Rental platform REZI will announce later today their $100 million deal with SR Alternative Credit, a private credit affiliate of Spouting Rock Asset Management, for a new investment model the company is launching. REZI, an alum of startup accelerator Y Combinator, aims to streamline the rental process through its all-digital platform by lowering costs and increasing profits for property owners. REZI guarantees owners a set rent each month in exchange for a portion of the profits created by the cost-savings.
“Our business has always been about identifying the frictional costs, the loss that is already embedded in the rental process and using software to compress it,” explained CEO and cofounder, Sean Mitchell.
This investment model has been six years in the making, says Mitchell, nearly as long as REZI has been in business.
“When I spoke about the company on the Y Combinator stage I said the securitization market backs the student loan market, the credit card market, the auto market, the mortgage market. We’re going to figure out a way to utilize this securitization market to transform rental housing.”
This initiative lays the groundwork for an investment model which sells bonds backed by the leases taking place on the REZI marketplace and provides monthly payouts to bond holders. SRAC is one of several institutional investors purchasing bonds during the initial launch. Mitchell declined to name the others but did say REZI had seen significant interest from investors. Currently the company is only open to institutional investors but has not ruled out a future model which would let individuals invest as well.
REZI plans to use the new funds to build the infrastructure so it can scale to a national level.
“No individual institution is going to aggregate 48 million units,” said Mitchell referring to the estimated number of rental units in the U.S. “I don’t care how big they are, the biggest institutions on the earth don’t have the capital to do it.”
“We are anchored in being a mission-driven business,” he continues. “By those investors now stepping in and helping us create an asset class, that is the track onto which we are going to be able to apply our solution in massive form.”
REZI currently operates in 11 markets with plans to expand nationally, an expansion also supported by their previous $100 million debt raise from Stratos Credit.