For years, homeownership has been the key to building wealth. Renting, meanwhile, had little financial benefit. At least that was the case until Up&Up found a way to help renters leverage the wealth, they can build by making on-time rent payments and caring for their rental properties. Here’s a closer look at how they’re using real estate data from ATTOM to make it all happen.
Overcoming the Inequities of Renting
Michael Wong, Founder and CEO of Up&Up, had a friend who was frustrated that year after year, he was throwing away money on rent. He felt that he’d never save money, never build wealth, and never be able to afford a home of his own.
Michael realized that he could help his friend. Instead of his friend renting from a traditional landlord, he could rent from Michael. And unlike a traditional landlord, Michael would let him share in the profits and the rising value of the home. It was a fair, transparent deal among friends – that benefited both of them.
“What Michael realized is that, since his friends had a financial interest in the property, they took care of it and they stayed for a long time,” says Needham Hurst, Chief Operating Officer at Up&Up. “When it came time to sell, they both benefited financially from their investment, too.”
With that experience under his belt, Wong knew that there had to be a better way to think about the traditional renting model. He wanted to help renters participate in the benefits of the housing market. Ultimately, he wanted to see a housing system that enables all Americans to build wealth, so that no one is left out, and everyone can achieve their financial goals.
Helping Renters Build Wealth with Up&Up
By early 2018, Wong founded the company that would eventually become Up&Up. The business model uses a profit-sharing agreement to help renters share in the financial benefits of homeownership.
“Let’s say you put two months’ worth of rent into a purchase option. Then, the next month, the home generates $100 in profit after expenses. You would get a certain percentage of that profit, relative to your pro rata stake in the home,” explains Hurst.
This purchase option is known as the Up&Up Wallet. Renters with the company fund their wallets in place of an initial security deposit. Then, the Wallet grows from the renter’s share of rental profits each month by keeping property management costs low and also as the value of the property increases over time. Notably, renters can also make their own additional contributions to the Wallet as well.
When the renter is ready to move on to their next phase, they have three options for how they can leverage the funds. Most importantly, they can put the value of their Wallet towards a down payment to purchase their rental. However, if they’re not ready to buy, they can transfer the Wallet to another Up&Up rental property or they can cash it out and keep the remaining funds.
Using ATTOM to Find the Best Investment Properties
Up&Up’s business model requires finding properties that will be good investments both for the renters and for the company. One aspect of what makes quality investments is if there will be property appreciation over time. Appreciation puts more money in the pockets of their renters and helps the Up&Up team to capitalize on their investments.
To find the best assets on the market, they built a program in-house that helps them zero in on neighborhoods and properties with the best appreciation potential. They’re using ATTOM data to make it run.
“Our acquisition process is two-fold,” says Hurst. “First, we use more static data like school district rankings to find out which neighborhoods are the lowest risk to invest in. Then, when listings come through on the MLS, we review them and prioritize the ones that are in the lowest-risk sub-markets.”
Hurst explains that ATTOM is Up&Up’s core real estate data provider for both phases of their acquisition process. They use the company’s property data API to connect to the local MLS systems in their markets and layer in property characteristic data, such as school district data, to help them find the perfect properties for their portfolio.
Growing Together Going Forward
As for why they chose to partner with ATTOM, Hurst believes that the choice has a lot to do with the breadth and depth of data that ATTOM is able to offer.
“When we looked for data, we looked for someone who was leveraging the best and, in particular, using newer tech around API integration. Over the last couple of years, ATTOM has been at the top of the real estate data space and we wanted nothing less.”
Beyond that, he cited ATTOM’s willingness to work with startups.
“We have a business model that really does work. I’ve had renters call me in as little as three years and tell me that they’re ready to buy the home. But, we’re a small startup and we were looking for someone willing to take a chance on a small contract and grow with us over time.”