Backyard Revitalization for Improved Standards of Living

In S.A. we have an informal backyard dwelling problem, where Owners due to poverty build informal structures in their backyards for rental purposes. With Government issuing RDP houses this phenomena continues in new Townships. These usually result in unhealthy dangerous living spaces.  

Our proposed solution is “Backyard Development Credit”. The product innovation is that it is structured such that unemployed Owners can also access it.  

Key features include: 

• Affordability is based on Rental Market; rather than Owner financial capability. 

• Rental income generated must be sufficient to pay instalment and allow residual for the Owner.  

• Backyard room design must include, water harvesting, solar geyser system, & fiber connection 

• We charge prime-level rates.  

Based on the above our product will benefit all our stakeholder; i.e. the Owners – through poverty alleviation, Tenants through smart-rooms & green designs, Government we will reduce reliance on municipal resources for Water & Electricity. 

The problem is multi-faceted & revolves around human settlements:

Problem Area 1 (Government) – Shortage of Settlement spaces; i.e. in terms of land (in urban areas) and residential rental stock availability. 

Drivers – urbanization is main driver. In South Africa this is driven from in-migration (i.e. people within SA moving to urban areas from other provinces, & from other African countries) 

Effect – People end up plugging informal structures in any space they can find. Resulting in unhealthy living spaces. 

  Problem Area 2 (Property Owners) – Continued poverty circumstances for Owners. 

Drivers – Lack of Funding required to develop their properties to earn extra income.

Effect – To alleviate poverty Owners either:

1. Will sell their properties – at lower than market value.

2. Build backyard shacks.

  Problem Area 3 (Tenants) – Unhealthy and dangerous backyard dwelling units. E.g. illegal electricity connections. 

Drivers – Urbanization is growing at a higher rate than new stock. And People building structure with a temporary structure mind-set.

Effect – Each season brings its own challenges to the residents; floods/fires are common. But overall the experience of living in a shack is not ideal; in winter its cold and hot in summer.

We have consider 4 stakeholders that we serve; 

1.      Township Property Owners – our main objective is to create a sustainable income stream for them. To achieve that, we have our business model includes property management business unit with focus on Landlord skills and support services. 

1. Tenants – We want to build a living environment that will dazzle the Tenant. This is our future Owner. Our tenant profile are mostly the youth with entry level job or small families. Some of the features we include in our room’ designs include – water harvesting, solar geyser power and fiber.  When we astarted we were shocked to learn from tenants that ‘a ceiling and tiles’ are seen as class differantiators in that market – now we plan to go beyond that. 

1. Government – we want to alleviate reliance of communities in government resources. Froma funding perspective we want to use our product to instill self-development by communities. Further to that we want to reduce our reliance to government for water & electricity. 

1. Investor – we hope for our investors they can be proud to be part of an organization that will bring true social return. 

Our solution to the identified problems is “Backyard development Credit” for Property Owners. We have designed  

In line with the problems identified our solutions are as follows: 

1 Solution to Shortage of Settlement spaces for Growing populations 

Our solution is that we leverage the existing land spaces and increase densities in the new townships – by leveraging the yard spaces that come with RDP housing. Instead of a yard (averaging 220 m2); we will add 4 rooms that can house another 4 people (in case of single families). 

2 Solution Income opportunities for Owners 

Owners have demonstrated the need for leveraging their backyards for additional income purposes, by building informal structures (shacks) for rental income. However, funding limitations continue to limit them from developing formal structures. Our solution is a “Backyard Development Credit” product developed specifically for this purpose. Our product design is such that affordability (i.e. ability to pay) is based on expected rental income (which is based on our continuous market research). 

The product is priced at 15% p.a. for a max. period of 10 years. One of the key elements is that each transaction is priced such that the Owner get residual income from day one.

To deliver on this solution our business model covers the whole value chain; i.e. We Finance the transaction, We Build as the Contractor, and we also have Property Management services to support the transaction throughout its lifecycle. Our core-product is the “Backyard Development Finance”, and there are plans to develop ancillary product.

Over and above that we also offer services such as related Maintenance, and property management (i.e. Owner can outsource the whole rental scope to us). And those will be driven by the following technological innovations:  

-     Payment & Collection systems –a system that can ensure ease of movement of funds (e.g. SARB/facebook cryptocurrency) 

-     Property Maintenance – technological capability to interact with Tenants/Owners regarding maintenance issues. 

-     Vacancy Management – integrate an app for rental stock management; where we can create a Township market for property rentals (Owners/Tenants). 

Our focus as a Contractor is to ensure that we bring green and smart building practices to our processes. At minimum our backroom designs include: Water harvesting, solar geyser system, & Fiber. We want to create an environment where Tenant families can live healthy, and can grow and learn and also aspire for progression. 

Product innovation

1. The credit structure is designed such that affordability is based on rental market rather than current consumer affordability; which makes it accessible to all property Owners.

2. The credit structure is supported by an innovative security structure. The security structure removes the traditional repossession risk for the Owner; still strong enough to support intentions of the transaction.

Business Model

To deliver on this value proposition we have adapted a business that will be responsible for the whole value chain; i.e. Lending solutions, Construction, & Property Management. It is this model that make this product financially viable as it allows for distributed pricing.

Energy Efficiency

For Tenants we have dazzling designs! Our rooms will come standard with Water harvesting, solar geyser, & fibre. That is a real upgrade in our communities.

Gig Economy

Our Property Management's business strategy is to source services for maintenance form the local youth/unemployed. The plan is to inspire an entrepreneurial spirit as it will be with our construction materials supplies.

We believe if we combine all the above in one pot; we will impact societies beyond our imaginations!

Our plan is to be a technology driven organisation. This June, we successfully moved into Office 365. The plan is to instil an online based culture across the company. We are meeting with Microsoft to go through the solution for our Onboarding module on Dynamics 365.

On specific technologies, our approach now has been to define a technological landscape that will drive the future of our business. 

Tenant Management System - we need the module of this system immediately as we will use (linking via ID number) to issue lifetime tenant profiles. (immediately). User - Tenants-Owner-Co. The strategic intent of this capability is to bolster our collection system, where we can collect directly from Tenants & pay residual to Owner.

Payments system - here under the Financial Solutions business, the mandate is to continue to look at crypto developments. (ongoing).

Property Listing system - we plan to integrate this capability to our website. We enlist our properties and the neighborhoods. (3 - 9 months). User - Owners

Maintenance system - Tenants & Owners' logging maintenance’ issues and linking to approved local suppliers. (9 - 12).

These systems are all designed to belong the Property Management business; and are to support the Core business vision. That is to transform the communities. We have no profit expectations from these technological expectations, especially into the medium term. But we believe investing in them will safeguard our investment and have a positive brand impact.

My story started with when I had to support my uncle after school. So to best help him I proposed a financing solution where I would develop his backyard and rent out rooms and he can repay me from the rent.

So after testing my idea with my uncle, that is when the concept of commercialising it came. Because I was expose to my uncle's friends and they all had houses, but were unemployed and struggling. 

That is how the Owner became the centre of the idea. However, during the business planning process I started to realise how far reaching the impact was. The product serves:

Owners - through our funding objective. Where Owners income abilities will be impacted immediately and more so into the future as they pay off their Credit.

Tenants - through provision of additional affordable adequate rental housing stock. We want to create an environment that will guarantee an improvement in the standard of living for tenants.

Community - we believe the Gig-economy approach, of a maintenance supplier-network will inspire confidence for self-employment with young people. We will build a incubator-type business-model of our operation for Technical college graduates.

Government - Through our energy efficient designs, we will relive the government services (water & electricity); whilst alleviating housing backlog pressures.

Investors - will get an investment that will truely high return, at financial, social & environmental. And we will measure those.

I only have one customer from my Proof of Concept. But what has been the best learning is the refinement of the business model throughout the 4 year testing.

Our 3 year business plan is to develop 100 Properties (min. 4 rooms each) which will provide households to a min. of 400 tenants. During that process we will create jobs in the communities (we are light construction, suitable for women in building and entry level on-the-job training seeking students)

We expect that in 18 months we will be preparing another 5 year funding proposal for a 500 yards; and so on until we go to JSE. 

My goals in the next year is:

- To get the company, the kick-off funding required for the current business plan and land the business. Continue to identify and build funding networks.

- Build a team to execute on the strategy; and reach the team to understand the social-enterprise state of the business and what it means for its approach to business.

In the next five years, I hope:

- For a stellar delivery towards our start-up objectives. Exceed our expectation we positive brand activation across our markets.

- Good book performance. Our ability to continue to reach the broader community depends on us managing our credit book competently.

- Have secured 2nd round funding. With a strong Executive team and Board of Director to support the growth plans.

- Set up the 1st Corporate Office in the Township.

Overall into the medium term we would like to see a brand that resonates with the community. Be a glimmer of hope, be their thing.

Financial - I need financial backing; and I am looking towards the Government 'being established' Human Development Settlements Bank. Over and above I am exploring this and other opportunities operational set-up funding. 

Legal - One of the important components is to perfect my contractual agreements. I have 6 contract documents to be executed to conclude this transaction structure. I need commercial drafting services.

Management Team - I believe getting the right mix of team members will take some time and some failures down the line.  This is a top of the mind gap, and we will put concerted focus to getting it right.

Cultural - this is going to be a big challenge; perhaps the same one that attracts to the possibility of turning around. The markets we are going to there is a general culture of non compliance (from building standards, services connections, service payment, etc.), coupled with an informal rental-style Tenant-Landlord relations that are complex at best.

Financial -we have committed to developing my funding-savvyness. To date we have made it to the top 32 of the 203 contestants; in one of the pitching competitions.We will continue to expose our business to the funding community. On the other hand management of our Collections will be key. With plans for a credit rating review in the medium term, so we can rubber stamp our and our market funding viability with [layers in capital markets.

Legal - by the end of the year we should be able to resolve this. Its the first thing on our mind in any of the competitions we are currently vying for.

Management Team - we have developed a structure of what we deem are the parts of the business we will need to drive the business. During our networking, we have connected with a lot of inspired people whom we believe can be a good fit. So we will continue to scout for entrepreneurial people that can fit into our team.

Cultural - On culture, 1st we are contractually bound to ensure all our works are compliant to all municipal requirements and any other regulations. In actual fact, mismanagement of your municipal services, and debts thereof is one of the evaluation reason that can lead to a decline. So we will use these tools to influence culture. Once we have the Owners on our wave length then we can work together and influence the the tenant market to their benefit.

Not applicable.

There is currently 2 of us; the Founder working on a full time basis and Co-founder on a part time basis.

The Founder - I have more than 10 years in bank across 3 of the 4 big SA Banks, in Governance, Risk and Control. During this period I learnt a lot about financial services, Products, customers, markets, operations and IT. This experience included Credit (Retail/Corporate), Wealth, AVAF, operations of the Bank. After the experience of the 2008 Financial crisis, my course of life was defined. For me the solution was to redefine the moral compass of Corporations to come. And this is the manifestation of the time invested in that conviction. And that makes me the best person to deliver on this solution. I have a clear purpose of what it is meant to achieve; its a delicacy I believe I will be its best custodian. 

The Co-Founder - With Honors in Financial Management and CIMA candidate, I have spent more than 10 years of work-life with one of the big SA Banks, in roles from Credit management, Insurance and Group Accounting. My budgeting and financial management skills will come in hand in supporting the operations of the business. I have spent the last 5 years of my career in premium collection environment and hope that knowledge will come in handy in this business.

Still working on a partnership relations.

The picture below provides a view of what we are trying to achieve. 

Owners are our main beneficiaries. Their challenge is funding to develop rental stock in their backyards so they can earn additional income. Most of them find themselves in poverty circumstances due to unemployability. 

Tenants will also be direct beneficiaries in this process. The whole building design is designed for the Tenant. Tenants demand for rental stock far outstripped that of supply. As a result they end-up renting informal structures put up by resource-constrained Owners. Our solution will deliver a product designed to ensure a living space that will support increase in standard of living. In my current PoC some of the encounters that have made me proud of this business were:

- Tenants moving from Shacks.

- Seeing tenants buy electrical appliances month-to-month.

Government will also be an indirect beneficiary, through reduction in non-compliance to municipal requirements. Our energy efficient designs will also reduce water and electricity dependence. We will install water-harvesting and solar geyser systems.

Community - the local economy will also benefit in our maintenance services; and will hope breed new entrepreneurs. Our planned technologies will connect the communities regarding residential matters.

Our plan is to use a combination; currently our funding landscape considers:

1. Government - government human settlements department offers various mechanisms to support provision of housing. We are currently in the process of being evaluate to be one of the financial intermediaries for low-market lending. Our hope is a SARB/Bank kind of a partnership structure.
2. Collections will be a key source of funding. Our projections currently are that we re-invest all our profits for the next 3 years. result in the Co being single biggest over 5 years.
3. Banks - we will leverage our banking relationship and try find financial solutions to unlock our Loan Book.
4. Suppliers - according to our projections we spend more than 65% of our development budget on building materials. So we will be harnessing this relationship to support our funding needs.
5. Venture Capital - there are a lot of funding support programmes around entrepreneurship and we are currently participating in most of them.

Further to the above we also have complementary financial products planned to complement the Backyard development credit. And we plan to invest in understanding our clients so we can design them financial solutions uniquely for their needs.

Firstly Solve will get us exposure to a network of people that think in a progressive manner. That should help refine and progress our model and product suite. 

From what we regard to be Solve's value proposition we see ourselves benefit through:

Mentorship & Coaching - which the Co requires to set-up and define itself as a Brand, in the Market and Corporation level.

Funding - the finance offered by the competition would give us a good jump-start of our operation. Our immediate budgetary needs to building our business include, perfecting our contractual structure (which includes 5 contract to be executed), automating Credit application & On boarding processes, and the Tenant on-boarding processes.

Technical expertise - this opportunity would expose us to a network that can assist in developing our technical skills; specifically Funding, Entrepreneurial and Networking skills which we deem critical to the realization of our vision.

National Housing Finance Corporation (soon to be consolidated into Human Settlements Development Bank.

Gauteng Provincial Planning and Development

Gauteng Provincial Human Settlements

Social Housing Regulatory Authority

Yes, we think we qualify for the GM innovation. Our product supports prosperity for the Owner community and general mobility for the society in term of living arrangements.

The prize would be used to invest in Development costs of the units in the identified communities.

Yes, we think we qualify for the Morgridge Family Foundation innovation. Our product is innovative in its design, resulting in a security design that eliminates repossession risk for Owners a; whilst offering a still strong a security position. That will disrupt the lending market. Whilst its is built on a shared-market risk construct.

The prize would be used to invest in Development costs of the units in the identified communities.