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December 04, 2009 1:48 PM
Startup seeks to link up landlords, tenants
ClickPayRent’s founders pitch a win-win strategy to apartment owners and renters.
Share Print Email Add a comment By Joyce Hanson
BUILDING BUSINESS:
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BUILDING BUSINESS: ClickPayRent founders Steven Kahmi, Steven Van Praagh and Tom Kiernan are using search engine optimization techniques to get their service in front of potential customers.

The founders of online startup ClickPayRent are pinning their hopes on a business model that can reward tenants for paying electronically rather than with the traditional check in the mail.

Like kids who are encouraged to eat their vegetables before they can have dessert, tenants who make Web-based credit card payments to their landlord can get cash back or reward points in return, depending on the incentive programs their cards may offer.

“It’s nice to get rewards for a bill you have to pay instead of [an incentive for] buying something frivolous, like shoes that you don’t really need. You’re being rewarded for a necessity as opposed to something that’s a luxury,” said Steven Van Praagh, 39, a ClickPayRent founder and self-described “serial entrepreneur.”

ClickPayRent’s revenues come from charging landlords for a merchant account at a fixed fee of between 2.3% and 2.9%, depending on monthly volume of rents paid. Tenants are charged either a $5 processing fee for an electronic check or $5 for a credit card payment. The company forecasts it will have 2010 revenues of $2.5 million.

That business model would seem to be a successful formula, yet the self-funded firm, which has 12 employees and offices in northern New Jersey and Harlem, has struggled for almost two years to get up and running. The challenge is not just the competition from other online payment systems, but its long search for the right credit card-processing company. Meanwhile, the startup’s founders have become experts at using online marketing strategies to sell their idea in the relatively new market of paperless real estate transactions.

Founder Steven Kamhi, 42, is a real estate investor and landlord with about 50 apartment buildings, which puts him in a great position to test ClickPayRent as a customer. While the service works fine, he said, the tough part was the extensive negotiations needed to find a credit card-processing company that wouldn’t charge too much for ClickPayRent’s merchant accounts.

“It took us a year to find the right back-end company that would process the credit cards and give us the correct rate that we can pass on to the landlord,” Mr. Kamhi said, declining to name the processing company for competitive reasons.

During the negotiations, the firm’s founders realized they could better sell their services to property managers if they created a package of Web-based account management tools and gave it away for free alongside ClickPayRent’s fee-based payment system. And considering the paper and energy costs involved in sending bills and payments via snail mail, they also saw the advantages of selling the firm as an environmentally-friendly option.

The package includes reporting and bill presentment tools that allow property managers to send their bills electronically and tenants to set up an account and keep an online payment history, said founder Tom Kiernan, 39. It also enables real estate brokers to use their smart phones to accept renters’ deposits at apartment showings.

“Our solution has secure reporting interfaces that let the property manager see who has paid and who hasn’t paid,” Mr. Kiernan said. “For a property manager, timing is everything.”

Timing is everything for tenants, too. ClickPayRent lets them pay rent a day before it’s due so the landlord receives it on the first day of the month, then tenants can pay off their credit card balance 30 days later, often without having to pay any interest charges if their bank offers a grace period.

“Collecting rents is arduous, and it’s one of the most important parts of property management,” said Adam Disick, CEO of Triumph Property Group, a real estate brokerage and marketing company. Mr. Disick is not a ClickPayRent customer, although he said he’s familiar with the company.

“People are lazy,” he said. “At some point, we’ve all paid a fee for using an ATM card or paying a bill by telephone. If it’s the difference between writing a check, stamping the envelope and going to the mailbox or post office, some people will pay a few extra dollars for convenience.”

“It’s secure, and it’s even more reliable than paying by check, because I get feedback for each step of the payment process,” he said. “It’s also a good place to see announcements saying, for example, that there will be building maintenance.”

Now that ClickPayRent is adding accounts, Mr. Kiernan has some advice for other startups looking to maximize their marketing budget: Rather than spending a lot on ads, companies should hire a search-engine optimization expert. And, he said, pick a good name that tells your company’s story.

“With online advertising, the industry benchmark is that you have seven seconds or less to deliver a message that grabs somebody’s attention. If you’ve got a very simple and clear name, you’ve saved time,” Mr. Kiernan said. “When I tell people our name is ClickPayRent, they immediately understand what we’re doing.”