When I asked Todd Watkins, chief operating officer and general counsel at multifamily investment and asset management firm Railfield Partners, what his technology wish list is for 2024, he had a simple and powerful answer. I’ll give it back.
“Right now, we have property managers who think there has to be a technology solution to every problem and charge us that,” he told GlobeSt.com. “We need more people getting up from their desks, walking around the campus, and getting to know our companies and our markets, rather than relying on some system to tell us what’s going on.”
His concerns echo what others have told GlobeSt.com. Technology is widely used in the multifamily industry, but many owners, investors, and managers believe that the constant effort to add technology to what they use is overemphasized, expensive, and expensive. , it doesn’t feel overwhelming.
“I’m not against technology, but it gets to the point where there’s just too much technology,” he says. “I have a kid who’s majoring in computer science, and he’s using his real AI, not what people are trying to pass off as AI.” I hear it advertised. “It’s shiny and bright and new-sounding,” he added. “Most people in the chain want to pass it on to someone else. I’m a different person.”
RailField uses a third-party property management company for its real estate holdings in 12 markets throughout the Mid-Atlantic, Southeast, and Texas markets. Management companies regularly promote new technologies. “They give us a budget, and that budget includes every cost you can imagine,” Watkins said. “But that comes with software license and maintenance fees.” During a phone conversation, he elicited the amount a property manager was charging him. The software they billed him for was 7 licenses. “He only has seven in one budget and for a license he pays $1,900 a month.”
Revenue management software has been getting a lot of attention lately. “We’re going to be old-school and not use revenue management on some of our properties,” Watkins says. “I think it’s garbage in and garbage out. It’s meaningless if there’s no one who knows how to use it. I think we’ve created a generation of managers who don’t know how to use it.”
Watkins and RailField are not alone in their skepticism.
“Our management software platform runs on AppFolio,” said Ryan Reich, chief investment officer at Mountain Shore Properties. The company holds commercial and residential interests, with a self-reported project value of $400 million. “I feel like I get hit once a month. We have a real estate development fund, so we use AppFolio to manage various interactions with investors. For residential managers It also has a management platform.
“I think most of the people who talk about technology in the real estate industry are the people who are developing that technology,” Reich added.
The flood of products is often baffling to those in the commercial real estate industry who don’t have a strong technical foundation, and that in itself can be bewildering and distracting.
“Apps and technology are drying up,” Joya Pavesi, vice president of marketing and strategy at property management company RKW Residential, tells GlobeSt.com. “Everyone says why it benefits you, but too much technology can be bad.”
“I have worked in a variety of businesses over the course of my career,” Jeff Klotz, founder and CEO of Klotz Group of Companies, told GlobeSt.com. Ta. “I used to work in commercial printing. You’re always chasing technology. If you don’t play that game, you’re not competitive. That’s what’s going to happen. We’re flooded with high-tech software.”
Pushing new software as something businesses must adopt is as old as the industry itself. Two major strategies were adopted. One was to find sectors of the economy with relatively low technology usage, develop specific vertical tools and packages for those industries, and then promise significant rewards, as Klotz remembers. The goal was to drive sales of industry-specific products. left behind.
Another strategy developed over time was how to generate recurring revenue. Vendors started by selling ongoing licenses for their applications, but the situation worsened because there was no significant need to obtain new versions until Microsoft and Apple developed new versions of their operating systems. Existing software often still did not work, forcing users to purchase new versions.
Change occurred in the early 2000s. Businesses have moved to hosted software models that run on their own equipment or eventually in cloud structures. Software has effectively become a rental. Rather than owning a perpetual license for previous purchases, companies had to pay vendors an annual fee for recurring revenue. After that, vendors kept adding new features to keep people feeling like they had to keep using the package, even if the license price went up. Then came add-on services that brought even more sales and revenue.
However, not all services and upgrades are necessary for each business. Owners and operators now need to develop standards that go beyond promises and hype. Does the new technology help some aspect of your business in a clearly demonstrable way, potentially make your business more difficult, or bring you more revenue?
Mountain Shore’s Mr. Reich discusses architectural projects in Philadelphia. His 247 homes are owned by two different anchor retail companies. The company was considering whether to provide digital and mobile access to the building. They developed an approach that considers the pros and cons of new technology, including its impact on residents, business impact, and cost.
New properties “have a trespassing problem that needs to be addressed,” Reich said. Doing without such fancy features is “a slight inconvenience for tenants. But the tradeoff for owners is that it’s a little more difficult to control access.” I have decided to use it and cannot share the entry code.
There is also the question of how long certain products will be available. “Most of these companies are not profitable,” Reich points out. “Are they going to be there? Are they going to catch up?” [new releases]? ” If a company is unlikely to succeed, it may make practical sense to keep building the hardware separate from the software, even with the trendy approach of integrating everything. yeah. Furthermore, is there a possibility that a large company with staying power will enter the market?
“If we just sit back and wait a little longer, Google or Apple will do it for us,” Reich says. “When Google layers in an access control platform, [its smart home platform] Mr. Nest, why don’t you use Google?”
Mr. Klotz always asks questions about making money. “Smart home technology is the latest fad and buzz when it comes to building and unit automation,” says Klotz. “Everyone wants access control, and technology makes it possible.” But once smart home controllers arrive, other things “can be sold as bundles.”
Mr. Klotz’s firm conducted research on some of its portfolio. “They don’t care about color-changing lights or whether they can use Alexa or Google Home,” he says. But there are some features that are literally a big selling point. “What we found interesting was that in a sampling of certain portfolios, upgrade costs per unit averaged $200 per month. When residents move out, the units remain with many upgrades. . The price of the upgrade is reflected in the rent.” And even if the person who upgraded leaves, the next person continues to pay.
“We do all the work on the model home, and once you show them how great it is, they often want it,” Klotz says. “It’s similar to the airline industry. We charge for all these things that seem incremental. Then they all add up. Upgrades go directly to the bottom line. ROI is important. Yes, the increase in revenue is immeasurable.”
Technology can sometimes seem like a thorny issue. But with the right attitude, backed by analysis, you may find that you created the printing press to generate cash, rather than incurring new costs.
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