A report released on October 31, 2017 by the US Census Bureau revealed two key facts about the current rental market. First, homeownership, while on the rise, is still nowhere near its recent peak in 2004-2005. Unsurprisingly, rental vacancy rates having been dropping since the global financial crisis in 2007-2008. Second, the median asking rent for vacant rent units has been steadily increasing since 1995. Though inflation plays a part, increased demand is what is driving prices higher. Simply put, the rental market is quite strong.
But this doesn’t mean that the rental market is perfect–far from it. In fact, the current rental market has two glaring flaws that need to be addressed. First, landlords can levy sky-high upfront costs that discourage potential renters. Second, rental third parties add additional costs to an already expensive process.
One company, Rentberry, is looking to disrupt traditional rental markets by introducing blockchain technology into the industry. Rentberry already has a platform in place with 53% month over month user growth (as of Q3 2017). They’re in almost 5,000 cities and have processed over 4,000 applications. They want to integrate blockchain technology with the platform to decentralize the rental marketplace. In doing so, they can lower costs for renters while cutting out third party expenses.
Sky-High Upfront Costs are the Norm in Some Places
In some cities, sky-high prices are commonplace. Take for instance rental markets in California. It is not uncommon for landlords to charge between two and three times the monthly rent payments as a security deposit. Additionally, landlords can charge application screening fees on top of the security deposits.
So, what about the single worker who relocates to Los Angeles for a new job? A one bedroom, fully-furnished apartment in Los Angeles costs on average $2,200. With first month’s rent, the security deposit (3x the monthly rent), and a $500 application screening fee, the upfront cost is $9,300.
To be sure, most of the security deposit will be refunded. But $9,300 is an extremely high upfront cost, especially when some landlords only accept bank transfers and cashiers checks as payment. These upfront costs end up turning away otherwise qualified tenants.
Rentberry is proposing a proprietary blockchain solution that will allow renters to crowdsource their security deposit coverage. By tokenizing the platform with BERRY tokens, the entire Rentberry community, no matter where they are in the world, can participate. This tokenization is what enables the crowdsourcing to happen.
So, in the example above, the new renter can pay the $930 for the deposit (10% down), then source the rest of his security deposit in BERRY tokens (90%). Other users will offer their BERRY tokens to help, and tenants can select which users to help front the payment. Those that offer their tokens for other users’ security deposits receive rewards, serving as a type of interest payment. Thus Rentberry will essentially create a decentralized loan market for security deposits.
What’s more, because the platform will operate with a decentralized cryptocoin, neither tenants or lenders have to worry about fraud or security. The platform will be designed with smart contracts, ensuring that all terms are met down to the last detail.
It’s a win-win for all parties–landlords receive their deposit, rent money, and have access to a wider applicant base; renters can rent apartments they wouldn’t otherwise be able to get; and lenders are rewarded in an interest type structure that rewards them for fronting coins to help out with security deposits.
Decentralization Cuts Out Third Parties and the Fees that Come With
Why do landlords charge so much for rent? In one sense, if the market is strong, they can. It is simply the laws of supply and demand in action. But, landlords themselves also have expenses that can be passed down to renters in the form of rent payments.
A landlord has a difficult job–he or she must source tenants, set them up, and manage their properties. This requires third parties like brokers and administrative assistants. Part of Rentberry’s blockchain integration will create a decentralized marketplace where landlords and tenants can interact directly, thereby eliminating the need for a broker or agent. The platform also creates a uniform rental application process–goodbye outdated administrative tasks and costs.
In order to fund these changes, Rentberry is having a token pre-sale that begins on December 5, 2017. The main ICO will start in January 2018.