REAL ESTATE TECHNOLOGY PERSPECTIVES THAT COUNT

The Growing Need for Affordable Housing

From rural towns to major metropolitan areas, a severe affordable housing deficit has affected communities across the United States for decades. Exacerbated by macroeconomic headwinds like record-high inflation and rising rents, the gap in affordable, available homes for renters has significantly worsened in recent years — currently standing at a

shortage of 7.3 million units.

As the commercial real estate industry grapples with this growing issue, the affordable and workforce housing spaces have seen an influx of institutional capital in recent years propelled by increased demand for environmentally and socially conscious investment practices. However, this asset class often presents owners with its own unique set of challenges. Unlike luxury multifamily housing where most applicants have high credit scores and can easily get approved, this is not the case with many affordable housing rental applicants. Lower credit scores make it harder for applicants to get approved and more difficult for owners to know which residents to accept. As more institutional players enter the affordable housing sector, there is a growing need for solutions that help owners better manage the risks associated with the space while making it easier for renters in need to secure housing.

Modernizing the Tenant Screening Process

Market dynamics persist, and there is a greater emphasis on identifying solutions that help create a more equitable renting environment for owners and residents, leading RET to our most recent investment in

Rent Butter.

Built to help owners and operators of workforce and affordable housing communities better assess risk when screening potential residents, multifamily, single-family rentals, and manufactured housing benefit from Rent Butter’s tenant screening process. Traditionally, owners of these types of properties have relied primarily on static data like credit scores and background checks when vetting potential applicants, which provides only a partial picture of renters’ financial footing.

Rent Butter’s digital application allows owners and applicants to transcend static credit checks in favor of sharing alternative data like banking, spending behavior, and other unique metrics. The platform then provides property owners with in-depth financial and credit reports in a matter of seconds. By reviewing the entire financial history of a prospective resident and using predictive analytics, Rent Butter highlights key trends — such as whether a credit score trajectory is on the rise or getting worse — helping property owners avoid threats like rent defaults and consistent turnover and providing them with more accurate, holistic and equitable assessments of an individual's ability to pay rent.

The platform

is also working to create a better leasing experience by fitting seamlessly within property managers’ existing workflows

and has the ability to validate important documents like applicant I.D.s, employment records, and income statements in real-time – protecting property owners from fraud.

Founded Through Experience

Rent Butter was founded in 2021 by Tom Raliegh and Chris Rankin after the pair worked together at a large institutional REIT in Chicago. As an eviction attorney, Tom was often involved in dealings with residents who were in arrears on rent; in these cases, working closely alongside residents on court-ordered payment plans.

Witnessing first-hand how a dearth in affordable housing options set these individuals on path to face an uphill battle for years, Tom and Chris decided to create another way for residents to communicate their strength as tenants. Using Rent Butter, these individuals are given a chance to convey to landlords that (despite a bad credit score damaged during a rough patch in their history) they are good, reliable renters. By incorporating banking information and other unique, subprime data — including, in certain instances, rent payment history — Rent Butter helps renters build a robust financial resume. Ultimately, this resume provides information that can demonstrate prospective renters’ financial stability and positioning as great long-term residents for the housing provider, even if they may have a poor credit score because of a missed payment years ago.

Rent Butter’s Incredible Potential

Just two years after its founding, Rent Butter has already made significant traction in the market

with a user base comprising more than 100,000 residential units across rental properties.

As the need for affordable, attainable housing continues to grow and more institutional investors enter the space, we are confident that Rent Butter will provide a much-needed solution to these challenges in the industry in the years to come. We look forward to supporting the team as they enhance their integrations and product offerings and continue to penetrate the affordable and workforce housing market to drive a more equitable future.

Last month, RET Ventures hosted a wide network of leaders in multifamily and single family rental — comprised of both innovative real estate technology solutions that make up the firm’s portfolio companies, as well as the institutional owners and operators that represent RET’s strategic investor base — for the fifth annual RET Summit in Park City, Utah.

Each year, the RET Summit serves as an opportunity for real estate executives to come together for discussions around innovation and transformative technology deployment and the ways in which new solutions can help address operational pain points. This year, we were thrilled to host 130 attendees as we spent three days exploring topics ranging from a venture market update in the rent tech space, to pressing industry trends such as AI and centralization.

Our role as a trusted, industry-backed leader in rent tech is something we take pride in, and our investment team — as well as our strategic investors and portfolio companies — continue to benefit from this annual gathering of a diverse consortium of market participants. Especially in today’s uncertain market, technology can play a critical role in helping create a stronger multifamily industry, and we look forward to future opportunities to carry on these conversations in the years ahead.

In the latest installment of this series profiling RET portfolio companies and their executives, we talk to Tripty Arya, CEO and Founder of Travtus. What is the inefficiency in the real estate industry that makes Travtus necessary?

There is something of a disconnect in real estate because it is largely a transactional asset class, but it also has the burden of operations. If it was a truly efficient asset class, it would be more tradable and scalable.

Real estate’s inefficiencies come largely from opacity of information and the significant labor cost associated with operations. Travtus aims to create an operational solution that enables property managers to scale across a larger portfolio without a significant increase in their workforce.

How do you solve that problem with Travtus?

We took a variety of approaches when exploring the problem of how to scale operations across a growing portfolio. First, we took a human approach, then a software and database approach, and eventually landed on the machine learning approach.

The technology we ultimately developed enables property teams to be much more efficient by taking many of the “long tail” property management issues off their plate. The machine-learning-powered system first reviews email correspondence, service requests, and other information to gain a 360-degree understanding of the property and how residents interact with it and then works as a virtual customer service representative that responds directly to resident communications.

When we were in the discovery process, we realized that machine learning has the highest chance of success because it thrives when there’s a large variety of fairly small tasks that have to be done.

We first use our model to identify these tasks not just for an industry but on a company, community, and even resident level. This information allows transparency into the operations, which then assists with the next steps in the journey. Most long-tail tasks are best handled conversationally; the items that are more repetitive then become candidates for automation. Through this process, there are operational and performance indicators that become the byproduct of the process and additional inputs for efficiency.

Essentially, we solve the problem of scalability by bringing machine learning to insight and decisions, instead of a pure focus on workflows.

How does your technology differ from your competitors’?

The shift in machine learning as a mainstream branch of technology has really allowed us to build a category-defining solution with Travtus. In other words, we have the privilege of being able to take a new approach to business problems without the bias of old technical stacks. This is very important to our growth plans as a business and also a very clear differentiator for our product.

Our unique approach is to solve our clients’ problems using a machine learning platform and architecture as opposed to relational databases — resulting in a much closer replication of the human approach. Unlike any other solution, we focus on handling everything rather than deploying departmental solutions – ultimately improving a broad variety of day-to-day management tasks. This is crucial for our clients, for whom separation of tasks is not always easy and cost transformation is dependent on a variety of task automation as opposed to purely departmental solutions.

If you weren’t a proptech executive, what would you be doing?

Before I was a proptech executive, I was a practicing architect and real estate developer, so I would probably still be doing that. If you ever need someone to learn how to solve problems creatively, put them on a construction site with a deadline and a budget linked to their own money!

What is the hardest thing about building a winning team?

The hardest thing about building a winning team is learning how to say “no”. There is a risk with every business that the pressure to perform or grow can open the door to people who may not be the best fit for your team at that stage. Think of your business as an athlete and your team as its coach. The needs of the business change as it performs better, meaning the type of team it needs also changes. One of the hardest parts of running a business is ensuring that the team you have is constantly evolving professionally and personally with the business. I’m extremely proud of the team we’ve created at Travtus, which was built with patience and awareness of our strengths and weaknesses as both individuals and as a team.

What advice would you give to a young entrepreneur just starting out in rent tech or proptech?

Take the time to understand the business of real estate before diving head-first into the technology. Many young founders develop solutions based on their experience in a specific team within the industry or from a consumer perspective. This can be dangerous because oftentimes they are missing the whole picture. For example, if you are selling rent tech, your business needs to understand what it means to own and operate all those homes holistically. Once you can do that, the second most important thing is to ensure the solution you’re working on is scalable.

There’s an old trope about real estate being slow to adopt technology. Do you think that is still an accurate characterization?

Technology adoption is usually synonymous with change management. The pace at which any new tools or innovations are adopted is usually linked to the need for and value of that change. The real estate industry is currently dealing with many headwinds of change, and I think if the technology innovations available offer practical solutions to the current challenges owners and operators are facing, adoption won’t be a problem.

What’s next for Travtus?

It’s business as usual at Travtus. We are currently executing on our ten-year plan which includes continuous research with product and market expansion. In the coming year, we’re hoping to create tools and insights from our machine-learning platform that make decision-making and operations simpler for owners. We want to better leverage our data to help operators learn, train, and optimize their workflows, resulting in lower costs and better retention. This will involve taking complex decision-making processes and distilling them into simple assessments and insights using our predictive technology.

We will also provide operators with an online platform to access useful knowledge, providing them with the skills and information they need to make decisions quickly and accurately, without sacrificing quality. Ultimately, our goal is to make decision-making and operations effortless for our operators.

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The broader startup and venture capital industry at large is currently in transition. Funding rounds have been more difficult to raise for entrepreneurs and many mid- and late-stage companies are downsizing and contemplating an uncertain future.At the same time, the multifamily sector is experiencing an inflection of its own. After nearly a decade of consistent rent and valuation growth, the economic outlook is uncertain and development and transaction activity has slowed considerably. As owner-operators look ahead for more favorable economic conditions, many are focusing on tech-based solutions that can drive greater renter engagement, operational efficiency and increased ROI.With these different forces at play, right now is one of the most complex — but exciting — times to be involved in rent tech. As our stakeholders work to navigate this new reality, RET is happy to announce its very own “Multifamily Summit” in partnership with the annual Blueprint conference in Las Vegas this fall. To be held on Monday, September 11, the summit will cover many of the pressing topics facing the multifamily industry, delving into how technology is helping owner-operators weather the current uncertainty across the sector and forge a more successful future.The event will bring together industry leaders across venture capital, proptech and multifamily with a range of panels on topics including:

• Technology and the Future of Multifamily Leasing
• Big Data and its Applications to Multifamily Housing
• Short- and Mid-Term Rentals for Multifamily Operators
• Dollars and Sense: Navigating Renter Affordability Amid Economic Uncertainty

The panels will feature speakers from the RET ecosystem and beyond, including RET investment professionals; executives from RET Strategic Investors and other leading multifamily owners and operators, such as Morgan Properties and Enterprise Community Partners; and entrepreneurs from technology companies including Kasa, Peek, GetCovered, Stake, Funnel and Markerr.Learn more and register to attend Blueprint by clicking here.We hope you’ll join us as we host this exciting event and look to write a new chapter in the rent tech story.

It’s no secret that the last year has presented immense economic challenges, as regulators have sought to tame soaring inflation by harnessing a market that has been firing on all cylinders for years. The early effects of these measures may have been most acute in the tech market, as giants like Google and Meta have announced multiple rounds of major layoffs, and a once-white hot era for tech and venture capital has cooled significantly.

That was the backdrop at RETCon — a proptech-focused conference held in Brooklyn between April 2-4. On the event’s final day, RET Ventures Principal Aaron Ru took the stage to address a standing room crowd and deliver his take on how our firm, and the VC arena at large, is working to navigate these obstacles.

Acknowledging the overall slowdown in funding that dates back to last year, he pointed out that while capital is continuing to flow to early-stage companies seeking Seed and Series A funding, more mature companies are struggling to secure larger rounds — looking instead to insiders who can finance bridge rounds until the broader economic climate improves.

Meanwhile, though many early-stage companies continue to raise, they are also facing steeper challenges and more critical vetting of their long-term paths to profitability. Many areas of proptech, particularly those based on supporting the transaction process, have been adversely impacted by the slowdown in activity across the broader commercial real estate market, and no longer hold the immediate appeal they possessed in an era of low interest rates and high liquidity.

Where many venture firms are now turning their attention, however, is to proptech solutions that may not be on the fast track to unicorn status, but that are capable of generating immediate return-on-investment for operators looking for both an immediate edge that will help them weather the current economic storm, as well as contribute to better margins in the long term.

“You have to have a business model that works day one,” said Ru. “There’s no free money to be had anymore.”

This environment, while not without its challenges, works particularly well for RET’s unique business model, which allows portfolio companies to take advantage of the firm’s network of Strategic Investors — comprising nine of the top 20 NMHC Owners and Operators, which together own and manage over two million multifamily and single-family rental units across the U.S. and Canada. While many start-ups often struggle to find an initial believer willing to pilot and distribute their product, RET-backed platforms are plugged into a highly trusted and capable network of operators that can vet, pilot and deploy their solutions across their broader portfolios.

While the days of free-spending SPACs and fast-tracked unicorns may be over for now, RET’s approach to venture capital allows it to not just identify and foster solutions that can thrive in any economic environment, but to also nurture critical relationships that help establish a  pathway toward developing and solidifying the long-term presence of these solutions across the market.

“That’s probably the best lesson from all of this market choppiness,” said Ru. “These market relationships are not just a year or two. You have to find partners that continue to back you and that you can work with for a half decade or a decade.”

RET Ventures today announced that it has appointed multifamily technology industry veteran Monte Jones as Platform Partner. Concurrently, RET announced that it has added three members to its investment team, Melissa Fagan, Jaymie Fung Bingham and Julia Lambert.

Jones comes to RET Ventures with nearly two decades of experience in the multifamily industry. For four years, he served as President of On-Site.com, an end-to-end marketing and leasing platform for the apartment industry. In these roles, he was responsible for leading all customer-facing departments as well as business development, acquisitions and strategic planning within the company. Under his leadership, the company’s sales team was successful in growing revenue by more than 200%, leading to its ultimate $250-million exit to RealPage in 2017. After the sale, Jones developed and led several specialized sales and go-to-market teams, integrated newly acquired companies into the RealPage system and left RealPage as its Chief Experience Officer.  

In his new role at RET Ventures, Jones will engage across a range of functions, including coaching portfolio companies, drawing on his deep industry expertise as an operator; helping build and implement RET’s own internal technology stack; and lastly, building out the firm’s “Affiliates” initiative.

The Affiliates program will be a collection of forward-thinking multifamily and SFR owners and operators who are interested in gaining access to the technology companies RET backs. Many of the leading multifamily REITs and private operators have already gained close relationships to these technologies by investing in RET’s funds. However, for companies that are not RET Strategic Investors, the Affiliates program offers an inside track of access to leading technology companies in the RET portfolio.

Currently, RET’s Strategic Investors represent approximately 2.5 million multifamily and SFR units across the U.S. and Canada — a figure that makes the prospect of an RET investment particularly alluring to startups looking to grow their user base. Through the Affiliates program, RET is looking to help drive innovative technology across a broader potential user base.

“As an industry-backed technology investor, RET is uniquely positioned to provide our portfolio companies with access to a broad swath of institutional owners and operators, and adding Monte to the team will enable us to further broaden our reach,” said RET Ventures Partner John Helm. “We also place great importance on helping portfolio companies scale quickly toward profitability, something that has become an even greater priority amid the current economic uncertainty. Monte’s unique skillset and ability to mentor early-stage companies and CEOs will be instrumental as we expand our portfolio and, with our Strategic Investors’ help, lead the industry towards a more technology-driven future.”

Added Jones: “Given recent macroeconomic headwinds, real estate owner-operators are increasingly looking for innovative solutions to help streamline their operations. RET has built a tremendous reputation by backing technologies that have immediate applications for owners across the entire real estate ecosystem. In its first five years, RET has already delivered tremendous value to a wide range of stakeholders, and I look forward to working with John Helm, Christopher Yip and the rest of the team as we pursue the fund’s goal of elevating technology in the rental housing sector.”

In addition to Jones, RET also announced three additional new hires over the last six months:

• Melissa Fagan has joined RET as a Vice President. Fagan previously served as an investment associate for KSL Capital Partners, and a private equity associate at Goldman Sachs. She received her bachelor’s degree in engineering from Princeton University.
• Jaymie Fung Bingham has joined the RET team as an Associate. Prior to joining RET, Fung Bingham served as a private equity and venture capital associate at Ensign Peak Advisors. She received her bachelor’s and master’s degrees in accounting from Brigham Young University.
• Julia Lambert has joined the RET team as an Associate. Lambert previously served as an investment associate at The Carlyle Group and Hanover Real Estate Investors (now Pacific Urban Investors). She received her bachelor’s degree in civil engineering from Stanford University.

With these four hires, RET continues its rapid growth over the past year. In April of 2022, the firm — along with Strategic Investors Essex Property Trust and UDR — launched RET Ventures ESG Fund, L.P. (“the Housing Impact Fund”), an investment vehicle to back the growth and implementation of ESG-focused technologies for the real estate sector. In June, RET announced the addition of former UDR President Jerry Davis and venture capital veteran Jacob Zornes to its growing team.

Since its launch in 2017, RET Ventures has backed more than 30 real estate technology companies, including category leaders in smart home technology, leasing tech, construction tech and sustainability technology.

About RET Ventures

A leading real estate technology venture capital firm, RET Ventures elevates real estate innovation by investing in cutting-edge technologies out of its core venture funds and a Housing Impact Fund. RET works in partnership with its base of more than 40 Strategic Investors who own and manage over $600 billion of real estate assets, with a particular focus on multifamily and single-family rental real estate. In these asset classes, the group includes some of the largest REITs and private real estate owners, operators and developers, who together control approximately 2.5 million rental units.

Through its deep expertise and network, RET has created a unique real estate innovation ecosystem that delivers significant value to the companies it backs, providing them with access to thought leaders, development partners and ongoing strategic guidance. For more information, please visit www.ret.vc.