Startups rush to reward tenants with cash and even equity

• In the US, 44.2 million households rent. the national median rent hit a high of $2,039 in August.
• The startup aims to modernize the transaction between tenant and landlord — while benefiting both.
• Three companies focused on tenant rewards say their strategies are needed today.

As of 2019, Alana Powers has been renting her dream home — a four-bedroom house in St. Louis’ Tower Grove neighborhood, where she’s building a fireplace and a bamboo fence.

Powers shared her story on the website of real estate platform Up&Up, which allows her to simultaneously rent the house and save enough money to eventually buy it.

“I can remain flexible in case anything changes other than working toward my goal of homeownership — and I haven’t had to compromise,” she said in her deposition.

Founded in 2018, Up&Up helps renters in St. Louis save for a down payment by funneling part of their rent payment into a fund, called a wallet, that grows if the landlord makes a profit.

Up&Up is one of many startups trying to modernize the relationship between renters and landlords. Historically, the 44.2 million US renters have written checks to their landlords and kissed the cash goodbye. Another burden on renters is the net cost: rent prices have become more unaffordable throughout the pandemic. The median asking rent in the U.S. hit an all-time high of $2,039 in August, up 11 percent year over year, according to Redfin data.

But a new group of companies is trying to digitize and streamline that transaction while offering credit card-style rewards to renters — from cash back and gift cards to a small stake in the property.

Insider spoke with three rental reward companies to determine how they benefit both renters and landlords — and how they plan to turn a profit themselves.

Up&Up: Contribute to the deposit when renting

One of the biggest pains when buying a home is saving up enough of a down payment — which can be as much as 20% of a home’s cost — while paying a significant portion of your income in rent. In some cases, mortgage payments fall well below rental rates, so the financial burden of buying a home comes mostly from the down payment.

Up&Up strives to convert renters into buyers by helping them save money on the down payment.

Instead of a security deposit, Up&Up users “invest” one month’s rent in their Up&Up Wallet. This wallet grows in three ways: Tenants get a share of their landlord’s rental profits at the end of each month (after mortgage payments, property costs, etc.). tenants have the ability to make contributions to the wallet. and should the property increase in value since you move out, the tenants receive a share of that appreciation.

Needham Hurst, the company’s chief executive, described the platform as “a product in the rental space that allows you to take advantage of the wealth-creating power of ownership by leveraging the biggest check you write every month: your rent check.”

The startup operates about 500 properties in St. Louis and Atlanta, with plans to expand with the $312 million it has raised to date.

“Our mission is to help our tenants build wealth,” Hurst added. “We essentially want to give tenants a fair deal where they earn the same amount that an investor would earn on, say, a 98% ownership stake in the investor-owned home.”

Bilt: Building credit is as easy as paying rent

At rental-rewards startup Bilt, renters are rewarded for paying rent.

“Rent is the single biggest expense for most people in this country, and somehow, historically, it’s done nothing for you,” Ankur Jain, the founder of Bilt, told Insider. “Like, you’re no closer to home ownership, which I think is the biggest failure of the rental experiment.”

Bilt, which launched in 2018, partners with major landlords and real estate companies, including Blackstone, Starwood Capital Group and AvalonBay, to offer their tenants rewards for paying rent on time. Rewards can be used for travel, shopping and fitness, and can even be prepaid.

Bilt, which raised $60 million last year from Wells Fargo and other venture arms, also has a credit card that lets users make rent payments without transaction fees.

While the rewards and down payment savings are nice, Jain believes one of the most critical aspects of the home buying process is credit history, he said.

“You can be a really affluent young millennial who pays your rent on time every month. You’re a great, diligent customer, but you don’t have much of a credit history,” Jain said. “One of the most important things we do is help get you credit for those on-time rent payments so you can qualify for a Fannie or Freddie or FHA mortgage in the first place.”

Tenants living in one of the 2.5 million “Bilt Alliance” properties have the ability to report their rent payments to Experian, TransUnion and Equifax.

Piñata: Open rewards while renting

Piñata also offers renter rewards along with credit reporting. The New Jersey company raised $20 million in Series A funding earlier this year, according to TechCrunch.

To date, Piñata has 350,000 tenants using the platform and nearly 1,000 property management companies, owners and operators on it.

Once signed up, renters can earn Piñata cash that can be spent at retailers like Starbucks, Amazon and Target. They can also report their rent payments to TransUnion.

Lily Liu, Piñata’s founder and CEO, said landlords benefited when tenants were happy.

“It’s a fine line to walk trying to balance the benefits for tenants but also the benefits for property management teams and landlords,” he told Insider. “Our big takeaway has always been that they don’t have to be combative. When that relationship works together, it can be pretty powerful.”