British tech entrepreneur Tom Allason has reasons to be cheerful when we speak via a video conferencing link to his hotel room on the West Coast of the US.
His latest venture Residently has just received an additional £2.5 million in funding, and the business has proved its concept, as they say in start-up land, or in layman’s terms, ‘people are using it and it works’.
But our interview starts off on the wrong foot when Tom is asked to describe Residently. Is it a property management outfit, a landlord or a lettings company?
Tom thinks hard when trying to explain. But it’s not surprising. Residently has many features that will be familiar to letting agents and build-to-rent operators, but otherwise, it’s unique.
It takes leases of up to five years on high-end apartments in London owned by private landlords and then sub-lets them to tenants via flexible tenancies, at the moment offering landlords a guaranteed rent in return. But there’s more to the business than that.
As most traditional letting agents who have tried offering guaranteed rent schemes they can be risky – if rents quickly nose-drive after a financial shock such as a bad Brexit.
“Our guaranteed rent scheme is only really for our start-up phase to help us gain traction with landlords so that they can see our platform works,” says Tom.
“Residently’s planned business model is to charge a modest percentage instead, and also make money from the valued-added services that we offer them such as cleaning, laundry and lifestyle support.”
This is part of Tom’s drive to make Residently’s tenants loyal to his platform, alongside other key metrics including how fast it can get tenants from enquiry to tenancy, and how quickly it takes from taking on a landlord’s property to letting it.
“At the moment the industry norm is to on-board a tenant in 30 days from enquiry but we’ve got that down to 16 so far,” he says.
But several other things mark out Residently from its traditional high-street competition. The first is that it wants customers for ‘18 years not 18 months’ as Tom puts it.
“What we’re trying to do is give the tenant the security of knowing that we are the best possible landlord that they could have and that we are motivated by having their business for hopefully the rest of their lives, and that we want to be their landlord irrespective of the property that they are in,” he says.
“Our ambition is that after living in one of our homes they will move to subsequent units within our network and move between them seamlessly on our platform.”
“The reason why no one else has done this is that all the participants in the market today are predicated on the belief that a tenant is only going to be renting for a short period of time until they become an owner, and on that basis it doesn’t make sense to focus on keeping customers.
“But I think a lot of people will now be tenants possibly for ever, so for us the tenant is worth more to us than the landlord, particularly if you get the right kind of tenant, and you’re able to remove all of the friction that stops them from moving.”
Uber has done a good job of doing the same thing with taxis and, Tom points out, has grown the market because it’s now much easier and cheaper for people to hail one.
“WeWork has achieved a similar goal within commercial property,” he says.
Residently has approximately 60 homes under management across London from £1,658 a month for a one-bedroom apartment in North London to £18,754 for a four-bedroom house off Old Street, and is going to use its £2.5 million investor cash injection as working capital to scale the business.
This will include signing up more landlords in London and starting up in New York. The investment is on top of £1.5 million of Tom’s own money used to develop the platform.
Residently does not charge tenants or landlords any fees, so how does it make any money? “We take a little bit off landlords, a little bit off the third-party providers of services to tenants, and because we use variable direct debit payments, there are no bank transaction fees, which helps keep costs down.” Tom Allason, CEO.
Residently is not Tom’s first business. His first after leaving university was eCourier.co.uk which he sold to Royal Mail for ‘eight figures’ ten years ago and his second, Shutl, which he sold four years ago to Ebay for ‘nine figures’. He then joined Ebay for three years as Vice President of its shipping operation, before leaving to establish Residently.
“I then sent an email to the investors who I had done rather well for [with Shutl] and within four days Residently had raised a million pounds more than we had asked for,” says Tom.
Glance at its website and it’s easy to assume that Residently is an upmarket accommodation service for the world’s elite as they jet around the globe, but Tom has an explanation when asked about this.
“We want to be THE global rental brand for all parts of the market, not one for the elite, but we are starting with ‘the 5%’ and the reason is they are the most attractive and profitable customers for us; they have a major selection bias for reduction of friction in their lives so when they’re presented with a process that takes minutes rather than weeks, they are the ones most likely to adopt, particularly if they are internationals.”
Once the business is established, it will then offer more moderately priced rental properties and move into new markets from there. By then, Tom hopes, everyone will know what sort of business it is.