RIO DE JANEIRO, BRAZIL – Property rental, purchase, and sale website QuintoAndar felt the same desperation and hopes as the whole real estate market throughout 2020. But, as in every venture that follows the startups’ philosophy, the reaction was swift – and the growth pace soon attracted attention once again.
In this year-to-date, the company’s turnover has increased by over 100% (the startup does not disclose the exact percentage). For 2021, the plan is at least to repeat the 2020 performance. And to reach the same rate of expansion involves entering new fields of action. “We began with rental, but we want to be a synonym of housing in general,” says Gabriel Braga, QuintoAndar’s co-founder and CEO.
Percentages are more impressive the bigger the startup. Founded in 2013, QuintoAndar became a unicorn (a scalable, innovative, and technological enterprise valued at over US$1 billion) in September 2019. The company has more than R$30 billion (US$6 billion) in managed assets on the lease front (total value of the properties with the lease managed by the platform).
The rebound of the real estate market (and QuintoAndar)
The pandemic interrupted the real estate market rebound that had been taking place since the second half of 2019 – and long-awaited by the sector, after five years of retraction. But it did not take long for this new crisis, this time triggered by the health sector, to be circumvented by real estate players.
After a drop in the sale of houses and apartments between late March and April this year, sales began to rebound in May. According to experts, a truly favorable scenario was observed from July on. August exploded and the subsequent months produced strong results.
Likewise, April was a month of concern with increased default and a drop in revenue for QuintoAndar. “We set up catastrophic scenarios. At the peak of the crisis, people were left with compromised income and deferred relocation,” says Braga.
On the other hand, the startup has stood out in the market since its foundation precisely because it doesn’t require collateral such as a guarantor or surety insurance. For those who own property, the appeal lies in guaranteed payment of rent on time, even in case of tenant default. This security feature has been in place since 2015.
In the first half of 2020, R$50 million were disbursed to cover overdue rents. Default rose, but not to the level projected by the startup in its catastrophic scenarios. According to Braga, the model “stopped standing”. “We are back to normal default and lease and purchase levels since July”.
QuintoAndar has already paid a total of R$200 million in overdue rents for 20 thousand owners, in data closed up to mid-2020. The startup has already mentioned that it is insured to protect the business from atypical situations, in the amount of almost R$1 billion. This guarantee has not had to be triggered so far.
QuintoAndar didn’t experience the pandemic just by promoting anticyclical expenses. The startup also improved its margins, says Braga. Part came from an 8% cut in the team, in April. “We became more efficient in our efforts to attract and retain clients. The strengthening of the brand during the pandemic allowed an improvement also in organic marketing channels”.
New action fronts
In addition to covering defaults, the cash manager was also directed to technology. QuintoAndar has developed accessory products for the rental, purchase, and sale of real estate.
For owners, it has developed an intelligent real estate pricing tool. “Real estate pricing is typically a very amateurish thing. Real estate owners decide for themselves how much to charge and then see how the market reacts. Thus, they leave money on the table for either selling too cheap or for taking too long to sell. We try to balance vacancy with liquidity, while those who rent see more suitable prices,” says Braga.
The startup uses a base of 500,000 properties that have already crossed the platform, looking for information such as photos, visits, rental proposals, and actual transaction value. It also analyzes real-time transactions (similar to dynamic pricing in urban mobility apps).
Also for real estate owners, QuintoAndar has launched a service to anticipate the receipt of upcoming rents, in exchange for an interest rate. This new feature had a positive impact on the startup’s revenue this year, according to its co-founder and CEO.
QuintoAndar created a tool for renters and landlords to renegotiate rent, as well as decided to readjust contracts following the Broad National Consumer Price Index (IPCA), rather than the traditional General Market Price Index (IGP-M). The most current projection for the IPCA’s increase this year stands at 4.39%. The IGP-M accumulated an increase of 23.41% in 12 months, according to the second December forecast.
“The IGP-M includes items that are unrelated to rents, such as the exchange rate. We think the index that most reflects this market, for now, is the IPCA. The IPCA fluctuates less than the IGP-M, up or down, and this generates less negotiation stress for the tenant and landlord,” says Braga.
Focus on buying and selling real estate in 2021
For the co-founder of QuintoAndar, this year marked major changes in the real estate market.
“People began to perceive and deal with their homes differently. It was no longer just a place to sleep, but also to work and live. We saw a migration in virtually all directions: people looking for larger properties in peripheral areas, or people looking for more accessible and smaller properties”, comments Braga.
Macroeconomic conditions also pushed the sector: there was a sharp drop in the basic interest rate. Between August 2019 and August 2020, the SELIC had nine consecutive drops, from 6.5% per year to the current 2%. The basic interest rate’s historical low allowed for a reduction in the rates charged on real estate financing.
“The drop in the SELIC directly impacts the real estate sector, thereby reducing the cost of purchasing. More people will be able to buy their own homes, but investors will also buy more properties to rent. With the drop in interest rates, the yield on rentals becomes more attractive. These trends should continue,” Braga says.
For this reason, QuintoAndar’s chips for next year are in a recently developed area: real estate purchase and sale. The platform hopes to expand the real estate portfolio beyond São Paulo and Rio de Janeiro, reaching other Brazilian capitals. It also hopes to improve the properties’ search and visit experience, using what has already been developed for vertical rentals. For instance, perform map searches, exclude duplicate photos, and schedule visits at any time or any day.
QuintoAndar hopes to improve the transaction itself – but has not yet defined how it will improve the process and make it more accessible and less bureaucratic. It will also go beyond signing the contract. It has recently acquired SíndicoNet, a company that collects contents and services for condominium residents. “It’s a kind of app store for those who live in this kind of property and need to solve day-to-day affairs. It is part of our strategy to be synonymous with housing, not only rental”, explains Braga.
Source: InfoMoney