Prior to the COVID-19 pandemic, Nathaniel Banks, a landlord with a series of rental apartments in lower Manhattan, had no problem collecting rent from tenants . Few, if any tenants, missed the rent deadline, and even if they did they would alert him in advance about the looming delay in payment and settle their accounts quickly.
That all changed in mid-March 2020 when the COVID-19 breakout led to massive layoffs that saw more than 30 million Americans unemployed. Nathaniel noticed a considerable portion of his tenants struggling with rent payments and he was uncertain about how to handle it.
“The situation is dire, and I was genuinely worried about my income,” says Nathaniel.
Then, Nathaniel heard about Pinata, a new startup that incentivizes renters to pay their rents in full and on time with its generous reward program. With nearly 20% of the American renters behind on rent, there’s a huge crisis threatening the rental property market. In fact, new statistics point out that millions of Americans are several thousands of dollars behind on rent payments, due to the pandemic.
Not only are these statistics alarming for renters, but they’re causing a crisis for landlords and property managers as well. Landlords are struggling to pay mortgages, and property managers are grappling with snowballing rent arrears and pending evictions.
By curtailing income, heralding massive layoffs, and fueling rent delinquency, the pandemic is also ruining credit scores by the millions. Although the federal CARES Act has provided protection that some late payments will not lower credit scores, many Americans are still feeling the blow to their bank accounts and credit scores, and are struggling to regain their financial footing.
Nathaniel learned about Pinata from a fellow distressed landlord who’d achieved considerable success in reducing rent arrears. “I was skeptical at first, but incentivizing tenants to pay rent is a real game-changer,” he says. Nathaniel admitted that his rent collecting efforts have paid off since adopting Pinata’s lease management system.
The service grants fully paid-up renters access to a marketplace with deals, rewards, and other goodies. It also gives renters the option to build their credit history by updating their rent payments to all three credit bureaus.
“The lack of incentives in the rental market makes paying rent feel like a chore,” says Pinata CEO, Lily Liu. “We aim to put a stop to that and create a win-win situation for all parties,” she added. Liu previously Co-founded PlublicStuff, a civic engagement platform that earned her a spot in Forbes 30 Under 30 Top Entrepreneurs and Business Insider’s People to Watch.
Pinata bridges the gap between tenants and landlords/property managers to shore up rent payment and collection efforts. It incentivizes tenants, with rewards that provide financial incentive, to pay their rent in full each month. The platform also enables property managers and landlords to offer custom incentives for their tenants.
“Switching to Pinata caused me to reevaluate my relationship with my tenants, says Nathaniel. “I have created a custom loyalty program to incentivize and reward loyal tenants, and I hope it will help differentiate my properties on the market.”
How Pinata’s Credit Reporting Feature works
Pinata tracks a tenant’s payment history and updates the three major credit bureaus. Traditionally, paying rent does not get reported to the credit bureaus, and thus, has no impact on credit scores. It’s a cost that millions of renters pay every month, and it’s typically the largest out-of-pocket expense for most Americans. But wth Pinata, tenants can quickly build their credit history and take corrective measures to repair dropping credit scores. This innovation in the property management industry benefits both renters and landlords.
According to Lily Liu, “Renters will generally see an average of a 40 point boost if they pay on time. It can be higher, based on other credit factors and the duration of rent reporting.”
Reimagined relationships between property management companies, landlords, and their tenants are key in rolling back the damage the pandemic has wrought on credit scores and the housing market. Pinata helps renters boost their financial health with cash rewards, special offers, and a community concierge service
