Many places have introduced policies to fix loopholes. When will the pain of long-term rental apartments end?

In the winter of 2020, due to the explosion of many rented apartments, landlords and tenants were involved in a long game of "victims".

Crisis does not happen overnight. Two years ago, long-term rental apartments were still in high demand. Capital from all sources rushed to increase investment, and leading companies went public one after another in the United States. However, precisely because of the support of capital, some decentralized long-term rental apartments have fallen into the common dilemma of "Internet-style" money-burning subsidies, and the more they expand, the more they lose money.

“Decentralized long-term rental apartments use high income and low rent to expand their scale, and use rent loans to make money, which is similar to a Ponzi scheme.” A senior person in the leasing industry told reporters that under capital pressure, these Long-term rental brands need to continue to expand in scale, but the more they expand, the more they lose, making it difficult to operate in a refined manner.

Even the leading companies in the industry cannot escape the profit dilemma. This is a manifestation of the radical corporate strategy and the result of the immaturity of the industry. It is worth noting that many places are currently strengthening supervision of the rental industry, and irregular behaviors are expected to be corrected. However, there is still a long way to go before long-term rental companies can find a sustainable profit model.

Frequent "thunder explosions"

On November 30, Ziroom announced the strategic acquisition of Beike Youth Boutique Apartments. After the merger is completed, Ziroom will operate 53 centralized apartment projects in 7 cities including Beijing, Shanghai, Guangzhou, Shenzhen and Nanjing. Ziroom said that this move will help quickly expand the scale of its centralized apartments in core cities.

In the current long-term rental apartment market, the decentralized type is to rent a house from an individual landlord and rent it out after renovation to obtain the rental difference income, commonly known as the "second landlord"; the centralized type is to renovate the entire property. After renting, the housing resources are concentrated and management is convenient, but the initial investment is relatively large.

Ziroom is the leading long-term rental apartment brand in China. It has now formed a full range of rental products covering distributed shared rentals, whole rentals, luxury homes, as well as centralized single-family homes and communities. While Ziroom is expanding its scale in a high-profile manner, Ziroom has frequently encountered property owners defending their rights in the field of decentralized leasing.

As early as the beginning of the year, a Ziroom landlord reported to China Business News that he received a call from a Ziroom salesperson to discuss reducing the rent. The reason was that the partitions would be demolished and income would be affected. If the landlord disagrees, Ziroom will unilaterally terminate the contract, compensate for two months' rent, and deduct decoration costs.

Most of the affected properties are properties that were acquired at high prices in order to seize the market. Affected by factors such as the impact of the epidemic and the low temperature of the rental market, Ziroom chose to "survive with a broken arm". "All tenants affected by contract termination will negotiate amicably, and landlords who meet the contract's support will be compensated for liquidated damages," Ziru said.

As the leading company in the industry, Ziroom still has room for turnover for the time being, while other companies that have "exploded" are experiencing turmoil one after another. Recently, many tenants have reported that the long-term rental apartments they rented have experienced a financial crisis, and their annual payments have been "wasted", and they have been forced to move out and find new housing.

“There are still seven months left on the lease, but the landlord said that he also has to repay the loan. The long-term rental apartment has already owed them two months of rent.” Tenant Wang Lin (pseudonym) told reporters that according to the landlord’s ideas , if you want to continue living, both parties can sign a new contract and pay the rent directly to the landlord starting from December.

Wang Lin did not want to accept this plan. "We have not terminated the contract with the long-term rental apartment. Even if we want to terminate the contract, it is still unknown whether the deposit rent will be returned. If we renew the contract with the landlord privately, which one will be legally binding?" He said that currently all parties are still waiting and watching, and he wants to wait for the next step. result.

The more they expand, the more they lose money

According to incomplete statistics from China Business News, since 2017, there have been 153 adult rental brands across the country that have “exploded”. From January 2020 to In November, there were as many as 84. Among them, a large part of the reason is that the capital chain is broken due to operating models such as "high in, low out", "long receipt and short payment", and abuse of "rental loan".

Among them, “rental loans” are the focus of criticism for long-term rental companies.

In order to obtain more funds, long-term rental apartment operators will introduce financial institutions, and tenants will sign loan contracts with them to repay the rental loans in installments. The financial institution will pay the annual rent into the long-term rental apartment enterprise account at once.

In this case, the tenant may incur a loan without knowing it, and the loan issued by the financial institution will flow directly to the long-term rental apartment. Because long-term rental apartments pay the landlord monthly or quarterly, a huge pool of funds will be deposited due to mismatching of terms. This fund is not supervised by an independent third party.

Once a "thunder" incident occurs, the capital chain of long-term rental apartments is broken and they cannot pay the landlord, but the tenant still has a debt relationship with the financial institution. There is no doubt that the abuse of "rental loans" has promoted the disorderly expansion of long-term rental apartments and increased the risk of damage to tenants' rights, but it is not the core factor that caused the company to fall into crisis.

As early as May this year, the National Finance and Development Laboratory wrote an article pointing out that even large-scale long-term rental apartments are facing huge liquidity risks. The fundamental reason is: the company’s own operating cash flow is Negative and huge scale; the epidemic accelerated the fluctuation of financing cash flow.

Take a long-term rental apartment brand listed on the US stock market as an example. In the past three years, the number of properties operated by the company has increased sharply, but its operating efficiency and occupancy rate have continued to decline. The growth rate of rental costs has exceeded the growth rate of revenue. The more you expand, the more you lose. Even without the impact of the epidemic, the company's liquidity risk is difficult to ignore.

Tongce Asset Management also believes that as long as the apartment can operate normally, maintain a certain degree of liquidity, and does not cause a crisis of trust among tenants or further centralized check-out and other issues, the rental loan itself will not become a The trigger of the crisis is not the main contradiction that causes difficulties in corporate operations.

The agency also believes that the root cause of the crisis is that under the current business model and management methods, long-term rental companies are subsidizing every operating apartment. Since 2018, cities across the country have begun to strictly inspect partitioned housing and group rental housing. Coupled with the impact of the epidemic, occupancy rates and rents have fallen, accelerating the exposure of long-term rental company capital chain problems.

There is an urgent need to get rid of "barbaric growth"

Despite frequent problems such as "thunder explosions", "formaldehyde housing", and "rental loans", the emergence of long-term rental apartments still meets the current needs The rental demand of young people is an important way to solve the structural imbalance of my country's rental market. As an emerging business format, the long-term rental industry urgently needs to enter the track of orderly development.

Ding Zuyu, CEO of Yiju Holdings, believes that long-term rental apartments are just like Bicycle and Didi in the early days. Fighting for funds, strength, and scale is a normal performance in the early stages of the industry. After the "big waves wash away the sand", the industry will mature, with mid-range companies gradually withdrawing, and eventually reaching a healthy state of multi-party checks and balances.

The National Finance and Development Laboratory also issued a document stating that industry entry thresholds should be established, relevant standards and regulations (such as partitions, decoration, safety, etc.) should be formulated, and industry situation discussions should be organized regularly; local governments should coordinate with The construction department should build an information platform for long-term rental apartments, and tenants' rent should open a special account in the bank for supervision.

Recently, many places have issued documents to strengthen supervision. Among them, Jinan must strengthen the supervision of the "high in, low out" and "long receipts, short payment" business models, conduct interviews and warnings, suspend online signature filings, and issue risk warnings for companies that do not have the ability to continue operating and expand too quickly. , investigate and handle in accordance with laws and regulations and other measures.

In response to the issue of "rental loans", Chengdu made it clear that the proportion of housing rental loans in the rental income of housing leasing companies must not exceed 30%; Shenzhen also made it clear that housing leasing companies are not allowed to use rent installments, rent discounts, etc. The tenant is nominally induced to use housing rent consumption loan.

Cruel Rental believes that the intensive introduction of regulatory policies will allow long-term rental apartments to return to the essence of "living". This means that the period of large-scale expansion of long-term rental apartments relying on means such as "high income and low output", "long-term rental and short-term payment", and "rental loans" has passed, and the industry is shifting from focusing on scale to in-depth operations.

However, some industry insiders do not approve of the development of decentralized long-term rental brands.

The above-mentioned leasing industry insiders told reporters that decentralized long-term rental apartments use rental loans to expand their scale by acquiring properties and subletting them. However, the more they expand, the more they will lose money, and it is difficult to achieve refined operations.

In comparison, centralized apartments have more centralized management efficiency, and through refined operation of this amplifier, they can effectively increase profits and achieve sustainable development; while decentralized apartments require less initial capital precipitation, which is beneficial to enterprises. Rapid expansion in the short term, but costs and profits are difficult to control.

Take the centralized long-term rental apartments operated by real estate companies such as Vanke and Longfor as examples. These brands are intending to slow down their scale expansion and instead improve the quality and efficiency of their operations. In the past three years, the overall occupancy rate of Longfor Crown Apartments has increased, climbing to 85.3 in the first half of this year, and will not use the "rental loan" model.

Long-term apartment rental is not a hugely profitable industry. Any blind pursuit of scale, excessive cost of acquiring housing, and abuse of financial leverage may put corporate funds under pressure. After properly handling the issues left over from the "explosion" apartments, only refined operations can allow the industry to achieve sustainable development.