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episode # 159

Don’t Trust Your Gut, Trust the Algorithm with Naborly’s Jerome Werniuk

One bad tenant can lead to bankruptcy, especially if it’s your first crack at a revenue property! And, until now, that risk was on you and your gut. Meet Naborly, an AI platform that is at the forefront of proptech using sophisticated algorithms to securely screen and verify your tenants and… it’s absolutely free. In fact, Naborly is so confident in its screening process that it’s willing to pay your rent if your tenant leaves you high and dry. How’s that for a security deposit?! Director of Sales, Jerome Werniuk, joins Adam and Matt to discuss the tech-lagging rental market, how it can be fixed, and what it means for the future of landlording and real estate in general. The future is here – Live long and profit!

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Episode Summary


About Jerome:

Jerome is the Director of Sales with Naborly Inc. He grew up in Toronto and has been involved in property management since he was a child, helping his dad run a 20-unit building in the east end of Toronto. Out of high school, he was drafted by the Texas Rangers to play baseball, but turned it down to go to college in the USA. After college, he joined a commercial real estate brokerage and worked in office leasing. One of his clients was the CEO and Founder of Naborly, Dylan Lenz, and Jerome ended up joining the Naborly team.

On Naborly and why he is so excited about this business:

Jerome had met many business leaders working in commercial real estate, but when he met Dylan Lenz, Founder and CEO, Jerome was just blown away and had to work with him. Naborly is a free tenant screening service that assists landlords to make tenancy decisions. Just like a credit score helps to assess the risk of lending money, Naborly helps assess the risk of renting a property to a tenant. They started the business in January of 2016 and have now grown to service 800,000 rental units across North America. A prospective landlord creates an account on the Naborly website, which allows them to send a digital application to the prospective tenant. The tenant completes the application and uploads identification and income documents. Within a few minutes, the landlord can view the completed report that gives a score (from 0-100) that is an assessment of how successful the tenant will be during the lease term. It is a recommendation for the landlord based on the tenant. A full Equifax credit report is provided and additional information like predictive income, likelihood of them causing damage to the property and other important information.

On what information is needed to make the predictions useful for landlords:

A profile of the tenant is created based on credit and income information they upload. This information is applied against external data like their Equifax information as well as Stats Canada data. For example, if someone is 27 years old and makes $45,000/yr with rent being 27% of their income – what is the likelihood that the tenant will move in the next 2 years based on the job they have. If this person is a software developer getting a pay increase of 7-8% a year they are likely to move faster than a person in a union job that is getting a 2% pay increase per year. This is a high level example, but gives a picture of how the Company makes these assessments.

On what problems in the rental industry Naborly is trying to solve:

Dylan, the CEO, was a first-time landlord in Kelowna, BC in 2015. He purchased a bungalow and attempted to find a reliable tenant. He found the tenant on Craigslist / Kijiji. He performed the standard method of screening the tenant, including requesting them to complete a standard rental application, provide income verification and references of past landlords. Dylan reviewed the information and called the references. The tenant had a great credit score and her references were very positive. He accepted the tenant and handed over the keys. Unfortunately, the tenant was unwilling to pay the first month’s rent and after several weeks of back and forth, Dylan had to start the process of evicting the tenant. What Dylan discovered was that the documents and references provided by the tenant when applying for the tenancy were fake and that the tenant had been evicted 4 times in the last 5 years. The whole ordeal ended up costing Dylan a lot of money (4 months of lost rent) and frustration. He decided that he didn’t want this experience to happen to anyone else and began his research to determine where he went wrong in his tenant screening process and how he could improve the tenant / landlord screening process to make it better for everyone.

In his research, Dylan discovered interesting things about the standard rental screening process. He discovered that credit is not really a great indicator of the tenant’s ability to pay their rent. Credit scores are created to assess if someone can repay a loan with interest, but not necessarily if they will be a good tenant.  For example, on average, 97% of tenants under the age of 35 will never have to be evicted from a property, but 62% of this same group will have subprime credit scores (less than 650).  Dylan determined that a credit score may be misleading for landlords when deciding to rent a property to a tenant and that a more holistic assessment system that factored in rent/income ratios, credit payment history and other information would be much more beneficial. This is how Naborly was born.

On if any other Company is doing this:

When Naborly started, nobody had built a service like this. There are approx. 4.5M rental units in Canada and 80% of them are owned by individual landlords. Credit bureaus do not retain rental payment information because there are just too many landlords. There really wasn’t anyone before Naborly moved into this space.

Naborly’s ambition is to establish to be the credit bureau of the rental industry and be able to underwrite risk better than anyone else can. They will be creating spinoff products that will assist the rental industry – with the help of financing from Silicon Valley. They are currently active in the USA, with an office in San Francisco, but they are still a proud Canadian company.

On the spin off products they anticipate offering:

The future of the Company is being the credit bureau of the rental industry. Users can report information on tenants (positive and negative) and this feedback allows Naborly to sharpen their risk algorithm. Products include offering tenant rental insurance for content and liability. In the future, these products will be offered at a discount rate as they continue to understand the risk better.

They are currently testing a beta version of a rent guarantee to cover rent default for a landlord for a low monthly fee. For example, a $2,000 a month rent (1 bedroom in downtown Vancouver – 12 month term) for a standard risk tenant might cost the landlord approx. $50 / month (2-3% of the rent) to guarantee the rent from Naborly. Rates adjust based on risk and rent dollar amounts.

They are also looking into mortgages, loans, shipping boxes going forward.

On the benefits for tenants by using Naborly:

Tenants using Naborly only have to complete their profile once instead of filing out a paper application for every place they are looking to rent. Naborly also has a secure platform that is much safer than sending sensitive information over email. Naborly is based on data, which takes some of the human bias out of rental decisions and leaves the decisions up to the numbers (chance of default, cash flow).

On where the rental market is headed in the next couple of years:

Naborly is focused on risk assessment. The rental industry has finally started to move digital after lagging behind for many years. This technology will allow efficiency and property managers can manage many more properties (e-transfers, e-documents, email instead of paper – saving time). In 5 years, Jerome envisions you will be able to apply for a place, book a mover and everything from your couch. If this efficiency is a good thing, people need to decide.

On where real estate in general is headed:

More democratized data. Last year in Canada, the supreme court ruled that MLS had to release past sale information. People are getting more and more data with more ease. Data will be more accessible which will lead to more creative deals (many partners for a purchase) or interesting investment opportunities (buy into real estate for very small down as a block of funding).

Brokers roles will change because many of the manual processes will be automated. Purchasing homes is an emotional transaction, so people will still need to be involved. Some of the fluff will be trimmed though.

Traditional brokerage houses will also be chopped up for similar reasons. Realtors can create their own brand online much easier than in the past and will need less support from their brokerage and less need for the brokerage to provide leads and deals.

On the role of property managers and how this will change:

The average property management fee for managing one unit is 8-10% of revenue. This commission is getting pushed down as technology makes it easier to manage a property. Jerome anticipates the business idea taking hold where a company will lease all the units from a building owner and pay the owner a fee while managing and collecting all the rents on their own. Technology will allow this business model and their will be money to be made.

On how Naborly using the data it is collecting:

There is a huge lack of data in the rental industry. Jerome would assume that 60-70% of all rental transactions in the major cities in Canada are done directly from a landlord to a tenant. These transactions and the data on the people involved is not captured. Naborly is looking to capture this data and use it to build helpful products and provide the information to the industry to help the real estate industry. The Company is very ambitious and will be looking to publish reports on the industry for the market users.

On prices for Naborly for landlords and tenants:

The service is completely free for both landlords and tenants. This is the only way they can access the entire market and get people using the system. They also offer ancillary products. For example, if your tenant is screened, the system will offer the tenant the option to purchase rental insurance. If they accept, they are passed on to someone that will provide that insurance for a fee.


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Something you have purchased for under $500 that has had a positive impact on your life: Flowers for his fiancée

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This Post Has 7 Comments

  1. EDT 0523 hrs Wednesday, 2019/07/10

    Why does Naborly ask questions as such and what the hell does:
    – Do you have health insurance?
    [Yes I do, but that’s none of ANYONE’S business other than the medical field.]
    – Who’s your insurance health provider?
    [OHIP, but again NONE of anyone’s god dam business.]
    have to do with a HOUSING RENTAL APPLICATION in Ontario?
    Where is the god dam relevance here?
    Health coverage is NO ONE’S business other than the medical field AND those working for a company who provide health related benefits.
    Naborly is DISCRIMINATING,
    and invasive.

    1. I agree that this is a form of discrimination against poor to moderate income people who’s lives are affected by economic up and down turns in greater proportion comparitively speaking . To use this statistic and form an inference used in a model to say who can rent or not rent is total discrimination.

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  3. These guys are telling landlords to report people who fall behind during the pandemic. They are unscrupulous and greedy

  4. Did they forget to promote how they, in the middle of a worldwide dilemma, are pushing landlords in the US to report tenants for missing April rents? To help improve their statistics, they say. Glad that’s all the people who make people like you rich are to you. Stay to your business in Canada. Like we stay to ours.

  5. This company is malicious and intent gathering and administering derogatory slander and libel information right or wrong on tenants. It is blatantly discriminatory and should be reported two attorneys general for any vicinity in which they seek landlord support. There are three well established credit unions already in play that can hurt tenant possibilities. I am seeking in the u.s. do have them completely blocked and penalized. They are an example of a socialist control.

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