Inefficiencies have marred Nigeria’s rental system for years, thus affecting how landlords and renters transact. Most landlords collect rent one to two years upfront, while renters struggle to find apartments as they deal with uncharitable agents.
“We started by understanding the pain points of landlords. Even though they collected rent one year upfront, the default rate of the yearly system is very high because when people’s finances take a hit, they might not be able to pay subsequent rent,” he said. “The legal process of evicting tenants where they’ll have to wait six to 12 months is also not supportive of the landlords.”
The chief executive argues that with Smallsmall’s monthly model, landlords can speed up that process pending when they give notice. But that’s only part of the package to them. SmallSmall also lets landlords access quality tenants and curb defaults by receiving monthly payments where they receive extra margins of about 10-15%, Balogun added.
“Our market is for young professionals with an average age of around 28 years. It’s a huge market,” said the CEO on the potential of monthly rentals in Nigeria. “We surveyed almost 3,000 people last year in Lagos, which showed that 80% of them wanted to pay their rent monthly. So that tells you how much adoption the monthly space would have if the markets eventually opened up.”
Demand and supply rarely converge in Nigeria’s real estate proptech market in that there’s a housing deficit where demand dramatically outstrips supply; it also doesn’t help that house prices and inflation keep rising simultaneously. SmallSmall, for instance, has had over 476,000 people register on its platform since 2018. While 80,000 of that number are on its waiting list, the company has only served almost 1,500 people. “That shows how huge demand is, relative to the supply, which is very slim,” Balogun added.
To increase the supply pool and create options for customers, Smallsmall rebranded from RentSmallSmall in July. The latter is now one of three product lines, including BuySmallSmall and StaySmallSmall.
“Supply was our bottleneck in a way, and we needed to be able to control quality because many properties were in bad shape. We also wanted to provide a channel where customers can invest in real estate and work toward owning homes,” said the chief executive about the BuySmallSmall product, which is based on the platform’s proprietary data. “We’re encouraging young people to own homes and invest in properties by paying as little as 20% down payment while we help them finance the remaining. That’s one of the reasons we raise debt financing.”
The seed round welcomed participation from other investors like Oyster VC, Asymmetry Ventures, Vivaz, and Niche Capital. Meanwhile, individual angels such as Sean Fannan of Chartboost, Adam Meghji of Universe, Jimmy Ku of Flutterwave, Samir Goel and Wemimo Abbey of Esusu, Jason Njoku of Iroko and Tunde Kara of Vendease participated.
SmallSmall has processed over 25,000 monthly stays across Lagos and Abuja, meaning a typical SmallSmall user stays an average of 17 months on the platform. The proptech claims to have had less than a 7% rent default rate, saving property owners over $1.5 million in damages and tenants over $1.2 million in broker fees.
Having generated over $5 million in its first three years and turning a profit last year, SmallSmall wants to use this new investment to support its vision of “providing flexible, quality housing solutions and financing to intending home buyers.” In addition, the startup will continue building its technology and partnerships with landlords, developers, property and asset managers, and other key stakeholders.
“When we look at the fundamentals of housing as a basic human need, it’s not just when people have access to homes but also in home ownership,” the CEO added, noting that Nigeria has one of the lowest homeownership penetration rates globally. “Homeownership can improve the economic status in one way or another because it generates passive income for people to meet other needs. So we want to play a part in that and help young people in their journey from renting to investing to eventually buying real estate.”
Nigerian proptech SmallSmall raises $3M to provide flexible living solutions for customers by Tage Kene-Okafor originally published on TechCrunch