As refugees in civil war-torn Lebanon, Kal Merhi (photo at right) and his family spent years living in shelled and abandoned buildings with no running water, electricity or sewer.

After Merhi and his family immigrated to Canada in 1987, that experience stayed with him. It shaped his decision to become a startup founder, helping people find safe and affordable places to rent with compatible roommates.

Merhi said he always thought about starting his own business, especially after his family was forced to abandon its small businesses after they'd lost everything during Lebanon’s civil war.

“I’m a people person. I like serving the market and building relationships with people,” he said in an interview.

Then the COVID-19 pandemic hit, followed by the spike in immigration and the shortage of affordable student housing in many Canadian cities.

Young people naturally want to move out of their parents’ homes and start their own lives, but they’re stuck because they can’t find any affordable place to rent, Merhi said.

Most young people graduating from high school, if they can find jobs, typically earn about $17 an hour, he said. If they work fulltime, by the end of the month they end up with about $1,900 after taxes.

The average rent for a one-bedroom apartment in Canada was $1,876 in February. However, in Toronto, that unit would rent for $2,353 and for $2,522 in Vancouver. 

In Ottawa – where Merhi lives – a one-bedroom apartment rents for more than $2,000. In Calgary, it’s around $1,800.

Having no affordable place to live “brought back bad memories [from Lebanon],” Merhi said. “I said, ‘Something has to be done.’”

Young people starting out typically can’t afford to rent by themselves, so they need roommates to share the rent, he said. But he couldn’t find any software in Canada that would match compatible roommates with reliable landlords in a safe, secure, one-stop application.

So Merhi hired his nephew, David Goguen, who’d just graduated as a software engineer, to take Merhi’s ideas and build a custom app.

“He thought it was a great idea,” Merhi said. “He struggled to find an affordable place to rent.”

Based on the app, Merhi in 2022 founded and became CEO of iROOMit Inc. His nephew David became the company’s chief technology officer.

iROOMit Inc. is now Merhi’s fulltime job. He runs the company from his own office and typically works about 16 hours per day, with a focus on expanding the company into international markets.

Building real connections between people

There are competing rental apps on the market. However, Merhi believes that iROOMit’s app has several advantages over its competitors, especially its verification, safety, video and secure money-transferring components.

First, all communications happen within the app itself. No third parties are involved, including any transfer of money between tenant and landlord.

Landlords and tenants pay a subscription fee to use the app. The fee options range from $7.99 for one week to $19.99 monthly to a one-time fee of $27.99 for 60 days.

The AI-powered app uses questionnaires and scanning techniques to check and verify the details and legitimacy of both landlords and tenants, as well as the compatibility of potential roommates sharing a space.

Roommate compatibility is assessed using a detailed questionnaire that covers such things as sleeping and waking times, degree of tidiness/messiness, do you like to cook, whether you're okay with sharing food in the fridge, vegetarian or carnivore, gender/gender preference, are you a partier, do you have friends/boyfriend/girlfriend over all the time, and other characteristics.

The app has an on-demand built-in video component that enables landlords and prospective tenants to view in real time the rental space. The app also can produce a signed rental agreement for landlords and tenants.

Through a partnership with credit rating agency Transunion, iROOMit can provide the landlord with credit ratings for prospective tenants, to verify their ability to pay.

The AI algorithm in the app also scans and weeds out information that could be used by potential rental scammers in attempts to bypass the app, such as phone numbers, email addresses, fake images from other platforms and inappropriate photos.

“When we say this listing is verified, it’s verified,” Merhi notes.

All transfers of money between tenants and landlords are done within the app, through a partnership iROOMit has with the Stripe online payments platform.

“As soon as you move in, you send us an email or a text that you’re happy, then we release the money [to the landlord],” Merhi said.

iROOMit currently has about 100 to 200 new accounts signing up daily, he said. Between Google and Apple, there have been close to 250,000 downloads of iROOMit’s app.

The company currently has more than 60,000 listings across 10,000 cities in Canada, the U.S. and the U.K.

iROOMit has four different categories of users, Merhi said. The largest user group is the GenZ and early Millennial  generations, ages 18 to 30, who are looking for roommates to share the rent.

Then there are people age 35 to 45 who are doing well financially but want to step up to a better place and are looking for somebody to share the rent.

Then there’s a group of people age 44 to 55 who are well-established and might have a home or another real estate investment that they’re renting rooms in.

The fourth group is people 55+ who are financially stable and includes many retirees who have a real estate investment and are renting, or who are looking for a roommate to share the rent but also for companionship.

iROOMit prioritizes the creating of genuine connections between people, Merhi said. “We are building a community within our app in one spot.”                   

Improving innovation and rental housing in Canada

Merhi has totally bootstrapped the creation and operation of iROOMit with his own money.

He said he searched some government websites for possible funding, but found there wasn’t sufficient information about who to contact and how.

He reached out to one federal agency, sending them his pitch deck and financials, but they declined any support, saying the market for rental apps was too competitive.

Merhi said he told the agency representative to remember the name iROOMit. “And when we go public in a few years, you’re going to say, ‘Oops, we should have invested in that.”

Merhi points to an online platform named Happipad that in 2022 received $1.3 million from the Nova Scotia government to help renters find affordable housing. By August 2023, only a total of 60 rooms had been listed and 23 leases signed.

“If you look at where we are and where they are, it’s like we’re at the Moon and they’re still climbing to the top of the building,” Merhi said.

 iROOMit plans to expand this year into Australia, New Zealand and Western Europe.

Merhi said he is reaching out to potential investors and is willing to negotiate an equity investment. If he could afford to hire a couple more engineers, he could accomplish in one year what it would take him and his nephew five years to do, he said.

However, a problem is that Canadians are great at inventing things but they’re not innovators, Merhi said. “We invent great in Canada, but when it comes to investing in the innovation, I’d say we really lack that.”

Also, compared with the approach in the U.S. to investing and commercialization, startup founders in Canada are confronted with way too much red tape, he said. By the time Canadian entrepreneurs cut through all the red tape and might receive some support, he added, they feel like saying “It’s okay, I don’t want it.”

When it comes to the bigger picture and problems in Canada’s rental housing market, too much rental housing is built in downtown cores where the rent – no matter which city in the world – is more expensive, he said.

Builders should be financially incentivized to build rental housing outside of downtown cores, in communities that are well connected with public transit, Merhi said. Young people don’t mind paying cheaper rent and taking a bus or light rail transit to their workplace, he added.

He also points to another problem: the tax burden on new home construction that builders face in Canada.

Government fees, taxes (including hidden taxes in some provinces) and charges (such as GST and HST on both the labour and cost of materials) add an average of $186,300, or 21 percent, onto the average price per new single-family home in Toronto, according to a study by the Altus Group. Such charges also apply to new rental properties.

Governments make much more money on new housing construction – up to three times as much – as developers do, according to a report by the Canadian Centre for Economic Analysis.

 The tax burden on new housing in Ontario averages 31percent of the purchase price, which is twice the burden in the rest of the economy, the report said. The federal government is the largest beneficiary, with a 39-percent share of total tax revenues. Provinces get 37 percent, municipalities 24 per cent.

“Give a little bit of a break for companies that build rental houses, especially outside of the core,” Merhi said.

Asked what characteristics are needed to be a startup founder, he replies: “Patience, focus, belief and determination.”

R$