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Hey, everyone, you're listening to On the House with Spartan, an ad-free podcast brought to you by a full-service turnkey company. I'm your host, lindsay Davis, ceo and co-founder of Spartan Invest. On this show, we talk about all things real estate, from market patterns, industry insight, construction, property management and other investment avenues. We hope you'll join as we dive into today's episode of On the House with Spartan. Welcome back to another episode of On the House with Spartan Invest, and this episode is going to be a first in a series of hot takes is what we're calling it and where we talk about current events and happenings in the real estate industry and then really just kind of talk about from our perspective, give our opinions, thoughts about what may be happening with that particular event. So, to kick it off, today I am going to talk about a lawsuit against some property management companies or, I'm sorry, property management softwares. One specifically is Yardee. Now I'm pulling this information. There's been several articles about this lawsuit written, but this particular article that I'm going to be talking about and reading from is the Real Deal, and there's real estate news. You can check them out at therealdealcom and it's the Tinnit-Sue's Yardee over rent setting software, and this is really, really interesting because we've talked a lot about in our podcast and we spend a lot of time talking internally about making sure that we hit the rent correctly and we use our database to do that. Well, yardee is no different. There's several property management softwares out there. Real page is also one of them that is being looped in to this lawsuit or is facing litigation as well in regards to pulling data on what particular rents are, and so a tenant is actually going after. 

A Seattle renter sued yard last week, accusing the company of driving up rents through its rent maximizer product. Apartment owners took advantage of the product to unfairly drive up prices, according to the class action lawsuit, which named 18 property management companies as defendants. So apartment owners who use the software do so to follow the operation of the competitive market. The suit said this is from the class action suit is what they're claiming. Yard customers, who are typically landlords, allegedly provide rental and occupancy data to into an algorithm that spits out pricing, recommend recommendations who, sorry, allowing owners to essentially collaborate and to set rents. Yardy marketed the product, which has since been renamed revenue IQ, as a way to drive up rental income by at least 6%, according to the lawsuit. The company, which recently concluded its annual North American conference, didn't immediately respond. That's what from the real deal said, that they're not commenting, but the lawsuit hits many of the same points as a legal challenge against real page and dozens of other multifamily landlords. This class action case, which generated widespread media coverage, is moving forward on the other side of the country after being consolidated from numerous other challenges. So this has been a pretty. This is a pretty big deal and has been going on for a while. The tenants from multiple markets also accused real page and its rent setting software of helping property owners raise rents In an anti competitive fashion because it suggested rental prices based on what other real page. Customers were charging Most of the time landlords raise rents when the software suggested it. Now, according to this article the real deal yardy had not commented at that time. However, we did find a statement released by yardy in regards to this lawsuit on their website Now I'll share it with you guys right now. 

On Friday September 8th, a lawsuit was filed against yardy and some clients who use yardy's revenue IQ formally rent maximizer software. This lawsuit alleges yardy conspired with his clients through revenue IQ to exchange competitively sensitive and non public information in order to illegally inflate rent prices and suppress Lee supply. Yardy and the revenue IQ software does none of this. First, revenue IQ does not mandate anything, including advertised rent parentheses called asking rent or price increases. In fact, revenue IQ regularly adjusts prices upward and downward based on supply and demand. Many clients also use revenue IQ to prioritize steady occupancy rather than rent growth, and the software includes setting to help clients comply with various rent control requirements and state of emergency rent cap programs. Second, revenue IQ is not quote a black box that makes compulsive pricing decisions, and revenue IQ does not use and has never used confidential, competitor or non public rent data for adjusting asking rents. On the contrary, asking rent adjustments are individualized and based only on one A client's own property unit availability, prospect traffic and leasing activity To the asking rents for comparable properties that the client selects, which come from clients own research, public information collected through surveys and information from public websites. And three, the over 200 revenue IQ configurations that clients can set, adjust and readjust based on each client's own individual priorities, goals and objectives, and clients can even choose to use only their own property data for making asking rent adjustments. In sum, there is nothing illegal about revenue management and the allegations in the complaint have no merit. 

Yardee stands behind Revenue IQ and will vigorously defend this ill-conceived lawsuit. Now, this is a statement from Yardee on their website, yardeecom. If you want to go to their website and check that out and I'll be very interested to see what the conclusion is, because when you really think about comparables and you could I can see both sides, and I see the argument from the landlord and the investor standpoint in that when you're going to sell your property, when you're going to price it on the open market, the previous sales are used by appraisers as a comparable to the value of that particular home. So I think that a legitimate argument can also be made that you need that same data or that same data could be readily used to accurately price what a property should rip for, and that I'm not. I'm not 100% sure I see a huge difference in having that information readily available. In fact, it's been something that we've discussed several times internally about wishing there was something. 

Now. This was years back when we were first starting and we were looking and evaluating properties especially properties are in areas where we were venturing into and that what properties have rented for, especially single family homes. There is no database for that. In Alabama most property managers do not put their properties that are for rent on the MLS and they don't put what it rented for. There is no database really to pull what properties have actually rented for. You can see Monzillo and Zillow will give their rentals estimate in which I'm sure if you've been in the real estate space you know is not that accurate. But so you you can find what the owner is asking for rent, but that doesn't necessarily mean that that's what it rented for. 

When you're going to sell a property, you can see what the owner wanted to sell it for and then you can actually see in public record what it sold for and then use that as a comparable. You can't do that with a rental. So it's really hard to generate comps, especially if you're doing this on your own and you don't have those 2000 properties in management, like we do, to really pull from. So when we were first starting out, it was really hard to determine exactly what a three to in Pinson would rent for versus a three to in Huey Town would rent for. And of course, if you're selling properties to investors based on the rent and that drives the rate of return, you need to make sure that that is accurate and we would always undershoot it. We would. We would keep the prices, the rental prices, down, just because we didn't want to over promise and under deliver. So I can see how that information is extremely valuable. 

Now, at Atlas rental property we currently use at folio, it was a big change that we just made. We moved away from the property where platform and moved into at folio and they have something very similar. They call it a rent match. So what they do is when you put in your rent, you put in all the information, you've got your property in there, you can click a rent match and it'll show you what other properties have rented for in that area that use at folio. So you can only really see because, again, it's not public record you can only see the information of other at folio users and you can see okay, well, your price is on the high end or you're right in the middle, you're right on the low end. So it'll kind of break down where your property is compared to others in that same area and it doesn't really give any recommendations as far as, hey, you need to push this rent or you need to reduce this rent, et cetera, et cetera. But it does give that information, just so you can compare to other single family homes in that space. 

Now, this is multifamily, these are apartments, and I'll be very curious to see what happens in this particular lawsuit Because, again, like I said, you can see it from both sides. I can see from the tenant standpoint and if you've got large multifamilies and you're kind of limited into where you can particularly live, all of these multifamilies are setting the price at a certain amount, then hey, you're kind of stuck and you don't really have a lot of give. We do the same for the resale market value of the homes when you go to sell it. So I'll just be curious to see how this shakes out and we'll hopefully do a follow-up once more information or once before this particular lawsuit gets in front of a judge. It is interesting to read about and something that those that are interested in the real estate industry or wanting to enter active investors should definitely keep an eye out, because it might change if you are in the multifamily space. 

All right, and that's our first episode of Hot Take. Thank you so much for tuning in and that's all with On the House with Spartan Invest. Thank you guys for listening today. If you enjoyed this episode, be sure to rate, review and subscribe. If you want to learn more, check us out online at SpartanInvestcom. Until next time, this is On the House with Spartan. 

Transcribed by https://podium.page