Housing Affordability: The Power of Choice with Paraag Sarva

About Our Host

Louisa Dickins

https://www.linkedin.com/in/louisa-dickins-ab065392/?originalSubdomain=uk

Louisa started her career in property working at a well-known estate agency in London. Realising her people skills, she moved over to Lloyd May to pursue a career in recruitment. She now is a Director at LMRE, who are a specialist recruitment firm driven by PropTech and recruitment professionals, and Louisa oversees their 5 core areas. Louisa co-founded LMRE and provides a constructive recruitment platform to the new disruptors in real estate. Louisa is also on the board of Directors at UK PropTech Association (UKPA).

About LMRE

LMRE believe there is a better way to recruit. LMRE focus on a more comprehensive, client led focus delivering exceptional talent to the right place at the right time. They are passionate about the industry and passionate about people’s careers. LMRE spend time with each client to become and an extension of the business, and their transparency and core values help them grow with the sector. LMRE simplify recruitment and innovate with our clients and evolve the people driven, PropTech community.

About Our Guest

Paraag Sarva

https://www.linkedin.com/in/psarva

Paraag is the CEO and co-founder of Rhino, a builder of products and services that gives renters a more affordable way to live in the homes they want. Since its founding in 2016, Rhino has made it a mission to replace cash security deposits with low cost affordable insurance. The product is now offered in over 1 million homes across the US, Rhino offers hundreds of thousands of renters a choice to eliminate high upfront security deposits with a low cost insurance. Before co-founding Rhino, Paraag lead a property management and development company with over $100 million worth of assets, and in that time learnt firsthand the pain points he’d go on to address for the creation of Rhino. He also served as City Hall policy advisor and aided in administration of the New York City Mayor, Michael Bloomsburg. He has also worked in investment banking at Goldman Sachs, and graduated from New York University have a bachelor’s and master’s degree in economics.

Resources Mentioned

LMRE website www.lmre.co.uk

UKPA website www.ukpa.com

Rhino website www.sayrhino.com

Insights From This Episode

• I have a strong profit motive and want to build a successful business, but at the same time, I want to help people – Paraag Sarva
• What we do is make renting much more financially affordable for people at the time of move in – Paraag Sarva
• Our goal is really thinking about the service and the products we provide as creating a new option for a renter that never existed before – Paraag Sarva
• (COVID 19) is not a one size fits all problem and it’s not a one size fits all remedy – Paraag Sarva
• It doesn’t matter where you live or how much money you make, you are feeling COVID and some economic uncertainty very much, and giving people a different way of essentially reclaiming a whole bunch of cash that they otherwise would just have to put into these escrow accounts with landlords, is really meaningful – Paraag Sarva
• What we’ve come to learn is that focusing on the resident is really Numero Uno. And it’s also number 2, 3, 4, and 5 – Paraag Sarva

Episode Transcript

Louisa

Hi everyone. And welcome to the Propcast, my name is Louisa Dickens, co-founder of LMRE and board director of the UKPA and I shall be your weekly host. Each week for 30 minutes, we will be connecting the VC, PropTech startups and real estate professionals globally, and assist in bridging that famous communication gap we all love talking about. So, sit back, relax and enjoy the show. Hi, everyone, and welcome back to the podcast. Today we will be talking to Paraag Sarva CEO and co-founder of Rhino and we will be discussing financial flexibility and the power of choice. So welcome, Paraag.

Paraag

Thank you for having me. I’m super excited to be here and chat with you today.

Louisa

Awesome. Now for those who are listening Paraag is the CEO and co-founder of Rhino as I just mentioned, and Rhino is a builder of products and services that gives renters a more affordable way to live in the homes they want. I mean, it’s already got my vote out. Since its founding in 2016, Rhino has made it a mission to replace cash security deposits with low cost affordable insurance. The product is now offered in over 1 million homes across the US, Rhino offers hundreds of thousands of renters a choice to eliminate high upfront security deposits with a low cost insurance that can start as low as $5 a month. Before co-founding Rhino, Paraag lead a property management and development company with over $100 million worth of assets, and in that time learnt firsthand the pain points he’d go on to address for the creation of Rhino. He also served as City Hall policy advisor and aided in administration of the New York City Mayor, Michael Bloomsburg. He’s also spent a fair bit of time in investment banking at Goldman Sachs, and graduated from New York University have a bachelor’s and master’s degree in economics. So welcome to the podcast Paraag, now enough from me, I would love to hear a little bit more about your whole journey to co-founding Rhino. So please go for it.

Paraag

Sure. I mean, I think things this are much easier to understand in hindsight, and so I’m glad I have the chance to reflect on this now, and really I think for me, the biggest takeaway is that all of those bits you touched on walking through my bio, are really all components of why Rhino. We operate our business today at the intersection of two of the most regulated industries out there, financial services and insurance as one and then real estate. And I think for me pretty uniquely, having spent time in finance, in working in government, working in real estate, and working in startups, really is a mash up as to what brought me to the point of being on this podcast with you here today. It really does touch on and draw on all of those different pieces, and I think another thing that I think I’ve found more and more important for me, as I’ve gone through my professional career over the last 15 years is, I have grown to have a worldview that you don’t just need to work on something that checks one of two boxes, you can actually check both boxes. And what I mean by that is oftentimes people end up following the American dream, or the American capitalist dream of making a million bucks, or whatever it is. And that often comes at the expense of something that is a little bit more personally fulfilling or mission driven. And what we do at Rhino every day, what I do every day is very much squarely both of those things. I have a strong profit motive and want to build a successful business, but at the same time, I want to help people and I don’t feel the only two ways you can do that in 2020 are working at a not for profit, charitable organisation, or working for Philip Morris selling cigarettes. I think what we do really very squarely checks both of those boxes, which is what I’m so excited about every morning, I get up and not go to the office, but log on to zoom I guess.

Louisa

Yes, and now tell us and tell the audience a little bit more about your product and how it makes housing more affordable.

Paraag

Absolutely. And what I’ll start by saying is that it sounds pretty dead simple. What we do is make renting much more financially affordable for people at the time of move in. So everybody that’s been a renter or knows a renter is accustomed to paying first month’s rent, and a security deposit, which is typically equal to first month’s rent, sometimes even more, at the time they move in. What we’ve done is created a brand new insurance product that replaces that cash security deposit with a low monthly fee. So instead of paying something call it $1,000, equal to first month’s rent when you move into a home, you can instead buy insurance from us, which will cost  $4, $5, $6 bucks a month. And you get to keep that thousand dollars as a renter. And really important for everyone to understand also is that it’s providing the same protections, that insurance certificate that we give to the landlord, provides them with the same protections that they otherwise would have relied on that cash security deposit for. But guess what, it’s 2020. And there’s really no reason that something that as I often think about it as up to or blunt as literally $45 billion that’s sitting in these individual tenant segregated escrow accounts across the country, that’s just not the best way to protect somebody from something that may or may not happen in the future. And so that’s what we’ve done is we’ve created a really low cost insurance product that gives landlords what they need to have peace of mind and feel they’re protected, but at a fraction of the cost for renters.

Louisa

This sounds pretty much like a no brainer. I mean, I’m a renter myself and there’s the whole upfront cost, I think for everyone at every point in life, it’s a huge amount of put up front. And if you can get the insurance with less upfront costs, and also have that security that you mentioned earlier, it’s an absolute no brainer. Now, tell me a little bit more about the impact, and can we look at micro and macro levels as well?

Paraag

Yes sure, I’ll take those in reverse order. At the at the macro level, I mentioned this number $45 billion, just to unpack that a little bit, that’s literally the amount of money that is sitting in these escrow account accounts that landlords hold on to just in the United States, just across the United States of America in residential rental apartment escrow accounts. So that’s money that just sits there in case something happens, right. So it’s renters money that they don’t have access to and can’t invest, they can’t use to manage other life expenses, all because maybe there’s going to be something that happens. And really if you think about that $45 billion, and returning that to the millions of renters across the country, there’s some 110 million renters in the United States, that is a huge financial stimulus and we often think about it as, it could be more money than even tax breaks that everybody in Washington is always thinking about.

This is a way that you can really unlock $45 billion, and give renters back their money, so that they can do something with it. Whether that’s again save or invest it or manage other life expenses. And at the micro level I think it’s never been more clear than what we’ve seen happening in the last eight or nine months now living in the new COVID reality or dream sequence that we’re in, where you’re very much seeing front and centre how important personal finance is for every single type of person in the country. It doesn’t matter where you live, or how much money you make, you are feeling COVID and some economic uncertainty very much, and giving people a different way of essentially reclaiming a whole bunch of cash that they otherwise would just have to put into these escrow accounts with landlords is really meaningful, even at the individual level.

Louisa

And for someone to qualify for this, could it be the everyday man and woman to use your product?

Paraag

Yes, that’s right. So think about it as a choice, right. Our goal is really thinking about the service and the products we provide as creating a new option for a resident, for a renter that never existed before, they’ve always had to just follow the rules of this is the way it’s done, it must be a one month cash security deposit that you put into this locked account, and maybe you’ll get it back, maybe you won’t get it back, who knows. But really, if you think about it, when you do that, and you’re a renter, when you move into that next home, even if you move out of the first place, you never really get that money back, because you’ve already left a deposit for your next home, right? And so it’s just money that’s just rolling in the background somewhere that you as a renter really never have access to for as long as you’re renting. And that is a real challenge.

Louisa

Yes, it gives people slightly more opportunity and like you said, choice. It’s fairly frustrating when you know the full upfront costs you’re going to have to put out, and then you don’t know where it’s going to go. Obviously, you’ve found a huge problem and a way to tackle it, housing affordability is everywhere. Looking at public, private partnerships how can we create benefits for everyone involved? How have you addressed that?

Paraag

Sure. So I think that’s a really important thing to understand or takeaway about what Rhino does, and we are not out there suggesting that this is the holy grail for housing affordability. Right, housing affordability is a big, ugly, scary topic that quite frankly, is going to require many people, whether they’re in the private sector, or in state houses or City Council’s, or in Washington to help address. But what we feel that we’re able to provide is a really important part of that solution. Even if there’s 50 things or 100 things that we all need to come together to tackle this broader issue around housing affordability, then the most interesting part about what we’ve brought to the marketplace is that simply by updating the way business is done, really letting insurance do what it’s designed to do to protect people from something that may or may not happen in the future, insurance is the most efficient way to do it. And that lets us really take a transaction level efficiency that has savings, and distribute that back to both renters and landlords which makes them both better off. And that’s what I think is really important about this win-win concept, that in fact it’s making the business better and life easier for landlords and property managers, and at the very same time making life easier and more affordable for renters. And that’s really, I think, a powerful concept to bring to bear, whereas oftentimes I think, especially in the housing topics, it always tends to be one sided. Folks come up with things or have policies or agendas that only benefit, say the developers building high rise buildings in Los Angeles or New York, versus programs that solely benefit renters in certain pockets. Whereas this is genuinely about a technology driven game that lets us just create value for both sides.

Louisa

It’s not often you see a product or service that has benefactors on both sides. And you’re always making sure it’s quite appealing and quite sexy. Now, if we’re looking at say the insurance industry, you’ve tackled what is notorious an incredibly regulated industry but what advice can you give to founders who are thinking about entering the space and fearful of the barriers to entry?

Paraag

I would say, don’t be afraid, you should embrace it, and just bring the right people into the room. One of the things that I often get frustrated by is seeing the million and one ideas that come out of Silicon Valley that are really just focused on tackling what I would call made up problems. I sometimes joke about it as an Alexa enabled juicer and that’s all well and good, but really does the world need another Alexa enabled juicer. The reason industries are regulated, the reason real estate and housing and insurance are regulated industries, is because they’re actually the most important things in people’s lives. And therefore, government has stepped in to put some rules into place, and so I would really just encourage folks to get after it. And hey, I’d be happy to be a resource to anybody looking at getting into starting a business in a regulated space. It’s not for the faint of heart, but at the same time there is huge opportunity to really build large businesses that really do have impact for hundreds of millions of people.

Louisa

This is more of a personal question, what has the transition been across your career from graduating to investment banking, to being directly involved in the property management and development space, to creating the Rhino and founding a business, and tackling it front on the problems you’ve been experiencing? How was that whole journey for you?

Paraag

Yes, it’s been interesting. And what I’ll say is, I don’t think I ever had all the answers, or nor do I claim to have all the answers today. But something for me that’s always been pretty clear is to keep moving, and keep making progress going forward. And what I mean by that is even just in my own personal self-discovery, I knew pretty quickly into my time at Goldman Sachs when I started in investment banking that I was solving hard problems, and getting up to speed on how to do that job as best as possible, and really mastering that part of the business that I was in. But after that I realised I just wasn’t that passionate about it, and so I’ve always approached these things as cross them off the list, as opposed to feeling a little bit more complacent and so what I’m trying to say is, the lack of knowing what the next step is, or knowing that the next step is the perfect step, the lack of awareness around that shouldn’t deter people from trying and just moving along and continuing to try to figure out what’s next for them.

And that’s why really I think in hindsight, it’s a much different narrative for me to understanding how all these different areas that I’ve touched, have brought us to where we are with Rhino. And being a property owner for the last eight years, is obviously a great place to be for anybody that’s starting a business in a property industry. And so I think very literally having managed 200-250 rentals and having been in the driver’s seat of move ins, move outs, lease breaks, landlord-tenant disputes the whole nine, really gave me a very clear first hand understanding of just exactly what some of the challenges are when it comes to security deposits that landlords experience, not just renters. And I think that’s often one thing that often gets overlooked is that it’s fairly obvious what we do for renters, making it more affordable for them to move in and live in the homes they want. But the other side of the story, it’s a pretty ugly side of the story on the landlord and property management side, whereas they don’t love dealing with security deposits. There’s lots of challenges there. And this is a really meaningful opportunity to get away from that.

Louisa

I often think people assume the rent are the most badly hit by it, but dealing with that as well is probably the number thing for landlords worry about.

Paraag

And that’s exactly why it’s so silly, right? it’s this archaic way of doing business that’s nobody likes, yet has persisted.

Louisa

Going back into chatting about renters, and we haven’t touched upon the C word. I for one, we’ve just gone back into lockdown in the UK, which is brilliant. What are you seeing in the market? Do you think renters are struggling more post COVID? Or as I should probably say, during this time?

Paraag

Yes, absolutely. I think what I’ll say though is it’s not just renters, it’s everybody’s struggling more, and that’s the wildest part about the current situation we’re in. But renters in the United States at its peak we had something 40 million unemployment claims in across the country. Obviously, this has had an impact, and so I think the jury’s out still on where this will all shake out. But what we’ve noticed now that we’ve had a few months of speaking with our partners in the industry and also renters firsthand, is that it’s a very uneven story. And that’s one of the most I would say challenging parts of this, is it’s not a one size fits all problem and it’s not a one size fits all remedy. And I mean that in a few different ways with respect to geography even right, so New York City was one of the hardest hit places early on, yet now seems to be holding relatively strong with keeping infection rates lower than in some other parts of the country. However, due to its density in 8 or 9 million people, it is struggling to get back to work, which means renters in New York City who may work in offices or other service industries or what have you, are more disproportionately hard hit than in other areas. And so I think it’s really a story about what are the many ways this is going to unfold over the next, I’d say five years. Anybody who thinks that next summer, we’re all back to business as usual, or renting is back to business as usual, that’s not realistic.

Louisa

Fairly wishful thinking, I think we can definitely agree on that. So what’s next for Rhino? Any focus for 2021 and the next a few years?

Paraag

Yes, I think what we’re seeing and what’s happened as this topic of housing affordability and just what we do for folks has taken hold even more than when we started the year, because of just what’s happening in the economic picture. And so we see a huge opportunity to continue to go after expanding education and awareness for what we do across the country. There’s some 43 million rental homes just in the United States, and we’re in about 1 million of them and growing. But that’s a lot more homes for us to get in front of. And the other thing I would say is, it’s been pretty amazing to watch what’s happening in terms of the public response to security deposit insurance over the last year. And we’ve partnered now with many stakeholders across the country looking to understand how insurance as an alternative to cash deposits can really play an important role in addressing this housing affordability question. And so we’ve seen legislation pass in two cities already this year, one just before COVID in Cincinnati, Ohio, which passed the Renter’s Choice and Flexibility Act, which requires owners to offer alternatives like insurance to renters that move in. And then just a few weeks ago, it actually was passed in Atlanta and so we’ve been working very closely with mayors and legislators on helping them understand how insurance is able to play a role in this, and we’ve been really encouraged, quite frankly, by the head of steam that this has picked up. And I anticipate that in 2021, there’ll be at least another dozen cities based on the folks we’re talking to and folks that are asking for our input on this, that are going to be passing similar legislation.

Louisa

Fingers crossed that. That was leading me into my next question which you covered, what partnerships and would you be looking for? But then also are there any partnerships you would look for in some other technologies out there within real estate for your product?

Paraag

Yes, absolutely. I think what we’ve come to learn is that focusing on the resident is really Numero Uno. And it’s also number 2, 3, 4, and 5, and the folks out there in the industry that know that are the ones that are constantly looking forward to how to deliver more and more value to residents. It is getting an increasingly competitive environment on the business side for landlords and property managers to really deliver best in class service. And the importance of financial amenities what we offer is now so front and centre. And so what I’ll say about partnerships for us, it’s largely about education and awareness that this is the new default way that people want to rent in America, and connecting ourselves with folks that also are thinking about the renter and the resident and the experience that’s being delivered directly to them above everything else, are absolutely the folks that we’d love to work more closely with. And so that could be the anybody that’s touching a renter, either before moving in or after moving in, or later in their life. I think one of the big things we focus on is that it’s a holistic view for how we are engaging with residents or a resident customer. 24.47

Louisa

And this also leads us on to the end of the show, how do people engage with you and how do they engage with Rhino when they want to find out a little bit more about your about your business?

Paraag

you can visit us at www.sayrhino.com to learn about us and what we do. It’s pretty straightforward in terms of the renter experience, it typically takes about a minute for a renter who’s moving into a deposit free home with Rhino to pop in and answer a few questions, get a quote, and then purchase insurance for their rental instead of plopping down a big security deposit.

Louisa

Well to me, that seems an absolute no brainer for any of those renters out there. And before we come to the end of the podcast, is any bit of parting advice you’d to give to our listeners?

Paraag

I would just say be optimistic about the road ahead. I know everybody at least at this moment here sitting on Monday November 2, tomorrow’s Election Day in the United States. And so there’s a lot of focus on that, but now is the time to really dig in and focus on where there is opportunity to create value for customers and having a firm view on what that means, I think lets you get ahead as long as you can detach from what some of the what I’ll call pandemonium is of the moment.

Louisa

Thank you very much Paraag for coming on the Propcast today, it’s been an absolute pleasure hearing about your business, and best luck for 2021. I’ll catch up with you after the show.

Paraag

Awesome, thank you so much.

Louisa

Thank you for joining us this week on the podcast and a big thanks to our special guests. Make sure you visit our website, www.lmre.co.uk, where you can subscribe to our show or you’ll find us on iTunes and Spotify, where all good content is found. Whilst you’re at it, if you found value with the show, we’d appreciate if you could rate and review us on iTunes, join us next Tuesday, and I’ll catch you later.