Rent Now, Pay Later 🏡

Welcome to Proximity Fortnightly #2!

In case you’re new here, this newsletter will get you smarter on Africa’s tech scene in under 5 minutes. Maybe 7 if you’re a slow reader.

If you haven’t already, you can subscribe below.

Every month we deep dive into a problem space and founder solving it.

This month we’re exploring why young people are saving up for years to pay rent, and how startups are stepping in to solve this.

Who has lived in a share house before? 🏠 👋🏾

If you haven’t, you’re missing out.

You get to have memorable experiences, there’s always something going on, and you get to clean up after your housemates when they forget to.

Best of all though: you pay cheap rent.

I live in a share-house of 5 in Melbourne Australia, and our lease is up next month.

The usual house discussion (or panic?) ensues:

Do we find somewhere new? Do we stay? Do we even like each other as housemates? Jokes, we mostly definitely do.

But a serious factor in our discussions are how rent prices have hiked in the last year in Melbourne, and it’s a difficult time to find a new rental.

When I mentioned this to my teammate who lives in Nigeria, he said that it takes 4-5 months to find a place in Lagos, and he recently moved back in with parents because rental prices were so high.

In fact, the proportion of salary to rent price is vastly different in Africa.

While a small hike in rent prices might mean $20 more a week for me, it still fits into my monthly salary.

In Africa though - well, it’s tough out there.

And it gets tougher.

In Nigeria, renters are supposed to pay for one year of rent upfront.

Even in Australia, paying a year of rent upfront ($16,884) doesn’t work.

So just like Mogwai, you might clench your fists at the landlords and ask..

What specific thing prevents Nigerian rent from being collected monthly?

Well, there are a few specific things:

• Mortgage systems in Nigeria aren’t feasible for landlords, so they have to pay for homes upfront. Why?

  • Nigeria inflation today is at 18%, and the average mortgage interest rates are at 22%.

  • This means that in 4-5 years, landlords are paying double the principal as repayments.

• It’s easier to chase a tenant once rather than 12 times in a year. Collecting rent yearly minimises the risk of a tenant defaulting.

• It’s hard and time consuming to identify and verify tenants

• There are not enough homes to house the continent’s rapidly growing population

I didn’t think I’d side with the landlords.. but I get where they’re coming from.

But as result, the cost of renting a house becomes disconnected from the earning power of its inhabitants.

So, renters in Nigeria have a few options:

• Stay at home with their parents as long as they can (and save up 2-3 years rent as they live at home)

• Borrow money to pay rent - usually at 5-7% interest per month

• Couch surf

• Have your family pay your rent (if you’re lucky)

Enter, Spleet

To dig deeper, I called up Akintola (Tola) Adeyami.

Tola is the co-founder and CEO of Spleet - a rent financing startup and marketplace.

Spleet’s co-founding team did most of the things on this list. Tola says he was fortunate that his mother could cover the first year of rent for him.

Similarly, his co-founder was couch surfing when they started Spleet because rent prices were too high.

Tola found that yearly rental payment collection is not just local to Lagos.

It exists (and can be even more severe) in other parts of West Africa like Ghana, Cote D’ivoire, Cameroon and even in some parts of South East Asia.

Spleet was born to help renters find property easily and quickly through their rental marketplace.

And after adding a new feature to the marketplace, Spleet had another discovery. Spleet’s rental financing feature let renters pay monthly instead of yearly. And when it was launched, it took off.

Renters wanted to pay monthly rather than yearly (duh).

Landlords want to identify and background check their tenants, and reduce the risk of tenants defaulting.

Spleet productised this as a Rent Now Pay Later product, and since launching their beta have had overwhelming demand.

They have only been able to service 10% of applications.

Spleet isn’t the first startup to tackle Rent Financing.

For example, Jetty in the United States lets renters pay back their monthly rent over the course of the month and charges a subscription for the service.

But only a handful are tacking the unique issue of turning yearly rent collection into monthly payments.

Paying a year of rent upfront eats up tenants’ cashflow.

Paying monthly lets renters save sustainably, invest their money into themselves, or spend it on travel and smashed avocado on toast like I do.

Startups across Africa are solving tough problems that government can’t - like making the cost of living affordable.

Spleet’s seed round will help them grow their Rent Now Pay Later offering for more renters to affordably move into homes.

Tola’s vision is to build the rails to make rentals seamless in Africa, and make the continent one where Africans and diaspora can live and thrive.

And Spleet will do this - one monthly payment at a time.

We invested in Spleet’s Seed Round, which they still raising. Reach out if you’re interested in learning more.

Did you learn something new? Want to share your thoughts? Continue the conversation below on LinkedIn or Twitter, or let me know what you think over email.

• Twitter 🐦

• LinkedIn 💼

• Reply to this email 💌

Know someone else who would find this interesting? Please share it over 🙏🏾