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When former WeWork CEO Adam Neumann got on stage last month to describe his plans for a property management company that would treat renters so well they’d want to plunge their own toilets, a few companies took note.
Neumann said he planned to work with venture capital backers to buy buildings, act as property manager and give renters a way to earn equity in the entire scheme. He calls it Flow, and he said it would drive up renter satisfaction and therefore raise income for the landlord.
Adam Neumann | Kelly Sullivan / Getty Images
Investors took note of the concept, with famous Silicon Valley investment firm a16z cutting its biggest ever check to fuel Flow. To a handful of CEOs already working in the renter-rewards space, some of Neumann’s new ideas weren’t so new, after all.
Stake, for instance, already offers thousands of renters benefits including cash-back for paying rent on time or renewing a lease. What’s more, a company representative said, “Stakers never [need] to plunge their own toilets.”
Another company, Up&Up, actually shares home equity with tenants renting its single-family homes. When the home’s value goes up, renters grow their net worth. The company gives them the option to buy the house they were renting, renew their lease to keep building their savings, or they can cash out their profits and move.
There are a slate of existing companies that already offer renters rewards for good behavior. They say their business model creates incentives for renters and landlords alike, driving up occupancy rates and lease renewals in the process.
At a time when prospective buyers are locked into the rental market due to high housing costs, Inman talked to a few companies to hear about how they’re changing the dynamic.
Stake
All the details about how Flow will create financial incentives for renters aren’t immediately clear, though Neumann talked about renters in buildings owned by Flow sharing in the equity created by the company.
Rowland Hobbs | Stake CEO
That might sound good, said Rowland Hobbs, CEO of the renter-reward program Stake, but it’s not at the top of the list of renters’ needs.
“Equity is the thing that every homeowner thinks renters want,” Hobbs said. “There’s a real disconnect into what people think renters need and what’s going to move renters’ behavior.”
Renters want cash, Hobbs said, and Stake gives it to them when they pay rent on time and renew their leases. Like any good loyalty program, there’s an incentive for all parties involved, Hobbs said.
About 45 percent of renters typically renew their leases at the end of a term, Hobbs said. Stake can increase that by 30 percent for landlords.
“Not only increase it 30 percent but increase it with folks that pay on time,” he said. “We’re getting the folks who are really great outperformers, these Stakers who are going to help the property outperform even more.”
Stake grew from serving about 7,000 units at the beginning of 2022 to over 40,000 units today, and Hobbs expects it to grow at a fast clip.
“We can actually prove to you if you spend $1 on cash-back I want to show that you’re getting over $2 on return and be able to change each property,” Hobbs said. “Even folks who aren’t in a highly stressed position are using Stake as well. This is an insurance against future volatility.”
Piñata
Piñata got its start by offering rewards to renters who paid on time. One of several startups that focus on letting renters build up their credit history while renting, the company’s motto is “pay rent, get rewards, build credit.”
Lily Liu | Piñata CEO
Piñata partners with other companies willing to offer perks that renters can earn when paying rent on time, renewing a lease early, maintaining a unit, referring other renters and more.
“The core and premise of Piñata has always been around how can we fix the rent equation?” CEO Lily Liu said. “Renting is not a predicament. Renting is a lifestyle choice.”
The company was initially focused primarily on helping renters build credit and earn rewards. It is looking to expand into fintech and offer more ways to earn cash back.
“Every one of these additional actions can unlock more Piñata Coin,” Liu said, “which can be converted straight into cash back gift cards and brand rewards.”
Liu said a third party study showed that landlords who work with Piñata increase on-time rent payment by nearly 10 percent. Renter sentiment also improves, Liu said, while renters generally see their credit scores increase by about 32 points.
The company has recently partnered with Visa and is preparing to offer more ways for renters to build equity later this year.
Piñata is focused on working hands-on with landlords who own more than 50 properties. Smaller, independent landlords have the option to use self-service tools from Piñata, Liu said.
RentSpree
Michael Lucarelli | RentSpree CEO
RentSpree is a platform that helps landlords screen and place tenants. But it has its own renter-rewards programs in place, as well, ones that might be more practical for landlords than what we know about Flow so far.
“It may be just too idealistic from my perspective just in terms of the vision for Flow,” said CEO Michael Lucarelli. “There’s a limitation to how much a renter might care in certain ways. I’m a renter now so I get it. I appreciate my landlord but at the end of the day there can be other things to focus on for helping these renters out.”
Like Piñata, RentSpree is preparing to facilitate rent reporting to credit bureaus so that tenants can build credit. It recently launched a payment collection feature.
Both tools will be available to landlords big and small, Lucarelli notes. About half of all landlords in the U.S. are “mom-and-pops,” or independent investors who own fewer than 10 properties. That’s a market that Lucarelli is betting would benefit most from renter-reward features.
“It’s great that you can report these payments if you’re a large landlord, you just need one property management company to report their data,” Lucarelli said. “But how do you tackle the millions and millions of mom-and-pop landlords where there’s no technology?”
“We want to be a bit more practical with things,” Lucarelli said. “Obviously we think it’s important to report rent payments. It’s the largest payment (renters) have but it’s not factoring or contributing to a person’s credit history.”
Up&Up
Up&Up is a company that helps renters share in both the upside and potential downside of a home.
“Unlike traditional landlords, Up&Up basically lets their renters share in the profits in their home,” Needham Hurst, the company’s chief operating officer, told Inman.
Needham Hurst | Up&Up COO
Renters contribute to a wallet and earn a share of profits each month if a home increases in value and there are no major expenses. Each tenant has a right of first refusal to purchase the home from the company. If the home increases in value, the renter shares in that upside.
On the other hand, if there are major expenses at a home, or if the home drops in price, the renter could take a loss along with the company.
“Our thesis is that renting’s not fair,” Hurst said. “There are ways in which you can be more creative and give renters the financial benefits of ownership.”
Up&Up launched in St. Louis, Atlanta and Indianapolis. It’s eyeing more Sun Belt markets for future expansion, but like other investors the company is being conservative during a time of ongoing market volatility.
The Federal Reserve indicated Tuesday it would continue increasing interest rates after the economy stayed red hot and inflation reduction stalled. That’s likely to drive up the cost of homebuying.
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