Flatfair, the online platform that allows landlords to offer deposit-free renting to tenants, has raised $11 million in funding, which the company says will be used to develop their technology to serve better the people offering living space for rent, at the same time, those who are looking for a place to live.
Moving into a new apartment or living space is without a doubt a struggle; packing your things and move them to your new home is never easy, at the same time, looking for the actual place to move-in.
Often times, the hardest part and often-restricting portion of getting a new place are looking and securing for a deposit that landlords ask from potential tenants. However, scraping together to secure the required deposit can be quite difficult, especially for those in the early stages of their career or people with families.
The average amount demanded to pay for a deposit ranges more than £1,400 ($1,690.66) in England and Wales, a relatively higher amount set by the UK National Living Wage, which is £1,920 a month. The amount leaves people with at least £500 pounds a month; not unless if you save up for months to stay afloat in your expenses.
In recent years, rental deposits soared drastically, with tenants consistently asked to pay forward the equivalent of two months’ rent, which they won’t see returned for possibly years – and with possible deductions.
Although tenants do have another choice, which is paying an insurance fee of about £300, however, the consequence of not seeing that money again is most likely to happen.
Flatfair recognizes these issues and positions the startup as a system that would be a common ground between landlords and tenants; for both parties to agree on a payment system, where tenants don’t feel the burden of conventional deposits, and at the same time, landlords continue to feel the security brought by rental deposits.
“This creates cash flow issues for tenants, in particular for those with families. Some tenants end up financing the deposit through friends and family or even accrue expensive credit card debt. The latter can have a negative impact on the tenant’s credit rating, further restricting important access to credit for things that really matter in a tenant’s life,” Flatfair co-founder and CEO Franz Doerr told an outlet.
Instead of paying a traditional deposit, Flatfair charges a one-off insurance-type of payment, typically worth of one week’s rental payment.
The company authorizes the tenant’s bank account via a debit card with Flatfair, and when it is time to move out, any end-of-tenancy charges are handled via the Flatfair portal, including dispute resolution.
The startup also has a scoring system that landlords can base from, which encourages tenants to have better behavior. “Given housing represents most people’s biggest expense, it’s only right renters should be able to build up their credit score and benefit from paying on time,” Doerr says.
“The fundamental idea is to streamline processes around the tenancy to create revenue and savings opportunities for landlords and agents, whilst promoting a better customer experience, affordability, and fairness for tenants,” Doerr added.
“We’re working on a host of exciting new features that we’ll be able to talk about in the coming months, but we see opportunities to automate more functions within the life cycle of a tenancy and think there are a number of big efficiency savings to be made by unifying old systems, dumping old paper systems and streamlining cumbersome admin.”
Last month, Flatfair signed on a deal with CBRE UK Residential Lettings, which further solidifies the startup’s potential to be an effective tool for both landlords and tenants.
In particular, the CBRE operates at the top end of the UK property market, which hosts a wide array of living space, which costs at an average rental value of £1,000 per week, or £4,333 per month.
The Series A round is led by Index Ventures, with participation from Revolt Ventures, Adevinta, Greg Marsh (founder of Onefinestay), Jeremy Helsby (former Savills CEO), and Taavet Hinrikus (TransferWise co-founder).
The startup will also invest in building out new features as it looks to expand its platform with “a focus on making renting fairer and more transparent for landlords and tenants.”