My favorite part of writing this blog is getting the opportunity to meet really innovative leaders and learning about all of the exciting technology which is getting introduced across the different real estate sectors.  Based on my experiences from current and former roles, the areas of the Real Estate industry that I know best are Commercial, Multifamily, and Residential.  But, I have a strong curiosity to continuously learn about the other real estate asset types and to stay on top of the latest technology

My favorite part of writing this blog is getting the opportunity to meet really innovative leaders and learning about all of the exciting technology which is getting introduced across the different real estate sectors.  Based on my experiences from current and former roles, the areas of the Real Estate industry that I know best are Commercial, Multifamily, and Residential.  But, I have a strong curiosity to continuously learn about the other real estate asset types and to stay on top of the latest technology solutions that support them.  I recently spoke with the executive team of a PropTech company in the location intelligence space that primarily serves the Retail sector, and I was blown away by their offering.  

Location data is a topic that we hear more and more about.  Whether it’s a solution launched by a new startup, or an existing player enhancing their offering through location services, there are a myriad of use-cases for this data.   Little did I realize the innovative ways that companies were offering B2B solutions.

Placer

Placer, founded in 2016 and having raised $166M, provides traffic analysis for every property in the US.  In other words, they can provide data on how many people pass by (or enter into) any location in the country,  including the day of week and time.  In order to obtain this data, Placer has built partnerships with popular App developers.  The data that they receive is completely anonymized (and users need to opt-in), so they are reporting on where visits are being made on an aggregate basis, instead of activity of any specific person. In fact, they built their technology to never include the information of an individual user.  Even though they do not receive location data from everyone in the country, they use a combination of algorithms and AI to fill in the gaps and provide what they say is the most accurate foot traffic reporting in the industry.   

There are certain use-cases that are very straightforward.  For example, a retail broker that is marketing a storefront can provide prospective tenants with accurate foot traffic analytics so that they can make an informed decision about whether or not the location will be ideal for their business.  And even though that use-case in itself is incredibly valuable, it is just scratching the surface for what’s possible with the tools that they provide.  Placer’s reporting isn’t restricted to just the number of people who walk by a vacant storefront each day.  They can see where shoppers go after they leave a particular store, how far they are willing to travel from home when choosing a restaurant at which to eat, or how long of a commute to work people are willing to endure.  With this information, millions of businesses can make important decisions which are informed by actual data.

Features & Use-Cases 

Unlike most solutions that have a very specific purpose, companies are continuously coming up with innovative ways to leverage Placer’s platform to gain an edge over their competition.  Below is a small sample of some of the features and use-cases that I found most intriguing.

Trade Areas 

A Trade Area is a polygon which can be drawn on a map around any specific location which depicts where the people live that visit that location (it shows their general location, not the exact person nor their home address).  In addition to providing insights for a retailer as to where their customers are coming from, they can also see where their competitors’ customers are coming from.

With this data, companies can make informed decisions as to where they should spend their marketing dollars.  Instead of just advertising to an arbitrary radius around the location, they can target the specific towns where their customers are coming from, or even better, where their competitors' customers are coming from.

Another use-case for Trade Areas is planning future expansion or contraction of a retailer's physical footprint.  One of the biggest fears that multi-unit operators have is cannibalization.  They want to make sure that when they open up additional locations, they are servicing NET New customers, not just pulling the same customers that were already patronizing their other locations.  In order to find the right location, they can draw trade areas around their existing locations along with trade areas around vacant storefronts.  By layering in demographic data from 3rd party vendors through their marketplace, they can easily find similar markets to expand into that don’t cannibalize their existing customers from other locations.  The same principle can be used if a company wants to consolidate locations.  By drawing trade areas around all of their existing locations, they can identify overlapping trade areas, informing them of which location they can shutter without losing customers.  This solution can be game changing for franchisors, restaurant owners, retailers, brokerage offices, hotels, car dealerships and just about any business that has more than one location.

Investors / Analysts / Retailers

When deciding which stocks to invest in, investors are always looking for an edge to see how a company is performing in advance of earning announcements.  Insider trading laws require investors to rely solely on publicly available information, and Placer can play a huge role in this process.  The platform provides data on how many visits are being made to any location, and compares this number to historical visits and that of its competitors.  They publish data within 3 days which provides near real-time visibility.   If an investor sees that visits to Walmart have increased 20% quarter over quarter, while visits to Target have only increased 6%, they can back into a general assumption about the revenue growth for each operator.

Target can then dig deeper into the analysis to determine if customers that visit both retailers typically stop in their store first, or if they more often go into Walmart first.  They can also see how much time a customer spends in each store on average.  If they see that shoppers come into their business first and spend an hour, and then go into Walmart afterwards and spend only 20 minutes there, they can make assumptions about what’s driving that customer behavior.  Utilizing the example above, a conclusion could be made that consumers prefer to go into Target to get a feel for inventory options and pricing, but then head over to Walmart to make their purchases because their pricing is more competitive.  Target can use this information to adjust pricing, store layouts, or other strategies to better capture their customers' spend before they leave.

Travel

Often it is the case that people that live in certain markets travel and vacation to similar destinations.  For example, at a previous role that I had at a real estate brokerage servicing the northeastern US, we concluded that many people that lived in Fairfield County Connecticut traveled up to Stowe Vermont in the winter for ski trips.  During the summer months, many of those same households traveled to specific towns on Cape Cod.  Of the residents of this county that owned second homes, the destination that was most popular for them was Naples Florida.  By understanding where their customers are most likely to come from, the travel industry can focus their marketing spend in these areas.  The beneficiaries of this data include hotel owners, Airbnb hosts, real estate agents, travel agents, restaurant owners, and just about anyone who makes a living off of tourism.  Going a step further, airlines can even optimize routes based on where they are seeing changing travel behavior.

Office / Hybrid Workforce

The pandemic has accelerated the biggest change to where/how people work in a generation.  Now that many companies have either instituted a hybrid work strategy or are in the process of trying to figure one out, they are entering uncharted waters and they have many unanswered questions.  How far are their employees willing to commute to work?  How much permanent space or flex space do they need, and where should these sites be located?  Where do their visitors/customers come from, and how far are they willing to travel?  Additionally, flex space providers are trying to determine the best locations to open up new sites and how big these spaces need to be.  Also, building owners are trying to assess how much risk they have regarding leases not being renewed due to their occupiers’ workforce not willing to travel.  All of this information can be gleaned from Placer’s data by looking at the general areas where people that commute to an office are coming from, and how far people are willing to travel each day.  It's not just the owners and occupiers that are affected by this changing behavior.  It’s also the mass transit operators, the local restaurants that workers eat at, office supply vendors, construction companies, and more.

More and More Applications

The list of use-cases is nearly infinite.  Consumer Packaged Goods companies (CPGs) can use this data to get a deeper understanding of the offline retail trends and better understand their customers’ journeys.  Multifamily developers can gain insight to where there are the biggest needs for apartments.  Local governments can understand migration trends, gain visibility into the COVID recovery to see if residents are returning to normal routines, and measure the success of initiatives (for example, did the new dog walk that they added to the local park drive more visitors).  Placer has also built a 3rd party marketplace that allows data providers to overlay their data onto Placer’s platform to provide deeper insights for a variety of businesses and applications.  And the more users that they gain on the platform, the more use-cases get discovered.

Privacy

As location based services continue to grow in popularity, so does the concern that consumers have about privacy.  When I met with the team at Placer, privacy was the one topic that I focused most heavily on.  Sure, the Placer platform provides unprecedented levels of value, but at what cost to society.  When I brought up my concerns, it was clear to me from their answers that privacy was the number one most important priority to them.  I can honestly say that I left the conversation feeling very satisfied with the way that they approach this important topic.

First, all of the data that they receive is completely anonymized.  Any information that can identify a specific person is stripped away before the data ever reaches the Placer team.  Secondly, all of their 3rd party App partners require their users to Opt-In to share any data.  If a user isn’t interested in being included, they can easily opt-out any time.  Placer’s business model has nothing to do with individual identities; they only focus on aggregated location data.

To further punctuate this point, the Placer team used an analogy on how the practice of anonymized data has become the norm in other fields.  There is almost no data on the planet that is more sensitive and protected than health records.  HIPAA provides broad protections for all individuals to ensure that their medical records remain completely confidential.  Health care providers are not permitted to release patient records to others without the patient's authorization.  Yet, positive COVID results (and other viruses and diseases) are reported publicly by each town, county, and state.  Not only is this practice permitted, but it is generally accepted and even expected by the population.  Just like medical records, as long as the data is anonymized and all personal identifiable information is completely removed, location data can be collected and reported on without violating anyone's privacy.  Placer goes the extra step by requiring that all users opt-in before any of their data is included in their reporting.  Placer is checking all of the boxes of protecting individual privacy and they take this responsibility extremely seriously.  Placer continues to dedicate significant resources to ensure that they are doing everything possible to protect individual privacy.  

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The PropTech market has exploded.  According to the Center for Real Estate Technology & Innovation, investments in PropTech hit $32B in 2021. There has been cooling in this market over the past few months, but capital is still being deployed at a dizzying pace.  With so much money flooding into the industry, there are many flashy startups driving really innovative solutions to the market.  As I attend innovation conferences and learn about new companies, I am amazed at the speed that new technology is

The PropTech market has exploded.  According to the Center for Real Estate Technology & Innovation, investments in PropTech hit $32B in 2021. There has been cooling in this market over the past few months, but capital is still being deployed at a dizzying pace.  With so much money flooding into the industry, there are many flashy startups driving really innovative solutions to the market.  As I attend innovation conferences and learn about new companies, I am amazed at the speed that new technology is being developed.  As a fan of new technology and as a member of the PropTech community, all of this new innovation is really exciting.  At the same time, early stage startups present a real risk which is too important to ignore.  Most of the conversations around the risks that accompany startups are tied to the VCs that are placing bets, but the other parties with significant exposure are the early adopters.

After an announcement that came out earlier in the year, and after seeing similar events play out time and time again, I felt like it was an appropriate time to highlight some of these issues. As anyone that reads my blog knows, I try to be as objective as possible in my writing.  I never want my day job to influence recommendations or opinions that I have, and I always disclose any employment or consulting relationships that I have during relevant articles.  

I am a managing director at Kastle Systems.  We are a 50 year old provider of access control, video surveillance, visitor management, and other smart building/apartment technology solutions across the US and Australia. We currently secure approximately 3,000 Class A/B Multi-Tenant and Multifamily properties, and 50,000 tenant suites. Over the years, new competitors have hit the market with sleek marketing collateral, beautiful packaging, and bigger than life promises.  One thing that I learned is that delivering access control and visitor management in Multi-Tenant Commercial and Multifamily buildings is incredibly complex.  A typical commercial building has dozens of tenants, hundreds (potentially thousands) of employees, and an untold number of visitors.  In most cases, a building has one access control solution controlling the perimeter, amenity spaces, turnstiles, and elevators, and each tenant has their own independent solution.  Additionally, buildings have to accommodate an unpredictable number of their tenants' daily visitors that often show up unannounced and without pre-registration.  Having everything operate harmoniously is much easier said than done.  It is also not just about convenience; it is also about  life/safety.  Imagine being locked out of your office or home, or even worse, being locked inside.  That’s not to say that innovative new startups cannot solve these issues, but you need to be careful where you place your bets.

The Risks Are Real

In 2016, a company was founded by the name of Proxy.  Their pitch was incredibly enticing.  They promised to deliver seamless digital credentials (using your cell phone to open doors).  They weren't the first to promise this, but what made their pitch so special was that they didn’t require building owners to rip and replace their existing hardware.  Replacing hardware can be costly and disruptive to the building’s operation.  Whether a client was using Lenel, AMAG, C*Cure, or a mix of many disparate systems,….  it didn’t matter.  They applied a software layer on top of the existing hardware that tied everything together and promised to deliver a seamless mobile access experience across all buildings in a portfolio.  Although buildings needed to use Proxy’s card readers, those devices are relatively inexpensive and can be swapped out in minutes.

The pitch worked, and many of the largest real estate owners and occupiers in the US started deploying Proxy throughout their portfolio.  They were successful in selling to buildings as well as enterprise tenants  But as we all know, startups are risky.  On January of this year, Proxy sent an email out to all of their customers announcing that they were going to be divesting themselves from the access control overlay business. New orders would no longer be fulfilled, and the existing readers would cease to work by the end of 2022.

So what does this mean?  Very simple:  Proxy is shutting down their Access Control Reader business, and anyone that deployed their technology needs to find another solution.  If this was a one-time event, then it wouldn’t be much of a story.  But, things like this happen all of the time with companies.  Whether new funding doesn’t come in, or there are supply chain issues, or product flaws, or unforeseen competitive dynamics, there are a host of reasons (both within and outside of a company’s control) that can turn a business on its head overnight. When a startup doesn’t have a large existing customer base, or they lack a diversified product offering, a single issue can put them out of business.

Early Adopters

I am a huge proponent of startups, but I know that only a small percentage of them will succeed.  I believe that entrepreneurs keep established companies on their toes, and I honor their courageousness.  My concern is not for the VCs that have a staff of Ivy League educated analysts that do proper due diligence to understand risk, it's for the end-users that trust a flashy pitch without the full context of the health of the underlying company.  That just ends up hurting everybody.

And this brings me back to Kastle.  One of the frustrations that I have is oftentimes a company with a rich 50 year history is perceived as old school, when in fact the solutions that they roll out provide an experience that always works.  The size and scale of an established company often allows them to be less dependent on rushing products to market before they are ready, or betting their future on unproven technology.  I love an underdog story, and I love to see new startups put pressure on established players.  But as PropTech becomes more complicated, and customers are demanding that all solutions be fully integrated with every other solution in the building, one weak link can take everything down.

There is a huge difference between Leading Edge and Bleeding Edge.  There is nothing wrong with trying out a new technology, but there are caveats that cannot be ignored.  If you are looking to deploy a solution that is integrated with other systems (meaning its failure will cause other systems to fail), or when it involves life/safety or it requires a significant amount of capital, I prefer to err on the side of caution.  

Mitigating Risk Through Proper Due Diligence

As I write this article, I realize the conflicting message that it sends.  In one breath I am saying that startups are necessary, and in the other breath I am advising to be weary of startups.  And that is the paradox that we face.  Very established companies typically are not nimble and often take a conservative approach to new technology.  It is not uncommon for them to become complacent and rely on their existing customer base to provide what they believe will be a never-ending flow of revenue.  However, they offer stability.   Startups on the other hand tend to roll out insanely innovative solutions, but they bank their entire future on technology that has been unproven in the market.  As with all gambles, appetite for risk needs to be considered.  My recommendation to customers is to understand how a failure of the solution that you are evaluating will affect the operation of your asset.  If there is only upside, then taking a risk may be justified.  If the failure of the solution would take down other systems, or significantly hurt the tenant/resident experience, then it may be better to stick with the established companies that have a track record of success and a strong financial footing.

The industry needs a combination of established players and new startups to ensure that the bar continues to get raised.  Before you make a final decision on which technology to purchase, I recommend the following due diligence:  

The purpose of technology in the real estate space is to increase efficiencies, improve NOI, and deliver tenant/resident delight.  The wrong decision can easily create the opposite effect by producing operational nightmares, increasing your costs, and frustrating your tenants, residents, visitors, and building staff.  It is never possible to remove all risks, but the only way to mitigate risk is through proper due diligence.

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I often write about the latest technology that is being deployed in the real estate industry.  During this unprecedented and explosive time period for the PropTech sector, there has been no shortage of exciting companies to write about.  From Tenant Engagement Apps, to IoT Devices, to Investment Platforms, to Disruptive Brokerage Models, a day doesn’t go by without new innovation being launched with promises of improving this industry which for so long operated with the same archaic model.  But one important

I often write about the latest technology that is being deployed in the real estate industry.  During this unprecedented and explosive time period for the PropTech sector, there has been no shortage of exciting companies to write about.  From Tenant Engagement Apps, to IoT Devices, to Investment Platforms, to Disruptive Brokerage Models, a day doesn’t go by without new innovation being launched with promises of improving this industry which for so long operated with the same archaic model.  But one important fact that often gets overlooked is implementation.  Even if a new solution can deliver on its promises, everything can be lost with poor execution.

I was recently speaking with one of my contacts who oversees technology deployment for one of the largest Real Estate Investment firms in the US.  A year prior, he had done a deep analysis on the leading Tenant Engagement App companies, and after piloting a few of them, he made his decision and chose a winner to roll out portfolio-wide.  The plan was simple:  they would go building-by-building until the entire portfolio was live on the App.  The first building, which they billed as their Beta, went very smoothly because it involved a significant amount of resources and attention from the leadership teams of both companies.  But as time went on, the deployments became rockier and tenant adoption continued to drop.  The problem wasn’t the technology, it was the roll-out.  This technology is complex and it requires many integrations and stakeholders to work together to ensure success.  More than anything, each building required a dedicated lead to evangelize the technology across the building staff and tenant base.  Simply activating the technology wasn’t enough to get people to completely change their behavior and adopt a new way of doing things.  While the company budgeted for the additional expense of the Tenant App, they did not budget for an employee to be hired at each building to shepherd adoption of this new platform.  To further complicate this problem, the Tenant App provider was growing at breakneck speeds, and they no longer had the bandwidth to provide the same level of hand holding that they provided during the launch of the first building in the portfolio.  My contact was extremely concerned about the outcome of this deployment, especially because he was the one that advocated for that vendor.

Technology is only valuable if it is accompanied by user adoption.  Otherwise, it only adds additional costs and frustrations.  To highlight the challenges and strategies of tech deployment and adoption, I wanted to leverage the expertise of a leader in this field.  I am lucky to work with an expert in this space who has a strong pulse on the changing landscape of PropTech.  I first met Andrew Kovacs when I started working at Kastle in 2016.  Andrew has held a variety of roles at Kastle including Sales, Account Management, and Customer Service.  He is currently the Vice President of Client Services for Kastle and is responsible for leading the team that owns the customer journey from the time that an installation is completed through renewal of their contracts for Kastle’s largest region.  Although Kastle offers a complex set of solutions that includes dozens of integrations across thousands of Class A/B Multi-Tenant and Multi-Family buildings, they have maintained a J.D. Power score of 815 which shares this elite status with companies like the Ritz Carlton.  Andrew (and his team) have maintained these sky-high numbers, all while he recently completed his MBA at Wharton.  I asked Andrew if he could shed some light on where other companies often fail, and how Kastle has gotten it right.  As Andrew explains below, the key to success boils down to the strength of the relationship that is built between parties.  Real estate is a relationship business, and although the right technology can add tremendous value to optimize a portfolio, the benefits can only be achieved if a strong relationship is built and a foundation of trust has been established across stakeholders.      

How can PropTech be more relationship focused even though we are leading with technology?

Since the pandemic, conventional wisdom has been one where companies supporting the real estate industry have had to develop innovative technology in order to remain relevant to existing clients and capture new market share. Thanks to COVID, technology adoption across the real estate industry has quickly accelerated and will continue to do so.  But the fact is that there is a lot more to being a good technology partner than some fancy software or integrated dashboard, and this is perhaps the reason why so many owners and operators I speak with are still just dipping their toes into the water while some of the new solutions and offerings they have piloted have not been ‘sticky’ within their firms.    

Through the lens of a real estate partner, if you weren’t yet discussing APIs, SDKs, standardized platforms across portfolios of buildings, 3rd party integrations into various software platforms, or the possibility of tying that all into a tenant amenity app with your clients, you certainly are now.  These technology solutions impact both sides of the equation: the technology partners that are developing solutions and the operators and owners who are weighing which technologies to implement.  So is there a better, more relationship centric way to drive adoption and implementation with technologies that resonate with these end users and operators who have traditionally been adverse to disruptive innovation? 

Technology Partners

For technology providers, prioritizing their own products and services over collaboration with their clients usually ends up with a one-sided relationship that fizzles over time.  Deeper market share and ultimately the ability to expand services across a portfolio is not built through deploying more technology. It is built through sustained engagement from dedicated staff who understand the needs and challenges real estate firms face.  This becomes even more paramount as recent data continues to hint that inflation will create havoc on the balance sheets of real estate firms who have limited ability to pass along cost increases.  In this current climate, red lights are blinking from our real estate partners as well as their prospective tenants and those with upcoming renewals about their increased price sensitivity.

The structure that we built at Kastle does not mimic a traditional SaaS company, but rather uses dedicated, cross-functional team members that are grouped together by the client they serve rather than the job they perform.  Project managers, onboarding specialists, account managers, and customer success are all teamed together around clients.  Providing cross-functional organizational support and structure improves communication internally, which naturally leads to a better client experience and deeper penetration of services that our clients are adopting over time.  Furthermore, the need to constantly reassess a mutually agreed upon strategy with the client post initial deployment is critical.  The idea is to empower your employees to teach, tailor, and take control of every client interaction to assess and reaffirm that we are maintaining a customer centric perspective rather than a limited, product specific view.  Generally speaking, the real estate industry takes a very long term view of the world and owners and operators are looking for partners and trusted advisors over the long haul, not just a Band-Aid to patch issues as they appear.   This means that there are no silver bullets to growth and it is imperative to make sure that everyone in your organization that serves these customers understands the big picture. This can’t just apply to the executive team who met with the client months prior to the deal closing or the initial business development person.  There needs to be a comprehensive strategy that is customized for each specific client allowing for buy-in across all stakeholders.  This also must apply to measurable internal goals such as retention rates, contract renewals, and product adoption per user.  

It is an exciting time for the real estate industry; the office of tomorrow will be different but fundamentally things haven't changed.  Real estate owners and managers want solutions that will be attractive to their tenants and technology partners want to provide solutions that will be highly impactful and adoptable by their clients.   If you think technology is going to solve everything then you are going to miss the boat on where true value is unlocked - through sustained engagement and collaboration over the life of a relationship.

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Choosing a home or apartment to rent is a big decision.  The outcome of that decision will impact many parts of your life for at least the next 12 months.  From the amount of time your commute to work takes, to the restaurants and stores that you patronize, to the people that you interact with on a daily basis, the location of where you live plays a defining role in many aspects of your life.  In addition to just location, the ownership, management teams, and characteristics of the actual building and

Choosing a home or apartment to rent is a big decision.  The outcome of that decision will impact many parts of your life for at least the next 12 months.  From the amount of time your commute to work takes, to the restaurants and stores that you patronize, to the people that you interact with on a daily basis, the location of where you live plays a defining role in many aspects of your life.  In addition to just location, the ownership, management teams, and characteristics of the actual building and unit that you select can positively or negatively affect your mental health, level of efficiency, and overall happiness.  Issues like spotty cell service, noisy neighbors, intrusive landlords, or a poorly maintained building can ruin an entire year of your life.  Unfortunately, renters typically do not find out about these issues until the lease is signed and they have already moved in.  And since the Multifamily sector is so hot at the moment, renters usually need to make quick decisions if they want to secure a particular home or apartment.

Landlords and property managers also take a big risk when signing a lease.  Is the resident going to pay rent on time? Are they going to throw loud parties?  Are they going to damage common areas?  Laws vary in every state, but it is notoriously difficult to evict a resident, so each lease has the potential to turn into a long term nightmare for the landlord.  In order to mitigate risk for landlords and property managers, there are a lot of great solutions available in the market to address these issues.    

Landlords often use Resident Screening solutions to help them make the best decisions as to who to rent to.  The types of services that they offer include Credit Reports, Criminal Background Check, Prior Evictions, and some of them offer an overall rating on how likely someone is to pay on time and be a responsible resident.  Many standalone companies offer these services including First Advantage, RentPrep, and Verifirst.  Additionally, many of the leading property management software providers including Appfolio, Yardi, and RealPage have built this functionality into their platform.  It is impossible to remove all risk when choosing a resident, but these offerings arm landlords and property management with tools to mitigate risk.

While landlords and property managers have access to screening solutions, residents often enter blindly into transactions due to a lack of readily available data.  Some cities have databases of bad actors (often referred to as Slumlords), but the data is often incomplete and difficult to access.  Realizing that this massive gap existed in the market, I decided to do some research to see if I could find any companies that offer solutions to help inform prospective renters about the quality of the landlord and characteristics of the location.  It was not surprising to see that most companies were targeting property owners and managers since it is much easier to scale a company through large transactions for portfolio deals, instead of picking up renters one-by-one.  But I was pleasantly surprised to see a variety of startups that were tackling these challenges with uniquely innovative offerings.

SmartRenter Inc. 

SmartRenter innovated what they say is the “only instant, confidential national Landlord background screening system” (landlord authorization not required) to protect and serve the needs of renters. Their landlord credit background screening system generates an instant report which provides renters with the opportunity to see/screen a prospective landlord’s background before they apply or disclose any information as “prevention is the best protection”. Renters deserve to know who they may rent from for their safety.

They also innovated their proprietary Real-Time Landlord monitoring subscription service which alerts renters to any changes to a property owner’s background (even as minor as a pre-foreclosure notice) to add an additional layer of safety and peace of mind. 

SmartRenter’s service is geared towards individual renters, off-campus students, vacation renters (users of Airbnb, VRBO,...). They are also having success selling to organizations who have decided to provide the service to their members. For example, universities are signing up for the service to help aid students/parents who are looking for off-campus housing to avoid the increasing number of rental scams and nefarious landlords who target students. Their clients also include advocates for victims of abuse, real estate agents, listing portals, and companies who offer the service to their employees as an added benefit in helping them secure safe housing.

ROVR Score

As important as it is to ensure that you are not signing a lease with a slumlord, there are other issues that have nothing to do with the actual landlord or property manager.  We live in a connected world, and access to strong cellular and WiFi is no longer a luxury.  From working at home, to streaming Netflix, to FaceTime with the grandparents, internet access is a necessity.  Our dependency on quality connectivity will only increase as industries like TeleHeath, Virtual Learning, and Smart Homes continue to expand.  Other than checking the service level on your cell phone during a tour, it is hard to determine signal levels in a home or apartment until you move in. This is where ROVR Score comes in.

ROVR Score gives the owner and the consumer a tool that evaluates and promotes the community’s quality of WiFi connectivity. They provide a unique ROVR Score badge that promotes the quality and connectability throughout an entire property.  The badge gives consumers a way to easily identify the connectivity quality in their next home. ROVR refers to a survey which was conducted by J.Turner Research which found that 84% of consumers would use a tool that easily identifies the quality of an apartment building's WiFi connectivity prior to signing a lease.  This survey also indicates that 9 out 10 residents rank internet connectivity as their number 1 amenity.  You can download a copy of the survey results here.  

Niche

For renters with children, the quality of the local schools is paramount.  Real estate agents are limited in what they are legally permitted to share with clients about the schools in each market, so independent research is required.  One of the best resources that I was able to find on local school information is Niche.  Through their easy to navigate interface, users can find pertinent information from every public, private, charter, magnet and parochial school and school district in the nation, including ratings on academics, teachers, diversity, culture, and safety.  Additionally, they offer data on class sizes, test scores, and user reviews from students, parents, and alumni.  Niche’s school platform is enhanced by its data on places to live, which profiles more than 50,000 cities and towns in America across factors such as affordability, the local housing market, neighborhood diversity, area amenities and walkability. While not necessarily pertinent to this article, Niche also offers a ton of really valuable information for students who want to compare universities and grad schools in areas such as cost, scholarships, campus life, and rankings.

Walk Score

Walk Score has been around for many years, but I still find it to be an incredibly useful tool when searching for a new home or apartment, especially if you are moving to a new area that you are unfamiliar with.  Walk Score is absolutely free to use, and within seconds you can learn about all of the nearby shopping and restaurants.  It also provides information on how walkable the location is, if it is a good place for bike riding, the local mass transit routes, and whether or not owning a car is recommended.  This information can really help to narrow down the neighborhoods that best meet the needs of you and your family.  For a decision as important as where to live, I believe that it makes sense to use as many data points as possible.  And since it is a free service, leveraging their platform is a no-brainer.

Additional Resources

In addition to the companies listed above, there are really valuable resources available to use before you decide where you want to rent.  For instance, if someone in your household has respiratory issues, it is important to understand the level of pollutants in the air in the neighborhoods that you are looking at.  A quick visit to the EPA’s AirNow website lets you check the air quality for any zip code in the country.  If you want to learn about the crime levels in a neighborhood, a quick visit to Crime Grade provides instant access to crime reporting down to the zipcode.  This tool is also free.  Another problem that can give you buyer’s remorse is local traffic.  Many people tour homes and apartments on nights and weekends, and the traffic levels during those times may not be representative of what traffic looks like during rush hour.  Many people move to a new place in order to be closer to their job, but after they move in they realize that the daily traffic is so bad that it negates the time savings that they were hoping to achieve.  Websites like TomTom can provide you with several years worth of traffic data, broken down by day and hour.  The only downside is that their data is limited to large cities.  Lastly, social proof can be extremely valuable in understanding exactly what life is like within a particular community, and websites like Google, Facebook, and RentGrata can provide invaluable insight into others’ experiences in a building that a renter is considering moving into.

The Next Big Thing

There are many factors that go into a successful startup, but at the most simplistic level it comes down to 3 things:  An Idea, Capital, and Execution.  Many entrepreneurs struggle with coming up with an innovative idea that hasn’t been tried before, that solves a real pain point, and has an enormous TAM.  As I was researching this article, I had 2 observations.  First, there are very few tools on the market to help inform renters about all of the things that they should be aware of before they sign a lease.  Secondly, even though there are some amazing solutions as referenced above, each of them solves a single problem, and multiple tools are required to get a complete picture of everything that a prospective renter needs to know in advance.  This leaves an opening for a company that aims to build a holistic offering that aggregates all of the relevant data points into a single interface.  Whether a startup chooses to partner with several existing companies, or they choose to build from scratch, I believe that this idea has the potential to solve real world problems.  As far as TAM goes, there are 43.6M rent based households in the US alone.  And when you figure in the number of renters that change apartments every year, and you add short term and vacation rentals, you end up with a total addressable market that would thrill any VC . 

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In May of 2021, I wrote an article about Compass.  I was extremely complimentary of both Compass and their CEO Robert Reffkin, but I called into question their valuation which made absolutely no sense at all to me. To illustrate the point, I drew a comparison between Compass and Realogy.  Although there are some differences between both companies (Realogy also operates a huge franchise business), a significant chunk of Realogy’s revenue comes from their company owned brokerage which shares the same traditional

In May of 2021, I wrote an article about Compass.  I was extremely complimentary of both Compass and their CEO Robert Reffkin, but I called into question their valuation which made absolutely no sense at all to me. To illustrate the point, I drew a comparison between Compass and Realogy.  Although there are some differences between both companies (Realogy also operates a huge franchise business), a significant chunk of Realogy’s revenue comes from their company owned brokerage which shares the same traditional model as Compass’s core business (where agents typically work on splits ranging from 50% to 90% - depending on their sales volume).  Below are the numbers based on the time of original article:

Even though Compass was growing significantly faster than Realogy, I felt that the cost of that growth was unsustainable now that Compass was a public company and no longer was receiving massive cash infusions from the VC community (growth via top producing recruits often requires a significant sign-on bonus, and revenue from new recruits typically takes a minimum of 4 months to show up).  I have always been a huge fan of Compass, so my concern had little to do with their actual business, and everything to do with their valuation.  There was no logical way that their market cap should have been 4.5X that of Realogy.

And then the public markets did what the public markets are designed to do.  They strip away the high gloss shine of beautiful marketing collateral and dynamic presentations, and they focus on the underlying fundamentals of a company.  As of the date that I am writing this article, Compass’s market cap has dropped to $1.69B, compared to Realogy’s market cap of $1.17B.  Over just one year, Compass’s value has dropped by over $6B (nearly a 73% drop), and now has a delta of approx. $500M over Realogy. That’s a pretty significant change over a very short period of time.  I predict that the gap in the market caps of both companies will continue to shrink.

The company's dramatic drop in value shouldn’t take away from the unprecedented accomplishments that Compass has achieved.  Agents did not join Compass based on its valuation (although they did promote a program to allow agents to invest in the company, and certain early agents were given stock options as an incentive), they joined the company because they believed that Compass was the best place for them to conduct their business.  Many agents that I speak with are still very happy with their decision to affiliate with Compass.   Never before had a residential brokerage made such an enormous impact in such a short period of time.  Most of their competitors lived in fear that Compass would open an office across the street from them and recruit their top agents.  But my concern has nothing to do with their agents.  Compass is a good place to hang your license and many of their agents are having their best year yet from a sales volume standpoint.   While the drop in value doesn’t affect their agents, the pain is felt on Wall Street and in the living rooms of average stock traders that bought into a mirage.  

Compass now has company in the elite world of unicorns.  In June of 2021, a startup brokerage closed a $50M round at a valuation of $2.5B.  And this company offered something very different than the traditional brokerage model that is found at Compass and Realogy.

Meet Side

Side, which was founded in January 2017, has raised north of $313M from investors including Tiger Global Management, Sapphire Ventures, and Trinity Ventures.  Besides their massive war chest of capital, what makes Side such an interesting player is their unique business model.  While most companies are focused on recruiting as many agents as possible, Side is only interested in partnering with top agents.  Their tag-line spells it out in bold terms:  “Not all agents, just the best agents.  What we do is not for everyone”.  Side’s philosophy is that they do not actually recruit agents, and instead they hand select the agents who best fit their model.

Most agents at most brokerages are independent contractors, and the same holds true at Side.  However, agents who partner with Side operate as a truly independent company.  They utilize their own customized branding and the leadership team at Side helps them develop a business plan which is centered around building a team.  Side provides a series of centralized services including a tech-stack, legal support, marketing and advertising support, transaction management, liability coverage, and assistance with procuring office space.  I see a lot of similarities to the way that Side operates and a traditional franchisor, but instead of affiliating established companies, Side affiliates independent agents and teams.  According to Side: In 2021, 30% of Side partner teams grew their production volume by over 100% year-over-year, and 20% of Side partner teams transacted over $100 million.

For most brokerages, their company brand is front and center in all marketing collateral.  The more agents that promote the company brand, the more recognizable it becomes.  As leads are generated, these companies often hand them out via a round-robin.  Although this strategy is designed to help all agents, it creates a scenario where the agent who generated the lead often isn’t the one that benefits from it.  This has helped companies like Compass, Coldwell Banker, and Sotheby’s become household names, but most home buyers have not heard about Side.  And this is by design.  Side’s brand is often invisible.  Their goal is to help agents promote their own brand, while Side provides back office support to help agents focus on what they do best.

PLACE

In November 2021, a new company became a unicorn when they announced a $100M Series A with investors that include Goldman Sachs and 3L.  This company, PLACE, founded by real estate heavyweights Ben Kinney and Chris Suarez, shares similarities with Side in that they only target the highest producing agents.  Additionally, they also provide their agents with leading technology and services to help them continue to grow their business.  However, PLACE has a very different spin on their business model. .   

Unlike Side (or most other real estate companies), agents do not actually move their license over to PLACE.  PLACE is not actually a broker at all.  When an agent partners with PLACE, they continue to hang their license with their existing broker.  However, in addition to the services their broker provides, they also get access to the suite of services that PLACE provides.  PLACE does not perceive themselves to be a competitor to other brokerages companies.  Instead they look at themselves as another service for elite agents that aren’t getting everything that they need from their current company.

PLACE promises to deliver industry leading technology and services to the agents that partner with them.  While this is a common promise that most real estate companies make to their team, the fact that it was developed by agents, Ben Kinney and Chris Suarez, who have walked in the shoes of agents and understand what it takes to be the best, adds a level of validation that is often missing from many of the other players who have come from Wall Street and have never actually listed or sold a home.   Ben has consistently been named the top agent in the US, and owns companies including Brivity and Active Rain.  Chris, in addition to co-founding Place, owns 6 brokerages and has been credited with expanding residential brokerages in Costa Rica.

Disruption Without Discounting

New brokerage models launch all of the time, but the majority of them focus on commission cutting.  As I have written about in the past, no matter how many times outsiders say that real estate agents make too much money (which I disagree with), almost every company that has tried to scale by offering discounted commissions has ultimately failed or pivoted to a traditional model.  It is exciting to see companies like Side and PLACE raise huge sums of money and take on the industry with a fresh model.

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Last month, the Department reversed a DeVos era notice which said that federal student loan servicers were not subject to state consumer protection laws. The Devos interpretation said that states’ laws that protect borrowers from servicers’ false and misleading practices were “preempted” by the Higher Education Act (HEA). Preemption is a legal doctrine in which […]

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Last month, the Department reversed a DeVos era notice which said that federal student loan servicers were not subject to state consumer protection laws. The Devos interpretation said that states’ laws that protect borrowers from servicers’ false and misleading practices were “preempted” by the Higher Education Act (HEA). Preemption is a legal doctrine in which […]

The post Moving in the Right Direction to Protect Student Borrowers – Department of Education Says States Can Hold Student Loan Servicers Accountable appeared first on Student Loan Borrowers Assistance.