quite a bit in terms of number of properties.
Adrian Yong: 11:35 The great thing about working with developers and real estate agents is that the minute you sign one up, we don’t get 10 or 20, we get hundreds. So Rentality Lite, so we, when we started, we sort of had properties in every state. So there was a mistake of going everywhere, but it was hard to manage the marketing and costs. So we decided to focus on three states after: Melbourne, Sydney, Canberra. And when we did that, so as of today we have 200 live properties at access to 2000, so meaning that when we rent out, let’s say level one of boom three, we get level two of boom eight we get an ongoing supply. When one property is booked out, we get another one. So the great side is that we have an ongoing supply. So we’re happy with that. And our main focus right now is attracting more tenants and being a brand is more trustworthy to corporates and individuals looking for a temporary rental.
Kylie Davis: 12:23 And so how were you looking to do that?
Adrian Yong: 12:26 Yep. So at the initial stage, we did a B2B approach. We approach relocation companies, travel management, subcontracting companies, HR, universities, TAFEs quite a bit actually. And we actually build a partnership model with them. We built a referral system with them and we’ve got tenants from businesses essentially. And after that stage, we are now working with Google. So we’re part of Google’s media style accelerator where we’re one of four companies that got accepted per quarter and they actually help us do a marketing campaign. So how the whole campaign works is that Google actually goes out and find companies, startups who can scale really well. And when they’ve heard about our platform, they went to actually mid-term rental is a highly looked after search term in a search engine, but there was no solution. And they actually told us that and we’re like oh, okay.
Adrian Yong: 13:16 And they went, actually, would you like to be part of our accelerator? We don’t take any equity. All we do is we take care of your marketing campaign. And in return, you just pay the ads and that’s all, that’s all we have to do. So they are technically like our marketing director and the only cost to us is the ads, which we would pay as well. So Google is now helping us find data with our competitors, with our close competitors with which market needs it, which market doesn’t. And based on that we create ads tailored to it.
Kylie Davis: 13:45 Right. And so who are your competitors in this space?
Adrian Yong: 13:48 So in Australia we do not have any direct mid-term rental competitors. So as in a marketplace from mid-term home rentals, but globally we have two. So one in America called the Blue Grounds, which is around series B, Series C, if I’m not mistaken. And there’s another one called the Homelike in Europe, which is going IPO this year. So these two companies are fairly new as well, about three, four years old. And they’ve established a model when Airbnb was there and they identified that there was a market and the need for mid-term rentals and platforms such as Airbnb stage, just wasn’t meant for mid-term home rentals.
Kylie Davis: 14:22 Wow, okay. So, so what’s the listing? What are they expecting the IPO to come in at?
Adrian Yong: 14:30 So, on the news that I’ve read so far was that they’re just talking about IPOs and getting prepped for it. They’ve not released any numbers on how much they think push down costs and their evaluation. So that’s all still in deep, we’re planning to go IPO, but no numbers are said yet.
Kylie Davis: 14:45 Okay, cool. And so, do you have any partnerships at the moment with any key agents that you’re working with?
Adrian Yong: 14:58 Yep, we have quite a bit. So the established ones that we’ve already have connected with are Iron Fish. So this is a property developer in Melbourne and some real estate agents such as Jam Realty, such as Make Comfy, such as, we have quite a bit actually. So, but overall, yes, we have quite a bit of a partners with our property site, yes.
Kylie Davis: 15:19 And are you working with Ewan Morton from Morton’s?
Adrian Yong: 15:23 That is correct, we also work with Ewan Morton, yes. So we had a chat with Euan Morton recently and we were working Morton property group in identifying how they are renting properties, how they work in the mid-term, so we’ve, we’ve just onboarded them and we’re trying to test their properties in Sydney. Yes, that’s correct.
Kylie Davis: 15:40 Cool. And so at the moment you’re covering Melbourne, Sydney, and Canberra, is that correct?
Adrian Yong: 15:44 That is correct.
Kylie Davis: 15:45 Yeah, okay. And so what are the challenges that you’re facing right now as a startup? As a very new startup who’s only 12 months old, literally.
Adrian Yong: 15:57 Actually, you’re correct. Yes. So the main problem that we face right now is basically building the awareness and building the trust. So unlike other hardware or SAS products, startups, we are a marketplace, an online marketplace, and our main goal is brand awareness and then network effects. So building that level of trust with users. For example, if you, if you heard, if you went online, you see Rentality Mid-term rentals, you go is that a trustworthy website? Will my money be safe? Is that accommodation even real? So we have to build that level of trust with our new users and build that brand awareness. So that’s our main challenge right now.
Kylie Davis: 16:32 Right. And so how are you overcoming that?
Adrian Yong: 16:36 Yep and how we’re overcoming that, oh quite a few strategies. So we’re pitching in quite a few places, universities, pitch competitions or even I’m attending some of the HR events from corporates to pitch up what Rentality does, how it can help ease the tension of transition and also with Google. So Google with Google itself, we’ve positioned our ads in key strategic areas where users feel comfortable with, and Google has as well advisers, what areas we should put blogs in, what areas we should also put reviews on for areas of a mid-term rental space.
Kylie Davis: 17:12 Right, okay. And so, and you’re part of the Fishburners accelerator?
Adrian Yong: 17:17 No, we don’t have Fishburners accelerator, we were part of Slingshot accelerator, so we were part of a Slingshot Horizon’s programme 2018 accelerator back in September, and we went through it, got an investment for artesian ventures and yep, we are here today after that.
Kylie Davis: 17:32 Okay, cool. And so if anyone’s looking are you taking investors or where are you at in that state?
Adrian Yong: 17:44 Yeah. So right now we’ve already got cashflow positive and we’ve covered all costs. It was really great opportune thing for us. So at the start, we were looking for investment, but the minute we’ve got money coming in and we didn’t actually see it as a problem anymore, we are now looking for key strategic investors. So we want to investors who had a key connections in the PropTech industry or the property industry and want key strategic investors within the corporate industry. So we want the people with the right connections. So we weren’t looking anymore for the money, but for the connections, and I’ll name some people that we’ve already got on board, such as we have Chad Stevens, a founder of One Form. So he liked the concept, he got the idea, he said yep, put me on board as one of the Angels. So, that’s an example.
Kylie Davis: 18:28 Fantastic. And so if anyone’s listening to the episode is interested to get in touch with you, we’ll put your contact details as part of the show notes. But what does your ideal, what would your ideal reach out be?
Adrian Yong: 18:44 So my note for real estate agents are that if you wanted to know more about the midterm rental space and understand what kind of yields you can gain from it or the risks that exists, we can feel free to give me a shout out and ask and I’ll send you the numbers that you need to know about how much money you can expect, how much rental you can expect. But the big key rates are and to, to also any of the PropTech people in the tech industry. You could also be asked what the industry experts are, people in the right tech space who understand what a marketplace is. And we are also looking for mentors on understanding how to further skill an online marketplace.
Kylie Davis: 19:21 Fantastic. Okay. And so, so how big do you think the market could be in Australia, Adrian?
Adrian Yong: 19:28 How I think it could be. So the data that I’ve already indicated from TRA was 11.8 billion in 2018, so I’m a numbers kind of guy, so I just go straight with the forecast what ABS shows or what TRA says. So as of next year, they forecast that the growth to grow from 11.8 billion to 12.3 billion. So that’s like billion-dollar growth within a year. So it’s, it seems as if from the world data and from Australia’s data that we’re moving more into a transitionary marketplace, a market space. But more and more people are travelling for longer periods of time, pursuit of the passion or pursuit of the jobs. And that’s becoming a trend with millennials and so on.
Kylie Davis: 20:05 Yeah so I guess you’re tying into that trend of the gig economy too, aren’t you, where people are kind of going to do their chic and then coming home to coming home to the family.
Adrian Yong: 20:15 Correct.
Kylie Davis: 20:16 Yeah. And I guess it ties into this idea that if you’re a professional, you don’t necessarily want to go to all the expense and trauma of, of renting a property long-term to be away from home for a short period of time. Cause that’s not where your heart is. Your heart is back, back home usually. But you want something comfortable and, and not a squat.
Adrian Yong: 20:37 That is correct. So again, imagine yourself, someone from US and you’re working in a consulting company and you literally got a job in Australia, Sydney, and the first thing in your mind would, all right, I need a place to stay. And then you do not want to fly into the inspections, apply and just wait. You might or might not get it. And the worst part about Australia’s rental system is that you need a rental reference. You need an income statement. And even if, let’s say your rental references from US they go, I’m sorry, only acceptance of references in Australia. And that just makes it a lot more harder for professionals with a steady income, a real home at home in US. But when it comes to a different country you go, what really is it that hard to find a place for a few months.
Kylie Davis: 21:16 So the people that you really want to attract, who are very low risk, good tenant. But you know, good tenants are actually the ones that are find the most difficult to rent.
Adrian Yong: 21:26 To be exact. We weren’t really looking to attract these professionals. They just came on board, our main target mark was initially working holiday visa holders who really wanted it. And then what we realised was that professionals have a higher income actually looked at it as an even bigger problem to them.
Kylie Davis: 21:42 So, so what’s the commission that agents get paid? Or the property managers get paid on a mid-term rental.
Adrian Yong: 21:49 Yep, so…
Kylie Davis: 21:50 Or is that up to the agent?
Adrian Yong: 21:52 That is actually up to the agent. So what we provide to two real estate agents is a platform where they can earn higher rental yield, never tell them how much and what we tend to see is that real estate agents impart their service fee, to their property owners because of the higher income they can earn for their homeowners. So it’s a sort of variable rate from real estate to real estate. Some charges more, some just don’t make any change.
Kylie Davis: 22:18 Right? Wow. Okay. And so no more 15 minute inspections. You can do all of that online because…
Adrian Yong: 22:25 That is correct.
Kylie Davis: 22:27 Most astonish me that he can get it in 10 minutes.
Adrian Yong: 22:29 Yeah exactly.
Kylie Davis: 23:44 And you said before though, that you do follow kind of state-based law around the property, property rental and you know, leases and all of that sort of stuff. So how does that work around the statement of income or the rental statements?
Adrian Yong: 24:01 Yep. So in terms of, so the property space market for rental right now is a bit of innate disruption where banks and legislation, I tried to work their heads around that short-term rental space as well. So everyone has always looked as rent as in a long-term rent where you earn rent an income from a long-term perspective. And now new laws are being in place for the short-term rentals perspective because of Airbnb, Stays, booking.com.
Adrian Yong: 24:25 In terms to your question for short-term rentals, if in Australia there’s a new law called the vacancy tax, not really new, was imposed last year where a certain percentage of your household will be charged as a tax if you rent out your property less than six months. And that effects short-term home rental, or short-term homeowners who rent out short-term. And for the long-term rental space there is no tax that exists for that. And in terms of GST, so you’re charged half the GST if you rent long-term, but your GSD is the same 30% when you rent short-term. So in our platform we help homeowners save on GSD by 50% we have them, we protect them from being paralysed by the vacancy tax. And in the state of Victoria where there is something called the short-term rental regulations or short-term rental tax, we help homeowners save about average of 1.85% of the household value in tax if they rent in mid-term, compared to short-term.
Kylie Davis: 25:24 And so what’s your vacancy rate like on the side or is that difficult to calculate? Cause you’ve got access to so many properties.
Adrian Yong: 25:31 In terms of the vacancy rates in the urban region, we, our vacancy rate is around 88 sorry, our occupancy rate is around 87 to 88%. And in the rural regions, that’s around 72 to 78%.
Kylie Davis: 25:45 Right.
Adrian Yong: 25:46 Yup, so that’s the number. So it’s fairly high, so in terms of occupancy is fairly higher than short-term, but not as high as long-term, which is what’s supposed to be. On average in the urban area, it’s around two weeks. In the rural area it could take up to three to four weeks.
Kylie Davis: 26:00 And so what, so now just tell me a little bit about the Rentality team,
Adrian. It’s you and your co-founder.
Adrian Yong: 26:06 Yep. So my co-founder, my CEO Joey Wong, my CTO Rushil Agarwal, so all of come from a professional experience. So Joey was originally a lawyer and her expertise come within the property rental laws and then we’ve got Rushil, who’s a CTO who’s done previous startups and sold it and he has eight years in system architecture. And I come from a finance and business development perspective where I call companies who are in need of it, sell the idea and partner up with them and get them on board it.
Kylie Davis: 26:38 Fantastic. Okay, fantastic. So we’ll have your details as part of the show notes, if anyone has been listening and for those people who have been listening and are curious to get in touch with you, you are taking more properties on board and you obviously are able to find properties for people who might be coming to Sydney, Melbourne or Canberra for the mid-term and looking to find some to find some accommodation. What are you reading at the moment? Adrian, what’s inspiring you?
Adrian Yong: 27:14 What’s inspiring me? So, I’m actually reading a book called the Intelligent Investor, and what inspires me is the way I should change my train of thought, of how I should not just focus my whole life on one thing, but have a diversified portfolio of different things. And I put that train of thought into a mentality. So how to better improve mentality with different aspects of how to improve different things rather than just going down one narrow pathway. I look across the different ranges of areas. So basically having an open mind, which one entrepreneurs should have.
Kylie Davis: 27:48 Okay, fantastic. So what we’ll do is we’ll get the link, or we’ll get the name of the author of that book and, and we’ll link to that in the show notes as well. Adrian Yong, thank you so much for your time. It’s been great talking to you.
Adrian Yong: 28:02 Thank you Kylie. It was my pleasure
Kylie Davis: 28:04 Thanks. So that was Adrian Yong, the co-founder of an exciting and a very new startup Rentality, which is looking to create the whole new market of mid-term rentals. I just love the thinking behind Rentality, it solves so many pain points for from professional tenants who find the current long-term rental system both inflexible and punitive, especially if they’re from overseas, to landlords because it’s giving them more options and more ways to rent out their properties to earn higher yields from trustworthy tenants, and yet still enjoy the protection that the traditional rental system offers. And of course, I really love it for the new opportunities Rentality offers us, real estate agents. It’s giving us a whole new category of property management and it gives developers an opportunity to move off the plan apartments, or who need a midterm fix before they decide to sell or rent out longer term. So check out Rentality, we’ve included information on how to reach them in our show notes at kileycdavis.com.au/proptechpodcast.
Kylie Davis: 29:11 And now if you’ve enjoyed this episode of the PropTech podcast, we would love you to tell your friends, please drop me a line or even write a review. So I’d like to thank my audio support, Charlie Hollands and our sponsors, Smidge Wines, official wine of the PropTech community and HomePrezzo creating content from your data. Thanks, everyone. Until next week, keep on PropTeching.
Content marketing strategist, researcher, journalist and presenter specialising in the real estate industry. I'm passionate about proptech, digital disruption and all things property, big data, leadership and entrepreneurial ideas, have an MBA and specialise in social and digital media content creation and automation.