Lee Lin is the cofounder of RentHop, which helps apartment seekers cut through the clutter of real estate listings by assigning a “HopScore” to listings, helping to surface the highest quality listings. Previously focused on the New York market, RentHop has in the past few months expanded into Boston and Chicago. As Lin explains, the course his company took pivoted greatly when he and his cofounder decided to pound the pavement for a month as real estate brokers themselves.
FAST COMPAY: How’d you get the idea for RentHop?
LEE LIN: Lawrence [Zhou, his cofounder] and I had awful broker experiences ourselves back in 2008. We thought, in this day and age, is it possible to just gather up as many listings as you can and put up a website to make the whole process a lot better? Still, enough landlords were skeptical about giving us their listings, that we actually got broker’s licenses. After that, people we more willing to hand over listings.
Was that tough, getting a broker’s license?
To get a New York real estate license takes 75 hours of class. I did an online class, and back then, you could do a few games. You had to click through a bunch of online slides, but they had URL strings with a bunch of parameters, like page 1 of 12 in a section. If you wanted to do the quiz at the end of the section, you could skip ahead.
I just got a New York apartment with a broker and had to fork over an infuriating 15% of the annual rent.
In 2009 we thought maybe brokers are commodities–that they’re not adding value, and maybe the site could help replace them. One of the bigger pieces of advice Paul Graham gave us at Y Combinator was this. He said, “If you really think that’s the case, if you really think you can go automate these guys away, you need to go and be brokers for a while. Simulate the life of a broker, and if you think you can automate that away, great.” He told us to fly back to New York and be brokers for a couple of weeks. So that’s what I did. I flew back and took a bunch of tenants around, and that’s when I realized, “Wow, this is tough work.” It’s a lot harder than people think.
How’d you fare as a broker?
I was hitting the streets, meeting with a whole bunch of superintendents of buildings, buying six-packs of Coronas to get in good with them so I could copy the master set of keys and be the first to get into apartments. It really is a pretty labor-intensive job if you want to do a good job of it. Then in the evening I’d go make visits, take photos, then have the photos prepped–you’d have to crop them and brighten them up. But I realized the most important part of brokering is that there’s a huge human trust component in the whole thing. A really good broker makes the whole process a whole lot less painful for the renter. The big takeaway was that brokers are not commodities at all. I didn’t think they were adding value, but now I’m convinced that a great broker does add value.
So at the end of the month, where did you stand?
First, we were very happy that we had been successful brokers. I closed quite a lot of transactions, and made quite a bit of money. I was proud of closing, I think, seven deals in one month. But once we got back to Y Combinator, it wasn’t crystal clear yet. We weren’t entirely sure how to pivot at that point. It took us a while to discover the current business model we have now–that this is really a big data problem. We have four years of data and profile building with landlords and brokers. Now we know which ones are the good ones, and which are the bad ones. That became our eventual pivot. A good broker is valuable, and a good landlord is also valuable. Anyone responsive and good we want the site’s visitors interacting with, and anyone nonresponsive and bad we don’t want the site’s visitors interacting with.
Yeah. We’ve increased revenues a lot in the last year. Last year we made some money through banner ads, but this year we’re not focusing on that at all–we’re making money from charging landlords and brokers to post on the site. We’re now making eight-to-nine times what we were doing this month last year. That’s been a very interesting hockey stick graph.
Do you advise more entrepreneurs to walk a mile in the shoes of the people they’re trying to get rid of?
Absolutely. Specific knowledge, you can never have too much of that if you’re gonna be an entrepreneur in that space. Especially if your goal is to disrupt and put that entire profession out of business, you’d better know that business inside and out.