When the preferred methods of payment for landlords and renters don’t line up, the results can be a major inconvenience for both.
One day while out for drinks, HubSpot product managers Remen Okoruwa and Ben Keller were trading terrible rent payment stories. Okoruwa said his roommates would Venmo him their monthly rent, and he would then deposit this into his checking account and write a check for their landlord. Keller and his roommates had a shared debit card. They would each go to a nearby ATM and deposit their rent before mailing a communal check to their landlord.
This conversation sparked the creation of Rentdrop, a free app that offers a selection of rent payment options for landlords and renters. The Boston startup launched its mobile app today.
“When we see that cash and checks have remained so durable, and the fact that how one side wants to collect and one side wants to receive creates friction, the opportunity we saw was why don’t we build a rent payment solution that actually breaks those two problems apart,” Okoruwa, Rentdrop’s co-founder and CEO, told BostInno. “Renters pay how they want to pay, and landlords collect how they want to collect.”
A 2016 report from the Federal Reserve Bank of Boston found that payment methods are fairly distributed, with 22% of renters paying in cash, 42% paying with a check and 16% using money orders. Electronic rent payments made up about 15% of transactions at the time.
Okoruwa estimated that the percentage of rent being collected digitally is around 33% in 2022. He suspects that most of these digital transactions are among young people, who are used to online payment and less likely to carry cash or a checkbook.
“It seems as though how younger renters like us want to pay isn’t actually aligning with how the landlords are collecting,” Okoruwa said.
Additionally, there are about 7 million unbanked households in the U.S. Okoruwa said these households prefer cash transactions and would struggle to live in buildings managed by landlords who want checks or digital payments.
Rentdrop is trying to solve all of these rent payment challenges with one app.
Renters with landlords who want digital payments can use Rentdrop to pay with a card or with an electronic fund transfer (ACH). For landlords who want checks, renters can link their bank account with Rentdrop to make digital payments. Once Rentdrop detects that the full amount has been submitted, Okoruwa said, they will mail a check to the landlord on the renters’ behalf.
Rentdrop is also working on adding cash payments into its services. The goal is to integrate with cash drop-off networks at stores like 7-Eleven, CVS and Walgreens. Okoruwa said renters will be able to hand over cash and scan a QR code, which digitizes their payment and sends it to the landlord.
“We aren’t just delivering more convenience. We actually increase the likelihood that rent gets paid on time,” Okoruwa said.
Okoruwa said the company will charge renters a 3% fee for payments made via credit card and will offer services, such as check mailing, with a fee. Direct deposits via a bank account are free.
The company will also build its revenue by providing renters with the option to pay for Rentdrop to report their payments to credit bureaus. Okoruwa said this subscription model will allow renters to build their credit score by paying their rent on time each month.
Rentdrop has raised around $850,000, Okoruwa said. The company is backed by angel investors including Dharmesh Shah, HubSpot co-founder and an angel investor in Dropbox and Coinbase, and Mike Volpe, former HubSpot CMO and former Lola CEO. The company is in the process of raising a seed round and is looking to connect with angel investors and venture capitalists, Okoruwa said.
The company began beta testing its app in January. Okoruwa said 75% of the landlords participating in this beta were previously using apps like Venmo or Zelle, but have now decided to stick with Rentdrop. Unlike these payment apps, Rentdrop has a very high payment send limit ($100,000), does not charge fees for ACH transfers and allows renters to enable autopay.
Rentdrop is targeting college students as a primary audience for its app rollout. Okoruwa said his team would be on Boston campuses this fall showing its app to students.
“We’re really, really excited to start building up our Boston presence and validating that if we can do this on Boston college campuses, there are hundreds of college towns across the country that we can then take this exact same strategy to and start building our presence among this younger renting population,” Okoruwa said.
