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Greg Rand2 Posts
Greg Rand is the chief strategy officer at Renters Warehouse. Renters Warehouse acquired OwnAmerica in 2019, the technology and brokerage company Greg founded in 2010 to serve the residential investor market nationwide. OwnAmerica was an online marketplace for single-family rental homes that catered to institutional and professional investors. Prior to that, Greg was managing partner of Rand Realty, one of the 50 real estate brokerages in the country and the technology evangelist for Realogy Corp. Greg is the author of Crash Boom!, host of the Power Play radio show on the Wall Street Radio Network and a regular contributor on the Fox Business Network.
One Company’s Experience Dealing with the Unknown of COVID-19
3 key questions we asked to determine our course of action Renters Warehouse was heading into a spring market that had great potential for us. New clients. New technology. We had just spent a year integrating the largest third-party management company in single-family rental (SFR) with a marketplace platform that enabled us to help customers buy, lease, own and sell SFR under one roof. The second quarter of 2020 was about to be legendary—and then COVID-19 hit. The unprecedented unknown was nerve-wracking. What’s the worse-case scenario? We couldn’t even really imagine the worst worst-case, because that was something from a horror movie. To put revenue numbers to these scenarios, we had to figure out how people were going to respond to the crisis. We made educated guesses about how people would react—and what that would mean to Renters Warehouse. Question 1: Were tenants going to pay the rent? Revenue for our landlord clients is rooted in tenants paying their rent. Some politicians ran to the microphone to encourage people to skip their rent payments. It was conceivable that as much as 50% of rents could be delinquent. As we tracked rent payments day by day in April, we found very quickly that our tenants, people who reside in single-family rentals with average rents of about $1,650 a month, were going to pay. In a normal month, 97% of the 22,000 rents we collect are paid on time. On April 1, 43% of our rents were paid. We finished the month at an astonishing 93% paid—just a few points below a normal month. We breathed a sigh of relief and started worrying about May. My personal love for SFR hit a new high March 1, 2020, when 58% of our tenants paid their rent on the very first day of the month. That was a record, and something clicked when we saw that. What is “essential” to life in America has taken on new meaning during this crisis. It’s now a subject of everyday conversation. Obviously, shelter is essential. After all, these days, the only way to keep your family safe is to go to a certain place and stay there. That place is home. But there is more to this. At a time when powerful people were chanting #CancelRent, we achieved the highest first-day rent collection percentage in company history. When things are tough and uncertain, people continuing to pay their rent is an indicator that housing stability is important. People aren‘t messing around with their housing situation. Question 2: Are we going to be able to continue renting homes? The question about rent being paid was about recurring income. For owners, that’s rent being paid. For a property management company, that’s management fees being paid. But would people sign new rental leases and buy investment property? That’s the other half of our business and it forced the question: Is movement in housing essential? In other words, in times like these, anyone who can stay in place probably will. So, who needs to move? For this we looked at the only historical comps we could find: the financial crisis of 2008 and the terrorist attacks of 2001. If the movement of people in a time a crisis was what we were trying to understand, 2008 home sales were a reasonable indicator. If no one in their right mind would buy or sell a home in a housing market “free fall,” who would still buy or sell because they had to? The answer was two-thirds. According to the National Association of Realtors, about 35% fewer homes were sold in the years after the crash of 2008 than during a normal housing market. Keep that number in your head. In 2001, I was on a management team that ran a decent-sized real estate brokerage in the New York City suburbs. After the terrorist attacks, the housing market froze. Everyone was hunkering down. I assume it was more intense in New York than in other parts of the country because we all knew people who had died, and many of us saw the smoke from the buildings with our own eyes. The city was the economic engine we depended on, and it had just been hit hard. We were wondering whether anyone would buy real estate in New York again. We wondered if this was the beginning of a new normal where restaurants and theaters were going to be bombed on a regular basis. If so, who would want to live near that? So, this time period and circumstance presented another reasonable comp for today—something totally unprecedented, unknown and out of left field. By October and November 2001, the market thawed out and the number of homes sales leveled off at a 35% reduction from where it was otherwise going to be. There is that number again. When no one wants to move, two of three people who were planning to move still do. So, at Renters Warehouse, we felt it was reasonable to forecast that 35% of the potential tenants we would have placed in the second quarter of 2020 would not move but 65% would probably still need to rent houses. We sounded the alarm to our agents to stay in the game. The pie would be smaller, but there was still going to be a pie, and we needed to get a healthy slice of it. Real estate agents on straight commission would be automatically furloughed if they didn’t stay productive, so it was critical to sell them on the expectation of a smaller, but active market. This was no time to go dormant. Here is how it played out. During the third week of February, our new tenant inquiries—our early indicators of tenant behavior—fell off a cliff. By the middle of March, they leveled off and stabilized at a 35% reduction from the norm. Since then, they have increased. In the final tally, our tenant placements in April were, you guessed it, about 35% off what we budgeted
Warehousing Some Respect
Greg Rand watched his mother work hard to build her real estate business, even though realtors often didn’t get much appreciation. He was determined to change that image. By Greg Rand My earliest business memories are related to real estate because my mom, Marsha Rand, launched her real estate career when I was in elementary school. She went from a rookie agent to a top producer, to a branch manager and finally the owner of her own firm. Century 21 Rand was a startup that had culture as its foundational value proposition. It was quintessential Century 21—a rowdy band of women who sported gold jackets and took on the town. Entrepreneurial Foundation I learned three key things about the business from watching this all unfold. First, entrepreneurship in real estate works. Second, family is the most important thing, unless an agent is having a problem, and then solving their problem is the most important thing. And third, the public didn’t appreciate real estate agents enough. Every time a real estate agent was depicted on TV or in movies, they were lampooned. That was my mom! I still remember how it bothered me as a kid. I worked in my mom’s company in many mission- critical capacities: licking envelopes, answering the phone, sticking photos into photo books…. I graduated to taking pictures and having them developed at a 24-hour photo. I observed that something important was taking place in that office. People would come out of conference rooms elated. “They just bought their first house,” someone would tell me. Or they would come out looking horrified. “They just bought their first house!” The range of emotions told me something weighty was going down. It didn’t make sense to me that a profession in which something so important was being handled was also made fun of. The Dawn of Data One day when I was answering the phone on the weekend, I had a revelation. I had been trained not to give out the price of the house until I got the caller’s phone number. Hmm. The caller wanted information, and we weren’t providing it. I filed that impression away for a few years until I learned about the coming “information superhighway.” I read a speech from NAR president Bill Chee in which he characterized the situation as a bunch of hungry lions coming over the hill while a few chihuahuas fought over a piece of meat. Those little dogs were about to be devoured. The chihuahuas were realtors, the lions were the consumer public and the meat was housing data. They wanted it. We were hoarding it. And the internet was going to blow us to smithereens. The customer wanted information, and we were intentionally getting in the way. At the time, I was 24 and making six figures as a mortgage sales guy. I quit that job to start a company based on “public access to MLS.” Mike Toner, a college buddy and I launched RealtyVision, one of the first two companies in the country to display interior tours of houses on computer. This was pre-internet. The computers were encased in kiosks in public places. Our business model was fatally flawed due to lack of distribution. If we had held out a couple of years, RealtyVision would have been a website and I would have retired by 30. But we didn’t hold out. We ran out of money and got jobs. HFS, Inc., the company now known as Realogy, had hired Bob Pittman as the new CEO of Century 21. Bob was one of the founders of MTV, so he was a whiz kid CEO. I pitched RealtyVision to Bob’s team, and they said “no.” Instead, they offered me a job to do half-day technology seminars for their agents. This was 1996. I did 70 cities in 18 months. We showed audiences ranging from 20 to 400 real estate agents that technology was not their enemy. I have some priceless memories of the first time my audience saw things like email attachments. As the Technology Evangelist, I got to work on the IT team that deployed the first Century21.com, which was also one of the first real estate websites with MLS data. Public access to the MLS was a huge success, and I believe it’s the reason the industry has thrived for so long. The customer wanted access, and we gave it to them. You can make fun of realtors all you want, but they stared down those lions and made friends. If they had held out and fought the release of MLS data, there is no doubt they would have gone extinct. All in the Family That was a wild ride that allowed me to make a minor impact on a large part of the country. Then my mom pitched my brother Matt and me to join her in the family business. My dad wanted to retire, and she wanted to begin a transition. I jumped at the chance to have a deeper impact, if on a smaller geographic scale. It was an honor to be asked. I had spent almost a decade in the real estate tech space. Now it was my time to work on the other side of my theory—that real estate is too expensive to take lightly. Real estate is a financial service. This was late 1997. We switched from Century 21 Rand to Prudential Rand. Flying the flag of a financial services powerhouse was perfect for where we wanted to take the company. We grew from $7 million in revenue to over $50 million within 10 years. We layered in mortgage, insurance and title businesses. We did our best to present a “business suit” version of real estate sales. We were a top-quality firm, but we were still essentially doing it the same way as everyone else. In 2008, we switched to Better Homes and Gardens and took on a much softer brand, which has worked like a charm. Launching a Dream I
