Fair and Transparent Renting: Is it Possible?

In this episode, we explore the issue of fair and transparent renting. It's never been easy to find the perfect place, but now more than ever, it seems like landlords are taking advantage of renters. This video takes a closer look at the rental market and how it may be possible for renters to have their voices heard in this complex system.

RentCheck is the property management solution that helps property managers save time on inspections with easy self-guided inspections that anyone can do from their smartphone. Know more here https://www.getrentcheck.com

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Fair And Transparent Renting: Is It Possible? | Lydia Winkler Part & Zain Jaffer

We are here with Lydia Winkler, the Cofounder and COO of RentCheck, where they make renting fair and transparent. How are you?

I am good. Thanks for having me, Zain.

It is great to have you too. You have chosen a mission that sounds impossible, making renting fair and transparent. I think most renters would say that is the dream. How did you get started on this journey? Tell us a bit about the mission.

It is quite personal to me and I am sure most entrepreneurs you have met, it was the spark that stimulated their company. A little backstory about how RentCheck came to be and why I am doing this. I live in New Orleans. RentCheck is headquartered in New Orleans. I moved to New Orleans from San Francisco. I was working in tech out there, but I ultimately knew I wanted to go back to school. I moved to New Orleans to get my law degree and MBA at Tulane. After my first year of law school, it came time to move. Thirty days came and went and I never got my security deposit back.

I was really frustrated by that situation and thought it would be an injustice for me not to pursue it. I represented myself and I sued my former landlord in small claims court. That whole process took well over a year and a half, which was stressful and time-consuming, but I won the case. The reason that I won was because I took meticulous photos of the move-out condition of my apartment, which was great. I was happy that it worked out for me, but I realized not everyone has the time, education, and funds to solve their problems in small claims court.

This happens to more renters than most people think. Thirty percent of all renters will lose some or all of their security deposit each year. That is from not even hearing back from their landlord. This is a major problem. A few months later, I was in business school orientation and met my cofounder who experienced a similar problem, but from the property manager side. He had been managing properties in and out of state for over ten years. For him, documenting apartments to avoid disputes with residents was always time-consuming and expensive because he physically had to visit these units or pay someone to visit these units.

You sued your own landlord by yourself after a year and a half?

RentCheck is on a mission to make renting fair and transparent. We’re addressing that by providing people the proper documentation they need to make good decisions.

It was quite an arduous process to get my day in court because my landlord evaded service. I had to hire two private investigators to serve my landlord because they had denied their identity when someone tried to give them papers. It was insane, but it was so worth it. There were times it was like, “Should I still be doing this? Is this a fool’s errand?” Most people said, “Why are you wasting your time? You should just focus on law school.” To me, I thought, “Why am I even going to law school if I cannot help myself? What is the point?” Something in me really wanted to see this through. I am so glad I did. If I did not sue my landlord, I would not have cofounded RentCheck.

Our mission is to make renting fair and transparent. How we are doing that and addressing that is by providing people the proper documentation they need to make good decisions. With RentCheck, you can do a move in inspection, periodic inspections, and involve the resident in the process. There is no discrepancy over security deposit deductions. It also empowers the resident to take better care of the unit because if they have access to the movement inspection, they know, “This is what it must look like when I move out if I want my full deposit back.”

There are some very interesting stats and you shared one. Most people expect that they will get a refund on their security deposit when they move out of their apartment, unless they completely trashed the apartment. What is shocking is that sometimes no reason is given at all. I believe 36% in one survey found that landlords offered no explanation at all for why they were withholding security deposits. That must be the most frustrating thing possible. To see how the system is designed where you have to hire private investigators and you have to serve discovery and you have to go through court. The system is designed to break you.

The average renter is trying to stay afloat. To take on the role of being an attorney and suing your landlord is a system that is not conducive to good outcomes, which is unfortunate. What do you think is really happening here? Are landlords abusing the process or is it just a miscommunication somewhere? The renter thinks that they left the place in great condition and the landlord does not agree or is there something nefarious going on here?

I will say not all landlords are bad landlords. I definitely had a bad landlord. We sell to property management companies. Those are our customers. We say we serve our customer’s customer, which is the resident, but property management companies pay us a monthly subscription to use RentCheck and to enable their residents to be involved in the inspection process.

Most property managers want great residents. They want residents that are going to stay there. They want residents who will pay rent on time and treat the property well so there is less turnover between tenants. You can decrease the number of vacancy months, which is what ends up killing property management companies.

Two and a half average months in between residents is what kills them. What we do is if you are regularly getting visibility on your unit or you can have your resident do a pre-move-out inspection, you can address those issues before that resident moves out, ultimately decreasing the number of vacancy months. Overall, I will there have not been proper documentation or tools that enable property managers to give their residents the information they need over what they are deducting for. Most inspections are done on pen and paper. Only 10% of the market is using some type of digital inspection tool. It is impossible to use written words to accurately verify what you have seen because it is subjective.

PTVC 142 | Transparent Renting

It reminds me a lot of the car rental experience. We are at least making some progress in favor of the car rental companies. I am sure many people try to game it where it is like, “When should I go to the petrol station, fuel up the gas, and then let there be some distance, so I get some free mileage before I give it back?” They can automatically detect the level of fuel in the tank and bill you in increments. You cannot play games anymore. That is a fairer system, but I am sure many of our viewers have gone through the situation where they rent a car and they do not take accurate photos and videos.

They are dinged with damages that they did not cause. It is painful to fight that, but there is a lot more to lose as well when it is your own home that you are renting. There is this feeling in the real estate industry that we say, “Treat this place like it is your own home.” Renters do not do that. There is this assumption that renters cause a lot of damage there.

You are going to get more wear and tear and faster depreciation. You are going to have unit turn costs. There is a budget for units around costs and real estate too. Is this true? Do you believe that renters do not take care of the apartment well and, therefore, the whole security deposit industry, because it is somewhat of an industry, is there to deal with that underlying problem?

I disagree. It depends on the renter. I do not think we can lump them all in one group, but I will say it is all about messaging and education. I think the future of renting is resident involvement and resident empowerment. Being able to, for example, make sure that air filters have been changed. That is something we see a lot of our customers do. They are sending monthly maintenance check requests, so residents change the AC filter once a month or smoke detector batteries have been changed.

A lot of safety features all about upkeeping the unit. If you are educating the resident about what needs to be done, it creates this perception for the resident of, “My property manager, my landlord cares that I am living in a safe place, there is not mold, and the batteries have been changed so they are not in violation of anything.”

I think when you change that narrative, it creates a less adversarial relationship, which is what people think of. The term landlord, people have disdain. It is a service. Not everybody wants to bother owning a home. I think we have learned that now, especially in light of the pandemic, people want freedom of movement. Renting enables you to do that.

You are right about the narratives and there are narratives on both sides. The institutional investors, not all of them, treat that core end customer, which is the tenant, with that respect. I have been in places. I have dealt with different buyers and sellers and seen parts of the real estate industry. There is certainly this perception that tenants are going to damage the property. You cannot trust them.

The future of renting is resident involvement and resident empowerment.

If you do not have the security deposit, as an investor, you can really lose out. I have been on the other side too. I did not buy a home for the longest period. I am one of those people that believes it is sometimes better just to rent than it is to buy your own place. There is a whole generation of people like this of this nomadic lifestyle coming out.

As a renter, it feels like the system is against you. Not only are there all these rules sometimes feeling like they are one-sided. I mean rules that you have to sign, the agreements that you have to sign. It is also hard to get a place, especially right now. Once you find a place, there is so much power and there is so much abuse of rights.

That is why we have things like in California, The Fair Employment and Housing Act. You have federal laws and state laws to prevent things like discrimination and rules around what the maximum amount is. It varies state by state, but the amount you can charge for security deposits and the circumstance in which you can use and cannot as a security deposit. Your vision for the future, are security deposits going to exist? Are we going to move to a different type of system?

We have already seen that there are options. There are security deposit replacements. They are more like an insurance. A lot of those companies have reached out to us. One of the things they have an issue with is they do not have a way to verify how the tenant left the unit once the resident moved out. That is a problem. I do not think security deposits are going away, but I do think there is going to be more reassurance. If we have anything to do with it, which we do, at the rate at which we are growing, things are changing.

People are going to have more security knowing that they are going to get it back because they are not going to be docked for damage they did not do because there is a library of knowledge of everything that was documented throughout the duration of their lease. You cannot doctor that or change that or if you did have a disgruntled tenant or vice versa, now you can take all of your RentCheck inspections into evidence because we are an arbitrary third-party and they are timestamped and submit them, etc.

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About Zain Jaffer:

Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780m.

His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as “Forbes 30 Under 30”, “Inc. Magazine’s 35 Under 35,” and the “SF Business Times Tech & Innovation Award.” He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.

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