Rewards Programs Can Be Used In Real Estate To Reward Renters

Want your renters to keep paying on time every time? One way to do that is through program rewards. Rewards programs are everywhere you turn, be it televisions, exotic cars, or household cleaners; then why not real estate?

The stake is on a mission to make renting financially rewarding. It wants to create the future of FinTech powered real estate with Cash Back rewards. Get paid for paying your rent—extra Cash for groceries, fun, or anything. Save and spend your Cash Back with Stake and earn additional monthly Saving Bonuses.

Know More About Stake https://www.stake.rent/

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Rewards Programs Can Be Used In Real Estate To Reward Renters

On the PropTech VC Podcast, we have Rowland Hobbs, the Founder and CEO of Stake. Stake is cashback for renters and they're on a mission to make rent financially rewarding. I've also invested in Stake through our VC fund. Rowland, thank you for coming on the show.

Thank you so much for having me. It's great to be here.

Rowland, you have a fascinating background, especially a strong one on the UX-UI side. Could you give us a quick summary of how you got here?

I started a company back in 2004 that focused on product design and we got pulled into a lot of customer experience and loyalty work. We worked on Sephora and helped them move into the mobile era. They have one of the most successful loyalty programs out there. We also worked with a lot of financial services companies, including Bank of America, Wells Fargo, and most notably working on Capital One and the What's In Your Wallet Campaign. That got me pulled in. Once I was hooked on the world of how do you keep your best customers sticking around, I stuck around and that's what I've been doing ever since.

How did you come up with the idea? Maybe a quick background on what Stake does as well.

Stake is cashback for renters. You see cashback from credit cards. You get it at Kroger when you walk into the grocery store. Cashback is a way to reward folks. I've been doing a lot of work in that world for a long time and they always talk about these two categories that are big, shopping and travel. When I look at my monthly expenses, I'm like, “Those are the biggest categories.” Shopping and travel are certainly big and I love to travel but there's this other housing category that has always stuck with me. I wasn't in real estate at the time.

As I walked around New York, where I live in Manhattan, there were a lot of signs that said, “One month free. Two months free.” If you translate that into a cashback, there's a lot of cashback. That's more than my credit card is giving me and I thought, “Why aren't these tools available in housing?” That's how it began. I was able to think about, “Something worked well in the credit card industry and the retail industry works for the biggest share of wallets,” which is housing.

It's interesting when boardrooms all around the world and executive teams look at capturing more of the share of a customer, you're right. Travel, shopping, leisure, and other areas. Housing is the business but everyone is like, “There's housing and then there's that car, and health which we don't touch.” It seems impenetrable. It seems like there’s a roof over your head and that's all it is. It's cool to come up with a new financial model to monetize that through what you're doing.

You're also in an interesting place because you're not just pure PropTech. You've got a lot of FinTech behind what you're doing. What changed over the last years since you've been running Stake that made FinTech a lot more accessible and allows you to build the type of company you're building? I understand you're now offering credit cards for your renters? You're able to tap in and see how they spend their money. You're able to offer cashback and you're able to do a lot of things like that which were harder to do before.

There are a couple of things. There's one which is a cultural shift. After 2008, folks moved away from larger banks, especially renters. A lot of folks lost trust in larger banks. If you look at America's renters who have less than $800 saved on average, where they bank is not Wells Fargo or Capital One. These are not places that they are going to. It is much more likely that they are getting banked by what's called neobanks. A lot of times, unfortunately predatory things like payday loans and this thing play a big portion in this.

There's one which is a whole cultural movement. At the same time, you have this tack that comes up that powers a lot of neobanks, or it's easier for folks to be able to provide banking services. If you take your largest portion of your wallet housing and say that's giving you cashback every month, we build up a lot of trust. We started to see as we were growing that renters, we call them resident members because we think of them as belonging and we treat them like members, we begin with that reward.

Imagine your first housing and banking relationship beginning with putting money in your account, not taking it out, and then people go, “Can you teach me a little bit more about how I should be saving my money? Can you help me with something else?” That's what we're hoping to do. The first product we have out is our Stake visa debit card. It gives additional cashback everywhere that somebody shops or visa is accepted. It gives a no-fee checking account as well. This is incredibly empowering because sometimes for our resident members, the first time that they've had a checking account that isn't trying to get one over on them.

We've got a lot of people who are investors on the show and property managers, and there's this divide between assets. We usually categorize it as, “It's a Class A asset.” “It's a Class B asset.” “This is a Class C asset.” What do you notice that's different about the renters who have more along with the mean average or median average even of $800 a month net worth?

That's an average in the US and you have a huge range there. You have renter by choice. That'd be more of an A-class. Interestingly, we've had several folks in that category. They have the same delinquency problem. It's not true that delinquency is always held in the C-class properties. You have a different range of what people's aspirations are and what they can consider being achievable. Somebody who may be beginning on their financial journey is not looking to buy a home necessarily. That's somebody who's later in their financial journey and has a certain income bracket who can afford to do so.

Everybody has an aspiration of what the next thing that they're saving for. And if housing can help them save for that, that's fantastic.

Everyone has a different goal that they're going to but everybody has an aspiration of what the next thing that they're saving for. If housing can help them save for that, that's fantastic and that’s what we're able to do. Some other important differences, we're starting in the largest residential property in Washington, DC. It's a wonderful, solidly luxury property like the typical ones that you see around.

Interestingly, that group who may have successful jobs with large student loans, they're paying quite a bit in rent, they may have families as well, they are on a percentage basis equally having trouble being able to save as well because they're paying out quite a bit in student loans. I'm not sure if it's always as true as people want to think that a higher savings for more luxury renters can be equally as difficult, given that they're already sold intense loan products when they're eighteen and they're still paying it off.

What's the consequence of this for banks? Because renters are notoriously difficult to bank. Sometimes referred to as unbankable. They're difficult to sell products to and they don't have many savings. Their credit sometimes is a problem as well.

This is true. It's unbanked or has minimal banking and is going to a lot of alternative banking services but that doesn't mean that they don't have quite a bit of influence on spending. If you were to say this is the unbanked group, Walmart has certainly stepped into this area to try to be able to build a bank and extend banking services and seize it, as you can see this connection. Walmart is everyday low prices and they're trying to do the same thing with the savings.

We're trying to do the same thing as Walmart of stepping in and saying, “What if you begin with renting, help them build savings, and then help them every time that they make a purchase?” It is tricky. There's a lot of financial literacy, so something that we might consider, but also changing the view as to what somebody's aspirations are.

I'll give one example of a resident that we talked to and they were excited about saving for two things. One was to change tires on their car. Car is super important for the three jobs that they're working. The other one was saving for their wedding anniversary. These are things that everybody can relate to. It's the same thing that a lot of folks can get to. It's the thing the other banking services aren't helping them get their withdrawal fees, etc. We have none of that. We're helping them save for changing those tires on the car and the wedding anniversary.

It's shocking how predatory some of these larger banks are. You've alluded to the fact that the financial crisis that we had created a lot of distrust amongst general consumers and this emergence of smaller banks and neobanks. One thing that's unique to PropTech companies is that they can leverage distribution channels to reach consumers. You find great success with that. You're able to partner with property managers and get access to the entire tenant base.

Why is your pitch powerful? How do you work with PropTech managers? How are you able to get so much distribution to sometimes get hundreds of tenants or thousands of tenants at once? Whereas your typical bank has to spend money on your user acquisition, get client by client, deliver retention, and churn issues. You and the other hand are in a building and you become quite critical to the workflow of how a tenant even pays their rent.

Think about the initial phases of what it's like when you're looking for a home which is incredibly stressful and to be able to pick up and move all your things and go somewhere new and try to find some more for yourself if you live on your own, your family, partner, pets, etc. It all becomes a difficult thing to build to do.

The middle of this combines with the worst things which are moving all of your stuff and a big financial decision. It's the largest expense that you're going to make during that year. Any therapist out there will tell you this could be a high-stress moment. The more that we can help take the stress out of that for the resident who is moving, the more likely they are to be able to move into that property.

As an example, a lot of properties spend $600 to $1,000 per resident to acquire a residence. That's separate from even if they're discounting the rent. Google and Instagram costs have gone up by 9% in 2021. Listing costs have gone up tremendously in terms of being able to list the apartment. Labor costs for leasing agents are going up at the same time.

Being able to get somebody to move into a property is expensive. Anything you can do to be able to attract somebody is going to lower your costs. At the same time, a lot of properties do this thing where they discount the rent and they'll say, “If you move in right now, I'll give you two weeks free or four weeks free,” or they'll reduce it all of a sudden on somebody.

The challenge here is that when they do that, it's not proven to be effective because the resident doesn't feel any of that. I'm not sure you ever got that you don't save money that you didn't spend. You don't feel it two months later. What we're doing is we're trying to add around saying, “Why don't you put some money in their pocket so that you can save it and build it up over time?” The leasing side, we're making it a lot easier for the resident. For the property manager, we're reducing a lot of the costs and overhead that they have.

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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.