Seth: Hey folks, how's it going? You're listening to the REtipster podcast. Today, I'm talking with Arvand Sabetian. Arvand is the founder of ZipRent.com, and I wanted to interview Arvand not only to help our audience understand more about what ZipRent can do for rental property and multifamily investors in the community, but also to learn whatever I can from this guy about entrepreneurship and running multiple software companies. He's got a ton of experience. He's done a lot of great things, and I think we can all learn from this. So I'm excited to talk with him today.

Arvand, how's it going? Welcome to the show.

Arvand: Good, good. Thanks, Seth.

Seth: Why don't we start from the very beginning? Can you share about your background? How did you get into real estate?

Arvand: Yeah, let's start with that. When I was in high school, I started a web hosting company and kind of grew that throughout college. And when I exited out of that company, I had some cash and I was trying to figure out what to do with it. This is around 2011, 2012 through 2014, and started kind of dabbling in real estate, buying single-family homes. That was right when a lot of foreclosures were happening post the 2008 crisis. So I would buy them, fix them up a little bit, and then rent them out. I got into some multifamily as well—some 16-unit ones, some five-unit ones. And so they were all kind of spread out across California. And the idea was kind of diversification within the California border. So, you know, something as low as LA, and then we had properties in the San Francisco area and Sacramento and Fresno, kind of all spread out, right? And that's kind of how I got started in real estate. And then ZipRent came after that, right? Because they were so spread out, I was having a hard time finding property managers that I trusted in all of those regions. As you yourself and a lot of your viewers might be aware, most property managers only work in a very specific geographic area. I mean, taking the San Francisco Bay Area as an example, I had a property in Berkeley, San Francisco, and Marin, and I had to use three different property managers. These properties are within 30 minutes of each other, right? Property managers don't cross bridges. It came out of necessity, needing to have a process in multiple geographic regions to kind of have a set expectation for how a property was going to perform when I put it up for rent. Sometimes I would have a property manager put up my property for rent and it would take three months. I would hear nothing. Other times I would hear nothing, but two weeks later, I would just get a lease. It was just kind of creating a standardized process to allow me as an owner to see what is happening with the property. Is it the price? Is it the time? What is it, right? So really adding a lot of transparency into the process. And then also having a system that can perform in any remote area, right? We use lockboxes to show our properties. So that allows us to essentially take on a property anywhere we're licensed.

Seth: Gotcha. So ZipRent, this is like a full property management solution, right? Like it's an alternative to hiring a property manager?

Arvand: Absolutely. Yeah. Think of it as if you have a local property manager that you like and you were able to replicate that property manager in a different state or a different city that you want to invest in. That's the idea behind ZipRent—to create that consistency and the level of quality of service that you would expect from a property manager you like, but be able to utilize your services in a larger geographic region.

Seth: Back when you were hiring these different property managers, do you ever recall a time when you were just blown away by what a great job the property manager did? They were just so high quality, you loved the company. Did that ever happen?

Arvand: It is very rare. I get the gist behind your question. Property managers don't have a great reputation. And I think that's also what led me down this path, right? I created software first, and it was mainly for myself to use. And then the question became, do I go out there and sell the software to owners? Or do I go out there and sell the service? I was a broker in the state of California. And when I was doing my research, it seemed like just the reputation management that was happening with property managers was almost non-existent, right? Low responsiveness, low transparency. They didn't care if someone left them a bad review. And that presented kind of an opportunity, I think, for me to go the full service route as opposed to just the software route.

Seth: I've had conversations with colleagues in the past about the job of being a property manager because I actually know a couple of them. And I hear from their end, all the challenges in their job, just managing expectations that different landlords have. Like some people expect one thing and others expect another thing. And there's just—communication is so important, but it's also so hard to do it consistently. And I've often thought of it as like one of the worst jobs in real estate. Like it just seems really hard to make everybody happy and do a good job. When I hear rental property management software, immediately I think of something like what Cozy used to be or Tenant Cloud or one of these other things, but that's not really what we're talking about here, right? This is like an actual end-to-end property management service as well? Or where does the landlord's job stop and where does your job start for ZipRent?

Arvand: In kind of a larger sense, you can think of us as a full-service property manager, right? And a landlord should come to us expecting that we're going to handle the leasing, we're going to handle the tenant communication. Most of our landlords never talk to the tenants directly, but they can see our communication with the tenant, which is rare in our space. Part of that is software that we built is kind of like what you mentioned, like a Cozy or Tenant Cloud. But because we also provide the service, the software is aware of the next step, right? So, for example, you mentioned the communication with owners and the difficulty of that. A lot of it is expectation setting for both owners and tenants. And let's use AppFolio as an example on a larger sense for that property managers use. AppFolio doesn't know how that property manager wants to manage the properties and how it wants to set expectations. My software does because it was built specifically for us. So when I send a renewal notice, for example, to an owner saying, "Hey, we need to renew the lease for this tenant," it comes with specific recommendations and guardrails to essentially make sure that we keep both the owner and the tenant happy, right? The whole idea behind the lease renewal is to keep the property occupied and keep both sides happy so they go on for another year. The owner continues to make money on the property and the tenant continues to have a roof over their head. So no other software that you can just get off the shelf and use for your property management company is going to make those recommendations because it doesn't know what you want, right? You need to make those recommendations. You need to do the legwork. And that's where the manual nature of some of these guardrails come into place. And it becomes very hard to keep everyone in line. When the software knows what we want, what I want as the broker, right, it can start making recommendations automatically to both the owner and tenant and set those guardrails and expectations so that all my staff have to do is essentially guide the process along as opposed to make up the process every single time.

Seth: Do you involve AI at all in anything here? Or like, is there a plan for that in the future?

Arvand: AI is a funny word, right? Because it has a lot of different meanings. You know, as an owner, when I list a property and it doesn't rent for two weeks, what are my options? What are my decisions that I need to make? So I built that decision-making into my software of what I would do as an owner, right? It looks at the number of leads and showings that came through and says, "Look, based off of this and based off of how many leads and showings we're getting for other properties in the same area, you're probably priced too high." And because of the offset of your leads and showings versus what else we're seeing, you're priced too high by maybe two and a half percent or five percent to essentially guide that process along, right? That is AI, but we built that like five years ago before the AI buzzword, right? Because vacancy is the largest problem that we were trying to solve when I first started ZipRent. And now, you know, a lot of what we work on is kind of making the turnover smooth, making walkthrough smooth, making the onboarding of the property smooth, right? Like the next steps. But the first step was making sure the property is occupied 100% of the time. And one of those is pricing it right as quickly as you can so that you can get a tenant in there.

Seth: Now, when I think of property manager in the context of a rental property, I kind of think back to what you were talking about earlier, how like there could be three different ones. They handle different areas in the same city, you know, like they're physically in close proximity to my property, like they can get there and that kind of thing. So with ZipRent, are there like a bunch of offices everywhere? Or like, do you just remotely contract people who can visit the property? Or how does that work? Like how does the physical presence work here?

Arvand: So all of our staff members are well-versed in speaking to owners and tenants, they all work remotely. Those are our employees that work for us. They know our processes. They know the software. They rely on the software to guide the process. And then they're here for customer service and that white-glove experience on top of the software efficiencies. Then we have subcontractors in every region, depending on how many units we have. Like San Francisco Bay Area is our largest market. So at any point in time, you have access to five to 10 what we call inspectors. And these inspectors can be dispatched for a variety of reasons. Most of the time they're dispatched for walkthroughs. But if there's an emergency, we'll dispatch a subcontractor. The benefit of this, and this is all done by design, not to cut costs or anything like that, is because my staff, the best that they can do is to essentially be in front of the computer and guide the process, right? They can evaluate what's happening, talk to the tenant, and talk to the owner. If they all of a sudden get up from behind their desks and start running to a property, who's there doing the communication, right? So we utilize these inspectors to be our on-site eyes and ears, whereas we can then take the time to actually address the situation when we get all the data points.

Seth: So when you think back to when you first started ZipRent, you probably had a picture in mind of like, what is this going to do? What are the exact tasks or problems it's going to solve? And I'm sure that it's probably evolved over time to what it is today. So I'm just thinking like, take me through the evolution. Like, what did it start intending to solve, but then what does it do now? And then how and why did that change over time?

Arvand: Going back to my story of I have properties all over California, right? I'm trying to figure out how to place a tenant in these properties without utilizing 10 different property managers. So originally, ZipRent's sole purpose was to place a tenant. That was the first iteration of the software, essentially. What came to fruition was like, I was doing this bike ride where you raise a bunch of money for AIDS and HIV awareness and you go from SF to LA. It takes seven days to do this bike riding and you're camping, right? And so I think it was about like 2017 or 2018 when we kind of built the first iteration of the software. And I was on that bike ride when I placed the tenant myself on my phone. And I realized, "Okay, I have something here," right? The tenant was happy. It took only like a week to place that tenant. And I'm happy as an owner. That was the first iteration, essentially being able to quickly list the property, quickly show the property on demand when a tenant wanted to see it, as opposed to trying to schedule with somebody who might take some time to show the property and then take on an application. Generate a lease for the tenant automatically, filling in the fields, filling in the information that's local to that jurisdiction. This property happened to be in Fresno. And then essentially having the tenant sign the lease and submit their bank information for the security deposit, right? That was the initial process that completed end-to-end as our first test case. Where we've come today is essentially doing that for every single part of the property management experience. You can go very deep into making the process efficient. And once again, the idea has never been to automate so that purely we can just cut costs. The solution has always been to automate to make it more efficient for the owner and the tenant to essentially either live at the property or manage their property through us. And it comes with cost savings that we ultimately pass on to the owner because of our lower fees that we charge.

Seth: Talk about the pricing of this a little bit. So your pricing is notably unconventional for property management. It's like a flat $150 per month per unit rather than the typical percentage of rent, which is what most property managers do. What made you so confident that this flat fee, no percentage nonsense approach could work in this industry? It seems like a good deal to me. You know, if I've got a property that I would normally have to pay a lot more as a percentage of somebody else, it's less with you. Plus I get the benefit of what ZipRent has to offer. Do people ever like push back on that or have doubts about that kind of pricing or?

Arvand: I mean, there's obviously always doubts around something that's new. You asked, how did I come up with that? A lot of things that happened at ZipRent happened at ZipRent as a result of my personal experience as a landlord, right? So when I came to pricing, the whole percentage thing didn't make sense to me, right? If I have the right processes in place and I'm running a good company, I'm treating my staff properly who want to come to work every day and properly manage the properties that are entrusted with us, then what is the actual cost? And let's just charge that cost, right? Why are we charging a percentage when the process is exactly the same, whether the property is in San Francisco or in Austin? That was the premise behind the flat fee—essentially coming up with a cost that achieved what we needed to charge to be able to provide the service and also make a profit as a private company, right? And from that perspective, that's how the pricing was born. Are people skeptical of it? Obviously, right? We do get a lot of landlords who are first-time landlords and they're shopping around and are like, "How do I even compare this? This is kind of like comparing apples to oranges when it comes to percentage and flat fee." And how I've tried to address that is with our reputation, right? I mean, at the end of the day, when you look up ZipRent and kind of what tenants and owners are saying about us in comparison to any of our local competitors, we outshine them. And the purpose of that is, look, we charge fair pricing, but that shouldn't scare you in thinking that you're going to get a lower quality of service. Just check out our reputation.

Seth: Yeah. So does that mean, say, if I've got a property like some mansion in California and my tenant is paying $20,000 a month in rent, I would still pay the same amount, $150 per month? Or would something change that?

Arvand: You would pay the same amount. In fact, I think if you go on our website and click on listings, you might find one or two of those. It's not what we specialize in. At this point in time, we have roughly 300 listings at any point in time. We manage almost 4,000 units. So we're all about adding efficiency so we can get a larger volume of business. And that doesn't come with managing mansions. But if you do have a mansion and you like what we do, then we'll definitely take that on as well at the same price.

Seth: How many states do you currently operate in?

Arvand: 14 or 15. We might have just added one this last couple of weeks. And we're shooting for one a month. So obviously, we started in California. I'm the broker of record in California. And that's the other pretty unique thing. So obviously, we compete against two different types of property management companies. One are the local guys, right? There's usually one broker in there. They manage a very specific region. And then there's our competitors that are tech-enabled. I don't know any other tech-enabled company whose founder is also the broker of record. I'm essentially taking on the risk of providing the property management service for a large bulk of our customers. Now, as we've continued to expand, obviously, I don't have licenses in every state. So we brought on brokers of record to help us out, explaining them our processes, getting them comfortable with how we operate, and then expanding in that region. So our goal is to add a state every month, which would then get us to all 50 states within the next three years or so.

Seth: Is it hard to add a new state to the list? Like what are the bottlenecks or things that you have to break through to say, "Okay, yes, now we can add Indiana to the list" or whatever the next state is?

Arvand: Yeah. The first thing, the obvious thing is licensure, right? Like we are a full-service property management company and every single state in the US, except maybe one, requires a professional license to provide property management services. So finding a broker of record who has a broker's license, not just a salesperson license, similar to the people who essentially buy and sell properties for a lot of your listeners—that's the license that we need. And so essentially finding a broker of record who is then comfortable with our processes and understands exactly what we're doing because they're essentially putting their stamp of approval on how we operate. That's the first step. Once we have that, it's a lot of just paperwork, essentially creating the right entities and making sure that that entity is licensed in that state. Once that's all done, then it becomes kind of a business expansion sort of process, right? Essentially setting up our address, making sure that our profiles are online, and then getting photographers in the regions, getting inspectors in the regions. We always try to have at least one plumber, one HVAC person, one appliance person ready to go before we start taking on properties in any sort of jurisdiction. The idea is that if your tenant says, "Oh, I have a clogged toilet," we can respond to that same day, regardless of whether it's a new state or a state we've been in since the beginning.

Seth: So it sounds like one of the key values I'm hearing in terms of why people choose ZipRent is getting that consistency with the service and the whole experience across all the different markets. This may be a horrible comparison. When I think of consistency, my brain goes to something like McDonald's, where it's like, you can go to any McDonald's in the world and you kind of know what you're going to get. It may not be like your favorite food, but you always know what you're going to get. And I think if something like ZipRent, if consistency is kind of one of the big benefits that you're trying to give people, is there anything people have to sacrifice for that consistency? Like, is anything like not as good because it's consistent? Or is that not really a thing?

Arvand: I wouldn't say not as good. So let me just correct the McDonald's comparison for a second. I would say, yes, you're absolutely right with that, except for the fact that you kind of don't know what's in that burger. It's kind of made in the back there, you know, and it just comes to you, it tastes good, so you eat it. Our goal is both consistency and transparency, right? So I'm having a hard time finding an analogy of something like a McDonald's that is like, you know, grass-fed beef and all that, right? Like there are some local chains that are kind of like that, you know, In-N-Out tends to do that in California. That's from that perspective—it's both consistency and transparency. And that's really big for me as an owner is to know what my property manager is doing at any point in time and having it be consistent, right? But what is it that we can't do or won't do that might be perceived as a negative? I don't think it's negative, but we do certainly have owners that ask for us to take actions that one, either we're not comfortable with or it's outside of what we believe would be the right thing to do. Showings is an example, right? I wholeheartedly believe that lockbox showings, not because of cost savings, is the right move to allow a tenant to see a property as quickly as possible. We use digital lockboxes that get a unique code. Each tenant has their own unique code. They can only access it in a two-hour window that they scheduled. We do a lot of verification checks before a tenant is actually verified and able to get the code, right? So we do all of those steps. A tenant can see a property right this minute as we're talking without any of my staff having to show up. That is good for everybody. Now, do we have owners that come and say, "Look, I am not comfortable with that. I really need you guys to show the property"? We generally push back. Now, we have inspectors, right? If it's a property that we might tend to agree that might need someone showing up for, like a mansion, as you mentioned, then we do use our inspectors to show. But in general, we're going to use our lockboxes and we're going to push back unless there's a situation with an HOA that doesn't allow lockboxes or something like that. Then we switch over to our in-person showings. That's just one example. But there's a lot of things, you know, some owners ask you to put things in the listings that are illegal, right? We're not going to do that. Those are just no-brainers. But there's also some process-oriented stuff is like, "Can you do a three-month lease?" No, I'm not going to do a three-month lease. That makes no sense for anybody. The tenant wants to live there for a year. This is an unfurnished rental, and it's got to be at least a year lease for everyone to win here. You want occupancy, right?

Seth: Now on that whole consistency thing, trying to like just illustrate this, you mentioned it a little bit, but the consistency and the transparency, when I think of transparency, is it things like being able to see what the communication is between the property manager and the tenant, or being able to see the financial data of what's going on? Is that kind of what you're getting at in terms of like, you can see what's happening. It's not like they kind of hide it from you or forget to tell you.

Arvand: Yeah, I'll use a few examples, starting with the tenant placement process, which I think, you know, in my opinion, is the most nerve-wracking for an owner, right? That's when your property is empty. You just need someone in there so it starts generating revenue. So the moment we list, as soon as someone inquires on Zillow, Apartments.com or whatever, you're going to see their name in our dashboard—name and what time they contacted us. And then there's going to be a separate section of this dashboard that shows those same people scheduling showings, when they scheduled the showing, when they went there. And then we also ask them for their feedback about the property. So their feedback is immediately shared with the owner, right? So there's this immediate feedback loop of like, what did the tenant think of the property? So that the owner knows if they need to make some modifications to the property, maybe they need to repaint some of the rooms because they're weird colors, that sort of thing. And then essentially going into the application processing, right? We process the applications, we do all the legwork. So the owner doesn't need to do anything, but we show them that, "Look, these applications came in and we processed them and this is the income and this is the qualification for this tenant" so that they feel good about the decision that's about to be made for that tenant to be placed in that property. That's part of that transparency. Obviously, we have to be careful of privacy laws, right? We're not going to share conversations that we can't share with the owner. But the owner can see all the automated notifications that go out of our system to the tenant and themselves. And then lastly, financial transparency. I think that was huge for me. One way that we're vastly different than traditional property managers is that we don't hold reserve accounts for our owners. So essentially, when a tenant pays, the money goes directly from the tenant to the owner, we just account for it. So when you look at a P&L for your property, every line item there is going to line up with a line item in your bank account. It's not just a black hole where the property manager is holding on to your funds, spending it for whatever they need to do, maintain the property, plumbing, et cetera. And on the 10th of the month, they give you net of that. And all you have is a piece of paper to show you what happened to that money. You're going to see it directly. That rent goes into your account. When a plumbing work happens and all owners have to at least approve of the work to be begun, they're going to see that plumbing invoice coming out of their bank account, going to the vendors.

Seth: Is there ever like disagreements between ZipRent and the landlord? Like maybe ZipRent is saying, "Hey, you know, this kitchen is in a horrible condition. We can't rent it out like this. We got to redo something or renovate the whole thing or whatever." And the landlord is like, "No, I don't want to do that. Now hurry up and rent it out." Like, does that ever happen? And how do you navigate through that?

Arvand: Yeah. So I think part of being a good property manager is having the experience and the know-how to know when to push back on taking on a property, right? That initial point of onboarding. So we have a full-on onboarding team. While we try to automate a lot of the aspects that really don't involve a human, the aspect of making sure that that property is move-in ready is a big one. A lot of time and effort is spent by our staff on either the onboarding or the turnover process to ensure that we don't list a property that we're going to have disgruntled prospective tenants showing up and saying, "Look, this place is not livable," right? So do we get it right 100% of the time? Of course not, right? There's all sorts of different properties and different shapes and sizes across the states that we operate in. But we've become very good at that because of the amount of volume that we do to kind of set those litmus tests in place. We only take on properties that we know are going to perform.

Seth: On that whole consistency thing, getting back to that. So are there any issues that come up that are hard to have a consistent response to it? I know like in managing rental properties, all kinds of weird stuff can happen. Like, I don't know, what if a skunk accidentally wanders into somebody's house and sprays the whole place? I mean, that's not a normal problem you would come across. So like, how would you have a consistent response to one of those off-the-wall incidents that comes up?

Arvand: Yeah, well, you try to be as consistent as possible. But part of a property manager's job is also addressing—I mean, as a landlord, that's why I would have a property manager, because I don't want to deal with the skunk moving in to a tenant, because the tenant is going to blame the landlord. The landlord is going to be like, "Well, I wasn't the one. The skunk walked in there." That's what we're here for. So we have teams in place. We approach the property management problem within each team. You have the onboarding team, you have the turnovers team. We have the leasing team. And then we have what we call the manager team. And the manager team is essentially there to deal with all of those issues, all the soft stuff, what we would call it, you know, rodents, skunks, neighbors, you know, HOA issues, all that sort of stuff that you don't really have a specific consistent response. But at the same time, you want to have an approach, right? We still have an approach to that, which is like calming everyone down and then trying to address the situation. If it's a rodent problem, then, you know, explaining to the owner that it's not pleasant for the tenant to be dealing with that and essentially getting the right vendor in place to address it. And once again, part of expectation setting, right? It's, you should probably be dealing with this because you want to keep your tenant happy so they stay there so they make more money for you.

Seth: Do landlords have to sign some kind of like a long-term or annual contract with ZipRent to use this?

Arvand: No. So that's once again, like transparency, accountability, and consistency are kind of pillars. That was a really big deal for me. I did not want to have a long-term contract with my owners because as an owner, I didn't like having long-term contracts. Ours is as you go, essentially. You could sign up today and you could cancel tomorrow. No hard feelings. We obviously try to do our best, but we realize that we're not the right fit for every single owner and property.

Seth: Yeah, that's a big deal. I mean, a lot of property managers almost kind of like hold you hostage, or if you want to get out, you got to like pay extra to get rid of them. It's just crazy. So I mean, that right there's a massive benefit. Love that.

Arvand: Yeah. And because you don't have reserve accounts, because our portal gives them access to the tenant's contact information, the lease copy, etc., there's no barriers to leaving ZipRent. The only barrier to leaving ZipRent is not continuing to experience the level of service that we provide. And that is the only barrier that should exist for anyone wanting to leave ZipRent.

Seth: Do you know where most of your new customers come from? And when I say customers, I mean like the property owner, like do they hear about you from a friend or is it online ads or just purely organic growth? Like when a person decides to create an account and start bringing ZipRent on board, like what went into their decision to do that? Do you know?

Arvand: Yeah. We have some metrics to show where our owners come from. It becomes a little tough in this day and age because let's say you hear from your friend about ZipRent. Do you immediately go to ZipRent and sign up? Maybe, but you probably go and research the reviews. Then all of a sudden you see one of our ads and you click on it. So did you come from the ad or did you come from word of mouth? But in general, what we see is about 30% of all of our customers come purely from word of mouth where we're not really paying for an ad to acquire them. The other 30% might come from some sort of an ad or partnership that we have where we specifically curate our presence on that website for the purpose of owners finding us. And then the other 30% would be like through reputation management. Think Yelp, Google reviews, that sort of thing where people research how we're doing and what people think of us before signing up.

Seth: We can revisit this next month because I'm sure after this comes out, 98% of your customers will come from the REtipster podcast. So that's my prediction.

Arvand: [Laughs]

Seth: So say I'm a landlord, I own 10 properties, or if I'm a landlord and I own 5,000 properties, could either one of those scenarios work with ZipRent? Or is there a point at which ZipRent doesn't make as much sense? Or how does that work?

Arvand: I'd say that the way we've grown and kind of concentrated on the single-family condo townhome markets, both of those make sense. If it's 5,000 homes spread out across, you know, a geographic region, even in the same city, we're all good with that. As long as the pricing makes sense. As you might know from our website, we actually do have preferential pricing for owners who have a second home and beyond with us. We give essentially 30% off. But when it comes to multifamily, that is kind of like a different ballgame from a management perspective. And so I'd say that out of the 4,000 units managed, probably less than, I don't know, two, three percent is multifamily, what we'd consider like five units and above.

Seth: Why do you think people don't use ZipRent in the markets where you serve? Are they just not aware of it or what are they not seeing? It just feels like a no-brainer to me. I'm trying to figure out what the objection is, if any.

Arvand: There is certainly a subset of property managers who are doing a really good job, right? That does happen. It's not that every property manager is not doing a good job. And so if you have a property in some region and you have a good property manager that you like, that's doing exactly what you want for you, you should stay with that property manager, right? I'm not saying you should switch to ZipRent. You might be paying a little bit more, but having that peace of mind is very valuable. There is that subset of potential customers that have a good property manager and they stick with those guys. Then there is all the stuff we talked about, like the concerns around flat fee pricing. I don't really understand that. Or "you guys aren't personally going to the property. You have a subcontractor going to the property when there's an issue. We use lockboxes to show," right? And I feel like these are all kind of momentary blips. That's why we're growing so fast is over time, some of these become normalized. When we started doing lockbox showings, this is before COVID, nobody was doing it. Now, over 50% of our property management competitors are using lockboxes to show properties, right? That's becoming the norm. And now the owners kind of expect it, right? Same thing with, does it make sense for the property manager to be looking over the plumber's shoulder or be sitting there and actually be able to communicate rapidly with the tenants and the owners and relying on someone who is dedicated to just running between properties to do that, right? It's just a different mindset in the process. So over time, I believe that more of those people who are not happy with their property managers, but are skeptical with our pricing or process will eventually move over. But it's, you know, it takes time.

Seth: And just to clarify, when we say lockbox showings, we're talking about the tenant shows up on their own. They let themselves in. They look around. They let themselves out. Is that what that means?

Arvand: That is what that means.

Seth: So given that in your mind, is there any kind of person who should not be using ZipRent? I mean, you've kind of alluded to it a little bit, but is there like a clear profile of, "Yeah, it does not make sense for this kind of person"? Or is that not really the case?

Arvand: I think, like I said, multifamily has not been our strongest area of property management. So I had a 60-unit property. We've taken on 10-plus unit properties. But in general, because they come with a lot of legacy tenants, what we're really good at is taking an empty property, filling it quickly and then managing it with the expectations that have already been set when we place that tenant, right? We don't have that luxury when we're taking on a 10-unit property that has tenants in it already. So that is really all I would say from a perspective of who is probably not the right fit for us. It still doesn't mean that we won't take it on. It just means that we don't have the processes as set for that type of property. But besides that, you know, we've tested our processes, our systems, and our services in so many different regions now, different states, different neighborhoods, large cities, small cities. I mean, one of the things I'm most proud of is like when somebody comes to us in the boonies, right? There's no property manager that will take on that property. We take it on and our processes actually work and we place a tenant for them out there.

Seth: It's interesting. In that scenario, so like somebody would have to get out there and put the lockbox on there, right? So where do you find that person?

Arvand: Well, so all of our lockbox placement and onboarding of a new property is done by our photographers. So we have an in-house network of photographers. Essentially, their job is to photograph, to account for the initial shape of the property when they get there. And then they have our lockboxes in hand. So that's part of the efficiency, right? Like most property managers, maybe they have the photographer, but then they have someone else go and walk through the property. And then they might even have someone else go and place a lockbox on the property. We get it all done in one go. And that's why we can get it done. Now, do I pay more for that photographer to go out there than some property in the middle of the city? Absolutely. But I'm taking on that cost because I want to be that company that you can trust that will take on your property in any state that we operate in.

Seth: This might be kind of a dumb question, but it just came to mind. I have to ask when I think of those lockboxes. So I've seen the kind that are like purely mechanical where like you push a button combination and they open. There's other kinds that are like electronic. I've seen realtors struggle with certain ones. Just makes you wonder, what kind of lockbox do you use? It's got to be idiot-proof where everybody can use it. Nobody gets confused, right?

Arvand: You touch on a very important point because the most important thing is getting the tenant into that door, right? So they can view the property. And so we started using these lockboxes called Igloo Home. And there's a couple of variations of digital lockboxes, but this is a digital lockbox where we can remotely set a code for a specific time period. So we usually do two-hour time period. A code gets generated for the tenant. Then the prospective tenant would get a link to YouTube so they can see how to operate the lockbox before they get there. It is a lot simpler to use than those realtor lockboxes that you've seen realtors struggle with. But it doesn't mean that everyone gets it on the first try. That's why we have the processes in place, and we have a staff, right? You're at the door, you can't figure it out, call us up and we'll get you through the door.

Seth: Does that mean that there has to be a Wi-Fi or cellular signal nearby so that these locks can connect to that?

Arvand: No, that's interesting. Yeah, so for a while, I didn't launch ZipRent because I was looking for this lockbox solution. And the interesting thing with Igloo Home and a few others now in the market is that they don't use cellular or Wi-Fi to set codes. It's kind of like an algorithm. So my system knows which ID lockbox is at what property. And that lockbox, because it knows the time of day, it knows which codes it can accept and can't accept. It's kind of like before banks had these little things, you would push the button and some numbers would show up. And then you would punch in those numbers into the website and they would have to match. This little thing in your hand doesn't have Wi-Fi or cellular signal. How does it come up with a set of numbers that that website knows, right? It's kind of an algorithm based on time of day.

Seth: Oh wow, that's how that works. That's a great idea though. So is it almost like for the next 10 years we know what codes are going to work at these times of day on these dates? Your system understands that based on which lock it is? Something like that?

Arvand: Exactly.

Seth: Oh, that's cool. I think you can only go out two years. We don't really need that. We place tenants within 14 days usually. That's our average time. So usually we're really looking at 14 days and then when our photographers go by again into that region, they pick up the lockbox and have it ready for the next property.

Seth: Does that mean these things are battery powered, these lockboxes?

Arvand: They are battery powered.

Seth: The batteries run out like how do you make sure that's not a problem?

Arvand: They go pretty long. If you had them at a single property, you know, it's rare that you're gonna have a property on the market for like six months, but let's say you had it six months and it was a popular property, everyone went by for some reason they didn't get rented, it would operate for about six months. But we have a policy to swap out the batteries after every tenant placement. They're always running at 90 to 100%.

Seth: Yeah, so I didn't mean to spend so much time on the lockbox, but I have a brain that like immediately tries to find all the problems and obstacles. And that came to mind, but it sounds like you've got a good solution to that.

Arvand: These are all great questions. As my staff know, I'm very passionate about the whole lockbox showing process. I can talk about it all day.

Seth: Yeah. I mean, it just seems like for how you work, that's a particularly important thing that has to work and it can't cause problems for people or be an obstacle to getting business done. So, going back to when you started ZipRent, and this is not the first like software company you've started, right? You had a hosting company as well that you did really well with. But like when you're starting a new company like ZipRent, is it like hard to get your first customer when like you have no track record yet? Like it's just an idea. Like do you have to give it away for free to the first person that signs up or how difficult is it to grow something like this?

Arvand: That goes back to deciding what sort of company do I want to start to begin with, right? When I started my web hosting company, I looked at the service that I was providing. And I don't look at it as a tech company. It was a customer service company, right? I essentially sold space on servers that you could have your WordPress website or whatever on. And if you had a problem, you wanted to call somebody and that person should help you solve your problem. So we were really a customer service company. So when I started ZipRent, I said, do I want to go out there and sell software? I have no idea how to sell software. Like you know the Cozys of the world, like Cozy exploded. How did Cozy explode? I have no idea. But what I do know is how to provide good customer service. And so I decided to layer on the service of property management on top of our software and sell it as a service. And how I've been able to get to market with my previous company, this company is, you're right, lower pricing. When we first started in San Francisco, we were doing tenant placements for 500 bucks a pop. That really proved the model, but $500 wasn't sustainable. So we quickly pivoted to about $1,000. That was still a good price, but it was something that we could pay most of our bills with. And you can see right now, we've kind of ended up at around $1,500 for tenant placement, which really allows us to provide that higher quality of service and still be profitable.

Seth: I mean, it sounds like customer service is a keyword here that's really important. In your mind, how do you define good customer service? Like, what is it about what you do that makes it so good? Do customers literally say, "Wow, that was amazing"? And if so, like, why would they say that? Is there some central component of what you do that makes it so good?

Arvand: I think there's some basics as an answer to that. And then there are some more evolved responses. The basic is you pick up the phone and you call somebody. You expect them to pick up the phone and respond. As you might know, there are a lot of property managers that don't pick up their phone. It's that initial premise, the basic premise of being responsive when somebody reaches out, be it via phone. We're also very responsive via text messaging and then email, right? Those three mediums of communication. And then moving on beyond that, a lot of customer service, in my opinion, when it comes to property management is centered around expectation setting. It's if you set the right expectation to begin with for both owners and tenants, and they know what you can and can't do and what you're willing to do and what you're not willing to do, then what you end up doing for them feels a lot better, right? Because they know exactly which lane you're operating in. And I think that's been the key premise. And that's where the software comes in, right? The software sets expectations as it continues to move those tenants and owners through that evolution of tenancy and then rent collection and then turnover.

Seth: Yeah, I just saw this video earlier this week, actually, with Simon Sinek, where he was explaining what good customer service is. And it was actually really interesting. He, I'm ad-libbing here, but he said normal experience of customer service is when you come to the company with a problem and you tell them the problem and the person on the other end is like, "Okay, yep, we can't do that. Sorry." But a good customer service experience is where the person from the company is like, "You know, sir, I'm going to do everything I can. I'm going to talk to my superiors. We're going to bend over backwards. We're going to try to make this work for you." And he comes back, "Okay, this didn't work. I'm going to try something else though. We're going to try to make that work for you." And finally it comes back. He's like, "Look, sir, we've tried everything we can. I know how important this is to you. Unfortunately, we can't do it." And something about that second version of it, you end up loving that company, even though the answer is no. It's like, so it's almost like what the customer really wants is to know like you care and you're trying and you're not just some flippant person who doesn't really care about it. When I look at what ZipRent seems to do, it seems like there's some of that in there, but also just like the clarity of like, I know where the boundaries are and I know where things are at. There's no question about it. Would you say it's more about that? Or do you guys actually have some kind of a policy of like really trying to show the customer that like you're going to go all out for them?

Arvand: Yeah, so I think it's both, right? Like if you come and ask us to do something, if we know for sure the answer is no, I'm not going to waste your time and go in circles. But part of our customer service and our philosophy is don't be a jerk about it, right? Like explain to them why the answer is no. And that's what our policy is and offer suggestions and alternatives, right? But can I get it to the point where that owner or tenant doesn't even ask the question because then we don't even have that friction at all, right? That's the goal is to get to that point.

Seth: Yeah, that seems like an interesting challenge. One of my property manager friends, like he was telling me one time he had a landlord who was furious with them because they visited their property and saw that there were little spider webs on the bushes in front of their house. Like as if that's the property manager's problem and fault that that's there. Like just they wanted things to be perfect, just like unreasonable expectations. And you've got other landlords who just don't really care about anything. It's fine. And so it's hard to get consistent expectations across the board for everybody. But is there some kind of onboarding process through which you can set these expectations for people? Like, how do you make sure they never even ask the question?

Arvand: We have a pretty good onboarding questionnaire that we've built in-house. It's also not us setting expectation fully. It's also owners setting expectations for us, right? "This is what I expect. This is what I expect you to do" so that we can say, "Look, I can do this and this and this. I probably won't be able to do this and this and this, just so you know going forward that you might need to handle those things." So we go through, we ask a lot of questions about the HOA, access to the property, all of that stuff. Start having those conversations early on to not disappoint somebody who gets their hopes up, starts using us and then realizes that we won't go out there and clean the cobwebs for free. Now, in your example of the cobweb situation, we realize that different owners have different needs. And if you come and complain to me about cobwebs on the bushes outside, I'm not going to say, "Well, we can't help you with that." I'm saying I can find a vendor to address that need. I have a system. We'll put it in there. Somebody will give you a quote, but you're going to have to pay for it. Right. And then also, if you expect me to send somebody on a weekly basis to check for cobwebs, we could probably do that, too. But you're going to need to pay for that.

Seth: Yeah. It seems like there's a lot of uses for AI in what you do, whether it's just like communicating to customers, delivering bad news in a way that doesn't sound so bad, or just do you see that being part of the company's future? Or maybe it already is in terms of like, how do we get consistent responses that make the customer feel good every time?

Arvand: I think what you're alluding to is what my ultimate vision is for the future. Is it so well done that all the communication runs through some sort of filter and gets kind of like beautified? Not necessarily. I mean, the customer relations management system that we use does have some already built-in tools that clean up the responses, right? To make them grammatically correct and like make them sound nicer or more concise or whatever it might be. But those are just the basics of it. You still have that human at the other end kind of drafting that email. There are some specific cases that we've started using AI to help speed up communication without angering the person on the other side. I despise the AI where you go in there and you ask the question and you clearly know that's AI, right? The right AI is that you don't know that's AI. And you feel good about the fact that you received a response in 30 seconds. And so we do some of that for prospective tenants. You know, there's all these privacy laws as well, right? So we have to be careful about that. But, you know, at the surface of it, when somebody asks, "Do you accept pets?" That information is right there in front of them. But they want to hear it from somebody and AI can give them an answer. And it does today for us. We don't need to get any other information from that person besides the fact that which property they're interested in. And all of a sudden we know if the property accepts pets, et cetera, and respond to them quickly instead of waiting, you know, an hour. The response is within a few seconds.

Seth: Yeah, totally. Well, I'm wondering when you started this and as you grew it the first few years and even till today, what were some of the biggest growing pains of growing a company like this? Like, was it finding the right people or figuring out how to get into new markets? When I think back to the different things I've started in the past, I had this idea of what was going to be hard about it. And oftentimes the things that were actually hard were very different things than I thought. And the things that I thought were going to be hard were like non-issues. When you look back though, like what were some of the hardest things you had to break through to make this thing work and grow?

Arvand: Probably I would say I had a pretty clear idea of what I wanted from a tenant placement perspective to date. I'd say that our tenant placement service and product is superior to anything else out there in the market. But as you get into it and you realize how much a property manager does, and the main thing is also when you're managing your own property, you're also the stakeholder, right? You don't need to go back to yourself and ask, "Can I do this?" As a property manager, before starting ZipRent, I didn't realize this dynamic of you have a tenant and an owner. You can't just start making decisions, right? Some owners expect that and we'll do that for them. But some owners expect to have more ownership over the decisions that are made. So it's like coming up with that fine line of where we can operate and not slow us down, right? We ultimately, we want to do the best that we can for the owner and we want them to feel good about it, but we don't want them to slow us down. And so it's that fine line. And that was the most difficult part of this is essentially keeping all stakeholders happy while making the right decision.

Seth: So have you developed like a certain size box that every property owner has to adhere to? Like if you're signing up with us, you're letting us do these things without asking you for it. Or do you have to like draw a different size box for every property owner?

Arvand: We try to get to a point where we give the owner as much control if it doesn't get in our way, right? The only time where we're making fully autonomous decisions is when it's a habitability issue. And that is still kind of up to our staff to determine what is habitability and what is not. But in most cases, it's very stark that it is habitability and we just move forward and get the issue resolved. But everything else, the idea is that we create a uniform enough process where like even to date, an owner does approve $100 expense on their property. But I can't wait days for that owner to make a decision. So how do I speed that up? Well, I'll text them a link. They can just press the link and press approve, right? They don't have to be in front of their computer. I'll email them at the same time. So it's just putting more touchpoints in there to try and get that decision-making to speed up so that we are adhering to most owners' needs and doing a larger box, as you would put it. Meanwhile, not slowing ourselves down.

Seth: Yeah, I gotcha. So if you were to start over with ZipRent today, based on what you know now, if you could give yourself advice, what would you tell yourself? Or what would you intentionally do differently based on what you know now?

Arvand: It's a good question. Maybe starting the expansion a little bit earlier would allow us to have a larger footprint five, six years down the line. That's one thing. It doesn't mean that we can't catch up. We have a dedicated person now that's in charge of expansion that's working on it to add more states on a more rapid basis. But that's what's happening now is we get these owners who are really happy with us. And they're like, "Oh, well, your mission is if I have a property somewhere else, I get the same level of service, but you're not in that state." I'm like, "Yeah, I get it. We'll get there."

Seth: I mean, on that whole thing, expanding to different states, and looking five, 10 years from now, it sounds like that's the direction ZipRent is probably going to be there at some point where they're everywhere. Aside from just expanding, is there any other thing you see on the horizon for ZipRent? Like, do you want to offer more services? Do you want to work in other countries even? I don't know. Anything come to mind in terms of where you want the company to go?

Arvand: As far as expansion opportunities internationally, there's some countries that are just like no-brainers. Canada has a very similar structure to us from a licensing perspective. And a lot of the tools we currently use to help tenants pay rent directly to owner and all of that can be kind of morphed into working in Canada. So you get an extra however many provinces out of that expansion if need be. From the perspective of where ZipRent could go, I mean, there is a lot, right? Currently, we don't do sales, either purchase or sale of a property. Well, as a property manager that has so much data on that property for the owner, can we help them with the sales process? Probably. We have the showing piece down, right? So we could probably make that sales process more efficient and lower cost for the owner. And then the list goes on. Could we partner up with an insurance company and provide insurance because we know so much about the property? We know the property's history. Lending. The fact that I know the full income history of a property on behalf of my owner, can I help them get a better rate because we know how that property performs? Probably. It's all scale driven, right? We got to get to a certain size to be able to make those partnerships. And ultimately, it's going to help our landlords in the end.

Seth: Does ZipRent even really have any competitors? Like when I think of a competitor, it's like, okay, it's your local property manager. That's not really what you are. Or I might think of like conventional property management software, like Tenant Cloud or something, but that's not really what you are. Like, is there anybody else out there that does precisely what you do?

Arvand: There are a few, you know, a lot of them are VC backed. We were bootstrapped, but it's a sector you would call the tech-enabled property management. There are a few. Our approach has been kind of coming from the West Coast and expanding into the East Coast. There are some that started on the East Coast and expanding to the West Coast. So we don't compete that often because there's just such large area. So I would say our largest competitors are still the mom and pops in every region that we're in.

Seth: Do you think you will ever get into property management for like different types of properties, like self-storage facilities, for example? I've got one. It's a very different and significantly easier management process than managing a rental property. I know it's outside what you guys do, but just given that it's actually easier, I mean, I'd love to pay just a super low price for the easier job that it is to a company like you instead of trying to like wrangle that and manage it myself.

Arvand: Yeah, it's funny you bring that up. So my personal portfolio has now completely moved to hospitality. So I do, you know, office to hotel conversions and the hotels that we operate under the ZipStay brand. So I use some parts of the software to help kind of automate that whole hospitality part of things is using essentially the hotels don't have front desks, right? Like people just go out, show up, put in a code, get into their room, that sort of thing. And then all kind of remote help. But I've seen in my process of acquiring properties other people acquiring those same properties for the purpose of turning them into storage facilities. And I've been very curious because on the surface of it, it seems like a no-brainer. I mean, we have all the processes in place to be able to manage storage facilities. And we could do it at such a low cost basis, right? Just letting that person into their storage unit. And then security is cameras. Like I can have someone just watching cameras all day. So you're right. I think there's an expansion there. Have I thought about it? Yes. Have I done anything about it? Not so far as far as storage facilities go, but I would love to try it and help you out.

Seth: I mean, I understand why you haven't, because like, even though it is easier, it's still a different thing. Like you kind of have to put on a different thinking cap to figure out what the problems are and how to price it and all this stuff. But I can tell you pretty much all of these self-storage management software out there is terrible. I mean, it's so poorly designed. It's overpriced. It looks like it was made in 1995. It's a joke compared to what's out there for like rental properties and that kind of thing. It would be pretty easy, I think, to come into that space and just dominate it. And there's tons of self-storage facilities out there who would love this. You've got the owner who either is too busy, like they never really wanted to manage it in the first place. They just wanted to own the thing or that's all they do because they have so many and that wrapped up in it. But it seems like there might be something there at some point.

Arvand: Yeah, absolutely. I think my model has always been, when I started a web hosting company, I first had a website that I needed to host somewhere. I couldn't find the right web host, so I started a web hosting company. I had properties that I wanted someone to manage in a certain way. I couldn't find it. I started ZipRent. The whole hospitality thing. I started, you know, doing hotels and it's like, "Well, I got to manage them. And nobody really does management the way I want it to." So I kind of need to get my hands on a storage facility, I think, to kind of realize the problems or someone like yourself, somebody who wants to partner and kind of figure out the problems. So then we can find a solution.

Seth: Yeah, it's really an important thing, though. To your point, like it's hard to grasp and truly understand the problems until you've done it yourself. There's lots of examples out there of like software people trying to figure out what the issues are, but not really getting it because they're not actually in the business. So I think it's a very important component. The fact that you owned and owned properties, like you just have an understanding that you can't fake it, you know?

Arvand: Yeah. I think that's a big part of, you know, successfully running a company that's addressing a problem is having faced that problem yourself.

Seth: Absolutely. So if people want to give you a shot, what do they do? Just go to ziprent.com. Is that the best place to take the next step?

Arvand: Yeah, absolutely. And we can also send you a code to get a little bit of a discount. And I'll send that after this call. But yeah, so you just go on ZipRent.com. We already give discounts for multiple units. Like we talked about, you could literally get started today. If you have an empty unit right now, and it's 9 a.m. Pacific time, if you were to sign up on our website, it wouldn't shock me if you had it listed by tomorrow. And that's kind of what we love about the process is just, I know how daunting it can be to be sitting on an empty unit. So we've tried to like speed up as much of that as possible to get a photographer and to get a lockbox on the door, get it listed as quickly as possible.

Seth: People want to check out the show notes. I'll have links to ZipRent along with that code. I'll put that in the show notes as well. You can find that at retipster.com/ziprent. And you can find everything we've talked about right there. Arvand, thanks again. It was great to talk to you. Awesome to hear about what you're doing. And I'm excited to see where it goes.

Arvand: Yeah, thanks for having me, Seth. It was a great conversation.