Unlike in Ukraine, it’s forbidden to start selling property in the United States while a construction firm is still building it.
This complicates life for American construction firms: it takes months to sell newly-built apartments. Besides, the U.S. real estate industry burns $30 billion every year on aggressive advertising to sell real estate as quickly as possible, according to Borrell Associates, a U.S. advertising research and consulting firm.
But there are two Ukrainian entrepreneurs who want to fix this.
In an attempt to make the U.S. real estate market more accessible and efficient, Sofia Vyshnevska and Bohdan Hnatkovsky – both in their 20s – developed an online marketplace that connects construction companies and real estate agents before the works are even done.
Founded in 2018, their startup Propertymate is an online platform that allows construction companies and real estate agents to connect and reach agreements for their property in advance. This also means that the first residents may appear right after a building is put into operation and without any backlog.
On the platform, real estate agents can look through properties that may potentially match their clients’ needs. The lists specify the state of a given construction project such as “ready-to-be-built” or “under construction.” The platform can also sort the lists by such categories as availability of parking lots, private schools and gyms nearby, patio access and more.
Propertymate earns money after each successful transaction — it receives 5% from the commission of a real estate agent, which is on average 6% from the price of a sold property, according to the startup’s founders.
“We came to developers and said that you don’t have to pay for marketing, you just need to place your property on our platform and pay only when a transaction is completed,” Hnatkovsky says.
Today Propertymate has 70 developers and over 1,600 agents.
And feedback from them makes Hnatkovsky proud. They say that Propertymate is “something absolutely different” from what they used to work with previously, according to Hnatkovsky.
“It is great to realize that we are not only bringing benefits for them but also changing their emotions while they work with clients or on (real estate data),” he says.
And there’s room for growth: overall, there were 2 million real estate agents in the U.S. in 2019, according to the Association of Real Estate License Law Officials. In Texas alone, there are more than 100,000 agents, who make half a million transactions a year.
“It’s a huge market for us,” says co-founder Vyshnevska.
US market
According to Vyshnevska and Hnatkovsky, the United States makes up one-fifth of the world’s real estate capital and their startup wants to tap into it.
The U.S. is the right choice for the startup for two reasons: it is easier to make money and the market is in dire need for digitalization.
According to Propertymate’s founders, U.S. real estate agents have the highest commission in the world – they get 6% from a property sale – while in Canada the commission is only at 3%, and less than 1% in Ukraine. This means Propertymate can earn a lot more in the U.S. than elsewhere.
Besides, in such a technologically advanced country as the U.S., developers still prefer to keep all the information about new buildings in an old-fashioned way, such as in offline Excel documents, which surprised them when they just moved to New York City in 2018.
“It was weird for us to find out that the market was very conservative,” Vyshnevska says. “We wanted to make it more open, more friendly.”
Today, the two Ukrainian entrepreneurs have “big ambitions for the largest market in the world.”
The COVID-19 outbreak, however, has made the young Ukrainian entrepreneurs hold on with some of their ambitions, driving the startup out of New York — the pandemic was the last straw for the company to focus mainly on dealing with property in the southwest of the country, where sales continue to happen unlike in New York.
The startup currently operates mainly in Austin, Texas with a population of 1 million, where new constructions have been growing fast over the past five years. In the nearest future, two more cities, San Francisco and Los Angeles, will be added to the Propertymate platform, too.
According to Vyshnevska, the Southwest is the best choice to scale their business, as it accounts for half of new construction sales, while northern and western states account for only 8-9%.
“The market grows significantly and it’s the place where we need to be,” she said.
Even though the startup focuses on operations in the U.S., most of its staff is in Lviv, a Ukrainian city 500 kilometers west of Kyiv. This makes more financial sense for the startup – labor costs in Ukraine are much lower than in the U.S. – while Ukraine is one of the best countries in terms of tech specialists, engineers and software developers.
In addition, the 11 people they employ in Ukraine can earn a few thousand dollars a month, while the average monthly salary in Ukraine is $450.
“They are talented and (culturally) close to us – they understand us just like we understand them,” Hnatkovsky says.
While there are no plans to move the team outside Ukraine, the founders are about to move to the U.S. this fall as “it is logical to do business where it is physically located.”
And the company has already gained a foothold in the U.S. In December 2019, it participated in one of the world’s top three programs for startups — Techstars Austin Accelerator in the U.S., which already hosted over 4,000 companies, some of which are now currently worth over a billion dollars each such as SendGrid and DigitalOcean.
“It was the best experience we could possibly have in terms of development, networking and the company’s growth,” Hnatkovsky says, adding that they won the program after applying for it five times. “It was the right decision to apply to this program until (we won).”
Bohdan Hnatkovsky and Sofia Vyshnevska, founders of an online platform Propertymate, stand on stage during the Techstars Austin Accelerator Demo Day in Austin, Texas on March 4, 2020. (Sofia Vyshnevska)
As part of the three-month program, Propertymate received $120,000 (for 6% of the company’s shares) and got “priceless advice” from successful investors and entrepreneurs.
“It was super helpful for us. Sometimes it felt like magic,” Hnatkovsky says. The startup still communicates with mentors, including getting advice on financial issues, business models and raising money.
“They became like friends who worry about our startup too,” he says.
Meanwhile, the two Ukrainian entrepreneurs are in the process of raising another $1 million from U.S. investors. The startup aims to have 10,000 real estate agents on their platform; they want to get at least 400 transactions a month, instead of 15 they have today during the pandemic.
“Our global goal is to become the biggest channel for real estate sales,” says Hnatkovsky.
