Startup Rhove is offering renters a vested interest in their Apts

8 Replies

I recently read this article by Fast Company on a new real estate startup called Rhove out of Columbus, Ohio. The quick summary is they're offering renters in their buildings a small piece of equity on the property they're renting and calling it Rentership! I love this idea!

As more and more of the Gen Z population moves into the working class I don't see them wanting to own homes like generations of the past. They want to travel, they want experiences, they don't think about signing up for one job that they'll stick with for the next 30 years in the same area like previous generations. This makes them a generation of renters. 

Rhove is only offering them a $50 stakes per year but you could see how that could add up over time and it could help to drive renters in their buildings vs competitive spaces in the same neighborhood. Rhove also gives renters the ability to invest more if they're interested. 

Rhove founder and CEO Calvin Cooper also discusses the community and pride of ownership aspect beyond just the financial upside. ““Ownership is not just about finance, ownership is about citizenship, is about social responsibility. It binds us more closely to our neighbors." 

I have to imagine tenants that have a vested interest in the property will do more to take care of it and take serious pride in knowing they're a part of something bigger, not just a row on a rent roll excel sheet.

While I don't know if Rhove has perfectly nailed the execution of this offering just yet, I do think they are headed in the right direction and I do think we'll see other Real Estate Investors following suit here. 

Interested in hearing what this community has to say about this? I'd love to do this in some of my rental properties in the future especially if I could legally do it to fund new projects and investments. 


 

Originally posted by @Tom Anderson :

I recently read this article by Fast Company on a new real estate startup called Rhove out of Columbus, Ohio. The quick summary is they're offering renters in their buildings a small piece of equity on the property they're renting and calling it Rentership! I love this idea!

As more and more of the Gen Z population moves into the working class I don't see them wanting to own homes like generations of the past. They want to travel, they want experiences, they don't think about signing up for one job that they'll stick with for the next 30 years in the same area like previous generations. This makes them a generation of renters. 

Rhove is only offering them a $50 stakes per year but you could see how that could add up over time and it could help to drive renters in their buildings vs competitive spaces in the same neighborhood. Rhove also gives renters the ability to invest more if they're interested. 

Rhove founder and CEO Calvin Cooper also discusses the community and pride of ownership aspect beyond just the financial upside. ““Ownership is not just about finance, ownership is about citizenship, is about social responsibility. It binds us more closely to our neighbors." 

I have to imagine tenants that have a vested interest in the property will do more to take care of it and take serious pride in knowing they're a part of something bigger, not just a row on a rent roll excel sheet. 

While I don't know if Rhove has perfectly nailed the execution of this offering just yet, I do think they are headed in the right direction and I do think we'll see other Real Estate Investors following suit here. 

Interested in hearing what this community has to say about this? I'd love to do this in some of my rental properties in the future especially if I could legally do it to fund new projects and investments. 


 

 Rent out all of the apartments, airbnb them, let renters pay your rent, build equity buy renting out the whole building and paying nothing out of your pocket, profit. The apartmenthack

Interesting idea. I'd like to see the ins and outs of the terms Rhove brings to their deal with the owner/primary sponsor. 

This would be nice for collections during a recession where you can't evict anyone! They'll be motivated to pay if they get some funds back in the form of cash flow.

I admit I do not understand this model, this seems really complicated. I went through the website trying to figure this out.. Is this correct?

  • Owner signs up for this for the benefit of reducing turnover, at the expense of sharing out a percentage of the "profit on sale."  Owner uses their normal property management software and tenant lifecycle processes, this is just an added layer. 
  • Tenants sign a lease like normal. The only difference is they can pay extra for "RNT" which are shares that pay a percentage at "sale" based on the initial valuation of the property at some point in time, and the return is based on the sales price of the building. They can buy and sell the RNT shares in the app, subject to a fee.
  • It's somehow tied to the tenant paying on time or renewing a lease?  
  • The owner has to pay Rhove to manage the "outstanding shares of RNT" ? 

Who is getting the money the tenants are paying for "RNT" shares?   Looking at the FAQ it looks like Roost Realty just holds onto it? 

When I look at the "owners" tab the marketing is basically just to retain tenants and have them pay on time?  What happens if I change PM's or want to leave the program? 

If I were a tenant, I'd worry if the initial valuation was fair? What if the owning entity/LLC/etc changes ownership quietly but not the building? Does the "valuation" constantly get updated as I buy more RNT shares over my 2-3 years living in the apartment?

Is this one of those things that makes a lot of sense for big syndication deals where the finances are quite complex?  This seems like a big complicated (and expensive?) layer on top of pretty traditional PM type issues.  

Also too I recognize I am definitely not the target market as an investor, this looks like something that appeals to a certain type of tenant that I don't normally talk to in the working class area I operate in. 

Originally posted by @Nicky Reader :

I admit I do not understand this model, this seems really complicated. I went through the website trying to figure this out.. Is this correct?

  • Owner signs up for this for the benefit of reducing turnover, at the expense of sharing out a percentage of the "profit on sale."  Owner uses their normal property management software and tenant lifecycle processes, this is just an added layer. 
  • Tenants sign a lease like normal. The only difference is they can pay extra for "RNT" which are shares that pay a percentage at "sale" based on the initial valuation of the property at some point in time, and the return is based on the sales price of the building. They can buy and sell the RNT shares in the app, subject to a fee. 
  • It's somehow tied to the tenant paying on time or renewing a lease?  
  • The owner has to pay Rhove to manage the "outstanding shares of RNT" ? 

Who is getting the money the tenants are paying for "RNT" shares?   Looking at the FAQ it looks like Roost Realty just holds onto it? 

When I look at the "owners" tab the marketing is basically just to retain tenants and have them pay on time?  What happens if I change PM's or want to leave the program? 

If I were a tenant, I'd worry if the initial valuation was fair? What if the owning entity/LLC/etc changes ownership quietly but not the building? Does the "valuation" constantly get updated as I buy more RNT shares over my 2-3 years living in the apartment?

Is this one of those things that makes a lot of sense for big syndication deals where the finances are quite complex?  This seems like a big complicated (and expensive?) layer on top of pretty traditional PM type issues.  

Also too I recognize I am definitely not the target market as an investor, this looks like something that appeals to a certain type of tenant that I don't normally talk to in the working class area I operate in. 

To me it looks like Rhove buys in to the deal and then gradually sells their shares to tenants who meet the criteria. They earn 5% cash flow as long as cash flows are generated, and a return based on their equity ownership at sale. Rhove probably takes fees and cash flow beyond the 5%, no doubt they have terms around that (as all sponsors do). 

Turnover is a substantial cost, so if they can reduce turnover by giving what amounts to a small refund on rent, then in theory it should work out for the property owner and primary sponsor. 

It seems like it'd make a lot of sense for competitive markets with rent control, where sponsors can only raise rents a fixed amount and cutting expenses like turnover is a potential major value add. 

The idea of sharing profits with an investor is pretty well accepted in these larger deals, and it's exactly what we do in the syndication space. 

This is a novel strategy for improving NOI by returning some gross cash flow to the tenants, giving them an incentive to stay. Thereby increasing economic occupancy, decreasing turnover costs, and probably also reducing turn cost if they do end up leaving. If a Rhove tenant was in there for 3 years but needs to move, odds are they didn't beat the place up too badly for 3 years.

It shouldn't matter at all if you change Property Manager, Rhove isn't managing the property. They're just distributing cash flow. You're probably stuck with Rhove once they're in the deal, since they buy an equity stake.

Originally posted by @Taylor L. :
Originally posted by @Nicky Reader:

I admit I do not understand this model, this seems really complicated. I went through the website trying to figure this out.. Is this correct?

  • Owner signs up for this for the benefit of reducing turnover, at the expense of sharing out a percentage of the "profit on sale."  Owner uses their normal property management software and tenant lifecycle processes, this is just an added layer. 
  • Tenants sign a lease like normal. The only difference is they can pay extra for "RNT" which are shares that pay a percentage at "sale" based on the initial valuation of the property at some point in time, and the return is based on the sales price of the building. They can buy and sell the RNT shares in the app, subject to a fee. 
  • It's somehow tied to the tenant paying on time or renewing a lease?  
  • The owner has to pay Rhove to manage the "outstanding shares of RNT" ? 

Who is getting the money the tenants are paying for "RNT" shares?   Looking at the FAQ it looks like Roost Realty just holds onto it? 

When I look at the "owners" tab the marketing is basically just to retain tenants and have them pay on time?  What happens if I change PM's or want to leave the program? 

If I were a tenant, I'd worry if the initial valuation was fair? What if the owning entity/LLC/etc changes ownership quietly but not the building? Does the "valuation" constantly get updated as I buy more RNT shares over my 2-3 years living in the apartment?

Is this one of those things that makes a lot of sense for big syndication deals where the finances are quite complex?  This seems like a big complicated (and expensive?) layer on top of pretty traditional PM type issues.  

Also too I recognize I am definitely not the target market as an investor, this looks like something that appeals to a certain type of tenant that I don't normally talk to in the working class area I operate in. 

To me it looks like Rhove buys in to the deal and then gradually sells their shares to tenants who meet the criteria. They earn 5% cash flow as long as cash flows are generated, and a return based on their equity ownership at sale. Rhove probably takes fees and cash flow beyond the 5%, no doubt they have terms around that (as all sponsors do). 

Turnover is a substantial cost, so if they can reduce turnover by giving what amounts to a small refund on rent, then in theory it should work out for the property owner and primary sponsor. 

It seems like it'd make a lot of sense for competitive markets with rent control, where sponsors can only raise rents a fixed amount and cutting expenses like turnover is a potential major value add. 

The idea of sharing profits with an investor is pretty well accepted in these larger deals, and it's exactly what we do in the syndication space. 

This is a novel strategy for improving NOI by returning some gross cash flow to the tenants, giving them an incentive to stay. Thereby increasing economic occupancy, decreasing turnover costs, and probably also reducing turn cost if they do end up leaving. If a Rhove tenant was in there for 3 years but needs to move, odds are they didn't beat the place up too badly for 3 years.

It shouldn't matter at all if you change Property Manager, Rhove isn't managing the property. They're just distributing cash flow. You're probably stuck with Rhove once they're in the deal, since they buy an equity stake.

It didn't look like Rhove buys into the deal up front, based on their website.  It looks like the only "upsell" for owners is reducing turnover. I may have missed where they discussed buying into the deal, that would make a lot more sense and would be a lot more interesting. 

Honestly, I am pretty doubtful this would actually affect turnover since tenants don't normally move for no reason. They have to move due to relocation, upsizing, downsizing, hate the area, rent went up, moving in with an S/O, whatever.  I don't know how having shares that pay off when the building sells would affect their psychology. 

It's interesting too they are based here in Columbus.  Not sure about what the vacancy is like for the bigger "luxury" complexes on their website, but Columbus is in a huge housing shortage and we also have no rent control. 

Again though my experience is all through "workforce" housing, where everything seems a lot more straightforward.  I can be a lot more interactive to keep control of turnover, retaining good tenants through various means and letting the problematic ones go. 

Originally posted by @Nicky Reader :
Originally posted by @Taylor L.:
Originally posted by @Nicky Reader:

I admit I do not understand this model, this seems really complicated. I went through the website trying to figure this out.. Is this correct?

  • Owner signs up for this for the benefit of reducing turnover, at the expense of sharing out a percentage of the "profit on sale."  Owner uses their normal property management software and tenant lifecycle processes, this is just an added layer. 
  • Tenants sign a lease like normal. The only difference is they can pay extra for "RNT" which are shares that pay a percentage at "sale" based on the initial valuation of the property at some point in time, and the return is based on the sales price of the building. They can buy and sell the RNT shares in the app, subject to a fee. 
  • It's somehow tied to the tenant paying on time or renewing a lease?  
  • The owner has to pay Rhove to manage the "outstanding shares of RNT" ? 

Who is getting the money the tenants are paying for "RNT" shares?   Looking at the FAQ it looks like Roost Realty just holds onto it? 

When I look at the "owners" tab the marketing is basically just to retain tenants and have them pay on time?  What happens if I change PM's or want to leave the program? 

If I were a tenant, I'd worry if the initial valuation was fair? What if the owning entity/LLC/etc changes ownership quietly but not the building? Does the "valuation" constantly get updated as I buy more RNT shares over my 2-3 years living in the apartment?

Is this one of those things that makes a lot of sense for big syndication deals where the finances are quite complex?  This seems like a big complicated (and expensive?) layer on top of pretty traditional PM type issues.  

Also too I recognize I am definitely not the target market as an investor, this looks like something that appeals to a certain type of tenant that I don't normally talk to in the working class area I operate in. 

To me it looks like Rhove buys in to the deal and then gradually sells their shares to tenants who meet the criteria. They earn 5% cash flow as long as cash flows are generated, and a return based on their equity ownership at sale. Rhove probably takes fees and cash flow beyond the 5%, no doubt they have terms around that (as all sponsors do). 

Turnover is a substantial cost, so if they can reduce turnover by giving what amounts to a small refund on rent, then in theory it should work out for the property owner and primary sponsor. 

It seems like it'd make a lot of sense for competitive markets with rent control, where sponsors can only raise rents a fixed amount and cutting expenses like turnover is a potential major value add. 

The idea of sharing profits with an investor is pretty well accepted in these larger deals, and it's exactly what we do in the syndication space. 

This is a novel strategy for improving NOI by returning some gross cash flow to the tenants, giving them an incentive to stay. Thereby increasing economic occupancy, decreasing turnover costs, and probably also reducing turn cost if they do end up leaving. If a Rhove tenant was in there for 3 years but needs to move, odds are they didn't beat the place up too badly for 3 years.

It shouldn't matter at all if you change Property Manager, Rhove isn't managing the property. They're just distributing cash flow. You're probably stuck with Rhove once they're in the deal, since they buy an equity stake.

It didn't look like Rhove buys into the deal up front, based on their website.  It looks like the only "upsell" for owners is reducing turnover. I may have missed where they discussed buying into the deal, that would make a lot more sense and would be a lot more interesting. 

Honestly, I am pretty doubtful this would actually affect turnover since tenants don't normally move for no reason. They have to move due to relocation, upsizing, downsizing, hate the area, rent went up, moving in with an S/O, whatever.  I don't know how having shares that pay off when the building sells would affect their psychology. 

It's interesting too they are based here in Columbus.  Not sure about what the vacancy is like for the bigger "luxury" complexes on their website, but Columbus is in a huge housing shortage and we also have no rent control. 

Again though my experience is all through "workforce" housing, where everything seems a lot more straightforward.  I can be a lot more interactive to keep control of turnover, retaining good tenants through various means and letting the problematic ones go. 

Totally agree that I'd need more evidence or a track record that this has an impact on turnover. It's a hypothesis at best at this point.

The article posted in the original post sheds a bit more light on the model:

"..Through an agreement with the property owner, who Rhove pays a lump sum of cash in the beginning to become an investor, stakeholders earn a 5% return on their investment paid out of the rent that the property owner collects from the building;.."

That's how they get the shares to distribute to the tenants. I have no doubt that the actual backend implementation is messy, both from securities and technology standpoints.

Originally posted by @Taylor L. :
Originally posted by @Nicky Reader:
Originally posted by @Taylor L.:
Originally posted by @Nicky Reader:

I admit I do not understand this model, this seems really complicated. I went through the website trying to figure this out.. Is this correct?

  • Owner signs up for this for the benefit of reducing turnover, at the expense of sharing out a percentage of the "profit on sale."  Owner uses their normal property management software and tenant lifecycle processes, this is just an added layer. 
  • Tenants sign a lease like normal. The only difference is they can pay extra for "RNT" which are shares that pay a percentage at "sale" based on the initial valuation of the property at some point in time, and the return is based on the sales price of the building. They can buy and sell the RNT shares in the app, subject to a fee. 
  • It's somehow tied to the tenant paying on time or renewing a lease?  
  • The owner has to pay Rhove to manage the "outstanding shares of RNT" ? 

Who is getting the money the tenants are paying for "RNT" shares?   Looking at the FAQ it looks like Roost Realty just holds onto it? 

When I look at the "owners" tab the marketing is basically just to retain tenants and have them pay on time?  What happens if I change PM's or want to leave the program? 

If I were a tenant, I'd worry if the initial valuation was fair? What if the owning entity/LLC/etc changes ownership quietly but not the building? Does the "valuation" constantly get updated as I buy more RNT shares over my 2-3 years living in the apartment?

Is this one of those things that makes a lot of sense for big syndication deals where the finances are quite complex?  This seems like a big complicated (and expensive?) layer on top of pretty traditional PM type issues.  

Also too I recognize I am definitely not the target market as an investor, this looks like something that appeals to a certain type of tenant that I don't normally talk to in the working class area I operate in. 

To me it looks like Rhove buys in to the deal and then gradually sells their shares to tenants who meet the criteria. They earn 5% cash flow as long as cash flows are generated, and a return based on their equity ownership at sale. Rhove probably takes fees and cash flow beyond the 5%, no doubt they have terms around that (as all sponsors do). 

Turnover is a substantial cost, so if they can reduce turnover by giving what amounts to a small refund on rent, then in theory it should work out for the property owner and primary sponsor. 

It seems like it'd make a lot of sense for competitive markets with rent control, where sponsors can only raise rents a fixed amount and cutting expenses like turnover is a potential major value add. 

The idea of sharing profits with an investor is pretty well accepted in these larger deals, and it's exactly what we do in the syndication space. 

This is a novel strategy for improving NOI by returning some gross cash flow to the tenants, giving them an incentive to stay. Thereby increasing economic occupancy, decreasing turnover costs, and probably also reducing turn cost if they do end up leaving. If a Rhove tenant was in there for 3 years but needs to move, odds are they didn't beat the place up too badly for 3 years.

It shouldn't matter at all if you change Property Manager, Rhove isn't managing the property. They're just distributing cash flow. You're probably stuck with Rhove once they're in the deal, since they buy an equity stake.

It didn't look like Rhove buys into the deal up front, based on their website.  It looks like the only "upsell" for owners is reducing turnover. I may have missed where they discussed buying into the deal, that would make a lot more sense and would be a lot more interesting. 

Honestly, I am pretty doubtful this would actually affect turnover since tenants don't normally move for no reason. They have to move due to relocation, upsizing, downsizing, hate the area, rent went up, moving in with an S/O, whatever.  I don't know how having shares that pay off when the building sells would affect their psychology. 

It's interesting too they are based here in Columbus.  Not sure about what the vacancy is like for the bigger "luxury" complexes on their website, but Columbus is in a huge housing shortage and we also have no rent control. 

Again though my experience is all through "workforce" housing, where everything seems a lot more straightforward.  I can be a lot more interactive to keep control of turnover, retaining good tenants through various means and letting the problematic ones go. 

Totally agree that I'd need more evidence or a track record that this has an impact on turnover. It's a hypothesis at best at this point.

The article posted in the original post sheds a bit more light on the model:

"..Through an agreement with the property owner, who Rhove pays a lump sum of cash in the beginning to become an investor, stakeholders earn a 5% return on their investment paid out of the rent that the property owner collects from the building;.."

That's how they get the shares to distribute to the tenants. I have no doubt that the actual backend implementation is messy, both from securities and technology standpoints.

Aha! Everything makes so much more sense now. I spent a while looking for that missing puzzle piece! Agree 100%