A new proptech play is giving investors who are short of cash for a renovation or other projects a lifeline - access to a year’s worth of rental income paid in advance.
Sydney-based proptech company Futurerent will pay residential landlords with tenanted properties up to two years of their rent up…
A new proptech play is giving investors who are short of cash for a renovation or other projects a lifeline - access to a year’s worth of rental income paid in advance.
Sydney-based proptech company Futurerent will pay residential landlords with tenanted properties up to two years of their rent up front, capped at $100,000.
The initiative even extends to investment property owners who have yet to secure a tenant.
According to Godfrey Dinh, Futurerent founder and chief executive, 38 per cent of their landlord clients used their upfront rental income for renovations.
The value of renovations nationally hit a record high of $1.07 billion for the month of March, as investors rushed in to capitalise on the Homebuilder program.
“Futurerent has seen a surge in property investors renovating either their own home or investment property, motivated by higher capital gains in a rising market,” Mr Dinh said
“Despite Futurerent being a relatively new fintech service, our inbound enquiries are surging 260 per cent month-on-month, propelled by the renovation boom, a surge in investor appetite, and demand for fit-for-purpose finance for property investors’ needs.”
Mr Dinh said 15 per cent of property investors accessed $60,000-$70,000 over multiple investment properties for larger renovation works, while 16 per cent used their prepaid rent to buy an additional investment property to capitalise on a booming market.
“Property investors have found the banks slow, painful and unpredictable, so we're giving property investors a faster, simpler and fit-for-purpose solution to their investment capital and cash flow needs,” he said.
“Post-COVID, we’re seeing a really clear shift in investor sentiment from wealth preservation to wealth creation.
“While investors were playing it safe and building their buffers during the pandemic, many are now thinking about how to get ahead financially and renovations have been a popular way to do this.”
The average rent prepaid for renovations was $32,455, while the average rent prepaid for home renovations ($45,625) was almost double that of investment property renovations ($23,675).
How it works
Landlords complete an online application, gain approval within 48 hours and have no restrictions on what they use the funds for.
Clients are paid rent upfront, then the company gets the funds back, and its fee of 0.5 per cent, from tenant payments – via the property manager – over 1.5 to 3 years.
“By spreading the repayments out over 3 years, property investors can continue to collect over 60 per cent of the rent each month," Mr Dinh said.
“Effectively we collect via the property manager — the amount they’ve been prepaid plus the fixed fee."
Futurerent offers two withdrawal options for investors, depending on how the funds are being used.
The first caters to property investors who want to grow their property portfolio. They can access up to two years of rental income per (existing) investment property.
For example, a property investor receiving $500 per week who wants to put their rental income advance toward a deposit on a new investment property can access $52,142 (one year’s rent of $26,071 x two years).
The second model is for property investors who want to use their rental income advance toward any other use. They can access one full year of rental income. The main uses the company has seen have been for clients renovating their primary place of residence or investment property, or those investing in their small business or the share market.
At present, the company’s client base is on the east coast of Australia, with Futurerent clients’ investment properties mostly in New South Wales (46 per cent), followed by 23 per cent in Victoria and 15 per cent in both the ACT and Queensland.
Darren Wilson, property investor based in Kambah, ACT, with an investment property in Darwin said he withdrew $25,000 in upfront rental income to renovate and add value to his investment property, with the goal of attracting higher-paying tenants.
His rent increased from $500 per week to $800 per week after renovations.
“As an investor, that ability to quickly and efficiently bring forward rent that is already yours and reinvest that into an existing property, that you can then list to the market with a much higher rent, is the definition of a win-win for me,” he said.
