Automatic Rent Collection with Rentsy and How to Create a Tech Startup with Prateek Janardhan

[00:00:00] This is everything real estate investing show with Sean Pan. We interview local real estate investors and professionals to go over tips, tricks and investing strategies to help you learn about the business and to enable you to achieve your financial goals, and now welcome to the show. Hey everyone, and welcome to another episode of the everything real estate investing show with Sean Pan. Today, we have Prateek who is a founder of Rentsy, a technology company that automates the rent collection process for landlords. The real estate industry is often antiquated and it’s always refreshing to see an old system get updated. In this episode, we talked about how Rentsy can help landlords and property managers and what it takes to create a tech company in the real estate space. If you enjoyed this episode, subscribe to the show and leave a review. We release episodes every Wednesday and Sunday. Enjoy!

Sean: [00:00:51] Thanks so much for coming on the show today. Go ahead and introduce yourself and just let us know who you are.

Prateek: [00:00:55] Thanks for having me today, Sean. My name is Prateek live in the Bay Area and I’m currently the founder of Rentsy, which is an online rental payments platform that kind of helps landlords collect rent online from their tenants.

Sean: [00:01:12] So go ahead and tell us your background. Like how did you even get into this business?

Prateek: [00:01:15] So right after college, I did management consulting for a couple of years and then move to the Bay Area to join LinkedIn and you know that LinkedIn for about 4 years. It’s actually, you know, really tough decision to leave LinkedIn for a couple of reasons, which I’m sure every entrepreneur, you know faces. I think you know obviously the perks of working at a tech company, people are great really friendly and then of course steady paycheck, but I think beyond that, you know. At LinkedIn, I was on the team that kind of help people find jobs and I think you know, everyone in text says that they’re changing the world or whatever but I think you know at least felt like I was making a positive impact in people’s lives through the specific work I was doing at LinkedIn. But you know, I think I’ve always been interested in entrepreneurship and I think had that kind of entrepreneurial bug and spirit. So back when I was in college at Northwestern, I actually started and ran a couple of student run businesses.

And so, you know in my sophomore year, I actually started a food delivery service. And so that was sort of in the pre like smartphone app era or before things really took off. So we kind of hack together the equivalent of like a postmates or doordash, where you know, we’d have like an online system that took in the orders of then, you know someone in the office like, you know on the phone kind of looking at the computer screen like calling drivers and being like hey, you need to go to Chipotle in like 10 minutes and here’s the order. And then drivers would kind of write out the order on like a spreadsheet on like a pad. So, you know, really like exciting experience just building that and kind of hacking that together. And then in my senior year of college, kind of started a summer storage business as you know, like, a lot of undergrads in college will want to store their items throughout the summer, and so that was kind of a clear business opportunity and so you know, built that as well. And so I think after college, of course, you know, I wanted to make sure that I step into the corporate world and I’ve got a foothold of you know, the things you’re supposed to learn as an adult, which you probably may not be able to do if you just leave college and decide to start something right away.

You know what really attracts me about entrepreneurship is 2 qualities. One is just having complete ownership over the product itself and really feeling like, you know, you can have an impact on a specific area and just having that autonomy and then I think you know, the other piece is kind of dealing with customers. So, you know, I think even back in college like it always gave me a lot of satisfaction when you hear from customers who are using the product and really seeing the value in it and just saying how helpful it was to them. I think that’s a pretty special feeling when you know that you’ve created something that’s now in the hands of people and they’re really benefiting from it. And so I think those were a couple of things that I really enjoyed about entrepreneurship and led me to leave LinkedIn after 4 years and kind of to go down that route again.

Sean: [00:04:33] So why Rentsy? Why is property management software the problem you’re trying to solve?

Prateek: [00:04:39] Kind of after I left my job as you said, you kind of have the world open to you in terms of you know, what can you start. Especially in this day and age where it’s pretty easy to just launch a website, it’s pretty easy to reach customers all around the country through, you know, Google, Facebook ads, that kind of stuff. So, you know, I think what I did was I actually made a list of kind of a bunch of different industries that I was interested in, you know, personal finance was sort of one of them and actually went down this route of looking into real estate crowdfunding as a business idea, which you know, I know there’s some sort of real estate crowdfunding sites out there, but I’d always wondered like why is it that as a sort of late 20s person that’s pretty financially savvy really like the only option. I’m aware of in terms of real estate investing is like buying a house and you know, so kind of looked into that but then that led me to just think more about the entire real estate experience in general and I think sort of struck a personal pain point that I’ve felt for many years, which is I’ve been a renter for my entire adult life and have dealt with both like inconveniences as well as some you know, pretty disappointing sort of results in terms of having to pay my rent.

So I think one example that comes to mind is at the prior place I live which was sort of a multi-family unit building. You know, they used an online system and I think when you set it up, the auto-pay like expires after a year or something, but obviously you don’t note that down. You’re not going to remember that and you kind of expect them to at least remind you about it, but I think the way I was reminded about it was coming home one day and seeing like a notice of eviction sign on my door and be like you haven’t paid your rent and I was like wait, but I got my auto-pay set up and then I went back to it. I saw like it expired and I hadn’t received any notification about it and I was like man, this could have been so easily avoided. You know, it was just as simple as just letting me know that your auto-pay is about to expire and so luckily I didn’t get evicted but I had to pay like $50 late fee and whatever which should have been like totally avoidable because you had the money to pay and it was all set up it just you know, the system didn’t notify me.

And so I think you know, that was sort of the personal aspect but of course when you’re starting a business, I think, just having a personal pinpoint isn’t enough. You need to both understand, you know, the market dynamics like the competition, the customers, all of that. And so, you know, did a lot of research into that aspect and you know learned a couple of things and so I just go through some numbers here. So in terms of the market, there are about 50 million rental units in the US. And when you think about who owns those rental units, about half of those or say 25 million are owned by say a large property management companies may own like thousands of units and then the other half are actually owned by individuals, which was kind of interesting to me that that many rental units are owned by individuals or say small time in real estate investors or property managers and you know, when you look at those 2 segments of the large-scale property management companies and then the individuals, the large-scale property management companies, obviously because it’s a business for them, you know, most of them use, you know, one of the established software for property management. So the 2 most popular are AppFolio and Buildium. And you know, they do everything from rent payments to maintenance request to hooking up to you know, any accounting system that you deal with so they’re quite sophisticated in terms of the breadth of what they offer which is kind of required if you’re managing, save thousands of units.

But then on the smaller side, you know, let’s say you’re an individual or a real estate investor that manages like 20 units, you wouldn’t be able to use one of these large-scale property management software because it’s cost prohibitive for example AppFolio, which is the biggest one I think has something like a $250 initiation fee and then a $250 monthly minimum in terms of like how much you need to spend and so it really only works if you have say more than like 500 or maybe even a 1,000 units to start to hit those minimums. And so you know, that got me thinking about what do these individuals really do, right? And like what does that market look like and so you know, did a bunch of research there and found that okay, there’s a couple of different options you have as a small-time property manager landlord. So obviously there’s the traditional like cash or check method which is you know has work for a very long time, but that doesn’t necessarily mean that it’s a right thing. It’s you know, definitely inconvenient for renters to remember to pay each month and also maybe mail a check or deposit a check and for landlords like you know, it’s just anytime you kind of leave the onus to the renter to remember to do something every month. There’s a lot of opportunity for things to come and lay or excuses which are you know, the infamous like the rent is in the mail, but like, you know, it hasn’t reached you yet, but it’s not my fault, that’s the US Postal service’s fault.

And then you have some other options. So you could give the you know, the tenant your bank account information and they could go to their bank and kind of initiate a direct deposit to you. But of course the biggest liability there is you’re actually sharing your bank account information, which most landlords don’t necessarily want to do. Then there’s you have the sort of the what I call the peer-to-peer, P2P payment services like Venmo and Paypal. And those can work in some cases, but they aren’t really built for rent collection or kind of running a small business. So just a couple of the major flaws, one is that you know with Venmo and PayPal, you can’t set up recurring payments. So, you know, the renter would have to actually remember each month to kind of go in and make the payments still. You know, and then I think they also have payment limits so Venmo for example has like a $2,000 weekly payment limit, which is okay and in some cases, but for a lot of places in the US if you’re collecting like first month’s rent plus security deposit plus like some fees or anything like that. You know, it’s probably over the $2,000 limit. So it’s just not ideal when you have to like split up your payments into you know, multiple weeks or anything like that.

In addition to that, you have all their online platforms that are kind of geared towards smaller scale landlords. And so the 2 most popular are Cozy and Avail and you know, they do everything from kind of allowing you to like instantly linked your bank account, send you notifications when payments are scheduled initiated, you know, they have a dashboard where you can keep track of all your payments and the status is all of that. But you know, I think what I found there was 2 things. One is that they’re still quite costly especially for the features that they offer so, you know, I think Avail is something like $10 a month for your first unit if you want kind of the full suite of features and then some additional amount, you know for each unit, which is fairly costly and then Cozy is actually a free service but if you want like faster payments, you have to pay $3 a unit a month. And so there are a lot of these add-on fees that can start to add up with these payment services. The other thing is for certain reasons, even when you look at the market, like, you know, something like 60% to 80% of rent is still paid with check at least in this sort of, you know, individual landlord segment.

And so even the largest player like Cozy or Avail haven’t significantly penetrated the entire market yet. And so, you know, I know this is kind of a long-winded answer to your question, but after looking through all of those different options and also understanding the overall kind of addressable market, I felt okay, there’s definitely an opportunity here to build a cost-effective but really powerful rent payments product and with the right go to market approach be able to get it into the hands of a lot more individual landlords and smaller scale property managers

Sean: [00:13:28] Cool. No thanks to the answer. It’s good to have so much detail so that we can understand like your thought process behind creating it as the co follow-up questions.

Prateek: [00:13:35] Yeah.

Sean: [00:13:36] So I guess the first one is can you summarize what you just said and kind of go over who is your ideal client and what is the exact problem that you’re trying to solve?

Prateek: [00:13:45] I think the ideal client is actually a variety which is kind of what makes this product versatile. But I’d say it’s anyone from an individual landlord that’s say just owns 1 or 2 units all the way to property managers that you know, don’t necessarily sort of own hundreds of units, but may own like say 25 to 50 units and maybe have a bunch of different landlords that they work with. The ideal customer is really in that smaller scale management segment. Yeah, I think in terms of the problem that were solving, you know, when it comes to collecting rent, you’re sort of in this awkward space where it’s not purely like a peer-to-peer transaction like a friend paying someone else for dinner or something. So a lot of these peer-to-peer apps don’t necessarily work but it’s also not necessarily a purely like, you know, business-to-consumer solution where you can afford really expensive software to manage your payments. And so I think creating a product that is able to offer some really customized features for the rent payments use case at an affordable price is an opportunity that a lot of landlord’s property managers could benefit from.

Sean: [00:15:05] And what is your current business model?

Prateek: [00:15:06] So in terms of the current pricing, it’s free for everyone’s first unit. And so, you know, what we want to do was essentially give the option for anyone to just try it out with one unit and get all the benefits. And so, you know, I can definitely talk to you about all the features later on but first unit completely free collect as much rent as you want from your tenants and then beyond that sort of a tiered pricing where it comes out to about $2 per unit per month. So it’s like say $10 for 5 units, $20 for 10 units. I think $50 for 25 units per month. And so that’s sort of the business model that we’re using is a monthly subscription fee for the landlords. We’re not charging any per transfer fees to either the landlords or the tenant so I think that’s what’s really nice about it. It’s a very sort of transparent pricing model where it’s like, hey, I’m paying this much per month, doesn’t matter how much I transact or you know, how many people I transact with, you can collect from multiple renters. It’s kind of that same fixed cost per month.

Sean: [00:16:11] I was going to ask you like how does it work? Why is it better than the alternative that you mentioned AppFolio and Buildium but more interestingly, like how are you able to do it at such a competitive price?

Prateek: [00:16:21] We offer some basic features that you’ve come to expect from online payment systems, like tenants can sign up for auto-pay, landlords can actually add automatic late fees. So, you know, that’s always something that is quite awkward for landlords to deal with is, you know, if someone’s like a day [00:16:39] late, do you charge them the late fee or do you let it go and so kind of leaving it to a you know, a machine or a website to just enforce that is actually very beneficial and then there’s of course a real-time notification so when a payment is scheduled, when it’s initiated, when it actually hits the landlord’s bank account. We send real-time notifications for all of that. But I think those are say features that you could find elsewhere as well. I think some of the features that make us pretty unique actually, one is the two-day ACH speed or the two business days a transfer speed. As you may know like most bank transfers take something like 3 to 5 business days to complete which you know as a landlord or investor, you know, just for cash flow purposes, you kind of want your money as soon as possible.

And so if your renter pays you on the first of the month with a check, by the time you actually deposit that and then it actually clears into your bank account, it may be like the 8th or the 9th of the month with weekends in between and everything like that. So you’ve almost lost like a 3rd of the month to actually get your payment. And so what we offer is an expedited ACH speed of 2 days, and that’s actually standard with kind of all of our transactions. So some of these other competitors do offer 2 day speeds. They actually charge a pretty hefty premium for that. And so our free products say your first unit, you know, which is free. You actually get the 2 day ACH included and so what that means is, you know, if the 1st of the month is Monday, the landlord will actually have the rent in their bank account available to use by the 3rd of the month which you know would be a Wednesday. And so that’s something that’s actually quite powerful that when you look at the feedback on a lot of these other payment services. That’s one of the biggest pain points is man, like I have to wait, you know 5 business days for my rent to actually come into my account and that’s you know, kind of annoying if I want to use that money to actually you know do something.

So that’s one of the features that make us stand out. I think the feature that makes us really unique is kind of what we do with payment reversals and insufficient funds. So another challenge that landlord sometimes face is given the way the ACH is kind of automated clearing house, which is you know, the banking network. Given the way it works, I think it’s still fairly antiquated and so what could end up happening is let’s say someone initiates a transfer to you on the first, they may actually not have enough money in their bank account but the transfer will actually kind of start to initiate and then it may take up to like 2 or 3 days for you know you to as a landlord to be notified that there weren’t enough funds and then what happens is a payment reversal where you thought you had the money but it turns out the money was never there. And so now it’s like, you know, the 3rd or the 4th of the month, then you realize you don’t have the money, you may have to pay a payment reversal fee. So it’s just, you know, even though it may not happen extremely often and you know, hopefully with good tenants should not happen, it is a risk and something that is really inconvenient to deal with and so one of the really unique features that we offer is essentially eliminating payment reversals.

So what we do is pretty much a second before the transfer initiates say on the 1st of the month. We’ll actually verify are there enough funds to complete this transaction, which seems like such a basic thing to do, right? Even with like credit cards, you have like pre-authorization and all of that so it’s not really like a novel concept in terms of payments, but in terms of ACH or banking payments, it is somewhat novel to know that hey, if a transfer has initiated that actually means that I’m going to get the money and I’m like guaranteed to get the money and if there aren’t enough funds to make the transfer, you know, what we’ll do is actually send a notification to both the landlord and the tenant letting them know, hey, you know there wasn’t enough funds to complete the transfer. So, you know, please kind of add funds to your bank account or find an alternate method of payment for this month. And so that’s something that really is unique and I think it gives people a lot of peace of mind, saves people a lot of time and potentially money if this were to happen.

Then I think you know a couple of other features that we have. So you can actually link up to 6 bank accounts if you want to deposit your money into different bank accounts, useful for some people, but I think the final 2 things that I’ve found are actually really important in this space, one is security. So as you can imagine, you know with any of these services, the number one kind of concern or question that a user has about the product is how secure is it and you know, I’m trusting this product with my banking information, I’m telling my tenants to give it their banking information so I really want to make sure it’s secure, right? And so what we’ve actually done for that is we’ve partnered with 2 payments companies. You may have heard of a plaid which is sort of a multibillion-dollar like Fintech Company in the Bay Area and they’re used by Venmo, MX, Robin Hood. They’re used by a lot of major companies to instantly authenticate bank accounts. And so they’ve actually developed this technology where instead of traditionally in order to authenticate a bank account, you have to like put it in your bank account routing number and then you have to wait like 2 days for micro deposits to land in your account. And so it was kind of a big hassle, but they’ve developed this technology with your bank account username and password, you can actually instantly authenticate your bank account. So literally takes like 5 seconds to do and they handle all of the security.

So what’s really nice is for all of the people that are using Rentsy right now, Rentsy actually does not store any financial information or bank account or routing numbers. It’s just that information does not exist anywhere in our database. The way it works is, you know, it’s authenticated by plaid which kind of handles all of that information and obviously, that’s all they do and so they have ton of security measures in place and they simply give us like a key or a token, a kind of a secret token that allows us to access that in or kind of you know, not access that information but allows us to essentially make transfers through plaid. And so, you know, that’s something that allows us to be really secure versus other competitors. It’s almost like a baseline, right? Like you need to offer like really strong security in order to you know, even get anywhere but I find that there are some players in the space that it’s unclear like what their security methods are and stuff like that. And so I think with Rentsy, the one thing we really wanted to communicate to users is hey, essentially if you use Venmo, if you use any of these other services, you’re actually not really adding another point of vulnerability because you know, we’re using the same service that they use to link bank accounts and make payments.

So security aspect is really important. And then I think the final piece is kind of ease of use. So this is of course a product that requires set up, right? Like you have to invite your tenants. You have to link your bank account. You know schedule payments all of that. And so what we’ve done is made it really, really simple to set everything up. So we have you know, a really easy-to-use onboarding flow like a 3 step onboarding flow with the like instant bank account authentication, all of that. It’s also mobile-friendly so you can do all of it from your phone, from like your phone browser if you want, you know anytime you need to schedule payments, you can do it from your phone as well. And so I think the ease-of-use aspect, it also is something that I think you know, we’re trying to stand out on versus the other competitors.

Sean: [00:25:14] Is Rentsy mostly base for a rent collection or does it also use for I say you know paying your contractors and then having a receipt so that if you’re a property manager, your landlord can see all the payments going in and out.

Prateek: [00:25:27] That’s a really good question. I think you know, we’re starting off with right now is really focused on creating an amazing payments experience between renters and landlords. However, like we are actually experimenting with some interesting used cases. So, you know, this is not necessarily like part of our core business, but you know as a start-up, you’re always trying to understand and experiment like hey; maybe this could work in like an adjacent space, right? And so like a couple of spaces that we’ve actually experimented in, one is kind of creating like a rent split tool for tenants. So if you’re you know, a lot of people especially you know, in major cities who are renters kind of live there, there’s actually a legal term for this called I think Master Tenant, where you know, you may be the only tenant on the lease. And then you’re essentially responsible for collecting rent from the other tenants as well as like filling up that space and so we created a little tool for those Master Tenants to be able to collect rent from the roommates for example. I think the other thing we’re looking into and we’ve actually, you know rolled this out with some of our users is most property managers collect rent directly from tenants, but we are working with some property managers who actually still have their landlords collect rent directly and all they want is just to be able to track that those payments are going through properly.

And so we’ve created this flow where the tenant can actually pay the landlord. And then the landlord can also pay the fee to the property manager all in sort of in one system and the property manager also gets notifications about you know, whether rent has been paid from the tenant to the landlord. So it’s kind of a fully enclosed system between the tenant, the landlord, and the property manager where you know, all the payments can go through Rentsy and you know, it’s visible to everyone. But I think to answer your question about being able to kind of pay contractors and track all of that, I think that’s something that we definitely want to add in the future. Right now we’re just focusing on some of the core payment flows.

Sean: [00:27:48] Cool, it makes sense. And you know as a tenant before, I used to rent back when I was in LA. I understand the pain of being a master tenant and having to collect rent from all your friends and like you paid yours on time but your friends didn’t pay his on time, like why do I have to pay the late fee and stuff. You know also seems that for a lot of these, uh, these programs it requires the landlord or the property manager to sign up with you guys first. Is there any way that let’s say the tenant can sign up with you guys? I don’t know if this makes sense because there are frustrations if this landlord doesn’t accept automatic payments. Got to write a check to him and mail it before the 1st of the month, that’s super annoying. Is there a way that I can just pay my landlord without having to write him a check, you know, I don’t know.

Prateek: [00:28:29] You bring up a really interesting point. You know, it starts to get at the question of why haven’t online rent payments scaled as much as they should have by now, right? I think it’s like the one space and payments were like literally I’ve had friends and other renters be like, it’s like I had to like order a checkbook from my bank for, you know, $25 because I realized that I needed to pay my rent with a check and like I’ve never used a check for anything else before. And I think one of the biggest issues is it’s a system that requires two parties to essentially consent to using it, right? Like any marketplace business. We have a challenge here, is that you know, the landlords are the ones that have all the power. And you know, they’re the ones that maybe you kind of first need to get to in order to say, hey like sign up for this link your bank account and then get your tenants to use it.

I think the challenge with that is a lot of landlords, you know are definitely on the older side, maybe, you know have been doing this for a really long time, maybe like extremely concerned about security not as comfortable using new technology. And so you kind of run into that issue of they are kind of comfortable with the current processes because they’ve been doing it for so long and so it’s pretty difficult to reach them or to convince them to try something new, right? And I think on the tenant side, you have this group of people that are all probably like extremely excited to do anything that does not involve a check. And you know, are very willing to use technology where they have to input their bank account information and everything because you know, they’re already connected and in many ways, but the challenge there is they’re not necessarily the ones with the decision making power in terms of you know, choosing how to pay their rent. And so I think you kind of run into that and that’s one of the biggest challenges I think of this business is, you know, the segment that you’re targeting requires actually a lot of effort in terms of acquiring them as customers, even though the segment that it’s also serving is really would be really excited to use the product.

So, you know, I think to answer your question of is there a way for renters to pay like upfront or you know to kind of sign up without landlords? You know, I think that’s something we’ve thought about, so right now if you go to the site as a renter, what you are asked to do is say like hey, you need to get your landlord to sign up first and invite you so just put in your landlords email and we’ll send them an invite and then you know, they can sign up something that, we’ve been thinking about is what if you essentially like allowed a renter to complete the entire setup process without having the landlord on the other side and then you could do one of two things right? You could either take the money into like say Rentsy could collect the money and then write a check on the renter’s behalf. So Rents essentially takes away the check-writing step of it, all that would require is like the rent or giving us the landlord’s address where they deposit the check to or you could potentially, you know, still try to keep it all online and like have them fully sign up and then actually send an email to the landlord saying hey your renter has set up auto pay and link their bank account for the system. All you need to do is just you know, sign up in five minutes and you’ll start receiving your payments automatically. And so that’s a really, you know, insightful question around just the overall like customer dynamics and how you can get more people to sign up because right now we are really relying on one side of the market to be bought in in order to you know, use this product.

Sean: [00:32:21] Yes, especially because if you get your renters sign up and kind of like bug your landlord, hey, it made the first ones free anyways, so…

Prateek: [00:32:28] Yeah.

Sean: [00:32:28] They have nothing to lose really, as automatic payments that’s kind of what they want, right?

Prateek: [00:32:32] Right.

Sean: [00:32:32] Sounds like an interesting opportunity.

Prateek: [00:32:34] Yeah, yeah. I think it’s something that we definitely want to explore like making it easier for renters to you know, use this, even if their landlords aren’t bought in already and you know, then kind of encouraging landlords to use it

Sean: [00:32:50] Yeah. So are you guys focused primarily in San Francisco or do you have renters all over the United States?

Prateek: [00:32:56] Yeah, so what I found is of course, you know as an early stage business the best way to get customers is by actually going to meetups, kind of meeting people in person, telling them about the product. So, you know, I think I’d say like the majority of our users are in San Francisco at least California. [00:33:18] We actually are worth serving like a hundred fifty unit RV Park in Orange County actually, that’s currently, you know, fully on Rentsy and for them we process rent payments for both the RVs that are kind of parked there as well as they have like a huge storage unit kind of facility where they essentially have a bunch of RVs that are just storage units for people and so, you know, we’re processing the monthly payments for that as well. So let’s say all of the California user base is based on kind of in-person outreach, but then just through you know, as I said at the beginning of the show, like the beauty of current internet age is you can really reach people anywhere through advertising. We have people in Pennsylvania, Missouri, New York, kind of all using, you know, the product that I’ve just heard about it either through online advertising or read about it somewhere else and have kind of signed up but most of those people are kind of more individual landlords.

Sean: [00:34:20] Is Rentsy able to be used all across the United States?

Prateek: [00:34:23] Yeah.

Sean: [00:34:24] So can you go international too? Or is it only based on the United States?

Prateek: [00:34:27] So, you know Rentsy can be used by anybody in the United States and any state and you know literally takes 5 minutes to set up your account. Internationally, we do not support rent payments and one of the main reasons for that is primarily like security and compliance. So the payment partners that we’re working with especially the banking partner that we’re working with to kind of process payments on the ACH Network, they purely serve the US banking Network and one of the reasons is just the regulations around banking networks are so different and stringent in each country, that even just kind of supporting one country requires a lot of compliance work to be done and you know, it’s almost like you would require like different vendor, you’d have to plug into multiple vendors to be able to serve different countries. So we’ve built a system that’s really easy to use and really secure within the US. And that’s kind of what we’re pursuing for the foreseeable future just given you know, that allows us to provide kind of the best service.

Sean: [00:35:36] Is your banking partnership the reason why you’re able to ACH so quickly?

Prateek: [00:35:39] Yeah. So for that actually we’re using one of the leading ACH payments sort of facilitators, the technical term is payment facilitator. And so they actually allow us to do the  2-day ACH speeds, we have the have the ability to turn on next day ACH which is something that we’re thinking about doing in the future, is actually even offering like faster payments for maybe a small fee or something like that. But I think the other advantage that they provide is the notifications aspect of it. So they’re also the leader in terms of you know, providing real-time notifications about everything related to your payments. So as you know, like every banking transfer has kind of 2 parts to it one is like when it’s initiated and then the other is when it’s completed and there’s some lag between those 2 and so this partner actually is able to notify Rentsy the instant that a payment is initiated or the instant that a payment is complete. And then we instantly notify the landlord and the Tenant as well.

So I think that’s really great because you know rather than like wondering like oh man, I need to log into my bank account and check like has the payment arrived yet and like maybe you log in on like the fourth, the fifth the sixth of the month and you’re just like wondering when it’s going to arrive, we actually proactively tell you like the instant that it’s in your account. We’ll send you an email and say hey funds are available in your account.

Sean: [00:37:12] So remind me again, how long has Rentsy been in operation?

Prateek: [00:37:15] Yeah, so it’s actually still fairly early days. So Rentsy kind of fully launched I would say in like late March early April and so it’s you know, it’s still like a pretty new service but I think what we’re finding is that this is a market that is still quite underserved. It’s actually quite interesting because it’s a highly competitive market. I laid out all the options in addition to other online rent collection systems. There’s like a bunch of other options you can use like check cash, Venmo, all of that. This is a highly competitive market but it’s still underserved in a lot of ways and so we’ve been able to serve everyone from say like 100 plus unit, property management companies all the way to individual landlords who simply own like one unit that’s out of state and just need some help collecting rent.

Sean: [00:38:10] So 3 months later since your launch, how big is your total portfolio of properties you’re helping?

Prateek: [00:38:16] Yeah. So right now in terms of like doors under management of doors using Rentsy, we have like, you know, a few hundred..

Sean: [00:38:24] Wow.

Prateek: [00:38:24] Doors that are you know, using Rentsy and in terms of like processing payments right like that translates to roughly say like a million dollars in run rate kind of rent payments, so annually, so not monthly but you know, annually, where kind of at a say million dollars processed, you know in rent payments and you know, I think like the goal right now for the business is just focus on customer acquisition because that is definitely the biggest challenge in this space where as I mentioned like things have been done a certain way for so long, a lot of people don’t necessarily want to try something new on top of that. You have a bunch of other services that are all claiming to do great things as well. And so, you know, I think the goal right now is just okay like, how do we get to a thousand and then how do we get to 10,000 and I think some of the points you brought up around, hey like,  maybe you have to be able to allow renters to sign up without the landlord’s initially signing up and also experimenting with different ways that people can sign up to make it even easier for them.

Sean: [00:39:34] Yeah, so do you have any strategies in mind of things you’re going to do?

Prateek: [00:39:38] One of the benefits of Rentsy is it’s very versatile in terms of the sort of customers that it’s able to serve. So as I mentioned we have like individual landlords with one unit and then larger property management company. So they actually require pretty different marketing tactics to reach both of those and so I think on the slightly larger scale property management side, you know really starting to double down on sales in that segment and calling as many of them as possible, you know reaching out to them that sort of the best way to reach these larger scale companies. I think testing out some interesting ideas like the stuff we talked about around, you know, getting tenants to sign up first and then maybe having the landlord sign up that could enable growth. I think there’s also from a feature set standpoint things that could make Rentsy even more attractive, so I think in terms of payment features, one thing that we’ve been thinking about is starting to kind of involve text messaging in the process.

So, you know, once you sign up or you hook up all your information like you set up your bank account and everything, you may get like payment request on a monthly basis or invoices for certain things and you may not want to like log into your account each time or go to a website and so what if we just sent you a text or you know sent you an email and you can just respond to the text or email saying yes, you know pay this and that would essentially schedule the transfer and everything. So I think that could be a pretty interesting feature that would make it even more easy for tenants and pretty unique and I think on the you know, in terms of the breadth of features, as I mentioned, like property managers, collecting rent is just one part of their job. As you know, most of your listeners will know, there’s maintenance request, there’s a counting all of that.

I think, you know, the next kind of area that we want to move into words is probably maintenance requests. So, you know, once you already have tenants and landlords on the platform, it’s actually pretty straightforward to add in say messaging capability and being able to track maintenance requests all of that. And so I think that’s something that we want to get to eventually but I will say that I think one thing that we are pretty focused and consistent on is we really want to stay focused on the rent payment experience and create the best rent payment experience possible because with any early stage company is very tempting to move into a bunch of different areas and spread yourself very thin and then what you realize is you may have built a product that serves a comprehensive set of needs but it serves those needs like in a fairly mediocre way, which is really difficult to stand out versus bigger competitors. So initially, we just want to be laser focused on payments and create the best payments experience possible.

Sean: [00:42:44] Yep, it’s a really good strategy. Just focus on one big thing and don’t get distracted by all the shiny objects around you.

Prateek: [00:42:50] Right.

Sean: [00:42:51] Before we go, real quick, I want to ask you more about your story and more about the business side of things. So you told me that you did a lot of research, especially after leaving LinkedIn to decide this is the kind of business I want to go into, how long with our process between leaving LinkedIn and starting Rentsy?

Prateek: [00:43:08] Yeah, so from the time that I started researching the business like business ideas to starting Rentsy was probably about two and a half months and you know, I think like I went pretty deep down a couple of different business ideas, but I also felt that at some point you kind of just have to take a leap of faith and just go for something because I think there’s a there’s a lot of red flags for starting any company, right? It’s one of those things where like if you’ve ever thought about a great idea that you’ve had and then you Google it, I think this happens to everyone like fairly frequently. You think of an amazing idea and you’re like, man. I wish there was a service for this and you go to Google and you Google it and there’s like 10 things that pop up that do exactly what you’re thinking of, you know, so I think like when you’re trying to start something or trying to come up with an idea for starting something there’s always going to be like, you know, red flags in terms of its super competitive. It may require like a lot of capital to build, It may be really difficult to acquire customers.

And so I think all those things are important than you need to do your research and at least believe that you can create something that can overcome some of those challenges but then I think at the end of the day, you kind of have to go with your gut and just say you know what, I think I have enough belief that this is going to work. I’m never going to know like a 100 percent sure. So rather than spending another like 3 months researching ideas and trying to wait for like the golden idea that nobody has ever thought of before, I’m just gonna move forward with this and I think kind of my goal going into this was I’d rather I’d rather try something and fail at it, than not try anything or just keep thinking of different ideas. And so that’s kind of the path that I’m on is, just be laser focused on building this, trying to make it work and seeing where it goes and you know taking it as far as possible.

Sean: [00:45:09] And you said you’re the founder. Do you have a co-founder as well? Or did you just do it yourself and somehow bringing other people?

Prateek: [00:45:15] No, it’s actually just me on the business. So essentially you know, what I did was I started this process completely on my own in terms of thinking about different ideas all of that and then found this SF development company that builds websites and so, they actually use this pretty unique technology that allows you to build websites pretty quickly, at least the front end piece of it as long as you know, some of the like back-end, like API coding aspects. So because of that and they’ve done like thousands of projects, I was able to actually get like an NVP of Rentsy done in like a month, which is kind of crazy to think that, you know, payments platform that has like all these different integrations and you have like two sides of the marketplace that have to interact with each other can all be done in just one month. +

But I will say that after that initial phase of development; of course like to really, you know, really build something valuable. You can’t just have like an end of basic NVP. You really need something that has like all of these unique features and that works for everyone. And so I got pretty into the coding piece of it, even though I’m not technical by Nature. I was able to understand enough how the back end works, how the APIs work with payment partners and because of that I was actually able to kind of take it to its current state of being able to offer like a bunch of these custom and unique and you know features that make it a really powerful rent payments product.

And so I think where I’m at right now in terms of team is I’m actually starting to think about either looking for other people to join Rentsy or either as like co-founders or you know as partners, you know, I think probably the highest priority need for a business like this at the stage that it’s at is sales and marketing. As I mentioned like customer acquisition is a big challenge and so that’s sort of where I’m at right now is it’s like, okay it’s built, there’s users on it, It works well the people that use it really like using it and so, you know in order to scale you need a team and so that’s kind of the next stage of Rentsy.

Sean: [00:47:38] Well, that’s super inspiring. So right now you’re a one-man show.

Prateek: [00:47:42] Yes. Yeah.

Sean: [00:47:43] Wow, so you learn how to code because you had an idea and just figured out how to do it.

Prateek: [00:47:48] Yeah.

Sean: [00:47:48] You know you do have a technical background. You kind of just figured it all out as you went along.

Prateek: [00:47:52] You know, I will say that the platform that Rentsy is built on is actually this unique platform that allows you to kind of build these websites and build these products without necessarily needing to code like the entire front end piece of it. So you can almost imagine it as like they’ve built like an interface that allows you to kind of build a website or at least the user interface without necessarily needing code but then the part that you still do need to be able to do is for example, like initiating a payment or authorizing a bank account, those all still require code on the back end to be able to interact with the payment processors and let them know like hey this person wants to send money to this person like you have to send that information. And so, you know that did require some like technical learning but I think that’s also what’s been so great about this experiences is I feel like my past experience was all on the business side and through this I’ve gained some technical experience as well.

Sean: [00:48:55] Well that’s amazing. And when did you go to that San Francisco development company to create your NVP?

Prateek: [00:49:00] This was back in December. So I guess the timeline was like December to like say January or February was the main building process and actually probably one of the biggest barriers to get through was that and this is something I’m very thankful for actually, our payment facilitator is extremely strict about compliance down to like you know when like, when this happens you need to send this email to the user and this email to the user needs to have this information in it. You know, and so we had to do a bunch of back and forth with the payment facilitator to make sure that we were fully compliant with all of their kind of regulations that they comply with and before we could even launch Rentsy we actually do like a live demo to you know, someone on their like legal team on their anti-money laundering team.

So, you know, [00:49:57] that’s something that I’m definitely very thankful for. That I feel really good about the fact that we built a product that is like extremely compliant and we’re using very reputable payment partners, but that’s sort of took us till like say March in terms of actually having all everything signed off on and then starting in like April is when we really started to introduce it to people advertise both online and offline.

Sean: [00:50:24] How much did it cost to create that NVP? And how are you currently funding your project?

Prateek: [00:50:27] In terms of cost, It was pretty affordable, say like single-digit thousands. I think what I will say, is that the website that you see currently Is actually fairly different than what it was when you know the development company handed it over and so I actually don’t know if, if I had essentially just taken that website and not made any changes to it myself or not learned how to be more technical with the product. I actually don’t know if we would have kind of reached a point where we could have all these users and make it work for everyone. And so I think like the key there was they really were able to like using their expertise get like the basic version out really fast, but then it actually required a lot more effort to get it to a point where you could have like different methods of linking bank accounts and link multiple bank accounts and you know add late fees and like all of that is stuff that you know was added later on.

So that was sort of you know, the web development piece of this. And then in terms of the funding, right now it’s all sort of self-funded and you know, in terms of, one of the nice things about a business like this is yeah, like, you know, you do have to pay the payment processor for sort of like a monthly subscription fee, but we actually don’t pay any like per transaction fees. So it actually scales really well, you kind of just you know, pay a fixed amount per month and what we’re doing now is kind of in the phase where, you know, starting to think about things like, you know, doesn’t make sense to get funding or honestly like maybe it’s fine to just keep growing this organically.

And you know, I think a common word that tech companies or startups uses like bootstrapping and what that means is essentially like you never took in any funding and you’ve essentially been able to grow the business at a more, say a moderate Pace but entirely self-funded so I think like any time you’re starting a company you kind of you know, once you’ve established that okay, there’s a market here, there’s some there’s a product that works and there’s users, you kind of have a decision to make I think one is, do I go and try to raise a bunch of money and then, create the expectation that this business is going to grow to like tens of thousands of users in like two years or else it fails or do I kind of continue to sell fund this or kind of fund it through like friends and family or  smaller set of investors. And maybe it grows moderately. But you know, maybe that’s okay and that allows it to succeed in the long run.

Sean: [00:53:10] Yeah, that’s an amazing story and thank you for sharing that because personally I’m kind of in your shoes where I do have a technical ground, but I’ve always been too scared to launch something because I’m not technical enough to create like that base. But it seems like hey for a couple thousand dollars, you can create an NVP with a development company.

Prateek: [00:53:27] Yep.

Sean: [00:53:27] And use your own knowledge and your own style to tweak it to your desire. And honestly that doesn’t take that much money and you have a great business model and that is pretty much infinitely scalable.

Prateek: [00:53:37] Yeah.

Sean: [00:53:38] You have little overhead and as customers come along and find you, your business is going to grow.

Prateek: [00:53:44] Yeah, yeah. Everyone should you know, I definitely encourage entrepreneurship, we don’t need another payments company, nah I’m just kidding, but…

Sean: [00:53:55] Right we need more unique ideas not just flooded competition at the same thing over and over again.

Prateek: [00:54:02] That’s definitely true and I think you know also again like starting a company you kind of have, there’s so many decision-making points, right? I think one of them is do I go after a space that’s highly competitive, but it serves a need that I know exists. So for example, like, you know rental payments like going into it; of course, it’s a need that exists because there’s all these other companies out there that are already serving the space. So at least like you eliminate that variable or you kind of have the choice of do I try to come up with something entirely new? And you know, I’ll be like the only one doing it or one of very few competitors out there, but I’m not really sure if there’s like a true market need, right? And so you kind of you have the benefit of being one of the few competitors, but you still have to prove like is this something that people actually want to use.

I think that’s definitely like a decision point that I came across when I was figuring out what to launch is like do I want to go for something that I know there’s a clear need but there’s a ton of competition or do I want to go at something where there’s very little competition and it’s a totally new idea, but I’m not really sure like whether there’s a market there for this. I don’t think there’s actually a right answer to that right? There’s businesses that succeed and fail and in both those areas.

Sean: [00:55:22] It’s like red ocean blue ocean question, right?

Prateek: [00:55:24] Yeah.

Sean: [00:55:25] And I think you’re doing it right where you’re kind of going in a red ocean, but your business is pretty much cash flow and then once your business here does really well, then you can probably go to something more speculative where you create something completely unique that blows up to billions and billions of dollars.

Prateek: [00:55:40] Yeah. Let’s hope.

Sean: [00:55:42] Amazing story man. Thank you so much for your time. How can people get in contact with you?

Prateek: [00:55:46] Yeah, so in terms of the website and signing up it’s free for anyone’s first unit. And so you just go to www.rentsy.co. I just want to emphasize that it’s .co not .com, so no M at the end. And then if you’re a tenant, you can invite your landlord to sign up. If you’re a landlord, you can go and actually create your account and link your bank account and invite your tenants in under, you know, five minutes, maybe even two minutes if you’re fast enough. And then in terms of contacting me you can reach out to me at Prateek@rentsy.co. And in terms of depending on what your needs are, right? Like I think I talked about we serve everyone from Individual landlords to slightly larger property management companies. If you are on the larger end property management companies, reach out because we do have some like volume discount pricing for more than say 50 units or so.

Sean: [00:56:43] Awesome, Prateek. Thank you so much for being on the show today. I look forward to seeing you around real soon.

Prateek: [00:56:48] Awesome. Thank you.

Here are some of the key takeaways I got from speaking to Prateek. There is a lot of potential for Tech and real estate. Most of the systems are antiquated and inefficient. Rentsy solves the annoying problem of having to manually pay your rent every month. By using other platforms, it’s able to be as secure as PayPal, Robin Hood or Venmo. If you’re a landlord or a property manager check out Rentsy.co and automate your rental collections. And when it comes to running your own Tech business, it’s not that difficult. You just have to do your research and find the resources to create your product. He was able to outsource the minimum viable product to a development company in San Francisco and then make his final tweaks after that. You can learn as you go and experience is invaluable and just goes to show that there really are no true excuses why you can’t start something great. He’s on a phase now where the basis of the company started, he just needs a team to grow it and over time, I’m sure he’s going to be wildly successful. I hope you learned a lot. Thanks, and have a great day.