They say the first step to coming up with a solution is to deeply understand the problem.
After decades in the real estate world, Mike Daniels was painfully familiar with the disjointed systems both residents and property managers navigate in order to accomplish simple tasks when trying to rent out a unit.
What started as a consulting project grew into an independent company when Mike realized the processes he was building could benefit every organization he’d ever worked for. So he set out to build a portal where the entire rental experience is managed online.
Rentivity closed its first round of funding in mid-2018 and is currently growing its user base. Here’s what Mike had to say about the pain points Rentivity relieves, and what he’s learning as an entrepreneur in commercial real estate.
What are the biggest challenges renters face in the current marketplace?
When we talked to renters, their three biggest complaints were, first, the cost associated with screening for multiple properties. For example, if you’re two people and you want to rent a house, the application fee is $75 each. That’s $150. And renters often get the third or fourth property that they apply for. So we spent $450 to $600 in the screening phase, and only got our third or fourth property of choice.
Their other complaint was lack of response when they make an inquiry on sites like Zillow or HotPads. That’s because a lot of people on there are looking for leads who want to buy properties because rent doesn’t pay much of a commission to other brokers.
And the third was not having the ability to compete for the property they want. A lot of them said, “You know, look, we wanted that first house.” And they’re usually not given the opportunity to make competing for offers. They’re just told, “sorry, we gave the house to somebody else.” They would have rather paid an extra 20 bucks a month if need be than spend $600 in screening and get their fourth property of choice.
And how about property managers?
I’ve seen some property managers use up to seven different applications to manage their portfolio. They use software for syndicating their properties, another platform for scheduling showings and calendar integration, another system for preparing the lease and signing documents, and then there’s still a lot of physical, verbal, the manual activity that takes place, like collecting renters’ documents and reviewing them. So we digitized all that.
Can you help me understand the ‘equitable’ element of your value proposition?
Rentivity is a transparent platform, where owners can see the activity that’s going on their property. It gives you a real, real-time, live market response.
Both property managers and renters answer a series of questions. The system matches them by credit score, by eviction dates, by a gross rent to income ratio, all these different factors. So they only see properties they’re eligible for. If the property’s in a seven-day bidding window, everybody has gone through the same screening process and they have equal opportunities to see the home, make inquiries on it, and make an offer on the property.
We also created an anonymous bidder ID, which escalates fair housing compliance. Property managers don’t see the person’s name, gender, race, ethnicity, anything else. If somebody claimed later, “I was discriminated against,” every property manager has a digital audit trail that shows everybody went through the screening process and the one who had the best offer is the one we awarded the property to.
What has surprised you about building Rentivity?
The biggest surprise for me has been around raising capital. It’s so obvious what’s needed in the market, and any property manager or institutional manager you talk to will agree: what’s needed is one single, point of entry, end-to-end, highly automated system. But when I go talk to investors, I tell them what the problem is, tell them our solution — and almost all of them own rental properties, so they love it. Then they ask, “Can you go to market with just this piece of it?” That would be contributing to the problem!
What do you want people to know about Rentivity?
A lot of systems out there that say they’re vertically integrated, but what I see is they’re vertically integrated across three or four different platforms, which really is more horizontal or diagonal to me.
In one equal opportunity bidding trial, we were about 60% of the days on market that the MLS was — we beat the MLS!