NYLP: Stepping on to the Launch Pod we have Susannah Vila, the founder of Flip. Thanks for stepping out to the Launch Pod Susannah.
Susannah: Thank you for having me.
NYLP: So you are the founder of Flip, and you want to help people get out of their leases. Is that correct?
Susannah: Or Sublet, the way we think about it is really be want to help people live more flexibly, so access housing for whatever a period time they needed for.
NYLP: And how would you describe Flip?
Susannah: Well it’s a marketplace for flexible housing. So on the one side we help people to sublet or get out of their lease, and then we help people to find the sublet or flexible rental. And we take care of the entire process from making sure it’s legal, to making sure both sides are protected from unsafe transactions. We really make it, so you have you press a button or two and you access space for whatever time you need it for, or you press another couple of buttons and you can get out of a space you don’t want to be liable to anymore.
NYLP: And it’s only for residential leases?
Susannah: Exactly, I was just focus on housing at the moment.
NYLP: So I have a lease for an apartment in New York and I just got a job offer out of town. I need to sublease. I need to get out of my lease. I go to you, and what do I do?
Susannah: So the number one reason actually the people use us is related to what’s going on in their professional lives. The interesting thing that’s happening in the world, as a side note, is that more and more people are working flexibly, right? So it makes sense that they would want to access housing flexibly. It might be that they have a gig in L.A. for three months but they live in New York, or they might have gotten their dream job in L.A. and they know that they hate New York and everyone be back in New York again. So in either of those two scenarios, what they’ll do is really simple. Actually you just post the information about the space that you want somebody else to pay for and you choose whichever person you want to live there, and you can see how qualified they are as a renter. In other words, how happy would even the most strict landlord be, with them living in the unit. It’s either credit score, their income pattern, all sorts of bells and whistles. And they put on money for first month rent and a security deposit if you want it. And then we can manage the whole thing for you, so you don’t have to worry about it anymore.
NYLP: And how are you able to find all this information about a prospective subtenant?
Susannah: So people make profiles right? So on any digital platform everybody has a profile, it’s just that a profile on Flip can serve as a rental application. It’s that detailed and technology exists now in a way that it’s easier to access than maybe ten years ago. We can really, you really can with the few button presses, connect your bank account and show that you make $100,000 a year, and that you pay your rent on time. Connect your credit score and show you’ve had your background checked, and you got a good credit score. So that’s what a profile on Flip means. It’s a kind of a dynamic constantly updating a rental application.
NYLP: So if I’m a prospective subtenant, I create a profile I have to link to my bank account, link my credit score, everything else like that?
Susannah: Yeah, exactly. You don’t have to initially but once you see a room or an apartment that you want, you’re going to be prompted to via the platform itself and probably via the person who is thinking about bringing you in there.
NYLP: And how many apartments do you have on the site?
Susannah: We’ve got about 2,000 available listings right now. Those are both rooms and entire apartments. And we’re active in L.A., and San Francisco, and New York.
NYLP: And what are the challenges in being in these different cities?
Susannah: Its surprisingly similar, the three different cities. And the reason we went into these cities is because we knew that this is where a lot of people on our demographic are living, right? This is where rent is a big deal for people, you’re not going to leave an apartment or room for three months and just not worried about the rent because it’s very expensive. Our users, the people who I think are product resonates with are moving between these cities, right? So a lot of people move between San Francisco, New York, and L.A. So, we are able to build up that density and that kind like the good stuff you want in the marketplace in those three cities.
NYLP: And how are you able to get the users onto the site? I have to imagine that’s the biggest thing for sites like these, it’s like you have to get people using the platform. It could be well designed but it’s all about getting those users.
Susannah: Yeah, it was very hard at first. What we have seen happen in the last, I want to say six to nine months is this amazing uptick in growth from word of mouth. People really just searching Flip, what is Flip? How do I Flip a lease? And then not being kind of complimented by us starting to rank for search terms, so SEO started to work for us, but initially what we did was we said, okay where are people now that might have this problem, they might be interested in our product. And kind to manually reach out to them on the platforms that they were on already, so Facebook would be a good example and said come and join us. You know you can stay on Facebook obviously but we’ve got a great set of tools that might be useful for what you are doing, and then they would do that. Then they would tell their friends, right? So that’s how we kind of grew initially.
NYLP: When I’m listing an apartment, I need to take photos of it? What do I need to do when I’m leasing an apartment?
Susannah: What we try and do is put a lot of the tools that have previously been more in the hands of real estate professionals into the hands of renters, so they can do all these themselves. So it’s our job to create something that makes it very, very easy for you to make your apartment look extremely enticing, right? Of course there are things that are hard, that it harder for us to do for you. We don’t go take pictures for our users right now. Most of them are taking photos themselves on their iPhones. As far as other stuff they have to add is just basic details, you know when is the lease on and you’re going on for, what’s the rent, why you’re leaving is just something that a lot of people add, I mean what in to that because it creates another layer, they can have a layer of and trust really on the marketplace.
NYLP: Right, like I’m not leaving because my neighbor is really loud or smokes a lot.
Susannah: Well that’s actually, as I see it, the huge benefit of building up the primary place for rentals is that ultimately we have all these information that comes from the peer, the consumer that you will never get by interacting with the professional.
NYLP: Such as?
Susannah: Such as the neighbors are really loud, the neighbors like to party a lot, there is really weird light in the afternoon. Something you just you need to hear from an outgoing renter.
NYLP: But if I’m an outgoing renter, I’m I really willing to share the negative parts about my apartment?
Susannah: Some are, some aren’t, right? Of course you can imagine why you wouldn’t be. But when it’s not your job to you know you have like commission on the hook, you’re more likely to.
NYLP: So what are some of the items that will make an apartment more attractive?
Susannah: I mean, the biggest one is probably not a shocker it’s just value, right? So if something gets listed on Flip and it is a reasonable rent price, and looks like an enticing place to live, we will see it flip within a couple of days. We got a ton of messages that we know, they have to pick up the letter the will choose whoever looks the best renter, whoever wants me put down the biggest initial deposit, and that person will have a great experience. On the other hand, you have a lot of, and this is just the nature of any market, you have a lot of units that are going to stay, vacant or available for a longer period of time, for a variety of different reasons but largely because the price doesn’t work for most people. And what we actually built as a way to address that is something called Bounties, which is a additional amount of money that somebody can put on their listing to incentivize no just folks who might want to come and live there to fill it but also anybody on the internet who might have a friend or a friend of a friend who wants to live in a unit in midtown with the pool of the roof. So they find you somebody to live there, though earn whatever that bounty is and since day one, we’ve always been shock by the amount of money that people are willing to pay bounties just to fill a space.
NYLP: And who are these people who are taking over leases? Because if you sign a residential lease its one or two years, let’s say its one year. You leave five months through, its seven months in the space that may not be furnished and then they don’t know if you know what the rent is going to be after the term of the lease.
Susannah: The thing to keep in mind actually in the way we think about it is that, it’s a lot easier to gain access to a Sublet, than it is to gain access to a traditional lease. And the result of that is that we have a lot of people for whom it’s hard to get on traditionally who are coming to us and say, I’m going to use Flip. Even if I’m going to be in New York for the next two years, I just want to get on Flip lease because it’s a better experience for me, right? A lot of our users are around that age range, maybe they aren’t making a lot of money yet, it’s hard for them to get approved for leases. And they don’t know where they’re going to be in 6 months. Being in your 20s is where you, just you know a little lot of unknowns relationships, job, school, and things happen in your life over the course of the year that you never would been able to predict. So people want that flexibility, right? So, the way I think about it is, there is three main reasons why people come to Flip to find the place to live. One is that, like I said, it’s easier to get on the Flip lease. Two is just they want that flexibility and they want to be able leave whenever they need to. And three is, they know they’re going to be in New York for three months, only three months or five months, and only months and they want a five month lease.
NYLP: And how will landlords reacting to this? Because I have to imagine some will just not be happy about that.
Susannah: The way I think about it is, Flip is a fast growing source of prequalified leads for a landlord, right? So, you are in the old way of doing things having trouble, let’s say filling a space, to varying degrees but it’s always kind of annoying, filling a unit and making sure that somebody is in there, is qualified, and is paying the rent. What we’re doing is we’re bringing in a digital platform to the floor, where there is really always a certain amount of people who are already qualified, right? Digitally, dynamically who want to live X units and pay whatever the rent is. So it takes a lot of the pain actually out of owning property. So in the past year what we’ve seen is, a lot of landlords, not the bigger ones but the smaller ones coming and joining us and saying, well this is platform looks like a great way for me to fill my units. It might be marketed towards renters who want a Sublet but I’m going to use it too. And they’re using it, and they are posting their units on Flip. And the ones obviously that more flexible go faster because we are a market place for flexible rentals, and they might want to rent something out for five months or six months because they can earn a slight premium or just, as a way to kind of manage their inventory and make sure that a unit comes on a market at the right time of the year.
NYLP: And what about some of the larger landlords, where people have signed leases. What are their reactions?
Susannah: That was interesting for the larger landlords they have so more units. That they see this problem on a daily basis, right? They have leasing teams of 5,10, 15 people, and those leasing teams very, very, very, frequently get the tenants in those buildings coming to them saying, I need to get on my lease, or I need to Sublet, can I do this, how do I do it legally? And they want to be able to say, not my problem, go use Flip. And so, in those buildings they have a lot, they have the leasing agents, leasing specialist sending the residents to us. And again, it works out well for both sides.
NYLP: And so when people are subleasing a unit, their apartment. Let say they go to California or San Francisco from New York and they lease out a unit to their subtenant. They are still responsible for the apartment, let say the subtenant parties or you know they may have a good credit score but they can do trouble, no fault of their own or don’t leave that apartment in the right condition. How does Flip play a role in that dynamic or is it just passed off to that person?
Susannah: So this is something that’s been happening in the world outside of us. You know with or without us, I call it a shadow market. It’s people who are renting in a peer-to-peer way informally because they want or need to rent that way because of the scenario you just describe and many, many more. And when they are renting informally and in the shadow market, they are all essentially liable, right? You use sublet out your room to somebody else, they say they’re going to pay but technically you’re liable or maybe the person who is the primarily lease holder is liable and neither of you are liable. But it’s a risky scenario either way, and of course that’s risky for the owner as well because they have, at the certain point no idea wo is living in their building and who is going to be paying the rent? And they’re quite liable. So what wondering is where really taking that market out of the shadows and making it bringing a lot of trust into it. So because everybody on the platform is qualified by us, because all the payment are taking off by us because we hold rent payments and security deposits in escrow and make sure that they are payout at the correct time when both party is release them. The experienced of renting on both the supplies side and to main side becomes much, much, much more I guess a good for it would be just delightful.
NYLP: And so people will pay the rent through your platform to the sublandlord?
Susannah: Exactly, yeah.
NYLP: And I know this in New York, I’m a real estate lawyer, everyone has a right to sublease their apartment.
Susannah: Not a lot of people know that.
NYLP: Well it depends on the building which I want to get into, if it’s a rental building but, that you have a right within 30 days that the landlord has to give acceptance or denial. What happens if the landlord doesn’t respond? Have you ever encountered that situation in New York?
Susannah: No, we haven’t. And that’s because although some landlords are terrible at responding in the case of our company and our users for the last two years, almost all the time it works for people, right? They get the application from us, they ask for approval and all goes through. But we always tell people and we make a point of trying to let our users and our potential users know that if you go through the process correctly and the steps that we layout for you, even if your landlord ignores you, or they say you can’t do it and don’t and can’t and the person who you bringing is in fact qualified, you can still go ahead and do it. That just a part of our job as I said, it’s a build awareness about what tenants rights are.
NYLP: And what if a landlord says no?
Susannah: When they say no, then you have this gray area where are they reasonable or is it an unreasonable refusal. There is no like, as far as I know no proceeding on that, it’s just it becomes like a common sense thing. Why wouldn’t the landlord bring somebody in and who can clearly pay the rent?
NYLP: There’s a whole lot going on with Airbnb and in short term rentals in the city all over the place. Do you see any regulatory challenges for what you are doing?
Susannah: No, and if I got have the opportunity to meet a lot of folks who have taken issue with the impacts of Airbnb’s short term rentals on four of the housing in cities. And what I was do is just kind of prop up Flip and say, I some doing everything above board, we care first and foremost about rental housing, being affordable, and easy to access, and available, and filled with renters so that everyone is happy. And nothing that we do is in any way illegal, right? All of our listing are 30 day or plus.
NYLP: How do you make money?
Susannah: So we’re a transactional marketplace, so when somebody books a listing we take a fee.
NYLP: Would you consider yourself a broker?
Susannah: We are technically a brokerage, because we are technically taking a commission based on a lease going to sign.
NYLP: So you had to register as a brokerage?
NYLP: How was that?
Susannah: In New York it wasn’t that hard. We are working on doing it on California and it’s a little bit harder. And we will have challenges ahead of us as we expand to other parts of the world and parts of the country. Not crazy insurmountable challenges but the way I look at it is some of my favorite companies, go to the trouble of dealing with regulatory challenges
and paperwork requirements for their users so the users don’t have to, right? And that’s part of what we’re doing for people.
NYLP: I want to read this quote to you from the New York Times, you were in the New York Times in December 2015, about the marketplace that you’re in. It’s a quote from Gary Malin, the President of Citi Habitats, about your company and companies like yours says, “I appreciate the ingenuity but I haven’t seen many of these companies take hold, because the system as it is now works.” How do you respond to this?
Susannah: My company and my product works within the system as it works now in every way, right? So some of our most frequent users are in fact the brokers, if you create a platform with lots and lots of renters who are qualified or want to pay for housing, then you will create something valuable for anybody who’s involved the real estate ecosystem, brokers, owners, managers, and other renters.
NYLP: So how are brokers working from your platform? Will they reach out to users directly?
Susannah: They are listing, actually they are listing and they are getting leads and accepting bookings on the platform.
NYLP: Do the people on your platforms pay the 15% rental commission?
Susannah: No. It is important to us that if a broker wants to charge that, they’re just be transparent about it, for the most part listings on Flip don’t have any extra fees on them. We take a fee that’s paid to the demand sides, so the renter coming in. But its orders of magnitudes smaller than any real estate brokers through, right? And we don’t charge the person listing at all.
NYLP: How are you different than you competitors?
Susannah: We’d have to say which competitors but specifically the things that separate.
NYLP: Well you can specify which competitors you want to differentiate yourself from.
Susannah: How are we different our competitors? What I care about is what is the Flip user thinking about using before they use us, right as they’re using us. So in New York, or in L.A. or in San Francisco when somebody wants to find a rental, they are going to use Zillow and Craiglist and in New York, it’s Street Easy. And the main difference between Flip and those listing portals is that on Flip, getting access to a unit of housing is so much easier because you can do it in the same way that you can book a vacation rental in Airbnb or book a rental car. You’re already qualified, you have a message and you press a booking button and then you have a lease, right? That’s something that is not the case on Zillow or any listing portal. These are media websites where a vacancy goes up and there is this whole layer of people and process between the vacancy going up on one of their websites and a renter getting access to the housing. So that’s how we are different for the renter. Then there is a supply side. How are we different for the person who is listing a unit of space that they want to fill? I think the reason that we’ve been able to grow when we will continue growing is that, we are really addressing what is the unmet need. There is no company out there that is saying, listen, Susannah you want to go live in L.A. for 4 months. There is a lot of hassle associated with making sure you’re not paying rent two places at one time. I’m going to take away that hassle out of your life in every way. There is no other company doing that. And that’s why we’ve grown, that’s why we’re getting word of mouth, right?
NYLP: That’s why you’re here.
Susannah: That’s why we’re here. And so with that in mind, all I care about is making sure that we continue to provide the best product possible to the supply side, and get more renters joining us, and grow that virtuous circle as much as we can.
NYLP: And what is the market like for people for flexible leases? Because you mentioned that it’s, its 20 something’s, is that really your main target? Who are they? And what are they really doing?
Susannah: I think about myself when I graduated from college or, the people are using as now who largely coming to cities after finishing school and what I want our platform to do is really hold their hands from the perspective of finding an experiencing housing in cities from the time they are 22 until they buy a house and get a mortgage when they are 30, or 35, or 40. It doesn’t matter how flexible it is. What matters is that, it’s a better and more convenient, and easier, and more affordable solution for finding housing.
NYLP: And what about finding a roommate? Let’s say you have that 3 bedroom apartment in the East Village and one room mate goes out, someone comes in, a lot of times these people list the apartment on Craiglist, or maybe they did yours pass and that’s you know probably hit or miss for Craiglist, but how are you bringing in people for individual rooms?
Susannah: We never set out to create any kind of roommate matching, product, or really even to address that problem at all. But what we did end up doing, we do is that we built a series of tools that it turns out are actually very useful and saw that after by people who are looking to fill rooms, right? But if you’re looking to fill a room you want to make sure the payments are secure, or you don’t want to have to worry about it, you want to make sure the person that’s the person who is living in your apartment with you in one of the rooms is qualified. You want to make sure that they are approved by the landlords. You so you’re not worried about that, you want to make sure you have a good legal agreement in place, right? That somebody else the third-party that knows about this, built for you and you don’t have to worry about. And that’s why we’ve started to get so many people renting up rooms with us. People don’t come to Flip, I don’t think because they want to find a roommate that gets them or that they are going to have the most fun with. They just want to be a better and more convenient solution for filling a room.
NYLP: And what happens if someone defaults on the sublease? Have you encountered that situation where they don’t pay the rent?
Susannah: Yeah, It’s a funny time to be asking me that because we’re working on right now, its building out of series of guarantees and insurance products for our users to make sure that they don’t have to worry about that either. So you can come to me in six months and I’ll have a better answer, but what I can say is that, oh really core part of our mission is to bring a level of trust into the subleasing marketplace that market that has not existed to-date, and part of that means helping to make sure people will pay the rent when they say they will pay the rent.
NYLP: Is this market a growing market or is it basically a fixed set of people who will be looking for flexible leases? Because I just read that now millennials are purchasing more apartments in the first quarter of 2017, there was a Trulia report that said that there were 854,000 new owner households and 365,000 new rental households.
Susannah: What’s a simultaneous trend that’s happening is that the amount of people who are renting in this country, and I think globally is growing at a crazy clip, right? So Trulia, Zillow also do this research and I think it’s over $500 billion is spent now in rent in the US. And just a few years ago it was 10% less, that’s insane. The amount of people that are renting is just sky rocketing, even if more people are owning houses. So the way I think about it is really not about if you want a flexible rental. It’s the fact that everybody in their 20s is renting housing, right? And more and more of them are sharing housing with each other because they are living in cities to a greater degree than ever before also and that’s not going to change. And they are going to need to share housing because it’s the best way to find affordable housing. So it’s very much a growing market and as we make it easier and more convenient for people to rent, right? Full stop, just rent but then also rent flexibility, sublet, get out of their lease, more and more people will be doing that.
NYLP: I just want to go back to that assumption where it’s a growing marketplace that people want to be in cities. Certainly younger people want to be in cities, we’ve found that migration to cities as cities have gotten safer. We’re the New York Launch Pod so everyone should be living in New York, but certainly people have moved to the suburbs before. And it is just part of, let say a bubble of people who are in that certain stage of life who are helping to fuel cities and then eventually they’ll move out to the suburbs, or if location doesn’t matter as much as they once did, may move away from cities.
Susannah: Of course on a micro level there are people who want to move to the suburbs and have kids still and there always will be. But on a macro level more people are living in cities.
NYLP: Where do you see Flip in the overall scheme of real estate? Where do you see this going?
Susannah: Real estate is one of the few industries that has not yet been really up ended by a digital platform. So in other industries we see platforms making it much, much easier for supply to connect with demand for buyers to connect sellers. Commerce is an obvious one. In work you see something like Upwork and making it much, much easier and much, much, more easy for people to, with work to find people who want to work. In real estate, as well as in healthcare, FinTech, they are, this is just doesn’t to exist yet, right? There is no transactional marketplace that directly connects supply with the demand of people who own property with people who want to lease property. The benefits of a digital platform for an industry obvious, when supply is directly connected with demand it’s always filled when a platform can be the gatekeeper, you don’t need to spend money on gatekeepers. It will have huge repercussions for the industry, but we think we’re on our way towards building up right and we’re not the only company that wants to build that. But we are going about it and what I think is a different way which is really focusing on the peer-to-peer market initially.
NYLP: I want to read you another quote from The New York Times article that you are in from Joe Charat, the Chief Executive Officer of Naked Apartments. He said, since we’ve been around, we’ve seen the graveyard of companies trying to build for the New York City renter. How are you going to avoid the graveyard?
Susannah: I mean I’ll go back to what I always say about, about what it is that we’re doing which is that, we’re solving a painful problem for people. And if you build a company where people are so happy to have found you, because they were in so much pain before, that they tell their friends and their families about it, we’re going to build the good company. So you know, I’m not, I can’t answer, to speak to the graveyard, what is the graveyard, but my assumption is that they had been similarly solving a problem for renters for consumers then they wouldn’t have died.
NYLP: And what’s been the advantage for you if being in New York?
Susannah: Well there is two ways to think about it if there is from the perspective of the start-up, and what the ecosystem in New York like, and I’ve always like that, it’s different from San Francisco where most startup are in that, it’s smaller and you know because it’s actually who is relevant to you and who you need to be getting to know. And that has its downside and its upsides, we’ve been able to benefit from a lot of the upsides. This was perhaps a weird market in New York City for us to start our company and because there are so many details about renting property in New York that do not exist anywhere. And what some people say is that, the residential rental market in New York is a crazy beast unlike any other. While it’s worth a lot of money, it’s pretty valuable, it’s extremely hard to dig into. And with that in mind maybe we shouldn’t started in New York, but at the same time at the side of the coin is that, because renting is so hard here that allowed us to I think grow even more because people are looking for a solution where it’s better, right? So if we can build something that works for all those intricacy is within all those intricacy and exclusives that brokers how are all these completed arrangement. And also works for the renter that is a win, win.
NYLP: So you have the New York grit, and then you can go to other markets and it’s so much easier.
Susannah: Yeah, after New York, every other market is a walk in the park.
NYLP: What’s easier about the other markets?
Susannah: Because I think real estate is so valuable here. There are a lot of layers of people, and processes, and rules related to how a unit of space becomes rented or doesn’t become rented. In other markets really it’s just more simple, right? There is a landlord and he or she wants to rent out his or her unit, renter comes and they sign a lease. It’s easier already and will be even easier for us to bring a digital platform in that transaction.
NYLP: That is a great point to wrap things up on. How do people find out more about you and Flip?
Susannah: They should come check into our website. Google Flip, we’re the first thing to come up so that’s definitely the easiest way to find us.
NYLP: And the website?
Susannah: It’s flip.lease, but I would recommend people just Google us.
NYLP: Google Flip or go to flip.lease.
I love your company, it’s a wonderful idea. I think it’s a great way for people to find their next subtenants, they’re on the pinch, they just got their notice to move to a different place so they want to get into a temporary place. Thank you for stepping on to New York Launch Pod and sharing your time with us. And if you want to learn more about the New York Launch Pod you can visit nylaunchpad.com for transcripts of the episodes including this one. And you can follow us on social media at NY Launch Pod. If you enjoyed this episode, please leave a review on iTunes it does help people to discover the episode and it is greatly appreciated.