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Tech Nest is the proptech podcast where we discover all the latest in proptech by interviewing the innovators and leaders from startup that are challenging the way we buy, sell, and invest in real estate. When you listen to Tech Nest, you'll get in-depth interviews and discussions each week, focused on uncovering trends in proptech and how startups are transforming the real estate landscape.
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You're listening to TechNest, the PropTech podcast. In each episode, you'll hear from PropTech founders, investors, and industry veterans on how they're using tech to change the way we buy, sell, and invest in real estate. Discover market opportunities, interesting data, growth tactics, and trends driving the industry forward. This isn't just another podcast about making money in real estate. This is about how we live.
Speaker 1:And now your host, Nate Smoyer.
Speaker 2:Alright. Before we get into this week's episode, I have the briefest of sponsor type messaging that I've got to deliver here. Not really a sponsor, but more of a partner. Blueprint, it's back. September 17 to 19 at The Venetian in Vegas.
Speaker 2:This is the premier prop tech event. If you're raising money, building partnerships, looking to close some sales, or just trying to go deeper with people in the industry so that you can build your business and set it up for success in the following year, this is the place to be. Head over to technest.io. Link at the top of the screen. It says blueprint discount.
Speaker 2:You can save $300 when you register your ticket using my link on the TechNest website. I'm gonna be there. A whole load of my friends are gonna be there and a whole bunch of people we haven't met yet. There's something like 22100 people that attended last year. These are all industry veterans, operators, investors, and more.
Speaker 2:Blueprint's the place to be. Head over to technest.io. Use the link at the top of the screen. I'll see you there. Hey, Connor.
Speaker 2:Welcome to the show.
Speaker 3:Thanks for having me, Nate.
Speaker 2:Excited to have you here,
Speaker 3:and,
Speaker 2:don't get to talk to a lot of East Coast people these days, so I always, love it. Are you born and raised Boston?
Speaker 3:Pretty much. Yeah. Born and raised just outside of Boston and now live downtown. So I went to school in Connecticut. That's basically as far as I've gone.
Speaker 2:Alright. My question for everyone I talk to from Boston, and maybe this gets old. I don't know. Are you familiar with the Sam Adams commercials that that, like, the kind of, start off with, you know, it's your cousin from Boston. And then, like, do you take offense to that, or do you think that's funny?
Speaker 3:No. I think it's funny. Honestly, I thought you're gonna ask me about Dunkin' Donuts. So,
Speaker 2:you know from the Philly area. We got Dunkin' Donuts. I don't I don't think that's true.
Speaker 3:That's right. You're from Philly.
Speaker 2:Yeah. Yeah. Yeah. Yeah. Yeah.
Speaker 2:Well, glad we got that out the way. For everyone else listening, I've got Connor Brennan. He's cofounder of a company called Rentable. Rentable has been working in a quasi stealth moment. They've been, or kind of pace.
Speaker 2:You know, they've been quiet the last few years, but they've been moving, leading security deposit management platform for residential real estate. And, believe it or not, this is a pretty significant pain point for owners, operators, and managers across the country. Why is that?
Speaker 3:Yeah. It's a great question. You know, it's funny. Whenever we bring up security deposits, people don't typically think it's the sexiest problem or industry. Like you just said, it's a surprising pain point, and there are you know, there have been a few attempts made to address this issue.
Speaker 3:And, really, from the property manager's perspective, it's a big issue for a few different reasons. 1, each city and state across the country has a different set of rules and regulations for how you have to handle security deposits. So I think may you did you used to manage a couple properties in Chicago area?
Speaker 2:I never managed anything in Chicago, but my my, landlord experience actually spans from Washington and, in Wisconsin. I've got commercial as and residential properties. But my time in Chicago was when I was at Avail. And so, our largest segment of customers was also, in Chicago. So I became somewhat familiar with the landlord laws there in
Speaker 3:Chicago. Yeah. And and I bring them up because Chicago is a great example of a place where they're really onerous. So you have to track interest on a deposit. You might even have to have a separate bank account for a deposit.
Speaker 3:The return timelines can be very difficult. Can be as little as 14 days, which if you think about it from property manager or landlord's perspective, getting a turnover done in under 14 days and getting that money back to the resident is really difficult. So that's really one of the big issues is legally speaking. There's a lot of hoops to jump through.
Speaker 2:The time period here. So, yeah, you have 2 weeks. You gotta turn over to unit, determine what goes back to the tenant or not along with
Speaker 3:the that money back to them.
Speaker 2:Along with the interest. Yeah.
Speaker 3:Exactly. Right. Some states, it's up to 30 days. Some states, it's 14. So if you have, you know, let's say you have a portfolio across multiple states, you now might have to juggle the laws in multiple states, not just one.
Speaker 3:You become a quasi expert in the law, and that can be really difficult. And, you know, as a property manager, you're not necessarily trained to be a lawyer or an interpreting these laws and keeping track of everything. And if you make a mistake, you can often be dinged for 2 or 3 times the deposit amount plus legal fees. So in Boston, it's actually triple damages plus attorney fees if you make a mistake. So oftentimes, you hear stories about a tenant might threaten to file a lawsuit or bring you to small claims court.
Speaker 3:And ultimately, you might just return the full deposit because, you know, it's very difficult to do all of the the minor steps that go into handling deposits. So that's one reason that this is a major problem. But I think another issue that we're seeing more and more is really from a resident's perspective. There's a set of expectations for how things get done. And as more and more renters are Gen z, for example, they want everything to be done online.
Speaker 3:They don't even have a checkbook. Yeah. When you move into an apartment in this day and age, you still have to pay a check. Like, I have a checkbook almost exclusively for real estate related transactions. No other part of my life am I writing a check.
Speaker 3:I would never write you a check if we went out to dinner, you know, things like that. So security deposits is one of the last remaining areas where it's still very paper based, whether it's paying a deposit upfront. You know, I had to pay a certified check. I had to Google what that even was at the time.
Speaker 2:Oh, yeah. Cashier's check?
Speaker 3:Yeah. Right. A cashier's check.
Speaker 2:Moved into my place when we moved to Chicago, which was three and a half years ago. 3 and a half years ago. Look. Not, you know, still using a check three and a half years ago. It was still kind of like, what's going on here?
Speaker 2:Okay.
Speaker 3:So, like, it's not like Exactly.
Speaker 2:And I literally, the the realtor was like, yeah. Just, you need to cash this check and just I won't be at my office. Just slip it into the slot. Like and I go to our office, and I'm like, there's just checks sitting. I can see them on the floor through the glass window.
Speaker 2:And I'm like, well, I need the place. I have 2 days to get a place. We're moving here in 2 weeks. Okay. I I mean, I did it, but I was like, I did not enjoy that at all.
Speaker 2:I was like, that was saving a pile of cash sitting there.
Speaker 3:Or my favorite is when they send you, like, an ACH form over email that you have to then type your whole bank and account info onto, and you're like, who sees this email? Who knows? Right?
Speaker 2:But it's but it's secure. It's a private email. It's not public. Right?
Speaker 3:Yeah. It's a private email, but, you know, who knows, right, what they're doing with that stack of papers in their office. I'm sure, you know, you've spent some time in some property management offices. It can get pretty pretty hectic in there. So the whole process really from the tenant's perspective is super archaic.
Speaker 3:When you get your deposit back, I think the stat is over 90% of the time it's done via check. I recently moved out of an apartment. I was in a big apartment building managed by an NMHC top 50 manager. So I thought, you know, they'd have a great system in place. But 45 days after I moved out, I got a check-in the mail for my deposit plus some minimal amount of interest.
Speaker 3:And I was pretty stunned that even they don't have a good process for this, and it totally missed on what my expectations are. I thought it, you know, at this point in time, we'd be dealing with a Venmo type experience where I might be able to get my deposit back instantly or within a day or 2. And really, that has been an interesting thing to dive into, you know, as we've done rentable is seeing just a huge gulf that's been created between the residents' expectations and what property managers are doing day to day when it comes to this very specific process.
Speaker 2:Yeah. Yeah. I mean, there's a so there's a lot of problems that break down in within that. But let's just start with this, you know, because I wanna, obviously, anytime we're building solutions in the multifamily vertical, or even scattered sites for large management firms. There's a ton of problems to tackle, but it it's pretty consistent that all point solutions invariably run into the same problem, which is integrations.
Speaker 2:So I actually wanna start there because that's what I have seen as being a key to success to any of these solutions coming to market. Do they play well with other systems? Is it replacing those systems? Can you talk a little bit about your approach to thinking about integrations? How you're you're combating the working with the incumbent tools in that they're not adequate enough, but you still need to integrate with them so that the you know, your current customers don't give you the reason of, like, we can't use you guys because you don't work or play well with all these other tools.
Speaker 3:Right. Yeah. And and that's a great question. I think for us, you know, when we started so we started we launched the products a couple of years ago. We're a small relatively small lean team still at this point in time.
Speaker 3:And, obviously, integrations are not only a ton of work, but it's often pay to play. So when we started, we got really good at pitching the standalone product. So we have a standalone application, a web application that property manager can use to manage this entire process. It's super simple. So we actually have a lot of customers who've used us.
Speaker 3:And what we're doing is really replacing their bank in a lot of ways Because a lot of this work is done with a local bank.
Speaker 2:You
Speaker 3:might have, you know, 500 security deposits or 25100, whatever it is really. And so we have a platform that essentially replaces, their banking partners. So for a lot of our customers, we're actually able to work with them as a non integrated partner. But obviously, there is a subset of customers out there who really need an integration. And so we are integrated with Yardi and Rent Manager, and we are working on a couple of others as well.
Speaker 3:And, I mean, that's been an interesting process. Obviously, those softwares are really vers tile. They do a lot of different things, but the tech itself sometimes can be a little bit, difficult to work with.
Speaker 2:Mhmm.
Speaker 3:Mhmm. But, you know, we've made it work, and thankfully, the process hasn't been too difficult. And that's enabled us to bring on a totally different subset of customers than, you know, we were winning, let's say, 12 months ago. So that's been really great.
Speaker 2:One of the bits of feedback I've heard from other start ups is that, these you know, the some of the larger incumbent players aren't really excited about integrating with a start up because they don't know how long you're gonna be around. Right? You know, as a start up, by virtue of even just being classified as somewhat of an experiment. Hey. We think there's a new way of doing this.
Speaker 2:That's why we've got this investment, you know, behind our name, and we're gonna take it to market and change the world. And that can represent a risk to some of those incumbent players. Did you encounter that friction when you started pursuing these integrations and partnerships and, of course, the ones that you're currently pursuing as well?
Speaker 3:Yeah. I think so with our current with Yardi and Rem Manager, for example, we didn't really encounter that, which has been great. They're pretty they're pretty open about how they work with people, especially Rent Manager. It's pretty friendly with with third parties. You already you need a couple of customers to basically say that they're interested in this.
Speaker 3:So fortunately, we didn't necessarily have that issue. But I think you're getting to the point of where we were at a couple years ago where we knew we just couldn't wait to integrate because that's how we would die. Right? We if we need to integrate, it's gonna take forever, tons of money. So we've got we had to kind of adapt and get really good at selling the standalone platform, which was in the long run really beneficial because we continue to service customers who use the standalone product.
Speaker 3:And we've built a product that's really easy to use to the point that oftentimes, even if an integration is an option, they may choose to do the stand alone product because there's some additional flexibility or things we can do that maybe via an integration is a little more difficult.
Speaker 2:Yeah. Yeah. No. I appreciate you sharing that. So maybe we can talk through a little bit about some of the things that you've been working on from a product perspective.
Speaker 2:Would love to hear, you know, tactically, what's really setting Rentable apart from other solutions on the market aside from the old way of bringing a cashier's check and dropping it off in the office?
Speaker 3:Yeah. It's a great question. I mean, really, what we've seen primarily in the market, and I think you've touched on this even in past interviews, is focuses on replacing cash security deposits. And there was this feeling maybe during COVID that cash security deposits, maybe they're not gonna stick around. Right?
Speaker 3:Maybe in 10, 20 years, we're all gonna be, you know, having a laugh about, hey. We used to pay cash security deposits. How crazy is that? I think what we've seen is that that is not happening anymore. Objectively, cash is here to stay.
Speaker 3:We've seen a lot of, you know, those replacement type products change up their models or deal with potential issues of their own. And so what sets us apart is that we're focusing on cash deposits. So at the time when we started, it was a kind of a funny time because people were really into the alternative, and we thought we sort of took a stance that this will revert to the mean here. Cash is here to stay. Some percentage of residents are always gonna prefer paying cash, and no one is focusing on the pain points associated with that process.
Speaker 3:And so that's really what led us to go down this path. And as we've gone down it, we've uncovered that every city and state has its own set of issues. So you mentioned Washington state. You have to potentially depreciate certain costs over time, and that affects deposit deductions. In Massachusetts, where I'm based, you have to do subaccounting.
Speaker 3:Each security deposit is technically supposed to be in its own bank account. So if you have a 1,000 deposits, you might need a 1,000 bank accounts, which is insane. So there's all of these issues surrounding the traditional cash deposit, which we didn't see anyone addressing. Mhmm. And that's really why we went down this path and what the product is focusing on.
Speaker 2:Connor, you must have been looking at my notes because, later in the show, I had the question on for the future of will we ever actually get rid of the, traditional deposit. And you've already answered that. You don't think that's that's going away. But I think a clarification is important here. When you say cash deposit, you don't literally mean a handful of cash.
Speaker 2:You mean by check or ACH transfer.
Speaker 3:Like a lump sum deposit. You know?
Speaker 2:And that's as opposed to the, some of the other models that have come onto the market, which are the credit authorization model, which is 1 which essentially gives the property manager in advance authorization to credit, a charge if there is some sort of damage outside of normal wear and tear. And then you have the insurance model, which is, essentially, you know, just like you would file an insurance claim, there would be a claim filed when the tenant moves out, and then out of that outside of the deductible, then the the insurance would cover the repairs for that. But both of those models still kind of put an additional cost. Typically, it gets passed on to the the renter. And I kind of I've gone back and forth on this, but I I think anytime you're adding more costs to the renter, I just see I kind of agree where you're you're you're at here.
Speaker 2:And when you say a reversion back to the mean, like, the the alternative sounds fun, but at the same time, like, an additional cost, I might as well just I might as well just pay you the deposit. But let me ask you this. What about, because some cities have pushed for legislation on saying, hey. We should break the deposit up. We should do multiple payments, over the next few months.
Speaker 2:What what's your take on that as a as an alternative to the the lump sum that is part of the traditional or standard?
Speaker 3:That's a great question. You must have been looking at my notes, Nate, because we offer that. I was gonna get into it after you touched on some of the alternatives, but we actually offer the resident the ability to spread their deposit out over time. So although we started focusing on traditional cash deposits, traditional lump sum deposits, we knew that giving residents flexibility is super valuable. And that was proven by the alternatives.
Speaker 3:I think what they've shown is that there is a need on the resident's side to give some optionality. What we didn't necessarily agree with is the way that they were going about it. So you touched on it briefly there. Typically, you're paying a monthly fee as long as you live in the residence. Mhmm.
Speaker 3:And once you move out, you're still on the hook for any damages. So what ended up happening with a lot of residences, they think they're signing up for something that maybe replaces their deposit, but then they move out after 2, 3, 4 years. They might have paid more in fees than the deposit ever was to begin with. Yeah. Plus they're then billed afterwards.
Speaker 3:So we didn't love that model. So instead, we took more of what I would consider almost like a buy now, pay later approach where if the resident wants to, they can opt to spread their deposit out over time and essentially build up a savings account, which is their deposit. So to give a concrete example, let's say it's a $1200 security deposit. We give residents the choice of paying $100 a month for 12 months. And by the end of that 12 months, they've effectively saved up a refundable security deposit.
Speaker 3:And we think that this not only gives residents the flexibility to avoid, you know, a big lump sum payment, but it's a little bit more financially responsible in our opinion to encourage folks to be saving up a full refundable deposit. Because ultimately, you're gonna live at this place maybe for 2 or 3 years, and we'd rather you pay, you know, pay up for a full deposit over 12 months than have you on the hook for 36 months of fees. And then when you move to your next apartment, as long as you're a good resident who keeps, you know, the unit clean and pays your bills, you should get that full refundable deposit back and not need to necessarily use a product like this moving forward.
Speaker 2:Got it. Let's talk I'd love to hear more about the ideal customer. Right? So going broadly, you know, we could think about, like, large multifamily, maybe the private equity that we hear in the news all the time that's gobbling up all the single family homes. Is it the the neighborhood property management company?
Speaker 2:Like, who who's rentable really going after? Or maybe you could talk about some of the attributes that make them the ideal prospect for you guys.
Speaker 3:Yeah. So, typically, we're going after, I would say, the mid market. So we're not going super enterprise. It's not like we're seeking NMHC top 50 logos all the time. Do I think there are issues in that space that we can and will resolve eventually?
Speaker 3:Yes. I mean, I mentioned I I literally just moved out of an apartment managed by one of those groups, and they have the same issues in a lot of, ways that the the mid market folks do. But what we like about the mid market is, 1, they're at the scale where they're running into a lot of these issues. So if you only manage, let's say, 10 or 20 or 50 apartments, this just might not be a big enough problem if you're doing a one move out a month, let's say, or something like that or one move in. It's it's just not a big enough scale.
Speaker 3:But once you hit, you know, 500 or a 1000 or 25100 units, it becomes a legitimate problem. And oftentimes, we hear, you know, you might need one full time staff dealing with security deposits every 2 or 3000 units, which is really interesting. And that's why we like the space because they have the the issues, but they don't have necessarily the bureaucracy of a 50,000 unit property manager. So we're able to sell into them more easily. They have the issues.
Speaker 3:They resonate really well. And we might be able to speak directly with the decision maker within one call or 2 calls rather than kinda run up the ladder of a, you know, a massive organization.
Speaker 2:But you guys just signed a pretty big deal recently.
Speaker 3:Yeah. I mean, we have large customers. So we just we just, released a case study with a 10,000 unit property manager. It's on our website if anyone wants to check it out. But, essentially, that lays out some really interesting statistics about how much time they were spending on deposits.
Speaker 3:And they saw over 90% reduction in the time spent managing deposits, which is really impactful for them. I mean, they that means hundreds of hours of labor time per year. You know, if you monetize that or take a multiple of, you know, an hourly wage, you can see that there's real cost savings on just the management of this process. But in addition to that, we're also making sure that it's all done correctly. You know, there's no real risk of running into tenants who might have, issues with how you're managing deposits, and we make it a much better resident experience.
Speaker 3:Ultimately, what's really a fun game that we kind of play at Rentable is when we pull up reviews of any property management company. I guarantee that if you look at the one star reviews, they are gonna be about security deposits, whether they didn't get it back in time. They don't know why they were deducted. Our platform, again, addresses a lot of those issues because the resident can log in at any time and see when did I pay my deposit? Where is it being held?
Speaker 3:We give interest. We accrue interest on all deposits. When a tenant moves out, we ACH them the money back. We give them a few different options for how to get that money back to them and really make it more of an experience that they're wanting and probably expecting. And so that's that's kind of laid out as well with this customer that you're mentioning.
Speaker 2:Yeah. Even the ACH back to the customer, that that's a piece that frequently gets missed. A lot of rental platforms that accept rent payments are really a one way. They're not a two way. And that's why even though you you have all these places that take rent online and have rent, you know, a renter portal, log in, and that sort of thing, That's why the security deposit has to go out by check again.
Speaker 2:And so then they're still stuck in, like, managing individual accounts and have like, there's a fair amount of just, like, you know, check the box here kind of thing, to be able to get that, money back to the the renter, and it it feels so counterintuitive. It's like we have all this other technology, and then we're still sending the check. The ACH back, you know, a handful of things, like, one, like, I bank with my bank is a national bank, and they're not in Rapid City or anywhere around me. So it's not very convenient for me to go to a bank if I have to cash check. Unfortunately, my bank has a mobile app, and I can now do deposit using my phone.
Speaker 2:But either way, I still have to wait for it to arrive in the mail, and I might need it I might need it for the next place. So the fact that, you know, that right there alone and a 90 per 90% reduction in time spent on a single function for property managers who already taxed for time. The number of tasks and burdens that are falling on their shoulders, whether it's the, you know, actual property manager or the back office staff. This seems like a pretty significant, or easy, to say, like, a tool to add to the arsenal. Because that's quite a bit of time to get back.
Speaker 3:Yeah. It's a ton of time. And and, honestly, you know, you asked me earlier who potentially in the market. It was some something along the lines of who might you be competing with. Is it the current process?
Speaker 3:And, really, that is what we see. It's it's the inertia. It's not necessarily that there is, you know, another vendor that they're considering or anything like that. It's primarily that they've done it this way for the last 30 years. So it's our job to sort of educate property managers on the fact that they're spending a lot of time doing this because it's, it's not even just sending the check.
Speaker 3:Let's say, Nate, you moved out. You're the tenant. Maybe you didn't update your forwarding. So I've mailed you a check and
Speaker 2:I'll send back time. Let's be honest here.
Speaker 3:Yeah. Right. Every time. And then it comes back to me. I've got a stack this high on my desk of checks that I don't know what to do with.
Speaker 3:And then tenants are calling me. Maybe I never hear from them. I have to escheat that money to the local government. There's a whole, like, bevy of pain points. And you even alluded to as well, there is new legislation in some states requiring installment payments, for example.
Speaker 3:So there's a lot of change happening with how deposits are viewed, and we're really trying to be the preeminent choice and sort of the leading option. So far, I think we've done a great job of really putting ourselves in that position to address the changing landscape, whether it's on traditional deposits or offering, know, an installment plan. We really do believe the installment plan is the most tenant friendly. We think it checks all the boxes. And we think it's something that both residents and property managers can agree is a really great choice versus something like, you know, a monthly fee in lieu of a deposit because that leads to friction.
Speaker 3:You have to file claims if you're the property manager. So we really didn't wanna go that route.
Speaker 2:Now kind of leading into the pandemic that I think there was an acceleration of adoption of PropTech. I think we saw a little bit of a lull and then we were like, hey, you know, the world's going to continue. And then we saw like a hyper investment. Right? And and this is both from the side of companies like, yeah, let's get all the tools optimized, maximize, you know, everything to the to the to the moon.
Speaker 2:We also saw VCs and private equity pumping a lot of money into these tech tools because it's like this is gonna solve all the problems. This is gonna maximize returns. And then we saw a pullback. We saw a pullback around anything that had to do with transactions. We also saw a pullback in multifamily, given that rent growth slowed.
Speaker 2:Right? And so in that be and because of that, especially with multifamily tools, because it takes time for it to play out, and there's some hesitancy sometimes. Like, look, I don't wanna roll this out to 2,000, units and renters because the time it takes to set up, get it to everyone, find out that they hate it, and then unroll it, you know, can be quite a bit. I'm curious when you're bringing this to a portfolio company or manager and you're in your proposing, hey. This could be something that solves some of your pain points.
Speaker 2:How are you balancing that discussion of the risk sometimes that it represents to implement a whole new system as opposed to what they're currently doing and then the the value they're gonna get out of it?
Speaker 3:Yeah. That's I mean, that is a great question. And, honestly, that is something that we definitely saw, especially in, like, 2022, 2023, which we're seeing a little I, you know, really can't tell if it's happening less or because we have a little bit more cache in the industry that it's happening less to us specifically. But I think to answer that question, it really, I think, leads to why we target who we target as well. In the mid market, if you have 3,000 units in Buffalo, New York or Sioux Sioux Falls or Iowa city or wherever the case may be, you're probably not the top of the list of who every other prop tech is selling to necessarily.
Speaker 3:I think at the really high end of size, they're the ones who are rotating between 5 different vendors for every single problem. And we had some conversations with folks like that who just were burnt out. I mean, they didn't want to try anything new and there's a lot of turnover in the industry, which doesn't help with this sort of thing either because the person who learned how to do wearable is now gone, and the next person used, you know, some other product at their last job. So when we target more of the mid market, I would say there's just less of all of that because it could be folks who've worked there for 20 years. It's a very stable company.
Speaker 3:It may be growing slowly or not growing at all. And they're not really being targeted a ton by different vendors necessarily. And so we've been able to pitch our value proposition without the backdrop of, hey. We just tried 10 different vendors last year. You know, what else you know, what are you guys doing that's so new?
Speaker 3:I think that really helps us. And I think another thing that helps us is and this is highlighted in the case study that you were alluding to. We solve a real problem. Not to say that most PropTechs don't solve a real problem, but I think that there can be a bit of, a stretch when it comes to certain vendors where maybe they're solving a problem that only affects a small subset of of groups or, you know, certain things like that, or maybe they're only applicable to certain asset types, like class a, for example, or only single family or really things like that. For us, the law is the law.
Speaker 3:If you manage a single family home versus an apartment versus a manufactured house or a student house, all of it's the same. You have to follow the law that the state sets for security deposits. And I think that really bodes well for us because everybody has to do it. It stinks. And no one is when we pitch, no one is saying we love security deposits.
Speaker 3:Our process is great. Everybody says, yeah, it kinda sucks, but we've done it for 25 years. And that's where our battle begins of where we need to start, you know, educating and pitching and really proving our value prop.
Speaker 2:Here, I thought all your sales calls kicked off with the prospect telling you how much they'd love the topic of security deposits.
Speaker 3:Maybe 1,000,000.
Speaker 2:No. I I appreciate the thoroughness there. I mean, I think that's just something and, you know, you you you actually touched on something that I I think is really important to, to highlight here. You know, adjusting your go to market strategy just based on the the knowledge of your how your prospects organizations work. You know, if if your prospects are gonna be exhausted with vendor trials and, you know, sign up for this and that, they've got enterprise agents knocking on the door every day, promising steak at dinners just to get a call.
Speaker 2:You know? You're probably gonna be be met with, like, really tired buyers or no buyer at all, and you're going right to the actual operator who's has a 100 things to do and does not have time for entertaining the next tool. But as you described, like, getting that mid market where the pain is just as real, they still have to follow they still have to follow the law on on this. And there may be a little bit more stability or there's less focus on them at I I feel like that's a that's a a pretty significant lesson for other founders listening of, like, hey. When you're considering your market and how you you take your product to market, like, there's more than just to the sales and marketing and the website, not sort of jazz.
Speaker 2:Like, you have to know the the prospects, you know, internal organization. Was that something you stumbled upon, or was that the strategy from the get go?
Speaker 3:Yeah. I was gonna say, you know, I I would love to take credit and say that that was just an insight we had from day 1, but it really, I think, was born out of the fact back to the whole integration discussion. We didn't have integrations off the bat. I mean, pretty much no one does. And so we figured out who could we sell to right away.
Speaker 3:And it's a hell of a lot easier to sell a nonintegrated solution, someone who manages a 1000 apartments or 2,000 than it is to sell to someone with 50,000. So we ended up doing that because we had to and ultimately uncovered, I think, that the whole insight, right, around these organizations. Because even up to in the Boston area or in New York, New Jersey, there are a lot of these management companies that they might manage 500 apartments in one small neighborhood. And it might literally be one person with an assistant. And so we ended up selling to these types of groups in the beginning out of, you know, necessity.
Speaker 3:But we learned that, hey. It's just one person running this whole company. Maybe it's easier to sell to a bunch of companies like that rather than go up the market to some massive organization. And although we have gone up market a bit, I mean, the company you mentioned that we released the case study on there around 10,000 units. Yeah.
Speaker 3:But it's still not the massive scale of a of a gray star or, you know, something like that.
Speaker 2:We should, jam after this call. I can show you, if you're not familiar, you don't already have it, a pretty easy way to find a whole bunch of Yardi and Rent Manager customers.
Speaker 3:That sounds that sounds good to me.
Speaker 2:We could just go find them 1 by 1, make it really easy here for you. Well, I don't wanna get too far into that, and anyone else is listening to this. This is a plug for my own, hackiness out there. I'm always down to to jam and talk about start ups and ways to to find those hidden nuggets. But we're gonna jump to a segment I like to call for the future.
Speaker 2:For the future is when I get to ask each guest to give their best prediction space on the following four questions. Connor, you took my first, second, and third choices of a handful of questions I had. But anyway, regardless, are you ready to play?
Speaker 3:Yeah.
Speaker 2:Alright. Let's do this. Number 1, what does rent look like 1 year from now?
Speaker 3:Rentable, I think in a year from now, we will be integrated with more property management systems. So we have 2 big ones now, but we have a couple others that are in the works that we'll be excited to announce later this year. I think really where we're going is we're gonna continue to deepen our current product. We're gonna make sure that we're up to date with all changes in legislation, things of that nature. But where we really think there's an interesting opportunity is on the resident side in a lot of ways.
Speaker 3:Mhmm. Because we by taking deposits so we hold the deposits. That's kinda how the product works. But residents' security deposit, it actually represents a massive percentage of their liquidity in their net worth. I think the stat that floats around is the average net worth of a renter is maybe $6,000.
Speaker 3:It's not a lot. We yeah. It's it's super low, and it makes sense in a lot of ways, and it's unfortunate. But we hold per resident on average. It's around $1500.
Speaker 3:So in that context, we actually are holding on to a significant asset for a typical renter. And we think there's a lot of interesting things we can do with that, whether it's allowing residents to tap into that money in some way, whether it's building out high interest capability on a security deposit to try to make that more of a worthwhile asset for the resident while still giving the property manager the protection of a security deposit. So I think maybe that's not 1 year from now, but I think in the future, we think there's a lot of creative things we can do to make the security deposit less of a a bad experience. Because right now, you write a check, you put it under a door if it's you, and you don't know where that money's going or if you're ever gonna get it back. And we think there's a ton of runway here to build an infinitely better experience that's suited towards the Gen z renters who are, you know, even now, I think the largest proportion of renters.
Speaker 2:Yeah. Question number 2. Let's say over the course of the next 5 years, what do you think the percent breakdown will be between cash deposits and all other alternatives, across the rental industry?
Speaker 3:I think in the whole industry, it's gonna be 80 plus percent cash, just normal security deposits. Because some percentage of property managers are just never gonna use an alternative because they maybe they don't trust it. Maybe they don't understand how it works. I think there's just a property manager preference in some instances against products like that. And then even when it is offered, it's just not really taken up as often as maybe it was believed during, let's say, the COVID era.
Speaker 2:Yeah.
Speaker 3:And I'm speaking about the alternatives that are like the fee in lieu of a security deposit. We actually we think that the structure we have is actually gonna lead to more adoption because it more closely aligns with how renters are and you buy something, you can spread it out over time. I just go to an Airbnb
Speaker 2:I just bought a couple of mattress, and that's exactly what we did.
Speaker 3:Yeah. You spread it out. Right? And and everyone is used to that. It's pretty easy
Speaker 2:to understand. 0 interest on the money, and then it was for 12 months. So I was like, I'll take 0 interest all day on a big purchase.
Speaker 3:Yeah. And and people are just really accustomed to that, and I think we are trying to fit into that mold. And residents, when they hit our flow, they're given the choice, pay up front or pay over time. And it really Yep. Mimics their current experience.
Speaker 3:And so ultimately, we we think we can get higher adoption. But I think as an industry, people are still most comfortable with cash on both sides of the coin, property manager and resident.
Speaker 2:Number 3 here on for the future. What's one industry trend do you think will continue, but you wish would go away?
Speaker 3:That's a good question. What's one? I think that there is a trend towards and there's some interesting legislation around this, but junk fees. I think that there are a lot of fees that float around or programs where residents are opted into things automatically or maybe, you know, required to do certain things. And I I just don't love that as a I mean, I'm a renter myself.
Speaker 3:I wouldn't love if I was forced to sign up for something that I didn't see a ton of value in, and I think that's a trend that has grown and is continually growing. Although it seems like there's a little bit of a focus from the federal government on this sort of thing. But I think just generally speaking, that's probably something that, is growing that maybe I don't love.
Speaker 2:Last one here. What's one thing you believe will dramatically change or fade away in real estate as a result of tech advances?
Speaker 3:Oh, that's a good question. I don't think I have a really good answer to that one.
Speaker 2:It's gonna be the same. You. It's gonna stay the same for 20 year for the next 20 to 40 years.
Speaker 3:We're gonna be paying security deposits under a door in 2060. The
Speaker 2:you know, the reality here is I tend to align to this, to some degree as much as I'm an optimist that we're gonna find better ways of doing things. It does seem like the more things change, the more they stay the same. And I think real estate will look so much similar to it does today, you know, in 10, 20 years on the surface. On the surface that is. Underneath, many things would be different.
Speaker 3:Yeah. Yeah. I would say so. I mean, maybe, there will be drones flying over all of the buildings to check roofs and things like that, which is a
Speaker 2:I know someone who does that. Yeah. It's true. Connor, this has been awesome. Thanks for coming on the show.
Speaker 2:Really appreciate you breaking it down. The the business of security deposits, who knew it could be this exciting? Congrats on some of the recent successes and, you know, looking forward to some of those announcements of those new deals that you're striking as well integrations. Before we close out for those who wanna get in touch with you and learn more about Rentable, where do they go and how do they do that?
Speaker 3:Yeah. You can find me on LinkedIn. I'm super active there. You could also go to rentable.com. Reach out to anyone on LinkedIn as well.
Speaker 3:My cofounder, Alex, he'd be happy to chat with you or Edward Shorter, our head of sales. So anyone like that, we're always happy to talk. We make some rounds at trade shows as well. So
Speaker 2:Will we see you blueprint this year?
Speaker 3:Probably. Yeah. We'll probably see you see their blueprint. I know I saw you at IMN. Yep.
Speaker 3:Are you gonna be at IMN?
Speaker 2:I've got a few of them on my calendar this year. We'll see which ones kind of, shake out, but, looking, closest at Miami as the next I'm in.
Speaker 3:Yeah. Gotcha. Okay. Yep. Yeah.
Speaker 3:I mean, those events are always great. So so yeah.
Speaker 2:There it is. Sounds good. Well, Connor, until then, we'll catch you later.
Speaker 3:Alright. Thanks, Nate.
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