When Chad Guziewicz dealt with a problem tenant that poured tar down the drains, he knew he had to screen his tenants better. This led him to create Rentify, a tenant screening platform using bank data to confirm income, rent history, and more. Chad is sharing with us how he used to vet tenants and how Rentify vets tenants for him now, how much pushback he gets from tenants using the software, and how the pandemic is causing a rise in fraud.
Chad Guziewicz Real Estate Background:
- Tech entrepreneur and CEO of Rentify — a tenant screening platform using bank data to confirm income, rent payment history, and more
- Former apartment complex owner
- Based in Belleville, Ontario, Canada
- Say hi to him at: www.trustrentify.com & use promo code fairless for 25% off your first report package
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TRANSCRIPTION
Joe Fairless: Best Ever listeners, how you doing? Welcome to the Best Real Estate Investing Advice Ever Show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever. We don’t get into any of the fluffy stuff. With us today, Chad Guziewicz.
How are you doing, Chad?
Chad Guziewicz: Good. How are you? And thank you for having me on your show.
Joe Fairless: I’m well, and I am looking forward to our conversation because, well, you are a fellow entrepreneur and you’re also a former apartment complex owner. I currently invest in apartment complexes, as do a lot of the listeners, and you have a service, and I’m familiar with the service; Rentify. You’re the CEO of Rentify, and Rentify is also a sponsor of this podcast. It is a sponsor because I believe in the service that you all offer. So we’re going to talk about your company that you are the CEO of. We’re also going to talk about your experience as an apartment owner, and learn more about how you got to the place where you’re at now.
A little bit about Rentify – Rentify is a tenant screening platform using bank data to confirm income, rent payment history and more. As I mentioned, Chad is a former apartment complex owner, and he is based in Ontario, Canada.
So with that being said, Chad, first, do you want to give the Best Ever listeners a little bit more about your background and your current focus?
Chad Guziewicz: Perfect. So I’m a serial entrepreneur. Also, I invest in real estate at the same time. I also started at another software company called Tire Wizard, that’s actually in the auto industry, that makes it easier for car dealers to actually sell tires, wheels, and accessories. And in Canada, we have a big seasonal thing where we get snow and you need to sell winter tires and all-season tires at the same time. But as I did that, at the same time, I also owned a tenplex at the exact same time. So I thought, “Hey, I’m going to get into real estate, and it’s going to be really easy,” right?
Joe Fairless: Mm-hmm.
Chad Guziewicz: So I learned some valuable lessons from getting into it; it’s not as easy as you think. And some of the challenges, really – if you get good tenants, it’s a good business, but if you don’t pick the right tenants, and especially in Canada, we have a very long period of kicking people out… It can be up to six months. It’s a lot different, obviously in the US than it is in Canada. So if you don’t pick the right tenants, you could be out 6-8 months of rent, so it gets really tough.
And what I found for being a smaller landlord is that the challenge was really just screening the tenants to make sure the information they’re providing to you is correct, real, all that kind of fun stuff. There’s not a lot of tools for the little guy to kind of figure that kind of stuff out. If you’re a huge company, there’s obviously a lot of tools, but not for the small- to medium-sized guys.
So my kind of story in that – I did both at the same time, and the software company took off really big, and I’ve always been big into software. And what happened was – I had this guy that moved in and he stopped paying rent for a while, and then he started damaging the place. And he told me that he worked at this job and all this stuff, and I called the place, and they said he did, but he actually only worked there part-time. So he started having issues paying me rent and all that kind of stuff, and he damaged the apartments… He actually poured tar into it, and I had to replace all the piping in the place.
Joe Fairless: Oh. So he was intentionally trying to cause some mischief?
Chad Guziewicz: Yes. And by the time he left, he cost me — I think it was $15,000 worth of damage.
Joe Fairless: Mm-hmm.
Chad Guziewicz: And trying to get money out of that, somebody that has no money, is a real tough thing, right? So I learned a valuable lesson in that moment, that if you don’t pick the right tenants at the beginning, it could be an expensive adventure. And you need to make a certain amount of money on each rent, but when you have those problems, it becomes a big problem. And eventually, I sold it off, because it became such a headache for me for a while.
And the software company took off so big for me… But I came back maybe two years ago, roughly, thinking about that piece, and my partner in the software company, we were actually in [unintelligible [00:04:03].01] parking lot and he said to me, “Is there any other problems that we could solve in a different industry?” And I said, “Well, I remember my building moments…” And that’s kind of where the aha moment happened, when we started researching how to screen tenants better, and using a different method. That’s kinda how it started and we came to be at this point.
Joe Fairless: And we’ll get into the methodology that you all use in the process, because I think it’s going to be important to learn what you’re doing that others should be doing with your approach… But I just want to talk specifically about the tenplex, just for a little bit. One guy’s putting tar into the unit; so that’s a nightmare tenant. What about the other nine units?
Chad Guziewicz: So the other nine units – I had some elderly people, which was no issues. But as people moved in and out, some people were good at collecting rent and some people weren’t. So we really had to vet them, like, we really did, and if they were good or not. But I’ve found that for me, personally, it was a bunch of work. The building also had a bunch of work that had to get done, and I actually, at one point, I got approached by a developer that wanted to turn it into condos. And I was like, “Oh, well the building needs a lot of work. It needs all the plumbing replaced in the place and the windows and all this stuff.” So I actually sold it off to him in particular, and made some money from it, so it was a great thing.
And maybe now it might’ve been good to keep it, because real estate in the place has gone crazy; it tripled everywhere here, especially in Canada. But no, it was an interesting experience for 5-6 years; having people come in and out, and showing the places, and fixing it, and maintenance, and finding the right people maintenance-wise to fix them, and making sure you had the right rents relative to what the area could afford, and all that kind of stuff. So it was quite an interesting experience. But because the software business took off so big, I took a different focus. I probably would’ve stayed in real estate if the software business didn’t take off so big.
Joe Fairless: What did you buy it for? How much did you put into it and what did you sell it for?
Chad Guziewicz: I bought it for $400,000 and I sold it for $700,000.
Joe Fairless: Okay.
Chad Guziewicz: And I probably put maybe 50k to 60k into the place.
Joe Fairless: Mm-hmm. And with the 10 plex, how were you vetting them, versus how Rentify vets tenants?
Chad Guziewicz: What I was doing is I actually got a sheet from one of the larger property management companies, and I had people fill it out. And then what I would do is I would call the references, I would call their place of work and try to vet that out, and I tried to get a feel of how they were. An old trick I learned is you always check people’s cars, because you can see how neat, organized they are based on the way they keep their cars.
Joe Fairless: How can you have a relevant situation where you’re like, “Ah, let’s go to your car…”?
Chad Guziewicz: Because I would always meet them in the back of the building, so they would drive into the building and I would meet them there—
Joe Fairless: Okay.
Chad Guziewicz: —and then I would take a look at their car—
Joe Fairless: Okay.
Chad Guziewicz: —and just see how it looked, like, “Okay, is there food and wrappers everywhere?”
Joe Fairless: Uh-huh.
Chad Guziewicz: And assuming they might keep a place like that.
Joe Fairless: Uh-huh. Okay. I like that. Alright. So you’re calling references and you’re calling the places of work, were you requiring any financial statements from them?
Chad Guziewicz: No, I wasn’t asking any of that kind of information, and maybe at the time I should have been, but I did not ask that kind of stuff, because at the beginning I was a little naive that people would lie on their application. But as I went further along into this business, I realized that people actually do lie a lot on their applications.
Joe Fairless: Do you know if the guy who was pouring tar in your unit had a checkered history of renting in other places?
Chad Guziewicz: As I went farther down the eviction process, I found out he goes place to place doing this.
Joe Fairless: Yes, it sounded like a serial eviction guy.
Chad Guziewicz: And the thing I learned, part of this, is landlords actually will lie to you. Because of how long it takes to kick people out here, they want to lie because then they leave your place.
Joe Fairless: Right. Right. Yes, there’s some states in the US that are similar to Canada’s timeframe, or at least some cities. I know New York city would be similar.
Chad Guziewicz: Yes, and California.
Joe Fairless: Califonia, yeah, you got it. Well, let’s talk about the vetting process now, that Rentify employs.
Chad Guziewicz: So Rentify is a completely different thing. So I’ll go back to our earlier conversation; while we were in the car, we started talking about using bank data, we started doing that kind of research. So lots of companies like Wealthsimple, PayPal, and all these guys are doing, are virtual connections to people’s bank accounts, just to transfer money in and out, right?
Joe Fairless: Mm-hmm.
Chad Guziewicz: And companies like QuickBooks have budgeting apps that connect to your bank account to tell you how you’re doing on your spending. And we started doing research and learning that if you want to get a financial picture of somebody and the way they are and their behavior, it’s based on the way they spend their money. So we actually do a secure way of actually connecting to a person’s bank accounts and we get 12 months of their bank statements and we actually go in and actually look for the rent payments. So they’ll tell us, “Yes, I pay $600 in rent.” We actually go in there and look for those rent payments.
Joe Fairless: Hmm.
Chad Guziewicz: They say, “Oh, I work at a place,” you can actually now go in and actually see the bank statements coming in. We actually validate their previous address, because they have it on file with the bank, and we’re actually matching up that name to make sure that that name matches up to that bank account. And that’s kind of a cash flow analysis, and “Are they paying their bills?” And there’s all these different things, “Are they getting it based on government?” And it’s a way faster process, and I wish I had that kind of at the beginning, because as we’ve gone through this, as we’ve moved forward, there’s actually a percentage of people that put a name that actually don’t match up to their bank accounts. And those guys are the actual scammers of the system. So it’s a whole new way of vetting differently that’s being done out in the world today.
Joe Fairless: How much pushback is generated or given, I should say, by the prospective tenants, when the leasing agent or the landlord who’s self-managing says, “Yes, I’m going to get your bank data and it’s going to show me how you spend your money, but I won’t see other stuff that you don’t want me to see, trust me on that. But I am going to see the three or four things.” How much pushback is received there?
Chad Guziewicz: So it’s funny that you asked that question, because that was the first question we asked ourselves when we started this business, will people do this? That was the number one question that we wanted to answer. And it’s funny, as we’ve gone through this process, we’ve actually seen it where tenants actually start liking this process better, because the challenge that they have today is they have to provide different information to different people. Our system can have everything done in five minutes. So it’s actually speeding up the process for them to try to get into the places, and some of the stuff they have to provide anyways to people, but this is just a secure way of doing it, instead of in non-secure ways of providing that. And honestly, from what our data shows us from the start to the finish, we’re actually seeing almost 90% of the people completing it.
Joe Fairless: Hmm. So it takes about five minutes for that information to be sent back to the landlord, or it takes five minutes for the tenant to—?
Chad Guziewicz: The whole process.
Joe Fairless: The whole thing.
Chad Guziewicz: So they go in, they fill out the information, our system analyzes it, and five minutes later, the landlord has all the information they need to make a decision.
Joe Fairless: What does the tenant need to have available and ready to input in order to complete the process?
Chad Guziewicz: So all they have to do is enter their card and their password, with no landlord and we do not get access to that. It sends a raw bank statement that gets analyzed, and all the stuff that’s not relevant gets stripped out, and only the relevant information gets sent to the landlord.
Joe Fairless: You say, card and their pass – so a debit card and their password?
Chad Guziewicz: A debit card and their password.
Joe Fairless: Password for the bank.
Chad Guziewicz: Just for logging into online banking.
Joe Fairless: Got it. Okay. So you said it’s a secure way. Will you qualify that statement a little bit more, and describe how it’s secure?
Chad Guziewicz: So the way it’s done is the banks are providing us a secure portal. You’re logging into your portal and the bank is just giving us the bank statement in a digital form.
Joe Fairless: Got it. And the software on your side does the magic of redacting a bunch of stuff—
Chad Guziewicz: Yes.
Joe Fairless: —or is that on the bank side?
Chad Guziewicz: No, that’s on our end. We, as Rentify, redact all the irrelevant stuff that doesn’t matter to the landlord, and we only provide the important stuff that the landlord needs to make his decision.
Joe Fairless: Got it. What does it cost the prospective tenant?
Chad Guziewicz: It’s $10. So either a landlord can pay the $10, or the tenant can pay the $10.
Joe Fairless: And what doesn’t it provide that you could see Rentify providing in the future, as you continue to optimize? I’m sure as a software entrepreneur, you’re always looking for ways to add more stuff.
Chad Guziewicz: So as we go in the future, the nice thing about our system is you can actually do an ID check, so we can actually make sure the ID matches up to the face on the card. We’re coming out with a future debt analysis to get back to. So instead of using credit checks in the future, we’re actually just analyzing all the debt analysis and actually providing a report for them, instead of using a credit check. And one of the main advantages of our tool is that it just doesn’t put a mark on people’s credit scores.
Joe Fairless: Oh, with the debt analysis, that—just so I’m understanding how that would be calculated, is that factoring in the bank statements that are available whenever those 12 months of bank statements are pulled?
Chad Guziewicz: Yes. We’re checking for any micro-loans that an individual might have with institutions.
Joe Fairless: Okay. And you wouldn’t be looking at a credit score. What if they have $3 million worth of loans that they’re not paying anything on over the last 12 months? That wouldn’t show up in the bank statements, but that could come back and be a problem.
Chad Guziewicz: We would find if they’re actually doing the payments to those actual institutions.
Joe Fairless: Well, I’m saying what if they aren’t; what if they’re defaulting and they’re making no payments and they have made no payments over the last 12 months, and you don’t pull a credit check? Maybe the scenario just doesn’t happen, I don’t know. I’m just kind of spitballing here. But if they’re not making payments to any entity, but they owe a bunch of money to that entity, there could be some trouble brewing with that entity and them in the future.
Chad Guziewicz: So usually in the bank, they’ve had to guarantee some way into the bank, to that institution, in some way. So we’ll actually get, with that analysis that we’re building out, we’ll actually say, “Yes, there is a loan outside of that institution,” because they have to guarantee. Some of the credit checks, and I agree, some of the credit checks in the past is stuff that are really far in the past, like seven years ago somebody might’ve got a divorce and they might’ve gotten a fight and that’s on their credit score, but anything that’s relevant today usually has to get attached to some institutions.
Joe Fairless: I’m going to switch gears completely and just ask you a little bit about the entrepreneurship approach and journey that you’re on right now, and then we can come back to Rentify to close the loop. But Tire Wizard – is that still happening?
Chad Guziewicz: That’s still going strong.
Joe Fairless: So you’ve got Tire Wizard and Rentify. Are those your two areas of focus professionally?
Chad Guziewicz: Yes.
Joe Fairless: How do you split time between the two and determine where to put your focus?
Chad Guziewicz: That’s a great question. So Tire Wizard is a great business, and we’ve got a great team working there. I’ve put a lot of stuff in place so that I can actually focus myself on the next venture. So I try to split my time when the stuff matters. I understand the patterns of the Tire Wizard; when it gets busy, when it isn’t busy. So I make sure I focus my own time for the other business when I need to, and then I split my time off with Rentify, which is probably eating out probably 80% of my time today.
Joe Fairless: Which one has the most upside potential for you financially?
Chad Guziewicz: Definitely Rentify in the future.
Joe Fairless: And that’s just because there’s a lot of landlords out there who could use this?
Chad Guziewicz: Yes. Essentially, from my research, 50% of the population rents, so it’s a massive market. It’s just massive.
Joe Fairless: What’s the next major milestone that you’re looking to reach from a business standpoint?
Chad Guziewicz: So, as you know, as people have gone out and built businesses, you try to go out to the market and understand, do you have the right product? Will people pay you for it? And will people use it? So that’s my first milestone, which I think we’ve achieved to that point. The next step, what I’m trying to do is, can we make this business scalable? Can we get multiple sectors involved in it? Can we get different segments like property management softwares involved, rent payments, REITs?
We’re actually working on some deals, we have the website to go to, to actually—tenants go to apply and landlords put their sites up to find them. So we’re in the midst of actually doing deals with each one of those segments, so that we can prove each market out and get to that point.
Joe Fairless: Anything that we haven’t talked about that you think we should, as it relates to the value proposition of Rentify, the objections that people might have with it, and any challenges that you personally came across as a landlord? …because that was interesting, too.
Chad Guziewicz: For me, the challenge in the future — because of the pandemic, a lot of things have changed. Because as housing prices increase, there’s going to be more and more strain on individuals, because the largest expense for an individual is their living expense.
So what I’m starting to see out there is there’s a lot more fraud starting to happen because of people having issues paying the rents. And as we open up, there’s going to be a lot of movement all over the place; people aren’t going to stay, the people that were in places that weren’t paying… And you’re really going to have to vet people to make sure financially they can actually afford the place.
And a lot of your listeners today, when they went to buy their properties, the banks would have vetted them to make sure financially they can actually afford that property. For some reason, landlords are not making sure that individuals can afford the property that’s moving into their place. And as we move forward and as I see this technology, we may be the first ones out in the market, but we will not be the last ones. In the next five to 10 years, I believe this technology will be the technology of the future. More and more people will be using the open source banking to actually vet their tenants.
I actually saw a study the other day that 86% of Americans are fine with sharing their data if it makes it more convenient for themselves. So it’s kind of amazing how the world of banking has changed for them. Open source, as long as it’s easier for them, they’ll do it. Again, like PayPal, like Wealthsimple and stuff like that.
Joe Fairless: Right. Yes. It reminds me when people don’t pay attention to ways to decrease their tax bill through smart and compliant maneuvers throughout the year to decrease the amount of taxes that they pay by investing in real estate, doing cost segregation and a bunch of other stuff, because most likely taxes are your number one expense as a property owner. And I have doctor friends who, that is their number one expense. That’s more expensive than even their mortgage, how much they pay in taxes.
So it’s in that same vein, because I can tell you personally, especially when I was buying single-family homes and I was using a property management company, but if I had a bad tenant, it would completely wipe out profits for at least 12 months. And those were cash flowing homes. But one bad tenant, you make 200 bucks a month, and then they move out, it’s going to cost $5,000 to get it move-in ready, if it’s a good tenant. And if it’s a bad tenant, much greater than that; in your case, upwards of $15,000. And that’s going to easily wipe out that $3,000 or $4,000 you made for that 12 months’ worth of rent. And there’s a compounding effect and a downward spiral, negative, armageddon sort of way, if you don’t screen properly.
So I’m grateful that you brought the service to the marketplace and I’m grateful to having you on the show and for you to be talking about this, so thanks for that. And how can the Best Ever listeners learn more about what you’re doing?
Chad Guziewicz: They can go to our website, trustrentify.com, and they can sign up or reach out to our sales team and we can help them out with anything they need. And again, I appreciate being on your show and I hope your listeners enjoyed me being on here.
Joe Fairless: And there’s a promo code, you put in my last name, “fairless”, and you get 25% off your first report package.
Chad, thanks so much for being on the show. I hope you have the best every day and talk to you again soon.
Chad Guziewicz: Thank you.
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