CPI Capital - Real Estate Private Equity’s Post

Transcript

Andrew talked to us about how the process works when somebody uses, you know, rent app. Are you are you targeting for tenants to utilize the app? Are you targeting homeowners? Talk to us a little bit about tell us more because like tell us the mechanics of rent. I mean, you talked about. Yeah, talk, talk, talk to us about what it is, what's the problem, does it solve and all the the whole mechanics of it. Yeah. And this is kind of like how you go about I think in a broadly it's, it's, it's probably illustrative of how I think you go about trying to solve problems with build companies, which is, you know, we we looked at the space and we just collected, you know, some, some data, right, in terms of like, OK, how do people pay rent for example. Well, actually it was we stepped back and said what are the problems in this space? And actually one of the reasons I mentioned is because we were like, is there are there problems making leases and then like renewing those leases? Are there issues? And by the way there is that. Problem we just, it's just not as big, for example, right? Like how do you negotiate leases, right? And how do you create, can you create a product that makes it easier for you to get out of a lease earlier or maybe to extend the lease earlier? And then like is there some arbitrage, some negotiation, some price, you know, differences that we can play with in that space? We actually started there, but then when we kind of went deeper, we found this insane statistic of the vast majority of rent being paid and in cash. Cash and check. And it's something I mean by, I mean like 70% of, of rent paid that way. But we also realized that it's, it's primarily the smaller owner. So if you're somebody like two to three properties, that's how you collect rent. And that makes sense because, well, if you wanted to go digital, you're going to have to adopt some type of property management software. And when you have 3 properties, it's sort of overkill, you know, because these, these things, they're designed for somebody. Only like 15 properties. And so we found this really nice space with this long tail of owner landlords that really just primarily have this problem with payments. That's all they need to solve and that haven't really bothered with anything else because it was too expensive or too complicated, right? And so we're like, boom, OK, let's do this. And we loved it too because it's a lot like Square. If you guys, you know, are familiar with Square story, right? Is that consumer? But not really, not really. Yeah. Well, so I mean that company, that company is built right on this on on this, you know, crazy, crazy thing, which is like in 2010. You know, there was like, you know, 25,000,000 small, what are called micro merchants in the United States, which were basically actually, yeah, small business. It's a business with one employee, right? So business with one employee, which I'm sure you know, a lot of businesses of one employee. Well, guess what, if those guys went to the bank and you love, you like to talk about sort of that aspect of it, right? Like these entrenched industries. If you went to a bank, I mean, I'm sure you've actually tried this. You go to a bank and you send an employee of one and. People, you know, they just like, they're like, they show you the door, right? You're not a business. You can't be a business with one employee. And the most basic thing that those people were missing was access to credit card payments of 2010. And so Jack Dorsey's big idea at the time was that, OK, we have this iPhone, we built this really small white reader, but allowed anyone to take credit card payments. We wrote some software and we enable this long tail of what are called micro merchants to take credit card payments. And it turned out that there's a lot of them. And that basically most banks pretended they didn't exist and they pretended to their own detriment because you know, Square ended up having like 20 million merchants doing this. And as those merchants grew, Square grew, etcetera. So there's a very similar dynamic for real estate ownership where you have the vast majority of real estates actually, and I'm not even talking about payments, right? 60% of all real estates owned by individuals, right? We still, we think about this like, ohh, Wall Streets like buying, but they are to some extent, but the long tail is still individual homeowners. It's just that the way that our financial system is built, it doesn't like. It doesn't like to go out there and help find all these individuals and help them individually. They don't like and they don't know how to aggregate this right. They all prefer to work with the largest owners of real estate, largest landlords and build tools for those people and build services for those people. And and we're technology really shines. Where software really shines is actually, you know, providing tools and aggregating that long tail. So rent app sort of does that, you know. Similar to how you know the Square credit card reader did it in 2010. Now by creating again just a very very simple like, like elegant, umm, free way for people to both pay and collect rent.