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Somerville start-up takes fee-based approach to apartment rentals, challenging Craigslist

Posted by Scott Kirsner  January 27, 2010 07:45 AM

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Can Rental Beast gnaw off a piece of Craigslist's apartment rental business?

It won't be easy, but the Somerville start-up is already profitable, and still plugging away six years after it was founded.

For people hunting for an apartment, Craigslist has become the go-to destination: most of the inventory in big- and medium-sized cities shows up there, and using it is entirely free for prospective tenants. (Posting to Craigslist is free for landlords, too, except in New York City, where apartment brokers pay a small fee.)

Rental Beast charges users a monthly fee to access what founder Ishay Grinberg says is a cleaner database of rentals, accompanied by better tools to let landlords evaluate potential tenants.

"When you search for 'Back Bay' on Craigslist, you get thousands of results, most of which aren't even in Boston," Grinberg says. "And people often post listings there without a phone number to call just an anonymous Craigslist e-mail address." Listings sometimes don't get removed, either, once an apartment is rented, which makes it hard to tell what's really available and what's not, Grinberg adds.

Rental Beast makes it easy to sort through apartments that have been de-leaded, or come with off-street parking. Landlords, who post their vacancies for free, can conduct a credit check on potential tenants through the site for about $15. (Sites like Rent.com and Apartments.com are free for tenants, but charge landlords various fees.)

Grinberg saved up the money to start Rental Beast about $20,000 while working as an apartment broker in New York City. That seed capital was enough to allow the site to reach profitability. Grinberg says the company, which has six employees, had net profits of $100,000 by 2008. (He says the company was also profitable last year, but won't share numbers.)

Right now, Rental Beast only lists apartments in Massachusetts, but Grinberg is currently trying to raise some funding to expand its scope. "We want to go after the top three-to-five rental markets over the next three-to-five years," he says. "That includes cities like New York, Washington, D.C., Miami, and Chicago."

Late last year, the site dropped its entry-level membership fee from $89 to $29, which allows for one month of unlimited access to the site; higher membership levels offer more personalized service, like advice about neighborhoods, help setting up appointments, and guidance on lease negotiations.

Apartment vacancy rates are "as high as they've ever been," Grinberg says. That has encouraged landlords to try listing properties on less-established sites like Rental Beast and has made renters less willing to pay a broker's fee.

But in a world where Craigslist has made filling or finding a vacant apartment fundamentally free, can Rental Beast build a significant business by trying to streamline the process? We'll see...

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About Scott Kirsner

Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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