Searching for an apartment in New York City is a special kind of hell: The listings lie, brokers are untrustworthy, and renters quickly snap up the few good apartments.
New York City startup Urban Compass aimed to change that when it launched four months ago, and today the company is announcing that it has raised $20 million in a first round of funding from Advance Publications, Founders Fund, Salesforce CEO Marc Benioff, and others.
What makes Urban Compass different? The company has basically streamlined the entire apartment renting process. You can search for listings on its website and mobile app, but the real innovation is in its booking system. Once you’ve found a few apartments you’d like to view, you can arrange viewing times right on the site. Urban Compass assigns a rep to meet you at your designated viewing times, and it also offers helpful advice about neighborhoods and deals with landlords on your behalf.
Unlike traditional brokers, Urban Compass’s employees draw salaries and don’t receive bonuses based on the units they rent out. This means they’re far more interested in finding the right apartment for you, rather than rushing you to make a decision.
The company makes money in two ways: by splitting fees with other brokers (where you pay 12.5 percent of the annual rent) and by adding a 7.5 percent charge to listings it manages on its own. Most NYC brokers typically charge around 15 percent of the annual rent, but when they work with Urban Compass, both sides take a 7.5-percent cut (Urban Compass also reduces its own side of the fee by half to drive the charge down to 12.5 percent). With every successful transaction raking in thousands, Urban Compass won’t need many customers to actually be successful.
The company says it will use the funding to scale its business, which means it’s likely aiming to expand to other difficult rental markets like San Francisco. Urban Compass raised $8 million in a surprisingly large seed round last December. With today’s funding, the company has now raised a total of $28 million.
I’ve used Urban Compass over the past few months to search for a new apartment in Brooklyn, and after years of suffering with fake Craigslist postings and shady brokers, using the service felt like a breath of fresh air. It often had apartments I didn’t see anywhere else, and they were typically better options than what you see on Craigslist. I also enjoyed working with my local Urban Compass rep, who went to great lengths to negotiate listings with landlords (and in one case, a co-op manager). In the end, my wife and I decided to stick with our current apartment rather than move, but I’m definitely going to use Urban Compass once I begin another apartment search.