World of Flexible Rent and Delinquent Paying with David Sullivan

About Our Guest

David Sullivan

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

David is the founder and CEO of Till, which is a PropTech that is on a mission to transform rental housing with personalised financial experiences. Till empowers renters to better access pay and stay in their homes, while enabling the next generation of risk management for landlords. Till’s core product, Flexible Rent develops personalised lease and payment structures that improves the renters ability to pay rent based on the renters cash flow. Prior to founding Till, David was the CEO at The American Home single family rental, where he grew the platform and successfully exited to reality corp SBY, and an entrepreneur in residence at Route 66 Ventures, a leading venture capital investor in the FinTech ecosystem.

Insights from this Episode

• When you’re a landlord, you really have a responsibility and a deep personal relationship with the renter, because you are providing someone’s housing. You are providing their access into a community – David Sullivan
• I think the whole ecosystem is really recognising now that a lot of the intersection between PropTech or RentTech and FinTech is very related – David Sullivan
• I think landlords want to be innovative. And many of them are looking for ways to be innovative, but they need partners that are building these things – David Sullivan
• So it’s about bringing technology to the partnership, and bringing an open mindset and ear towards where do they want the product to go – David Sullivan
• How do you adapt the way you work with a renter based on the dynamic events of the renters financial life? And so leases, payment structures, and the whole renter experience I think will become personalised over the next five to ten years – David Sullivan 

Episode transcript

Louisa

Hi everyone and welcome to the Propcast, my name is Louisa Dickins, 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 tall love talking about. So, sit back, relax and enjoy the show. Hi everyone, and welcome back to the podcast. Today we are talking about the world of flexible rent and delinquent paying, and today’s guest is David Sullivan, who is the founder and CEO of Till, so welcome to the show David.

David

Thank you so much. I’m super excited to have this conversation with you.

Louisa

And for those who’ve not heard of Till, Till is a PropTech that is on a mission to transform rental housing with personalised financial experiences. Till empowers renters to better access pay and stay in their homes, while enabling the next generation of risk management for landlords. Till’s core product, Flexible Rent develops personalised lease and payment structures that improves the renters ability to pay rent based on the renters cash flow. Now David is passionate about improving the rental housing experience, as I’m sure you would have guessed, for residents and their landlords. And after being a landlord he knows that there is a better way to work with renters that proves their ability to pay and the landlord’s cash flow. Prior to founding Till, David was the CEO at the American Home Single Family Rental REIT, where he grew the platform and successfully exited to survey reality corp SBY, and an entrepreneur in residence at Route 66 Ventures, a leading venture capital investor in the FinTech ecosystem. So as you can guess, David is passionate about rental housing, FinTech and PropTech startups, but also the ocean and his family which includes three lovely kids. Now David, let’s start with the show and tell us how did the Till concept come about? You’ve been a landlord, you’ve been in finance, talk us through this journey.

David

Yes, thank you for the overview, and I really am passionate about what we’re doing. It starts from being a landlord, as you highlighted, and I oversaw our property management teams and our operations working with renters, and I became very interested in the renter as a consumer and started studying them during that experience. And when you’re a landlord, you really have a responsibility and a deep personal relationship with the renter, because you are providing someone’s housing, you’re providing their access into a community. And it startled me how frequently renters were struggling to pay rent, and how frequently different financial challenges would come up for a renter that challenge their ability to pay.

And it’s a very personal experience, running a property management company or even call center, hearing renters call and being on the phone with renters, say, where they’re saying, hey, I had this problem in my life, hey, can you just work with me, please? We just need a better way to work together. And so I started wondering why, as a landlord, really the only tools I had or the only tools the industry was using was the late fee and the eviction fee and filing process, to really push and force renters to perform. And so we started working with renters in a very analog way, renters that had good performance, that we believe that were forthright and we just saw their experiences improving dramatically, our relationships with them improving and ultimately them staying longer and paying more successfully over time.

So I became a deep believer and what Till is doing with technology to that end. Also the other experience, I had this after the American Home, I spent a few years as a FinTech investor. And there’s just a lot of ideas, old ideas and a lot of emerging new ideas that have been coming out of the FinTech arena around data analytics, payments, lending insurance, and using all of those in a more personalised way. So a lot of ideas coming out of the FinTech arena that can be applied into rental housing. I think the whole ecosystem is really recognising now that a lot of the intersection between PropTech or RentTech, and FinTech is very related. And so how do we use financial innovations in rental housing to improve renter experience and landlord risk management? And so that those are the two experiences that bring me here and why I’m interested in what we’re doing.

Louisa

I guess it gives renters and landlords rather than giving them an ultimatum of, here’s a fine and you’re out, you pay your rent or you’re out, it’s giving more of a solution which I think a lot of people in this day and age are looking for. And there should always be a solution now we have different technology advances. So what’s Till’s target market, because surely everyone at some point in life, unless you’re very fortunate to be brought up in a privileged upbringing, everyone could have cashflow issues, especially when you first go into the world of work and putting a house over your head. Is it the younger generation, or the older?

David

Yes, it’s interesting. So at the very top today, we are focused on the rental housing market, although there are applications into homeownership maybe at some point, but we’re focused on the rental housing market. The rental housing market is about a third of the US rents, it’s about 45 million households and about 120 million people. And other than people that rent as a lifestyle choice and trophy kind of rentals, the class A cut, other than that rent for pretty much everybody is the largest expense. And other kind of commonality of the renter that we work with is, because rents the largest expense and occurring every single month, it is the expense that gets challenged when challenges arise in their financial life. Whether it be cash volatility, or income volatility issues, which are highly prevalent. Most Americans have 25% month to month income volatility, which is kind of astounding. We think of income as you get a paycheck every two weeks or four weeks, but the reality is there’s a lot of dynamic nature to what an income is across pretty much all Americans and that constrain someone’s ability to pay.

And the other reality is unforeseen expenses, episodic challenges occur in everyone’s life and at different points and that forces a renter to sit and say, do I pay rent or do I solve this other problem save in my life? And oftentimes, what we see even pre COVID is that many times a renter is having to do something else, which delays their ability to pay rent and forces them to be delinquent. You know, pre-COVID on an annual basis, there’s about $50 billion of delinquent rent. Pre COVID on an annual basis, there’s about $50 billion of payday loans borrowed every year. And it’s very similar population that’s doing both. So you have about $100 billion financing challenge. It’s a challenge towards being able to pay rent and so we wanted to step in and prove the renters ability and willingness to pay with what we’re doing to prevent them having to pay a high cost late fee charge or take on a payday loan. Both events, which actually can exacerbate the renters ability to pay in the home long term. Taking on high cost charges for a renter actually worsens their long-term financial position in life, which exacerbates default risk, and actually increases the likelihood of a bad outcome for both the renter and the landlord.

Louisa

So we’ve spoken a lot about what an asset can be to a renter, say I’m a landlord – technically I am a landlord, not a very big landlord – but what tools does your product give me?

David

Yes, so our core product is called Flexible Rent, and Flexible Rent is a few things. At the heart of it, it is an intelligent payment schedule that enables a renter to better budget, save and pay for rent. It’s like a financial advisor for managing rent effectively. And the schedule that we build uses data and analytics on the renter to uniquely understand them and personalise their payment schedule. And then it can adapt to the renters needs over time as the renters financial reality changes, which it does. We’ve also we built Flexible Rent to work with both on time payers, where it is helping them budget save and pay for rent, but also delinquent payers. And for delinquent payers while they’re successfully enrolled in the program, two things happen. So one, the renter when they’re successfully enrolled is not being charged late fees or eviction filings, they’re making payments consistently. And we have very high probabilities that as renters are on the program, we know that there’s 98%, 99%, over 100% certainty that the remaining payments will come through based on historical analysis of other people in the program that. So we actually can stabilise rental payments in a portfolio for a delinquent payer. But the other thing we do with delinquent payers, we build a schedule that not only stabilises them, but then moves them back to becoming an on time payer.

So we want to make sure that we’re increasing on time cash flow for our landlord partners as much as possible. And what’s been interesting is for the delinquent payers, we actually see an almost an immediate increase on kind of on time cash flow for our landlord partners, because we’re able to collect about a third of rent on time immediately. So it’s not that a delinquent renter has no ability to pay or no willingness to pay, but it’s actually building a structure and working with them in a real verified way. Get them to be making those payments. So we see immediate on time cashflow improvements for our partners, which has been really cool to see. And then the other reason our lender partners are rolling this out is because delinquency management just takes a lot of time. You know, it’s not a fun part of the property managers job and it is very time consuming. So our partners, we’re in hundreds of buildings now and they’re usually spending about an hour per week per delinquent renter. If you add that cost up over a year to a 200 to 250 unit multifamily site, or corresponding single-family portfolio spending about $40/50,000 a year, just managing delinquency. And so we can step in and through tech give them a better tool and a better resolution towards unlocking the renter’s potential and unlocking that site teams tasks that they frankly don’t really to do.

Louisa

Yes, I can’t imagine many people chasing rent, no one wants to be chasing it. And I guess if they receive one third of the rental payment, that definitely covers the cost. It might not be making profit yet, but that’s hopefully a good amount of what the landlord needs for them to carry on business.

David

For the delinquent renter that enrolls, that landlord wasn’t going to get anything in the current scenario. So if in your portfolio where 80% of your renters are on time and 20% of your renters are delinquent, today, there is no cash flow from the 20% by the on time date.

Louisa

I’d take that third

David

And I tell you this, what we see is we actually can step in and there’s a really high demand from that 20% of the renter base for products this, and we see an immediate adoption from them. And we also see an immediate unsticking of the willingness to pay, and cash flow coming in the door. And so we see an 80% on time cash flow collection rate for the landlord move up to 86% almost instantly.

Louisa

And the landlords who are using your product, and I’m sure you’ve seen a massive uptake especially since COVID, where it’s no doubt been challenging for so many people to pay their rent on time, the massive unemployment out there and sickness, what have you. Have landlords been a lot more receptive to it? Because some of these huge landlords are famously not that innovative can we say, I know we will talk about it. But some landlords must be pretty hard to get into, what’s your experience been of it?

David

I actually think landlords want to be innovative. And many of them are looking for ways to be innovative, but they need partners that are building these things. So it takes a lot of investment into these programs to get them running correctly and effectively. It’s why we are venture backed, it’s why we are building the way we are. And so it’s not that landlords aren’t innovative, it’s just the way that they’re capitalised historically hasn’t afforded them the capacity to be building towards these tools to do things at scale. And technology is advancing to the point where we can now do these things. So we’re seeing very open mindsets with our landlord partners. We are growing very quickly. 14.58  We have doubled our unit base in the last month and a half ad we have partnerships now with, I’d say five of the top 10 owner managers in the country.

So we go to market just to clarify, we go to market with landlord partnerships, we are a B2B, B2C distribution strategy. And we work with institutionalised owners and managers. So our institutional definition is more based on their process, but from a unit perspective is usually anywhere from 1000 up to over 100,000 units. Many of our clients and partners have 2000, 5000, 10,000 20,000 units of their own they are managing. So we go to market through these partnerships, and our partners have been highly receptive. They’ve been great thought leaders, so we really look at our partners to help inform where the product should go, what can we better help them do their job. They are in effect, hiring us to do a job. And the job we are stepping in to do is to better work with renters to collect rent. At the end of the day, it’s how do we help them better service and better provide a customer experience for the renter. And so there’s really amazing feedback loops if you’re listening, from our from the landlord partners in the market, because they see what they want to occur. They are innovative minds.  And it’s been really interesting, the patterns are definitely shaping up between the 20 or so partners we’ve deployed with.

Louisa

And would you say that everyone should have a personalised lease? Is this there for the taking for everyone?

David

Yes, my perspective is 100%. I think in 10 years, we’ll look back and laugh that leases for so long had been 12 months, rent was due on the first late fees on the fifth, evictions are filed on the 15th. There’s so much personalised need and information out there, that matching the two seems to make logical sense. And the personalisation won’t be static I don’t believe either. I think the personalisation will become very dynamic. So COVID is a great example. We see that a renter used to have good consistent wage income, payroll income, then we see the renter shift off of payroll income in real time to unemployment income, and side hustle gig economy income, or unemployment income and at risk of not wanting to forfeit unemployment, just random under the table cash transaction income. You can see these things you can underwrite them. And so how do you adapt the way you work with a renter based on the dynamic events of the renters financial life. And so leases, payment structures, and really the whole renter experience I think, will become personalised over the next five to 10 years.

Louisa

Well, we’ve seen a lot of personalisation or I guess flexibility in the office space, and in the residential space as well.

David

We’ll probably see a convergence of the mindsets between short term rentals and long term where we want to look at a renter and say, there’s really three things the industry needs to think about from a landlord. What is the landlord’s need? What are they trying to achieve within the building or their portfolio? Then what is the renters need? And that’s right now what is very rigid, so what is the renters need? And then the third leg is what is the renter risk? And how do we uniquely understand that, think about it, and adjust to it as we go along. And so I think there’s just a lot of room for improvement across those three categories. And those three categories converging for how we uniquely understand and work within the renter relationship.

Louisa

Yes, well that goes quite nicely into another question I’ve got for you. What’s next for the product? We briefly spoke about schedule intelligence before, further personalisation and the schedule, seasonality between different industries, talk us through a few of these maybe next things for the product.

David

Yes. So for the foreseeable future, we’re singularly focused on making flexible rent great. And there’s a lot of just product improvement building that occurs. And then there’s also the infinite improvement loop. Schedule intelligence is one of those and so there’s kind of no end to interesting innovation on schedule intelligence. And you were just highlighting one of the things we spoke about earlier, or prepping for this. It’s just the obvious example I to give is seasonality, is one of those explorations we’re working on. So teachers, as a very simple example, get paid most places 10 months of the year, they’re not paid during the summer. And so why does the lease have charges in the summer? Instead of you know, charging the renter say it’s $1,000 lease in July and August, why aren’t we charging that renter $12,00 for the 10 months where they are being paid, where cash flow is known to alleviate that burden. A teacher’s financial reality, which can be very similar across teachers is different than a seasonal worker in a different part of the country, which is different than maybe an oil worker in Texas, or a lawyer who’s getting paid many times quarterly.

And so really understanding not just the month to month volatility or intra month volatility, but really understanding, how should we think about leases and lease structures to really optimise that experience for that renter over time? Can we understand volatility? Can we understand cash flows? There’s also known effects in the industry, that I think intuitively most people in industry think about. But using the data and the science to then make adjustments is also a big opportunity. So you talked to most property managers and ask them what’s the worst collection month of the year? Well, it’s December, probably January. You see a lot of delinquency due to the holidays. January, I think historically, is the biggest delinquent challenge. Well, is there a month that’s the best for rental payments? It’s somewhere between March and April when tax refunds come through. And so what if schedules were built where in December rent was half of it, half of what December’s rent normally is, but in March and April rent was 150% of what it should be. So how do we just better match personalise the lease or the payment structure or experience towards the financial reality of the renter.

Louisa

It’s crazy that we’ve only started to think about this, I don’t know any figures that back this up but surely rent is a persons biggest outgoing, it must be?

David

100% and it’s not just the biggest expense, but it’s the biggest, most consistent expense. It is effectively a line of credit or revolving credit that is due every single month, or an installment loan that is due every single month. And so the renter is constantly having to manage around it.

Louisa

Yes, it’s been a bit of a nightmare, especially for so many of us who have been spending this time to move out of the city, move back in with families, whether it’s rural England or back to somewhere in a different city or state, and your apartment or flat is just sitting there costing you over half of what you’re earning. So David, what’s next for your product next year, are you going to can go further into more of the States, take on more units, more landlords?

David

Yes, we are. So we’re available in all 50 states in the US. And 2021 is about growing this product, both in terms of partnerships. Today, the partners, we’ve deployed with control about 800,000 units and we take those partnerships really seriously. So we usually start with pilots, and then we expand from there and it’s really important that we are giving. There’s really three customers we balance, we balance the owner or the manager, the site team or the property manager and the renter. And so it’s making sure that the experiences are really good because as we do that, as we demonstrate that we can really be a helpful solution in the community, the expansion and growth opportunity for us is really tremendous. And so it’s about growing and units. It’s about growing the product and the sophistication of the product. And then it’s about thinking through what is the next area we believe that we can transform flexible rent to keep improving the renter and landlord experience. And so there’s a bunch of different features that we will be looking at and deploying, as well as product evolutions that we’ll be looking at deploying in the next 12 months.

Louisa

Wow, well how very exciting. And David outside of work, you’ve got a young family, you’d love the ocean, how do you spend your time, if you have any spare time?

David

I have very little spare time between three kids and Till, it’s like four kids. I’m working from home, this has been a crazy leadership exercise and just personal management exercise. But I’ve got into a good routine of trying to work out and go outside in the middle of every day for 30 minutes to break up the early shift of kid work and Till work, and then the late shift of kid work, Till work and some more Till work. That’s been good. We’ve been living down in Charleston, South Carolina during the pandemic and so I’ve gotten to be on the ocean a lot, which I just personally love. So it’s been great. I’m ready for the pandemic to be over as everyone is, it’s funny I was talking with one of our engineers the other day, and he said something that really resonated. We are working really effectively and productively over zoom. It’s forced us to become better writers, better asynchronous communicators and decision makers. We’ve hired people remotely across the country. But when you’re grinding, an 18 hour a day to get a project across the line, the commiseration being in the same room with those other people, drinking too much coffee or trying to just get it there just is missing. It’s harder to commiserate over zoom at 1am.

Louisa

Yes, and when you’re trying to celebrate maybe finishing off and everyone’s like, let’s do zoom team drinks, I really just want to go to bed but well done, guys! Unfortunately, we’re coming to the end of the podcast. David, please share with the audience the best way they can connect with you and find out more about tell.

David

Thank you for having me on. For anyone listening, thank you for being interested in this, you can find me My name is David Sullivan and you can find me at David@Hellotill.com and I’m also on Twitter @homesandhomies

Louisa

Awesome. David, thank you so much for joining us and I will catch up you after the show.

David

Really appreciate it. Thanks 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. We’re all good content is found. While you’re at it, if you found value in the show, we’d appreciate if you could rate and review us on iTunes. Or if you simply just spread the word, be sure to tune in next Tuesday and I’ll catch you later.