National Post (National Edition)
PROPTECHS LOOK TO CHANGE WAY WE DO REAL ESTATE.
Taking the risk out of selling and buying
Real estate brokerage Properly may be new to the Toronto real estate market, yet its co-founder and CEO Anshul Ruparell believes that the two-year-old startup can, backed with $100-million in credit, “fundamentally” change how users across Canada buy homes and sell their old ones.
“Historically, people have faced this stressful dilemma when looking to buy their next home: do you sell the old property first and risk moving twice or do you buy first and risk holding two mortgages,” Ruparell said in an interview. “With Properly that dilemma disappears.”
Here's how Properly works: the company estimates what a seller's home will fetch on the open market and guarantees the seller that price, promising that Properly will actually buy the home if it doesn't sell within 90 days. That guarantee enables the seller to get the necessary financing to buy their new property, close the deal and move in to the new home. At that point, Properly manages the sale of the old property, including the viewing process. If the first home sells for more than the Properly guaranteed price, the seller pockets 90 per cent of the difference. The company's cut in this process is the typical five-per-cent listing commission.
“With Properly you have the confidence to buy the next home as soon as it hits the market because you know you can secure the necessary financing before having even sold your current (one),” Ruparell said. Canadian Imperial Bank of
Commerce has partnered with Properly to offer mortgage approvals to its clients, but it's not an exclusive deal.
Properly is just one of a number of Canadian companies in the new and growing property technology field, a segment of the larger fintech industry that one analyst says will continue to expand even with a likely “dip” in investment in 2021.
The property technology sector — sometimes shortened to “proptech” — is broad. In Canada, proptech companies include listing sites, rent payment companies (including Vancouver-based RentMoola), and companies focused on energy efficiency savings and business model improvements.
“It's pretty vast,” says Eugene Bomba, a partner in PwC Canada's technology sector who tracks the fintech sector, including companies in property technology. “Proptech has become (an) all-encompassing word for anything that might touch tenant or landlord and residential listings.”
Bomba says investment in Canadian proptech companies is likely to drop in 2021, although the sector will continue to grow as real estate companies, landlords, renters, home sellers and construction firms continue to seek technology that can reduce costs and improve efficiency.
“Up until this last year with the pandemic, investment into proptech was growing significantly. We saw a trend with proptech investments similar to what we saw in the earlier days on fintech investments,” he said in an interview.
But that investment has slowed, with Bomba blaming the pandemic as well as buyers — such as a construction firms, landlords and real estate companies — more closely evaluating which proptech technologies will provide the best value. “With so many entrants, you have a lot of choice in terms of which technologies you want to implement or buy.” The result: people are pausing more to consider the benefits and costs.
According to a PwC Canada report last week, equity funding in proptech globally is projected to fall slightly to US$8.4 billion in 2020, following years of “rapid growth.” “You'll still see investments being made,” Bomba said. “We're not suggesting a massive valley of debt, but … it won't look like the previous years.”
Many Canadian proptech companies have raised significant funding, as Canada's real estate market emerges as one of the few bright spots for the economy. Canada's MLS Home Price Index (HPI) accelerated to a rate of 10.3 per cent year-on-year in September — the first time it's been in double-digits in three years, according to the Canadian Real Estate Association.
Vancouver-headquartered RentMoola, which aims to simplify rent payments, has raised $20 million since its founding in 2013 and expects to be profitable next year, says its chief executive, Karthik Manimozhi.
Manimozhi, who was hired as CEO last year, says RentMoola is expanding, pushing beyond its main service of processing rent payments via debit, credit card,
bank transfers and other means.
In the coming weeks, RentMoola plans to unveil an interest-free line of credit for renters in the U.S., with plans to make the service available in Canada next year.
According to Manimozhi, who is based in San Diego, the American rental market is roughly 10 times that of Canada, with an estimated 43 million renters and $500 billion paid in rent last year. Landlords and property managers use RentMoola in more than 400 cities in North America, and the company is “eyeing global expansion," Manimozhi said. “There is a lot of opportunity,” he said in an interview. “We do have global ambitions.”
Properly, meanwhile, has raised $15.5 million in venture capital since its launch in 2018. The company recently announced access to $100 million in credit from U.S. finance firms Silicon Valley Bank and i80 Group, providing it with what Ruparell calls the “very, very large amounts of capital” needed to make good on its promise of buying unsold homes.
Ruparell compares Properly to an insurance company, promising that a home will sell, within 90 days, even if Properly has to buy it. In a market like Toronto, houses typically sell in far less than 90 days, meaning Properly is not expecting to be stuck buying a lot of unsold houses. Nor does it want to. “We don't actually want to buy homes,” Ruparell said, noting the legal, tax and holding costs involved.
According to Ruparell, Properly hasn't had to actually buy a home since the service was launched in Toronto and Ottawa in August. However, he won't say how many customers have actually used the service since then, noting only that “many thousands” of people have expressed interest in Toronto and that “dozens” have used or are actively using the service. So it's unclear how much risk Properly has so far taken on. The goal, Ruparell said, is to roll the service out to all major cities in Canada.
“We think we're at the start of something very special in Canada,” he said. “The market opportunity is clearly very interesting.”
DO YOU SELL THE OLD
PROPERTY FIRST?