Knitting up the Canadian Rentals Industry: We Speak to Rentsync About Their 6 Portal Acquisition Spree

The Canadian real estate marketplace industry is one that we don't hear a lot from. No news about toxic relationships between agents and portals, no massive public companies throwing their weight around and no huge tranches of VC money flowing into revolutionary models.

So when we heard that one Canadian real estate portal operator had been paying "tens of millions" of dollars to buy up 6 other portal domains and might be in the market for even more, we were keen to talk to them.

RentSync (formerly Landlord Web Solutions) was founded in 2010 and initially specialised in software tools and services for agents in the multifamily industry. Over the last couple of years, the company has embarked on a series of acquisitions that have doubled its enterprise value and created a leading player in the rental portals market.

We spoke to co-founder and President Jason Leonard and Interim CEO Steinman to find out more about a market that sometimes goes under the radar and their plans for the future of the Rentals.ca network.

Online Marketplaces: How is the Canadian real estate and portal system defined? Is it similar to the United States?

Max: It is broadly similar, we have a different set of sites that renters go to. There is some overlap but like many industries in North America, Canada ends up with its own brands. There is some overlap, for example, there is a company we work with called Zumper which owns a site called Padmapper and they are significant in both markets.

There has been a small shift recently where some U.S. sites have been investing more in Canada and building small teams here. Zillow is an example of a company that just has a very small presence here at the moment.

The main functionality of how you advertise and rent an apartment is very similar to how you'd do it in the U.S.

OMP: One thing that caught my eye on an email with you guys is the acronym ILS. I wasn't sure what it meant and I'm sure many listeners won't be familiar with it either, could you tell us what that stands for?

Jason: It's a common term that we hear a lot up here. It just stands for internet listings service or internet listings site - basically a marketplace.

OMP: Could you tell us what the relationships are like between portals and their customers? Is it as toxic as we've seen in other markets?

Jason: I don't think that the relationship has been toxic between clients and the portals. That might have a little to do with the fact that historically portals in Canada have been very inexpensive to advertise on compared to the print that customers were accustomed to prior to the shift online.

OMP: So tell me about the acquisitions you guys have been making? What is the opportunity you see here?

Max: We decided about a year and a half ago as part of our strategic plan that Canada really lacked a strong and well-resourced listing network like you see down south with Apartments.com and what CoStar owns. Who better to roll it up than us?

Canada's still large enough that if you have a market-leading business it can still be profitable and so we just viewed the opportunity as a way to professionalize the industry a bit better and to have a safer marketplace for renters. 

Without having the right amount of resources behind the network you can't have things like QA and fraud detection and we've been able to achieve a lot of those things by bringing resources together and it's not just a race to the bottom where everyone is competing on costs, it's a much more sustainable model.

We're only just at the tip of the iceberg with that stuff and at the moment, not a lot of major features have rolled out other than better customer support.

OMP: Can you tell us some specifics around which portal domains you guys acquired and, maybe, how much you paid for them?

Jason: The great news is that many of these sites were our partners for many years through the Rentsync platform so we were able to use our own information to identify market leaders and where the market was shifting.

We centred all of our acquisitions around the Rentals.ca brand which was the fastest-growing site in Canada. If not number one then a close number 2. Behind that, we acquired Rentals.ca, Rentfaster.ca, Louer.ca, RentBoard.ca and RentCanada.com Torontorentals.com.

In terms of what we paid I will say that it was substantial and in the tens of millions so it wasn't inexpensive and it was a very big and bold decision on our company's part and one that doubled our enterprise value.

OMP: What are you guys working on now? Is there any specific technology that can be brought in now that the companies have been merged?

Jason: There's still an opportunity to look at some more 'tuck-in' deals. A few more sites out there that we're looking at.

That said, we are now putting more of our attention back on our core Rentsync product where we're looking to go from list all the way to lease so we have that 360 view of what the renter journey looks like.

Max: There's a lot of product development we are working on to just improve the portal itself and give both renters and landlords more tools which is what they're asking for. We have the resources now to do that - things like automatic credit checks, the ability to self-tour units, the ability to apply through the portal and ultimately sign a lease.

We'll be spending a lot of time in that area but also going beyond that looking at things like paying rent on the platform and so on.