It’s no secret that due to a number of factors, including high inflation rates, low supply and changing work models, rentals have taken on new importance for both tenants, owners and agents alike. As previous would-be homeowners continue to flow into the rental segment, new demand for property management services is also flowing into the technology sector.
RentSpree is one proptech that is taking advantage of the widening segment, adding new services and tools to help those involved in the housing industry to better handle the rental process. The company recently raised a $17.3 million Series B led by Green Visor Capital, about a year after previously raising its $8 million Series A, and continues to expand its services and user base to meet that demand.
Michael Lucarelli, RentSpree founder and CEO, recently spoke with FinLedger about the company’s recent funding, notable partnerships and how he sees the current rental market.
Q: First off, you recently raised your Series B. Before getting into that, how has the rental market changed since you raised your Series A last July?
A: It’s been a little bit of a roller coaster ride for, I think, a lot of companies out there. You’ve gone through so many different phases, whether it was dealing with COVID to now having to create a company that’s set up for remote work. Then all of a sudden now, it’s the great resignation, you see all these like salaries skyrocketed and attracting talent was so challenging. You had to basically increase salaries across the board by about 30% in order to retain talent.
At the same time while you’re dealing with all these changes, and now increase expenditure for salaries, it’s very difficult to raise funding for most companies. So it’s been a little bit of grappling to just make sure that we are taking the right steps and adapting to the market environment as we see.
But for us what’s been good is making sure that no matter what’s going on, we’re always hyper focused on just operations and making sure that we’re listening to user pain points. Making sure that our users are happy and adopting, and we are retaining them on our software. By doing those types of things, I think that pretty much trumps a lot of the stuff that goes on, because if you can execute well enough and make sure that you’re solving real user pain points with quality products, and the rest of it can kind of work itself out. We saw that happen and we’re in a really good spot now, and looking forward to really what we have to come for the next 18 to 24 months here.
Q: How did you connect with Green Visor, and really what was the process like for this Series B?
A: Green Visor was actually unique because they wrote a little bit of a smaller check as a follow-on for our Series A, with really the hope that they would have the opportunity to lead and participate in future rounds. We had worked with them before, so we knew that it was a really good fit for RentSpree. What’s helpful is that they do have that FinTech background, and so they’ve been able to work closely with us in making a lot of connections. This is particularly relevant because we launched our Rent Payment feature maybe less than a year ago.
That one was really good, but what’s nice too is getting some validation from the real estate industry itself. We also had participation in the round from the California Association of Realtors and California Regional Multiple Listing Service, which are just two of the utmost industry leaders in the space, and we’ve actually been partnered with them for years. It was really kind of nice to be able to strengthen the relationship that we had with them even more, and see the validation from the real estate industry. And that these two, important organizations in real estate are really believing in what we’re doing with the problems that we’re solving and the need for what we’re doing. Because we’ve been talking about rentals, pretty much hitting people over the head about it since 2016 to 2017. It’s been really interesting to see year over year over year how basically, more and more people have started giving notice to rentals, and especially now with the interest rates and affordability at an all time low. It’s been a long time coming and it’s a good spot to be within the industry.
Q: The last time we spoke you mentioned how not all agents focus on rentals, but that it can be a powerful lead generation tool. What adoption have you seen as far since RentSpree released its Agent Suite?
A: I believe it was Zillow that had a rental report that came out maybe about 18 months ago or so, and it says the median age of the first time homebuyer is about 36 years old now. People hear that, and I think they’re starting to realize that that’s a lot older than what it was. But they hadn’t really thought about what to me is the logical next question, which is “Okay, so what are they doing all those many years before that time?”
Well they’re all renting and so we’re seeing now a lot of agents and brokers that have really just started to take notice of that. That everyone that’s going to be buying a home within the next year to five years from now, are all renting today. That’s why RentSpree has been able to also secure some pretty large partnerships with some of the large brokerages out there too. We have started working with RE/MAX on a brand level, we’re starting to work with Realty One Group on a brand level, as well as a couple other large brokerage brands out there. They’re seeing the value and they’re seeing that working with rentals is an essential piece to connect the dots and to create an environment where agents can be successful, and whether these types of market changes.
So we’ve seen great adoption with the tools that we’ve rolled out. Since we launched that we already have thousands of agents that have been using it like right off the bat, and that’s only grown from that point. We’re continuously adding new tools and just iterating as we go to really, like I said, close that gap and connect those dots a little bit better. For how agents can not just think about creating a client for their lifetime, but also getting in before this renter even hits the market and becomes a buyer.
Q: Can you talk about the biggest ways you plan on deploying that Series B?
A: The one thing that I think is really important is making sure that we’re providing value to users. We’re also a little bit unique in that yes, we do provide software for agents and landlords to accomplish transactional tasks, nurturing and building relationships. But one thing that’s also really part of our DNA is catering to the consumers and renters as well. Again this comes from me, because I was a renter when I founded RentSpree, and that hasn’t changed. I’m still a renter. And so we also realize that for as much as agents want to, and should be working with renters to nurture them and develop relationships, we also feel that it’s important to provide tools for renters and help them in their own real estate journeys.
One of the things that we’re doing now, which kind of piggybacks off of the Rent Payment that we’ve launched, is that we’re going to be reporting those rent payments to the credit bureaus soon. That’s something that’s upcoming, and will be really exciting to launch. You’ve seen there’s a slew of companies out there that are kind of doing that now, and it’s important because that is the largest signal expenditure that people have for the most part. Again, even for myself, 30% to 40% of your income just goes right to your rent, and so we’ll be harnessing that power by reporting.
It’s all through the credit bureaus, and I think the difference with RentSpree is that we are not just a company that was launched out of doing that alone. It’s really the logical steps of what people are doing on their real estate journey. You’re finding properties, you’re talking with an agent, you’re applying to a property, you’re paying rent, and now your rent is being reported. We have the lifecycle from all those things already happening on RentSpree, so we don’t need to take a one-off tool and try to acquire users, and try to get them to use RentSpree just for rent payment reporting. We already have thousands of rent payments that are being processed, so it’s just a matter of connecting the dots from that front.
We’re really excited and ultimately what it will do is help consumers to be in a better financial position, to rent a better place next time or establish a stronger credit history so they could have a better chance to qualify for a mortgage if that’s what’s in the cards for them. So we’re excited about that, but that rent payment reporting is just one thing.
It’s also looking at, what are the other elements that you can provide to renters so that they can make better financial decisions and put themselves in a better position. A lot of it really comes down to information, insights and advice about, “Hey, you might not know, but this is what target you need to be looking for if you wanted to save for that downpayment”, or “Here’s what you should be thinking about if you’re looking at mortgages.” What that could mean, or if you want to rent a better place next time, here’s how you can improve your credit score. We’re looking at a lot of really interesting elements like that which creates a win-win for consumers and agents alike on RentSpree.
Q: What are the biggest challenges to get rent reporting up and running?
A: It’s just making sure that you have good, clean data for the most part, and making sure that the data is in a format that plays nice with the credit bureaus. That’s the main thing, it’s not rocket science. Pretty much all the credit bureaus are already set up to intake this data, so it’s nothing overly complex. The main challenge is just getting access to the data, which we are the primary source of that data anyway. I think that’s the hard part, and we’ve already got that kind of nailed. So really, it’s just formatting data in the right way and then being able to provide that. Of course, we’ll only be making sure to provide that when the renter is okay for us to provide that. So making sure that they’re kind of bought into it, and then it’s up to them basically.
Q: You recently announced your sixth MLS partnership in Florida. Can you talk about what that market means for RentSpree and for the overarching industry?
A: That was with the Miami Association of Realtors. Miami is, I believe from our data, the largest MLS by rental volume or by rental listings. There’s a huge need for automating and streamlining in the city and in that surrounding area. That’s only been increasing. I think Miami is one of the places where you have so many kind of elements converging at once. It is getting more and more expensive to buy there, so people are being driven more to rent. That’s one of those hot areas, but then you’re also seeing other interesting things. Miami has really exploded as a tech hub in the past year or two, so you’re starting to see all these elements come to play and come to fruition there. We’re excited to work with the Association and to roll out within the MLS there, and we know that it’ll provide a ton of value. Like you’ve mentioned, we’ve already worked with five other MLS’s in the state prior to this point, as well as working with the state realtor association since about 2018. So it’s connecting the pieces and catering to a market that really needs help and has a huge benefit. There’s a huge lift for getting rentals really optimized within the city.
In other recent proptech news, multifamily smart home tech provider iApartments announced a 585% year-over-year increase in units served. The National Association of Realtors (NAR) also announced the 12 companies selected to participate in its upcoming Innovation, Opportunity & Investment (iOi) Summit’s “Pitch Battle”.