Breaking down the exploding rental market with RentSpree CEO and co-founder Michael Lucarelli

Brokerage Insider

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TRANSCRIPT:

Hi everybody. And welcome to brokerage insider the podcast where we interview the leaders in real estate and technology. I'm your host, Eric Stegemann and I'm the CEO of Travis. We're one of the largest independent prop tech companies in real estate and provider of custom brokerage technology to medium and large sized brokerages in the United States, Canada, and even around the world.

In addition, I'm the managing partner of Travis' capital, a private equity fund focused on the prop tech industry. On today's episode, we have Michael Lucarelli. Now Michael is the co-founder and CEO of rent spree at leasing management tool that has been focused on the MLS industry recently. And I'll, we'll be sure to dive a little more into that, Michael.

Thanks so much for joining us today and thank you so much, Eric. Really glad to be here and excited to chat with you today. Yeah, so let's dive in. So, you know, the first question that I pretty much ask all of our guests is how did you get into real estate and real estate tech? Yeah. So going back a couple of years ago is when I first actually moved.

So I'm from the east coast and I moved to California. It was about 2014 or so. And so a lot of what I experienced was first originating as a renter. And so I had done it quite a bit of moving around up until that point and just saw how there's really a massive number of people that are renting. And the U S again, kind of looking at it from the renter lens and that it was just a completely fragmented process where when you're a renter, you're kind of thrown through these loops where you have to submit your application to many different properties if to pay fees over and over again, you don't really hear back.

There's a question of information security with your sensitive information. So I saw all that on the renter side and then kind of combining that a little bit. I actually ended up getting my real estate license and hung it at a local Remax. And so I really put both pieces together where on one hand I was renting and saw that.

And then I was working in the Remax office and I saw actually a ton of agents that were working with rentals or at least trying to, and at this office. Considering how many people were working with rentals on a regular basis? I was surprised that there was no tools. There was no resources, even like the broker didn't really have any feedback or advice to give to agents on how to handle these types of rental transactions when agents were working with lease listings and representing renters.

And so I just saw a huge gap in an opportunity and given how large renting is in the us. Just like saw big chance for me to kind of come in and create a standardization that can streamline these processes for renters. But of course, also now a lot of what we do is focusing on agents, brokerages landlords, property managers, MLS.

So from a high level, you know, just to, so that everybody is listening. And can you give us a high level understanding of exactly what rents Bree does for either the broker or the consumer? Yeah. W what rent-free does, is it really looks at You know, like these rental transactions, and this is not necessarily something designed for property managers.

Although we do have property management companies that use rent-free it's really for agents that are mainly focusing on selling and buying, but they may have from time to time the opportunity to work on a rental, whether they have a lease listing and they're representing a landlord, or they might represent a renter.

And so Given how many people, how many people are kind of working on those types of transactions and spree really seeks to streamline that process as much as possible, because we know that typically. Agents and brokers don't tend to earn as much on rental commission. And so when you have these situations where agents and brokers are possibly spending a little bit of too much time on these types of transactions and not earning a whole lot, it doesn't really make financial sense in certain cases.

And so rent-free aims to streamline these rental transactions as much as possible so that it becomes kind of worthwhile. Maybe if you're not spending a whole lot of time on a rental, you can get it done within a couple hours instead of a couple of days or a couple of weeks. Then some of those smaller commission checks make a lot of sense.

And so the way that rents actually works is it handles really the entire process that an agent needs to go through in order to close a lease listing. So everything from bedding, the tenants. So we do online applications that are automatically set up. So renters can apply online using in some cases like our standard rental applications.

Or even Association forms. We also provide instant access to screening reports through TransUnion. So I'm talking about credit checks, background checks, eviction reports. They also verify income. Check references all that kind of stuff. So basically gathering all the information that's needed to vet a tenant, and then beyond that as well.

We give a great way that these agents that are vetting these tenants, they can basically make a decision and then send a lease out for signature. So really like from listing to lease is kinda what I like to say in terms of what rent-free handles for these rental transactions. And like I said, the main thing is just to streamline and create some efficiency there so that it makes it a lot more worthwhile for agents that work on rentals.

I and I, from a personal experience and you're, you're out in California. Correct. So from a personal experience, when I first moved out we were getting, Travis started up back in 2009. I moved out to California and was in a hotel looking for a place to rent in the Newport beach area. And I'm out looking around and I probably call 15.

Folks and I focused on ones that were listed in the MLS and you know, a few that were on Craigslist because I wasn't seeing a whole lot of animals and got out there, made a, made a bunch of phone calls. And I will say I probably got two out of 15 people to call me back. And I always tell this story at events about the most important app on your phone is the phone app to agents.

And I had an agent call me back eight months later, literally and said, I heard you're interested in 1, 2, 3, any street. You know, are, are are you still looking, would you like to go see it? I said, I signed a lease two months ago and I said, well, you know, is there a reason you're just getting to this now?

And, oh, what's a lease listing. I, I, I just don't care about it. Right. And so he, you know, that's, that's the somewhat of the problem in the space. And so obviously it looks like you guys are, are, are trying to make it easier for agents. Now that begs the question is, you know, there's other mega organizations out there, like for example, Yardi is a big one, Y a R D I, for those listening, if you haven't heard of it, they're kind of one of the big players in this space.

And they, they do all sorts of things. But like, for example, you know, you're, it seems like your client and their. Are two different things, right? Yeah. Yeah. They're definitely different. And I would say for Yardi in particular, they would cater more towards let's say like institutional property management firms like large multi-million dollar managers even like re and so those kind of targets that Yardi and others, like it a provide tools for they account for about 50% of the rental market in the U S.

The other 50% tends to be more like your mom and pop landlords, mama pop landlord, small property managers. And this is actually the half of the market that they're not really given any kind of standardized tools and they're most likely to need assistance and kind of working with their rentals. And so that's where like, those people are very likely to maybe ask an agent for help either, either because they don't know how to handle the rental process or screening.

Or maybe, perhaps they don't have time and they need help from an agent or a broker to kind of get those services done. And so rents for free really does focus a little bit differently on that segment of the market. And because we focus on that segment segment of the market, which is more like the mom and pop side, We cater very well to them because we don't hate our tool is free.

So we don't charge landlords or agents or managers, anything to use it. You can set up and start using our tool within 60 seconds, which if you compare to those like Yardi, Yardi is 10 thousands, or maybe tens of thousands of dollars. With months to set up the software. So it's really something that is very quick and convenient for agents and smaller landlords, to be able to just get up and running and really get their transactions completed without.

So, you know, the, the, the numbers that you're giving there of what percentage of the spaces under served from, from what you're saying is there's, there's a lot because, you know, I think right before we were talking right before we started recording this, this episode, you were telling me that roughly a third of all.

Homes or households in the United States are currently renting. Is that accurate? Yeah, that's correct. So roughly one third of the housing units in the U S are rental housing. And so it's a big market. It's very much underserved. And like I said, you know, even within that, looking at the long tail. So for example, on the institutional side, there may be, let's say hundreds or thousands of different property management companies out there.

Or kind of serving and then maybe using Yardi's out there, but there's millions of landlords. And so these are the people that they don't have any kinds of tools available for them. And so it is a large market and it's growing. And so you can look back dating to about even like the seventies. When renting really kind of started growing in popularity at that time.

And it's been really on a sustained upward swing ever since that time. And there are certain events that happen in the economy that accelerate the adoption of renting such as the financial crisis of 2000. Just changing habits, people liking a little bit more mobility, a little bit of flexibility, moving around jobs a little bit more.

And so all these factors really kind of contribute to a change in what we're seeing with our real estate landscape in the U S where it's not so much where people are necessarily looking to, or able to purchase a home. Anytime they like people are often choosing to rent. I mean, Because they want to, or because they need to.

And so it's a, it's a good opportunity to really you know, cater to this type of market and really look at how the trends in the U S are changing and how agents and brokers can embrace that change. So, you know, just some quick napkin fear, not even napkin math, but what you're, what you're saying is that there's an opportunity for, for something like one sixth of all households in the United States to be connected up with an agent we're, you know, they're not served by a mega organization that you already might use.

And, and it seems like from what you're saying, that there's a population to be served there by realtors and maybe some easy commissions. If they can use a tool like yours to get them from, from, you know, to that, to that lease kind of position. But that they're being underserved right now, or that realtors are under serving them.

And so, you know, it seems like there's a huge opportunity. And in that percentage, that one, six of households, percentage that not only could you get them for that, but maybe migrate them to a commission down the road. Yes. Yes. Yes. So you're going to definitely get that maybe small rental commission where, Hey, it could be, you know, a couple of hundred to a couple thousand dollars at most for that.

And that's certainly great. And there's definitely value, especially, like I said, it kind of goes back to maybe you're not making a lot, but if you can spend. A lot less time on it then, Hey, maybe you take it. Maybe if you're a newer agent getting started or maybe if there's some gaps in income if you can work with a quick rental, it closes a lot faster than a for sale property.

So, Hey, that can be a nice little quick win. So it kind of keeps on going or sustain a new agent, but then like you said we know. In the future. It's not that people are necessarily like, like I said, choosing to rent and not purchase a home. They may be renting in the interim while they save up and then they're going to be renting for on average, a longer time period than ever was done in the past.

And so just kind of a misconception out there that people are no longer buying and that they're renting instead. But really the truth is, is that people are tending to actually purchase a home. About seven years later than they normally would have in the past. And like I said, there's a variety of factors that kind of contribute to that.

But the question that agents and brokers should be asking themselves is how can we position ourselves to those renters so that when the time comes, when they're ready to purchase a home, that renter can kind of come back and tap into the agent that might've helped them with. With their rental transaction.

So it's a great opportunity to keep those relationships. Is anything in rent spree help them with that? Like, is there a list of all my past transactions, if I'm an agent and I sign up with you or if I'm a broker and sign up for all of my agents and account with you guys, is there some way to go back and see everybody that I've helped?

You can see everyone that goes back there that kind of goes into the system. And so it'll help you kind of keep track of everything in there. And we're making some really kind of cool enhancements that can. Further streamline that process. So we'll be making some changes that will let's say, allow you to kinda message renters a little bit, see when they might be likely to maybe make a housing change so you can make sure that you're kind of there and knowing when to follow up with renters and the whole thing with rent.

Is that when you work with a rental, you're not necessarily only just getting into contact with the two renters who may end up actually renting the property. He may have come into contact with dozens of prospective tenants as well, who maybe have shown interest in this rental or maybe have applied, but they didn't get the place.

And so these are all also very important interactions that if you're on top of things, you can kind of tap into these individuals as well. Encompassed them all as part of your network. So I think that's a great benefit. And if you're smart, you're definitely gonna be thinking about those types of. But then beyond that as well, we, we, we know that one of the reasons why you know, a renter might come back to an agent when it's time to purchase a home, it really comes down to the service that that renter receives and they associate that service with their agent.

And so if you're an agent and you do a great job servicing or renter, making that transaction super easy and smooth, then you're going to make a strong impression. And that's, what's going to lead to that recurring business later on down the road. And so that's also where, Hey, you have a professional process in place.

You have this tool that streamlines everything. It makes it super easy and painless for the renter. While that renter's going to be more likely to come back and associate a positive experience with the agent who helped them out. Gotcha. And I, I agree with that. Totally. In fact, one of the things that I've, we've long pushed on the tribal side of things is you know, to connect with those folks because renters are usually going to buy something at some point, especially if you educate them.

But the problem that I see a lot of times, Agent's face is this the forgetfulness to follow up with past clients? Everybody wants to work the new lead that came in the door yesterday, but nobody ever works the past clients. So it sounded like, it sounds like you're working on some tools to help them maybe automate some of that.

Yeah, that's exactly right. And that's, I think the key point really that you get that you brought up that, Hey, everyone knows that they should keep in contact with past clients, but it's. You know, it takes time to do that. You have to really invest in a tool or invest your time to track those people and put some kind of infrastructure in place.

And so we're going to try to make it as easy as possible that at least on the renter rental side of things, that's for the renters that you kind of work with as an agent we'll try to make it really easy for you to kind of keep in contact with those individuals through our platform. So that's something that we're going to be launching pretty soon, and we're really excited to be able to offer.

Because those are the types of things that really make a difference to agents and can really streamline their overall process and Hey, and the end of the day, bring them a lot more. Yeah, for for sure. Especially when there's, you know, we're talking a huge percentage of, of housing out there that is, is underserved.

In, especially in this space, that's there, it seems like. So now let's, let's talk a little bit about your growth because holy cow I'll be real honest as of last year. I probably don't think if you said rent spree to me, I would have said. I'm going to assume it's something to do with Reynolds, but I've never heard of it before.

And now it seems like this year, all I hear is just press release after press release. After press release of, of mostly MLS is integrating with you guys. What, what shook loose this year? Yeah. You know when we had launched, we had also you know, we, we provide services mainly and we will work with larger real estate organizations.

So we've been working with some really large organizations adding back for a couple of years now. So we've been working with Sierra molests, which is the California regional multiple listing service the largest MLS in the country since about 2017 or so. And we just launched with a couple other large MLS.

So we we're now up to. 30 different multiple listing services that we partner with. And so we actually have a really interesting integration into the MLS. So, like I said, it's really comes down to this idea of streamlining these processes as much as possible for agents. And so I think what's really attributed to our growth has been partnering with these large, you know, some of the multiple listing services, large brokers, and we can actually embed.

This rental process into the tools and softwares that agents and brokers are already using. And so by doing things like that, that's where Hey, like you can really compress down the transaction time to get these things done. And so we've been working with, like I said, 30 MLS is that are launched and most of those have been launched in the past year, just because we hit on something we know at work.

And we've been building a lot of momentum and getting a lot of positive user feedback and it's been great to kind of see that. So it's really exciting time for us. Yeah. For for sure. So, so it seems like MLS is, are just seeing more value in getting into that space, or do you think that they've been missing this space for, for a long time and they're finally waking up to the, the, the...