Flying The Nest: Pennsylvania Startup Nido Banks On Landlords Converting Tenants To Homeowners

A Philadelphia-area startup is selling the American dream to help landlords attract and retain tenants in what has become a hotly competitive multifamily market.

Over five months of operation, participating landlords have put themselves out of a job about 20 times.

And Nido, which helps landlords help tenants save for down payments on their own homes, is hoping their numbers will swell locally and up and down the East Coast.

Nido, named after the Spanish word for nest, launched in June, offering a platform for landlords to place 5% of a tenant’s monthly rent into a nest egg savings account which they can then use to buy a home down the line. The service officially launched via a mobile app in June and is currently free for tenants and landlords, founder John Pack said.

The concept may seem counterintuitive at first. Why would a landlord want to help tenants move out of their units?

But in a market like Philadelphia, where high supply has given renters plenty of options and lots of leverage, the promise of help with a future home purchase can be a powerful piece of advertising for Nido properties.

For tenants, the appeal is obvious. Pack, a former investor in single-family real estate, said 85% of tenants want to buy a home but can’t afford to.

“Renting used to be a stepping stone to homeownership,” he said, adding that the high cost of living has made the goal feel “unattainable.”

For landlords, offering the benefit is a powerful tool in an incentives arms race that kicked off this year amid a glut of new apartments entering the Philly market.

Despite its growing residential population, steady absorption rates were outpaced by new inventory, CBRE reported in Q3, and the ending of the city's 10-year tax abatement in January 2022 is a major reason why. Building permits for more than 26,000 multifamily units were issued by the Philadelphia Department of Licenses and Inspections in the months leading up to the change.

In the short term, the additional credits Nido tenants can earn by paying their rent on time and renewing their leases incentivize the behavior landlords like to see.

“If we can help the renter still believe that homeownership is attainable, then maybe they’ll stop jumping from property to property,” Pack said. 

One of the company’s early investors was Gary Jonas, CEO of The HOW Group, which operates dozens of rental properties across greater Philadelphia. HOW has already implemented Nido at some of its buildings, Vice President of Property Management Kelli Tomczak said.

General interest in properties with Nido was 20% higher than those without, she said. Lease closures were also 10% higher at the properties where Nido has already been implemented.

Tomczak said participation was a question of “How can we differentiate ourselves from the other landlords?”

“It was really competitive out there,” she said, adding that “being a landlord can be a rough gig.”

Nido “kind of makes [tenants] put a little skin in the game,” she said.

It takes time to build up a significant number of credits through Nido, but retroactive rewards were issued to renters with a strong track record as a way to get the ball rolling, Pack said. 

Nido already has some promising statistics.

Nest egg funds have already managed to help 19 former tenants buy a home. Another 10 are currently searching. On average, Nido has provided the equivalent of $8.3K in support to these homebuyers, Pack said.

But Nido isn’t literally handing out money. Tenants receive proprietary credits through the startup’s mobile app. To redeem the full cash value of those rewards, they must use lenders and real estate agents in Nido’s network.

Pack said the company is willing to work with real estate professionals from outside of the network if that’s what a tenant wants, but they may not be able to redeem the credits for their full value.

The project has caught the eye of Philly-area landlords like Mike Sroka, the co-owner of M Property Services, which will begin rolling Nido out for some of its Pennsylvania renters next month. He also plans to invest in the company.

Sroka was skeptical about the project at first. He was initially concerned that Nido might encourage tenants to move out of his properties, but ultimately came to the conclusion that the kind of people truly dedicated to buying a home “aren’t going to be tenants forever.”

Sroka also buys and sells single-family investment properties. He sees being in the Nido network as a way to increase the chances a former tenant will purchase one of his homes.

The landlord said he is also happy to provide an additional value to his renters.

“They’re paying a lot of money,” Sroka said. “The more I can give back to them, the better.”

The prospect of homeownership is a powerful motivator for many, but Pack acknowledged there are also lifelong renters who have no interest in buying property. That’s why he’s looking to launch a cash-back rewards program with a select group of retailers sometime next year.

Nido isn’t profitable yet, but Pack is confident that it will be. Much of the revenue will come from fees paid by Nido’s network of real estate agents and lenders, who tenants will be encouraged to use.

Pack is currently focused on building up Nido’s reputation in Pennsylvania, but he plans to expand the company across the U.S. The founder has his sights set on other East Coast states, including New Jersey, Delaware, Georgia and Florida.