Edward: [00:00:00] Big conferences have gotten crowded, and getting the attention of multifamily decision-makers is harder than ever, until now.
Introducing the [00:00:10] virtual AI and Innovation Forums from Commercial Observer. This is where hundreds of leading multifamily owner-operators, property managers, investors, developers, and [00:00:20] asset managers gather to better understand how AI and emerging technologies are shaping multifamily.
The next virtual AI and Innovation Forum, which is called [00:00:30] Reimagining Multifamily Through AI Experience and Data, is set for September 29th The event is designed to showcase your products and CEO's expertise, [00:00:40] elevate your team's thought leadership, provide premier high-impact opportunities to connect with new clients, and expand your brand awareness to a national multifamily [00:00:50] audience.
If you'd like to learn more about how to participate, send me an email, ecohen@commercialobserver.com or click the link in the show notes. I'm [00:01:00] excited to help you reach multifamily decision-makers.
I'm Edward Cohen, and this [00:01:10] is Tangent, a Commercial Observer podcast. Today I'm joined by the Lionel Messi [00:01:20] of commercial real estate AI, Zach Aarons
Zach: I'm more like the Maradona
Edward: Oof, RIP. Go Spain
go Sp- Vamos[00:01:30]
España. airlines figured it out in the 1980s. Hotels followed, then credit cards took over and turned [00:01:40] loyalty into its own economy, worth more in some cases than the underlying businesses. But one of the largest, if not the largest monthly expense in American life has [00:01:50] never had a loyalty program: rent.
There are 48 million rental housing units in the United States. Renters pay on time every month, often for [00:02:00] years, and get nothing back. No points, no cash, no credit built from the payment itself. The gap between what renters put in and what they get back is one of the defining wealth [00:02:10] problems in our country.
property owners on the other side of the equation have their own challenge. Vacancies are up, retention is down, and a golf simulator in the amenity deck isn't [00:02:20] moving the needle. happy to say that we do have the perfect guest to talk about this, Roland Hobbs, co-founder and CEO of Stake.
Roland, where does this podcast find [00:02:30] you?
Rowland: actually you got me today in Bogotá, Colombia. . But, uh, tomorrow I fly back to Dallas and I'm in the midst of moving, and it's the first time I can say here from New York [00:02:40] to Dallas after 25 years of living in New York. So all sorts of movement
Edward (2): Roland, , you started your career as a broker in New York showing apartments. What did [00:02:50] renters tell you then about how they chose where to live and, and how did that lead you to starting Stake?
Rowland: Well, I should say I wasn't a, a particularly good broker. I became a [00:03:00] broker after, in, uh, two startups in the past. But coming into real estate, I, I just wanted a- as a product designer to actually talk to renters. so I showed a lot of apartments in New [00:03:10] York, a lot of walk-ups in Bushwick. and, what we wanted to do at the beginning was be able to put some ideas in front of renters of what they might be able to get. would a one-month free [00:03:20] offer move the needle? Is it going to be, uh, points? We even tried things like blockchaining properties, you know, and seeing if people wanted to be able to get an ownership stake in the property. [00:03:30] And what it comes down to is just as one dude said to me, "I, I just care about the money.
I need this thing to be cheaper." Right? And so when you're looking at the thing that matters [00:03:40] the most, which is, to coin a phrase from the hotel world, heads and beds, what the renter cares about is affordability. They care about that price. Certainly, there's other [00:03:50] considerations that are coming in, but right at that top of the list is price.
So as a particularly crummy broker, I, I was listening to that, and I think that moment that [00:04:00] this renter says to me, "It's the money, stupid," is the moment where you're like, we need to be able to find a way, to make this more like a booking.com than a marriott.com, [00:04:10] where the price is always high versus the price always having a better deal.
Edward (2): we've had loyalty programs for a number of industries, for decades now. Why, why do you think rent [00:04:20] has been left out of that until now?
Rowland: I think there's a couple reasons for that. I think the main reason is when you looked at the big, uh, where loyalty gets funded out [00:04:30] of, which is normally interchange, you know, this is where a lot of things come from. So when you swipe a Visa, MasterCard, American Express, there's a little portion in there that's meant to be able to pay for rewards.
And from the [00:04:40] government level, that does not include rent. So just on a structural level, it is cut out. Like, it, it just cannot be in that, that group. Now, groups like Built [00:04:50] have done a great job of being able to say, "Hey, we can do something more in this." But the fundamental problem is that rent is not part of that economy, right?
It's just not in there. [00:05:00] And so structurally, it's really difficult to figure out what hotels, and actually Starwood Preferred Guests, for those who remember this, now it's Marriott Bonvoy, figured out is we're [00:05:10] not gonna use interchange. The money actually has to come from our marketing budget, because if we keep a customer longer, we do better.
So those who fish off of the [00:05:20] Visa pier or the MasterCard pier for, uh, interchange don't do as well as those who just build it themselves and come up with their own loyalty strategy. So I think it's taken a while for that. I think the [00:05:30] second reason is, for a long time, rentals were making a lot of money.
know, as much as there might be, like, a concern on the other side from a mission level, like, "Hey, we should be helping renters." But as long as you're printing money and [00:05:40] prices are going up and interest rates are low, there's less of a concern about that. That has changed post-COVID.
First, you had delinquency, then you had higher interest rates. Now you [00:05:50] have this thing of high concessions across most of the country, and rent prices are kinda flat. So I think now you have this situation where, we're competing over [00:06:00] renters as opposed to, uh, build it and they will come as sort of the mentality in the 2010s into 2020.
Edward (2): Zach, how do you think the [00:06:10] rise of loyalty programs for multifamily has impacted their strategy overall? has this make it a core feature, uh, in certain [00:06:20] types of rental properties or certain markets that are more competitive? How do you think the rise of loyalty programs have, have impacted multifamily leasing?
Zach (2): Yeah, I think they've [00:06:30] really started at the top end of the market, but our view at MetaProp is that programs like this will eventually, whether [00:06:40] that's five years from now, diffuse into the entire multifamily market, all the way from workforce housing up to the highest [00:06:50] end, you know, Class A rental buildings.
I think when we speak to property managers in our LP base, they wanna be able to [00:07:00] offer a variety of what I would call financial amenities to their potential [00:07:10] tenants, and then have the tenants sort of select, which ones they want. Before a while ago, like rewards [00:07:20] programs should be considered in the broader ecosystem.
They're also offering security deposit solutions. They're [00:07:30] also offering renters insurance solutions similarly to the golf simulator or in a sort of lower end building, [00:07:40] just a very basic, gym, laundry room, whatever. these are all amenities that are now requirements to be competitive in a [00:07:50] market that, yes, is still undersupplied overall and has been a pretty safe place for investors to [00:08:00] park capital.
But it's a, industry that's under quite a bit of pressure right now, and certain markets have slacked. And we're seeing, [00:08:10] really big players like with the AvalonBay, Equity Residential merger. We're seeing these consolidations in order to squeeze out savings and [00:08:20] synergies, right? As costs to operate these buildings has ballooned far in excess of what they've been able to charge on, [00:08:30] on rent increases
Edward (2): Yeah, I mean, to that point, I was thinking earlier just comparing it to airlines or comparing it to other, loyalty programs in other businesses. Rental housing is not [00:08:40] consolidated by any means, right? So it's possible that that scale that the loyalty programs have that now, Delta or United that, you know, is just killing it now with, like, their higher end [00:08:50] of the market and loyalty program. now that we're seeing more consolidation on, especially in the higher end of multifamily, there, there's even more incentive for them to offer these financial [00:09:00] amenities.
Also, just curious, putting it out there for Roland or Zach, but w- and we started using the, the term financial amenity when I was at Obligo back in 2018, the security [00:09:10] dep-deposit replacement company, and in a way, financial amenities, by definition, they're, the ROI for everyone involved i- is a lot more straightforward than the ROI from [00:09:20] a golf simulator or, or a Pilates room.
but it's not sexy, right? It doesn't go on the marketing. It doesn't look fancy, flashy. so it's like in a way, a lot more [00:09:30] tangible the, the value for the renter, the value for the property manager, for the owner, but it doesn't look as sexy on the marketing,
Rowland: I think that there's an interesting thing there though, because when you talk to [00:09:40] renters and you see the numbers that when price is at the number one issue that they're looking at... And, and I think Zach makes a good point. There's different loyalty networks that'll work for [00:09:50] different groups.
So like a $8,000 apartment in New York is gonna behave differently than a $1,200 apartment that's gonna be outside of Dallas. [00:10:00] But, I think that when renters are concerned with price, I think it's how you package that. And I think the challenge has been that real estate has known for a long time that they can use price to be able [00:10:10] to drive more demand, right?
Like, you can lower price. That's the reason why we have revenue management systems, or you can add a concession. So they know that price drives demand. Making it sexy, I think, is the [00:10:20] challenge of well, what is the value here that you're helping somebody get to? And if we look at the, even the ROADS Act, better or worse, but the drive towards [00:10:30] homeownership and savings, I think, is the key thing.
And I think when people come out at the end of their lease, and they're looking at the 12 months of, am I doing better financially or doing worse financially, [00:10:40] is one of the big questions that people are looking at. what we, see is it's not just about a reward.
a reward can be the, free toaster or whatever. It's about [00:10:50] the value that you're accumulating at the end of the lease. So if you ended up coming out with more savings at the end of the lease... Now, where you are in your savings journey may be different. One person may be close to [00:11:00] saving for a home, and they got 10,000 bucks in the bank.
Somebody else may ha- be spending down to zero, like a lot of workforce housing every single month, and just getting 200 bucks is gonna be a cushion. But if [00:11:10] you're coming out with more of that savings, and for them, let's flip it over to the landlord or the property owner and, and manager, they wanna be able to have a renter [00:11:20] that's able to pay the rent on time, stay, and hopefully afford some sort of rent increase, right?
So it is better if you end up with somebody who's in a, a better [00:11:30] position. So I think a lot of the idea of, like, this, like, pathway to homeownership, I think in single family because it's getting more regulated, it's being talked about a lot more, and that pathway is the key [00:11:40] thing. homeownership is sexy, right?
The idea of being able to buy a home is a great, sexy idea. The pathway is the key thing. Are we helping people get savings, build credit, [00:11:50] and put that in a package that works? So I don't think all financial amenities have that somewhere, just like an immediate like, "Hey, help me with the deposit 'cause I don't have, um, a-as much," But you have to package it [00:12:00] together to a future that this renter is trying to get to, and everybody in the American dream is homeownership. The American dream is being able to have that saving. So I think it's the packaging of that that [00:12:10] becomes really important, and that's hopefully what, you know, we're doing at Stake, and, I think it's important to be able to not just talk about it as sort of a, a, a freebie.
It's something that is getting you somewhere as a [00:12:20] renter.
Edward (2): to your point, the, pitch to owners and operators has changed over time, you know, depending on market dynamics, supply and demand, and which market we're talking about. But, delinquency was a problem in, [00:12:30] in early 2020s, then retention after that.
Now vacancy in some oversupplied markets like Austin. how does the same product solve for all three?
Rowland: so [00:12:40] right when we were about to, to launch in New York, and we were all excited to be able to do, like, a leasing approach, and it was February of 2020, [00:12:50] and so COVID hit 30 days later. So we had to make this really, sharp turn towards, A, we're gonna help multifamily solve for delinquency.
So th-this was the [00:13:00] sort of pitch of, like, will cash back resolve for delinquency at the first time when there's a rent moratorium and people didn't have to pay rent on time? And so we built the data behind that to be able to [00:13:10] measure how much cash back gets folks to be able to pay rent on time.
So we solved for that. But then suddenly, after COVID, rent prices are rip-roaring. They're less concerned about delinquency. It's more about [00:13:20] retention. "Hey, can we keep people at the same price?" Now it's flipped a high concession market. And in each one of those, you can use cash back to be able to get somebody to sign a lease and [00:13:30] measure it better.
You can use it to be able to reduce delinquency, to get people to pay on time. And then really important for single family and a lot of multi right now is renewals. Like, will the, the [00:13:40] reward, and can you measure that reward to see if somebody stays? We offer a base level where there's cash back that the property does not have to pay to be able to start.
So they begin with [00:13:50] cash back on leasing, cash back when you pay rent, cash back in our neighborhood network, which is, , over 20,000 places you can earn cash back, et cetera, and then savings on top of [00:14:00] that, even cash back for savings. But that gives the kind of infrastructure for a property to build their own, , loyalty program.
And one group may be looking to be able to [00:14:10] sell a whole bunch of property soon, another's looking to buy and hold, and they're really concerned about delinquency. One's worried about cla- cash flow, another one's trying to get to refi. So everybody has a different reason why they're trying to [00:14:20] change resident behavior for what their strategy is.
So I don't think there's a one size fits all, , that's there. I think it's up to what that property needs, the, what you're trying to achieve with that property, and then use [00:14:30] your loyalty program to start solving for that. The kind of magic wand to change resident behavior is how we talk about that.
You know, if you could wave a magic wand and be like, "God, I wish these people would renew at a higher [00:14:40] rate," that's probably where you need a loyalty program.
Edward (2): Fascinating. So , you're also basically switching the, the stick for the carrot, for paying rent on time and, and good behavior
Rowland: Yeah, I think that... [00:14:50] real estate for a long time just worked on negative incentives like, Hey, if you don't pay the rent, we evict you," right? Which is okay, that's fair enough. I mean, it is the law, but it doesn't [00:15:00] have a measurable change in terms of being able to get people who are in between there who may be choosing to pay their auto bill instead of the rent.
And it's not even a [00:15:10] malicious thing. They're just trying to be able to sort their bills because of a stack that's in front of them. But how do you get them to pay you first? So I think that this kind of shift to thinking about... And, and by the way, this was all in [00:15:20] place in, like, a lot of customer experience in the early aughts.
Like, I think we saw the sort of rise of digital. Real estate was just later to being able to think about that for, for renters. But I think now those who outperform are [00:15:30] the ones that actually attract renters who are gonna pay on time, pay the increase, renew, take care of the, you know, the property in a, better [00:15:40] way.
And that's certainly true, and I kind of mentioned single family, because I think single family is kind of more at the forefront on a lot of these things than multifamily because they've had to invent a lot of the [00:15:50] technology to deploy, whereas multi didn't have to worry as much about that. It's a little slower.
Edward (2): Right, right. I think that could fundamentally shift, l- landlord-tenant relationships forever. [00:16:00] reminds me, Zach, of our friends at The Roots down in Atlanta, that they were allowing residents to put their security deposits as, part of the equity or convert it into [00:16:10] equity, and also get, discounts when they send a quarterly video, that they took care of their apartment.
so love what Stake is doing there. you mentioned before the [00:16:20] 10-billion-pound gorilla in the room, Built Rewards. Zach, from a venture perspective, I mean, this is, fintech for real estate, which is great, that category. But how... do you think about their, their [00:16:30] approach in terms of...
they've done a lot. They, they're working with Madonna and A$AP Rocky and, I also have a lot
Rowland: as a huge Madonna fan, I will say that, I found out that [00:16:40] first from my niece, and, it was like a, a dagger. No, I'm kidding.
Edward (2): yeah, their approach has been quite unique. they have the funding to, do a unique approach. But they're doing a lot for the consumer [00:16:50] side. How do you think they're doing on the owner/operator side and, and their approach using a credit, product?
Zach (2): I mean, I think that the new Madonna album's supposed to be really good [00:17:00] apparently,
my understanding of why they were successful on the landlord property manager front was the, tenants wanted it, so there was pull there, and they built really elegant [00:17:10] kind of payment rails, to enable that.
I also like what they did going out into the neighborhoods and, building their own cafe [00:17:20] and incentivizing local stores to participate. my understanding is they've gone after different categories. They're also going after, mortgages with United [00:17:30] Wholesale Mortgage, so I thought that was kind of an interesting partnership as well.
from what it seems like from the outside, we're not investors in Bilt, but from what it seems like, they're really going [00:17:40] after becoming a very large credit card company, kind of in the way that American Express is using this rent as a beachhead. But it seems [00:17:50] like they've moved into other categories, travel rewards, things like that, competing with some of the other more mainstream credit cards in the market, they [00:18:00] also have a new deal. they originally had a deal with Wells Fargo. Now they have a new, deal on the credit side that I'm, I'm, not super [00:18:10] familiar, with who the partners are there. but the demand is definitely still there from what I can tell from the owners and, and managers of the, at least the [00:18:20] high-end, the high-end multifamily assets certainly.
Rowland: Built deserves a huge, credit for being able to bring the concept of loyalty to kind of the mass, they've created an incredible [00:18:30] brand on that. And I think that something that Zach said earlier about owners and operators want different networks to be able to offer to different folks.
If you think about going into Macy's, I don't have to choose a [00:18:40] MasterCard or Visa, right? Like, there's multiple different networks I can use that give me loyalty, and that's the reason why, one person has a Delta American Express and somebody else has a, [00:18:50] Discover card recently, acquired by Capital One, because they're reaching different groups.
So I think for us, big difference here is what do we need to be able to... [00:19:00] The financial amenity versus the reward. And so they've done a great job of bringing the points economy into rentals. Renters aren't in a place to afford or [00:19:10] even qualify for a 700-point, credit card, let alone the 650, and, and Built, I think, , is, uh, 700 and above. So it's by definition the [00:19:20] most rewards you're gonna get are for folks who like a SoulCycle class or want to fly to Paris, and nothing wrong with that.
But the large, majority of American renters Are not that. [00:19:30] we-we're not seeing people complain about affordability in the headlines of, uh... And why the ROADS Act passes is not because people are like, "I can't fly to Paris," you know, or, "I can't get my SoulCycle [00:19:40] class." That's, that's just not what the, the main burning issue is.
The main burning issue is, "I don't have money left over at the end of my lease, or let alone when I come to pay rent." So I think that we're [00:19:50] solving kinda two different issues. one is, yeah, a nice perk, good things to be able to have. You know, I mentioned at the top I'm moving to Dallas from New York, been a New Yorker for a while, know what those [00:20:00] rents are.
And if you're in Manhattan, a café or something like that may be a great thing. But if you are a renter who's paying the average $1,800 a month, you're only [00:20:10] getting with Bilt about $40 a year back. With Stake, you're getting $550 on average in direct cash as opposed to points. We're giving a bank [00:20:20] account that 98%, are gonna get approved for, versus a credit card that 80% of America's renters won't get approved for.
We're also focused on [00:20:30] leasing. So what we've started to do recently is that we're not... Like, uh, Zach mentioned payment rails, and they've done a great job. Bilt's done an amazing job of being able to roll out a payment solution, I feel, for the, [00:20:40] the Yardis and Real Pages out there because they kinda called them out on, "Hey, you know, I think you make a lot of money on payments, and I think that your profit there might be my opportunity."
[00:20:50] We think the opportunity's on leasing. So we acquired the largest brokerage in Texas. We're now signing one out of 10 leases in Dallas by offering renters cash back when they [00:21:00] sign a lease. 'Cause the moment the renter cares, Once they're paying the rent, they have to pay the rent, right? It's good to get the cash back, and it can influence behavior, but you're a little bit late.
When they're looking is [00:21:10] the moment when they're signing the lease. And kinda going to the booking.com analogy, like, they want a way to find a deal, and if you're looking on apartments.com, you're looking on Zillow, you're looking on [00:21:20] Apartment List, you're looking on the property's website, it's all the same price.
But when you're coming to Stake, you're getting cash back, so it's actually cheaper. And going to that 550 a year, which the [00:21:30] average renter is getting, is a sizable amount, and that's even before the property's offered their own cash back.
Edward (2): Lots to unpack there, and we'll definitely double down soon on your recent acquisition [00:21:40] in Dallas, , of the largest, apartment locating platform in Texas, as well as your business model. But, uh, yeah, I mean, just, uh, to wrap up the, the Bilt topic, I, disclosure, have been [00:21:50] a Bilt, customer because that's what my...
the buildings I've lived at have offered. it was nice to get points for doing nothing, right? I do have to say that the recent changes, and it's normal, you know, when you're a startup, you're [00:22:00] growing, things change. The recent changes in how the point system works is not super straightforward, to say the least.
And also [00:22:10] before I think it was a five-transaction minimum per month, , using the credit card in order to qualify for points from your rent system. And what I, and I [00:22:20] suspect many ended up doing, is we just used it for five subway passes and then paid rent with that because, you know, we had our main credit cards.
so now they switched it after [00:22:30] they, moved on from Wells Fargo, who, like Zach said, was the credit card partner there, the banking partner. also think, uh, from reports, Wells Fargo was [00:22:40] actually funding this, right, as a loss leader, if you can call it that, to, get access to the single largest monthly payment for most Americans.
So, you know, it makes a ton of sense for them to [00:22:50] have done that.
Rowland: yeah, the challenge that they had in going to the interchange thing is just there is no interchange on rent. Like it's mandated by Congress. So, they were contributing and Wells Fargo was [00:23:00] contributing, and then as you say, there's kind of a growth mode, like, "Hey, we're gonna get everybody in, and then we gotta be able to change it."
But it's the problem with points. Like points are deflationary [00:23:10] by nature. Like Delta or American Airlines, whatever, can suddenly decide to change the rules and your points aren't worth anything. Whereas cash is at least tied to Treasury insofar [00:23:20] as you might believe in the Treasury, is gonna be less up to the whim.
So I think what you experience there is more the equivalent of like, "Hey, you're getting the points," sort of like the DMV giving you points. Because, [00:23:30] okay, well, I have to pay my rent through this, but it can be devalued at any point, the interchange determines what people get, and it's very controversial interchange 'cause some people [00:23:40] feel like it's a tax on small business or whatnot. But it's, rent is excluded from it, and nobody can kind of shift that. So Built and Wells Fargo decided to contribute to it, which is fine, [00:23:50] but then at some point, like folks like you and renters get the like, oh, at any point the rules can change.
Edward (2): And the last anecdote, two weeks ago I was at a restaurant in Brooklyn and all of the sudden [00:24:00] I get a text message from a random number that says, "A gift from certain team is on its way." lo and behold, the waiter shows up with two drinks [00:24:10] saying, "Here, here's from Bilt." And I'm like, first of all, how does Bilt know I'm here?
Second of all, I don't drink alcohol. Second or third, are they trying to roofie us? Like, w- I, [00:24:20] I... That text was super random. it was an un- unknown number and I'm like, "What is going on here?" I love the detail, super unique. I would have liked to be asked what I [00:24:30] want before they give it to me for free 'cause I felt it was a waste.
Uh, anyway, I, I appreciate the creativity. Let's move
Rowland: I like the surprise and delight there. The surprise and, uh, maybe a little bit more [00:24:40] surprise if you want a, a drink or you, like, send it back and get the mocktail instead.
Edward (2): Right. I, I definitely didn't send it back, but I was, like, a little shocked, and also kudos for the [00:24:50] creativity.
let's talk about, I mean, your, business model, 'cause it's, you know, we're talking about cash back. Renters can do whatever they want with that cash. It's not any point system that you have to, figure out. [00:25:00] So walk us through the business model. Who pays, who benefits, and how does the math work for a property owner?
Rowland: So w-we call ourself a network because there's multiple different places that the cash comes from. [00:25:10] So, one comes with our recent acquisition with the brokerage from, brokerage or, locator fees where there's gonna be a cashback to the renter. There's also where the [00:25:20] property is contributing cashback for being able to sign a lease, pay rent and, and the side.
We also get cashback through our banking partner, so when folks bank with us and pay rent, we're contributing [00:25:30] cashback there. And then interchange, just like everybody else, right? We have interchange that's, uh, giving us cashback through our twenty thousand plus merchant partners, that are there as well.
So the one that's [00:25:40] really unique outside of this as well is some of the new government programs as well. So in Colorado, we have Colorado Renter Rewards. It's two hundred and fifty million dollars [00:25:50] of cashback that's going to renters there. And why did Colorado do this? Because when they're building more affordable homes, they wanna be able to make sure that renters who are staying in those homes build savings.
So they studied this [00:26:00] for a long time, decided to be able to go with the Stake approach of cashback. So you have brokerages, you have properties, you have merchants and retailers, you have government, [00:26:10] you have banking, all of those surround to be able to give cashback to the renter, and that's what we mean by the network.
So if you're signing a lease in Dallas, you're gonna start with a minimum of two hundred dollars [00:26:20] in cashback. If you create a, a Stake account, you're gonna get a minimum of ten dollars every time that you pay rent. It's real cash. It's cash in an [00:26:30] FDIC-insured account. I can't change it. I'm not the Treasury Secretary.
I can't change what the dollar's worth. They can, you know, spend it how they want to. And why that's so important is [00:26:40] that when you have the delay, like I have to build up points, it's harder to be able to change behavior because not everybody saves up those points, but cash gives you that immediate, like, I'm gonna take an [00:26:50] action. I can use that cash immediately. So that's kind of the basis of, of everything we do is starting with cash, but then we try to be able to make it where it's not just a one time, like, "Hey, what are you [00:27:00] gonna do with the ten bucks?"
But if I'm getting that five hundred and fifty in the year, that becomes something that I can save and be able to start banking with and start a, a, a better [00:27:10] wealth journey. something that's actually gonna help me, by the end of the lease.
Edward (2): uh, it seems like you also provide flexibility depending on the type of property, whether it is multifamily, high-end, [00:27:20] middle income, single family rental. So yeah, how does that flexibility work in practice?
Rowland: In the same way like with airlines, if you're flying from New York to LA, they may give you a certain amount of, [00:27:30] reward versus here to Cleveland. So the same thing here, like if you're renting in, somewhere that is one of our property partners and you're coming in through our brokerage, you're gonna get more cash [00:27:40] back than if you came in and weren't part of that network.
Everybody's gonna get something, but it's gonna depend on what's there. What's really cool from the kind of owner/operator side is they [00:27:50] can use this as a great way to solve very tactical problems in their property. So let's just say that you have a three-bedroom that's harder to lease, and the studios fly off the [00:28:00] shelf, right?
Everybody leases them all the time. We'll add a cashback reward for the three bedroom instead of a concession, and we'll let you know how much cashback to give to be able to get that lease, because we're being able [00:28:10] to pull together more with our AI tools of like, "Hey, here's how much cashback is changing behavior in that particular property for the three bedroom versus the studio."
So it's, it's a [00:28:20] promotional tool as a way to be able to drive actions that you need.
But in the network for the renters, then they're searching for the best deal, and that might be, it's somebody in [00:28:30] Colorado who's, living in workforce housing and can find one of the Colorado RentForRewards apartments, that can give them a huge amount of cash. They're getting cash when they pay rent.
[00:28:40] They get cash when they save money. They're even getting equity distributions from the fund and the property itself once a year. So literally, it can add up to tens of thousands of dollars over the course of a [00:28:50] four or five-year lease. It's significant amounts.

Edward (2): Very cool. let's talk about your recent acquisition of YouMoveFree, the largest apartment locating platform in Texas. you raised 8 [00:29:00] million bucks, uh, for it, and you announced it in March, if I'm not mistaken. So what does that acquisition add, and why Texas first?
Rowland: So Texas has kind of a, a [00:29:10] unique challenge of where there's right now a huge amount of supply that's coming online, and at the same time, there's a huge affordability challenge. And we had heard from [00:29:20] our renters of, "Hey, if I'm moving from somewhere," and let's just say out of the six hundred thousand or so homes that we have today in a multifamily, uh, you know, renewal rates are like forty-five percent, [00:29:30] fifty percent, something like that.
So fifty percent of those are gonna move somewhere else and they're like, "How can I find another home that's gonna offer me good cash back?" so we started testing before we [00:29:40] acquired YouMoveFree of would a cash back offer change the margin and the numbers for agents combined with AI.
So you do cash back, and then [00:29:50] you're able to remove a lot of the brokerage tasks with using some basic AI tools, and the numbers were really amazing. Like, we were able to be able to improve demand, by about three X. [00:30:00] Um, we were able to get agents to be about thirty percent more productive because of that, so they were signing more leases, so the agents really liked it.
So you got this win, win, win. The renters are getting cash, [00:30:10] agents got more demand. They didn't have to do as much 'cause renters were coming in because they wanted the price deal, and the properties were thrilled because, know, they're signing more leases. So we [00:30:20] work with seven out of the ten top NMHC, owners and operators in Texas, you know, where we're driving a huge amount of leads coming through.
So the [00:30:30] property's still paying that fee, but any broker can get to that fee, right? It's not just us. We're just outperforming the other brokers because we're the only one who's actually saying, "Hey, we're [00:30:40] gonna solve for not just the do you wanna live near your kid's school, but can you afford to live near your kid's school?
And is there something that's gonna be able to help you afford to stay in that school [00:30:50] district or near your work or whatever it is that you might be looking for?" So it's been really cool. It's an amazing group 'cause YouMoveFree's been around for twenty-five years, so it has a really great brand, in Texas and [00:31:00] is, known well, we're pretty thrilled.
Edward (2): is your next acquisition, uh, you break, I fix?
Rowland: Maybe. we'll, we'll, we'll get on it. [00:31:10] We'll get on it.
Edward (2): Zach, uh, fascinating how Roland and Stake are, going with the vertical integration here and going, earlier stream, if you can call it that, in terms of [00:31:20] discovery of the apartment and signing the leases, increasing, velocity and, and leads.
So do you see this type of vertical integration happening in the space or, or other [00:31:30] types that, previously maybe companies wouldn't consider,
Zach (2): I think everybody at this point is focused on Amenities beyond financial [00:31:40] and obvious, gym and wellness ones. So one large manager I spoke to has developed their own managed Wi-Fi solution, [00:31:50] and they're monetizing that. Round the clock kind of additional maintenance. I speak all the time about pest share, right?
Let's monetize [00:32:00] pest control, create a better experience. So No one's looking for more than two per category. So I think the, the people we talk to, it's like, wanna have two [00:32:10] sort of financial products per category, ideally, that we can offer, and then I think they're good.
I think there's kind of a land grab [00:32:20] that's been happening that'll happen over the next three years or so. And then, yeah, the next wave is sort of monetization beyond that. ', it's hard to [00:32:30] imagine a future in which rent growth is going to outstrip expense growth for these assets.
If you look at insurance and you look [00:32:40] at, , heating oil or natural gas or other types of electricity. And there's still a massive wave of electrification [00:32:50] and decarbonization that is ongoing, that is going to continue. As well as obviously we've had, you know, some bad news [00:33:00] negatively impact the space recently, but the, the multifamily to office conversion market is just-- remains really robust and I [00:33:10] think, you know, will continue.
So I think everybody right now is really trying to push the envelope in one of those directions.
Edward (2): Yeah, I think that's a very good point. the fundamentals [00:33:20] here, you know, the insurance, the maintenance, even property taxes in certain parts of the country. those are not stopping, and those have to be paid no matter what, no matter...
Yeah
Zach (2): Any [00:33:30] interest rates are, you know, most like, who knows, but most likely going up, so you have that, you know, additional cost as well
Rowland: I think the challenge is also, to that point, all those [00:33:40] costs, so leasing costs, if you're trying to attract a renter by doing a lot more concessions and then bringing a renter in who then bounces, you know, three, four months later because of the [00:33:50] concession or doesn't pay the rent, that has huge impact, right?
If you're o- on NOI, if you're suddenly then pushing up, more days on market. So we kinda think of it as, like, lead [00:34:00] to lease to loyalty. Like, you want to be able to get that right flow through, and nobody has that connected, right? It's really difficult to be able to get that connected and, [00:34:10] every dollar at the moment, I think really matters to, to properties to that point. Like, if expenses are going up and just the maintenance or the cost of people on the property, all of this is going up, [00:34:20] I think things that may have been taken for granted before, like, "Hey, we can survive if it's a 4% bad debt," is no longer a good situation.
cause, you know, the expectation that rent prices are gonna go up [00:34:30] isn't, isn't gonna be there.
Zach (2): Yeah, a-a-and to your point, the churn is the main concern 'cause all the expenses associated with churn, are [00:34:40] increasing, right? You wanna turn over that unit 'cause someone's churned out. Okay, it's now more expensive to turn that unit, and good luck getting the subcontractors onto the [00:34:50] job site to do it, right?
'Cause they're busy building a data center somewhere. And then you couple that, and we talk about, you know, our portfolio company 100 all the time, like [00:35:00] we have fraud going parabolic in terms of its proliferation. And so if you're caught with a, with a bad debt tenant [00:35:10] and you can't even get them to churn, by the way, the legal cost to get somebody out of a unit who's not paying has also ballooned.
That's the number one risk. Number one risk right [00:35:20] now is people not renewing their leases even if the new rent you can get is a little bit higher. it's just not worth it
Rowland: It's so funny because I think [00:35:30] about that as like, uh, if I was going to Zach and pitching him and I said, "Hey, we churn 50% of our customers every year," the deal's over. But that was accepted as kind of the [00:35:40] norm of... And it's not because 50% of those multifamily tenants are residents are leaving the state.
They're moving for a [00:35:50] deal down the street, there's this crazy churn of just people looking for that deal and moving around. So at some point, I kind of think of it as like the Amazon moment, where you're like, [00:36:00] people were shopping between, you know, whatever, Macy's and H&M or whatever before, and Amazon's like, " we can consolidate this group."
I think that right now is the chance to be able to do [00:36:10] that. I think it's very hard, and I have a lot of sympathy for owners and operators because they can't own every single place on the, on the, on the block. So it's incredibly competitive, and it's incredibly difficult [00:36:20] to be able to keep folks staying.
I think a lot of folks, even when the price goes up by a little bit, they're like, "I can move across the street, get that one month free." And that, a-a-and the [00:36:30] fact that they are doing that shows how important that money is to that, that family or that individual,
Edward (2): i, I certainly have felt, especially in New York City and even markets like Salt Lake City, uh, and, [00:36:40] and Miami, that some operators, underestimate that renters can just move. Yeah, it's a, it's a pain. It's annoying. You have to pay a little. You [00:36:50] have to dedicate time, but if you're gonna get a deal right across the street, no-brainer.
so, Roland, you said during our pre-interview, you said, uh, choices [00:37:00] being made right now about the renter loyalty will define the next 25 years of the rental market. what do you mean by that?
Rowland: True loyalty is where you're able to provide the value that [00:37:10] keeps somebody coming back to you, right? That's a loyalty strategy. And I think this is the thing that's gonna be able to define how we think about both the renter and how properties that [00:37:20] outperform.
Amazon outperformed by being able to provide the best customer service imaginable with free shipping. People thought they were nuts at the beginning because you're giving billions of dollars away in free shipping, [00:37:30] but it crushed the retail market, right, and just changed the landscape. I think this is the thing that's going to be the...
when we make renters that are, are more successful, those are the ones that are gonna stick with [00:37:40] that particular brand or property over time, and especially, I think, in single family in particular, , because that's gonna be their pathway to homeownership, and that's where you're gonna get [00:37:50] portfolios that are gonna outperform in a bigger way.
Amazon and equity coming together, I think, is a huge opportunity to be able to double down on that of what does it mean to be able to move and stay in that sort [00:38:00] of network over time, and what value do you get when you're out of that five years later? And so why I put that timeframe on it is anything on somebody who's maybe, you know, twenty-five [00:38:10] today and looking to be able to buy a home at the average time now is forty to forty-five, that's the timeframe that you're looking at of your rental time to be able to come out of what did I get in [00:38:20] that time period.
And that's gonna define all their choices i-in that time period. should also mention today, just 'cause a super interesting thing from the Federal Reserve came out of restating how much people are homeowning. [00:38:30] It's now saying close to fifty percent of homeowners rather than sixty-five percent because how many people are doubling up as roommates and this sort of thing.
So there's a huge challenge ahead of [00:38:40] us towards homeownership. So that's the reason I think that might sound odd, because loyalty is kind of thought of as the free toaster. But really what it is, is a transformational thing that like, you know, Amazon or [00:38:50] Costco uses to be able to define a whole new way to be able to, make a decision and, and stay sticky with a brand.
Edward (2): last but not least, collaboration superpower. [00:39:00] If you could partner with one person, historic or living, real or fictional, who would it be?
Rowland: Oh my gosh. I can't pick Madonna, right? It's already taken? Or the collab's [00:39:10] already done?
Edward (2): A Madonna. you just need to back it up
Rowland: oh, I gotta back up. No, no, no. I, I would probably go with I'm a huge Obama fan, so I'd have to be able to pick [00:39:20] with, uh, Obama, but the reason for that is because of his, uh, communication skills. I think that the ability to be able to describe really complex ideas in simple, clear ways that everybody can get is the [00:39:30] challenge that I think, and especially when you're talking about things that are as complex as, housing, right?
There's a, a, a lot of fraught, kind of a either/or zero-sum game, and you need really simple ways to [00:39:40] explain things. So I'm gonna, I'm gonna pick Obama for, simple and clear communications.
Edward (2): just like Zach said that, multifamily owners and operators are picking two different of the same [00:39:50] category of financial amenity. So Madonna can also pick two renter loyalty programs
Rowland: We'll see when she's off contract and, it's kind of like what, when the, can you hear me [00:40:00] now guy went over to the, uh, from Verizon to AT&T or something.
Edward (2): Brilliant. Zach, who's your collaboration superpower this week?
Zach (2): I couldn't get his first name, [00:40:10] but we'll call him Mr. Goldsmith. he was a, a tailor and draper in Sudbury, England in the late 18th century, [00:40:20] and he is believed to be the person who invented the loyalty program concept in the modern world. And he [00:40:30] issued for his customers who were coming back for his tailoring services, , he instituted a ha'penny, loyalty copper coin, [00:40:40] and you could bring it back to his shop.
You can buy one actually for $85 on the web. Roland, I think you, you know. Let me talk to Zane, [00:40:50] let me, and your other investors, see if you can afford, 85 bucks, but I think this might be a good, thing for your collection.
So this guy was a major innovator, [00:41:00] right?
I mean, thinking about loyalty back in 1793, I'm, I gotta go, I would love to collaborate with Mr. Goldsmith. Who knows what other ideas he would have
Edward (2): Can you [00:41:10] imagine? Orli, and where can Tangent listeners and multifamily and single family owners and operators learn more about Stake and connect with [00:41:20] you?
Rowland: Uh, Stake.rent, and you can always email me at rowland@stake.rent. There's a pesky W in there, so it's R-O-W-L-A-N-D. My parents like to keep people [00:41:30] guessing, @stake.rent. , Always happy to be able to chat to people on... especially on partnerships. I think that, a lot of these things on owners and operators become like a sales thing.
We're also looking for broader partners to be able to [00:41:40] join our network, especially around funds in particular. Uh, at the moment, we've had a lot of partnership with larger, , real estate funds, if it could be government, , or like enterprise with the Rental [00:41:50] Wealth Creation Fund and others. So welcome to be able to hear from folks.
Edward (2): Today we covered why rent has been left out of the loyalty economy for this long and what it looks like when that [00:42:00] finally changes. We talked about how the problem has shifted since COVID from delinquency to retention to vacancy, and why cashback follows the same [00:42:10] cycle for multifamily and single family owners and operators.
We got into what the YouMoveFree acquisition means for getting cashback in front of, Texas [00:42:20] renters before they even sign a lease rather than after. talked about the Colorado becoming the first state to launch a renter rewards program. and we also discussed the bigger question, [00:42:30] if rental loyalty becomes as embedded as airline and hotel loyalty, what does that market become and who builds it?
Roland, thanks for coming on to Tangent and sharing your [00:42:40] wisdom and your exciting company with us.
Rowland: Thank you so much. Thanks for having me. It was, uh, a lot of fun . [00:42:50] Muchas gracias. If you learn something new or enjoy the conversation. Text a friend the link to this episode right now.
You can find links, resources, and ways [00:43:00] to connect with us in the show notes