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Ayo Alonge, [email protected]
Tunde Balogun is the Chief Executive Officer of Rent Smallsmall Limited, a real estate startup he had had to invest time, money and vast experience into, coupled with creating a niche for himself in such saturated sector.
Balogun, in this interview, discussed his motivation, patronage and turnover.
Background
I had my primary and secondary school in Nigeria. I left for Thailand for my university degrees 11 years ago, from wher I obtained my Bachelors Degree in International Business Management and Masters in Business Administration at Stamford University, in Bangkok, Thailand. I am a recipient of 2012 edition of Clinton Global Initiative held in Washington D.C. I am a Global Ambassador for JumpStart Africa, an empowerment programme for young Africans. I am also an executive at Youth 4 Change initiative.
Startup motivation
We had a clear idea of what we wanted to achieve right from the conception stage. It is to make renting houses in Nigeria very flexible in terms of payment. To ensure that paying rent in Nigeria is as easy and seamless as it is done in other parts of the developed and developing world. And what readily struck our minds was to design a model where tenants will pay a certain small amount of money on monthly basis against the tradition of waiting till the end of 12 months as it is the tradition in Nigeria. Therefore, we got the name Rent Smallsmall. We are here to use technology to improve rental experience in Nigeria. This is a very unique package in this part of the world and our clients and prospective clients are so excited about it.
Patronage
The demand is huge and we already have clients. The average monthly earner doesn’t want to pay yearly. Everybody is excited about Rent Smallsmall. People can’t put that huge annual rent together; therefore they go to get a cheaper house very far from where they work which reduces productivity at workplace.
With our package, you can find a place closer to where you work and you can pay the money with ease. At the moment, we are in Lagos but in the next few months, we will extend to Abuja. In the next few years, we want to go beyond Nigeria because it is not only Nigeria that is suffering the pain of paying rent yearly when the tenant earns monthly. It is certainly not a good standard of living for people. Other African countries are also passing through the same problem. It is really only in Africa that this is happening. It is monthly rent payment even in developing countries like Malaysia, Thailand and the rest. We also want to lead the market in terms of flexible payment of rent.
High rate of business failure
They need to do things in accordance with international best practices. Take a cue from us. What we have designed is a win-win situation for the properties owners and their tenants. From our research, it was discovered that the default rate is 71 per cent in Lagos. That means people renting a place and not being able to pay the subsequent rent. One of the reasons from our research is that people begin to think of paying their rent when the active rent is due or almost due. They often forget to save towards the end of the 12 months. This is where we come in. With our package, you don’t have to wait till your rent is due but you pay every month. We help people to manage their rent payment in a very convenient manner. We have also discovered that it is not very convenient but difficult for people to pay their rent on annual basis. We are highly-technology driven.
We are not like the typical traditional estate agent. We work directly with landlords with the intention to change the entire system. Working with landlords means we get them to buy into our model. Our business model says that a landlord gives us the base rent of the property on annual basis, and then we mark it up by a certain little percentage. Then with that mark-up, we break it into monthly. The landlord gets 92 per cent of the rent while we get take only eight per cent. Another advantage for the tenant is that out of the eight percent, we pay insurance to protect the tenure of the contract.
This is to ensure the tenant is protected for certain months against default. A default could come as a result of loss of job, critical illness or accident. Again, the landlord benefits here too. That is what the premium is also about; the insurance company has calculated its risk and no issue with that at all. We also handle the legal, out of the eight percent.
You can see that everybody benefits. It will also help the landlords to have steady income because most of them are pensioners. The tenant comes on our platform, and there are varieties of properties there. If they find the kind of package they want, they are in. You can choose monthly, quarterly or biannually to pay your rent. Based on the payment plan you choose, our platform will guide you.
At the end of the day, it is far less than the agency and agreement fees that the traditional estate agents charge. Our packages cover every level of income earners; from the low, the middle to the high. Nobody is left behind. Our target is the mass market. At the moment, the majority of the properties we have on our platform are for the mid-income earners. Landlords can also come on our platforms and list their properties while we take it upon ourselves to thoroughly verify them. Before we accept a tenant, we take him or her through a verification process. We will find out what he or she earns, the source of the income and proof of identification, and we do our documentation.
Once that is done, the tenant pays the first one month rent and another one month as a security deposit. The security deposit is called caution deposit which is refundable as clearly stated in the agreement. Our verification ensures that whoever is renting a property from us is eligible.
Experience
I relocated to Nigeria 12 after living abroad for 11 years. I have been to 18 countries across the globe but I didn’t see anywhere there where a tenant would pay one year in advance to rent a place. People earn monthly and they should be able to pay for their rent on a monthly basis. So, I was shocked when l needed to rent a place in Lagos. I was told to pay for one year in advance, agent and agreement fees separate.
Knowing that these are not the norms in any sane system, l resolved that l needed to do something about it as fast as possible. I have been in real estate business for years in different countries. I had managed luxury properties in Thailand.
The First company l worked with was Unique Edge Management in Thailand and we subsequently expanded into the United States of America (USA). I co-founded Unique Edge with my business partner who is an American. We were managing over 100 properties there. We rented out the apartments to people that were coming to the country either for businesses, education or visit. Those were options to lodging in the hotels and spending so much.
Doing all that, l was able to discover more potential in me. It didn’t just start when l got to Thailand. As a child while still in Nigeria, I had interest in making sure that our houses were neat and in order. So when the opportunity came it was not difficult for me to fit in. I came back to Nigeria because l believe so much in the country.
More importantly, l needed a bigger challenge. I have passion for Real Estate business and l was not and I am still not satisfied with the way it is being run in Nigeria. I am here to help people find apartments that will suit their needs. For me to focus here l had to dissolve the partnership I entered into with my partners abroad. My return to Nigeria is purpose-driven not minding all the challenges in the country. Because of my focus, l see a lot of positive things in Nigeria’s everyday problems. So far, so good, this belief has helped me to move on and build formidable blocks for my business. Let’s not forget that l was born here and had the first half of my life here.
