There’s no question, technology has disrupted just about every industry over the past ten years. Tech has changed transportation, media, communications, retail, travel, and more. Yet, I’ve heard many people argue that real estate is immune to much of the technology disruption due to its hyper-local nature. The CEO of a property management company even told me technology didn’t matter for property management!
In many ways, the lack of tech adoption in real estate has created a massive opportunity for new companies and individuals. Since the opportunity is so great in real estate, I decided to write a four-part blog series on the disruption of technology in the real estate industry. In this series, I will cover tech disruption of property management, tech disruption of real estate investing, using digital advertising to scale real estate companies, and finally, a primer for what to expect in the future (think 2025). Hopefully these posts become a catalyst for investors to increase their technology usage. Feel free to connect with me on BiggerPockets to make sure you catch all four blog posts.
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1. Going Paperless
First, property management can now be an entirely paperless business. When our property management company moved offices a few months ago, we literally threw away our filing cabinets! We kept one file cabinet because the Pennsylvania Real Estate Commission wants to see a file cabinet that can be locked! Years ago, a property manager would need to dig into a file cabinet every time there was a question about a lease, an owner contract, a maintenance bill, etc. The logistical and organizational issues with keeping physical copies of everything was a disaster and impossible to scale without mistakes. Property managers scan and throw away paper files with no file cabinets in the office!
2. Moving to the Cloud
Every document, interaction, text message, request, rent payment, employee manual, etc., sits in the cloud and can be referenced by anyone in the company with a click of a button. Even better, many documents are electronic all the way through the process. Ninety-nine percent of all leases are now signed digitally—meaning a property manager or tenant can save tremendous time on logistics rather than trying to meet in person to sign a physical lease or application. An average property manager signs 10-20 leases a month. Let’s say it takes, on average, one hour to get a physical lease signed. That means that digital leases can save a property manager 10-20 hours a month. That’s a big deal, and is just a small piece of the puzzle!
Unfortunately, there isn’t just one single type of technology to do everything. The best property managers will leverage a variety of technological solutions. But, we do also recommend using either Dropbox or Google Drive as a catch-all for anything that doesn’t fit into the specific technology suites.
3. Maintenance Logging
Taking this concept one step further, a property management company can keep a record for eternity on every property. Let’s play through a typical scenario: Tenant reports that the roof is leaking. Previously, a property manager would need to have the memory of Ken Jennings to remember the maintenance history of a property. Did the property just get a new roof and she should call the old roofer under warranty? Does this roof always leak and therefore needs a different solution? Is it not a roof leak at all—but something unique to property that causes strange water run-off? A backend database store this information, forever!
Putting together a system can be difficult, as often one technology stack does not have all of the features that you’ll need. For example, the major technology platforms for tenant management are Buildium, Appfolio, and Yardi. However, a property management company that has full-time maintenance crews will need one to two additional, separate technologies to manage technicians like plumbers, cleaners, and carpenters. For example, with the right technology, a company can track, via GPS, where the contractor is at all times. This is a great way to make sure contractors are not over charging for time spent on a specific job.
In addition, large projects require a much more difficult organization of timelines, tasks, priorities, and various contractors. Without technology tracking a timeline, major flips will almost always take longer, as it’s very difficult to juggle jobs. But, implementing the right technology makes the project management much easier and lowers the overall project risks.
4. Tenants Ledger
Not only do properties have a history, but tenants also have a clean ledger that anyone can access. To make it even cleaner, our property management company doesn’t accept cash at all. Seventy-five percent of the tenants actually pay online, and the rest pay via check or money order. Why not accept cash? First off, holding cash is a major security risk that we do not want endure. More importantly, not accepting cash means a tenant can never claim that they paid a property manager when they haven’t. Every transaction is kept in an online ledger that can be digitally accessed by the tenant and the property manager. When sitting in front of a judge to argue an eviction, it makes for a much easier discussion when there is a central ledger with transaction history and tracking codes.
5. Smartphones vs. Brick & Mortar
Smartphones have essentially replaced the need for massive, centrally located brick-and-mortar offices. Huge, expensive offices to hold physical files have been substituted by all the information on properties, maintenance, and tenants that’s now available in the palm of your hand. Many of our property managers spend much of their days at the actual properties they manage—as everything they need sits in the cloud, available on their smartphone. We actually think big offices are a liability and a crutch—the best property manager, in 2018, should spend their time at the actual property or working on their smartphone from the most convenient location.
Tenants now have a 24/7 emergency number to call, or they can put in a maintenance order via their smartphone. The new challenge for property managers is staying organized with all the different forms of digital communication. The single most important trait for the 2018 property manager is organizing electronic-communication flow. Throw away the physical journal!
Another key technology suite is the call-center operation technology. Vonage, Ring Central, 8X8, and Google Voice are all examples of different call-center technology options. Technology sends the call to a certain property manager or call center during work hours (and to a separate number during non-working hours) to handle emergencies. We actually service our emergency line with a rotating senior manager, but we’ve also heard some companies use off-shore emergency response call centers. A strong call-center technology connects those with issues to the right person 24/7.
6. Faster Rental Information Flow
The tech advantage begins at the stage of setting a rent amount. Rental information used to sit mostly in the memory of local investors and property managers. Now, you can find a decent rental estimate using different websites as data points.
To make it easier for our property managers, we just launched an app that sits on their phones with the actual rent amount for every property we manage. GPS mapping lets the property manager easily find units that are right down the street from the new rental house.
To find a tenant, a landlord used to post an ad in the local paper. The landlord often relied on a leasing sign outside the property to get interest. This process was slow and locally confined. Today, landlords list properties on sites like Craigslist, Apartments.com, Zillow, and more, to generate interest from anywhere in the country from the tenant’s smartphone or computer. Larger property management companies can even utilize SEO to rank in the top-ranked sites on search engines like Google and Bing. SEO rank matters because you want to be the first stop for a tenant in search of a rental.
Once a tenant finds a property they want to see, they schedule a showing with a click of a mouse. How cool is that? Just like ordering a pizza, the tenant can schedule a showing, 24/7, without even talking to anyone. Three different technologies merge together so the showing appointment blocks off time on the property managers’ calendars. This speeds up the time to fill tenants significantly.
Once the tenant finds the house they want to rent, landlords can easily do a credit check. With a couple clicks, you can find out if a tenant has ever been evicted. Eviction data is the most important data-point for a landlord to research.
7. Integration Technology
Seamlessly integrating systems can be very tricky and time consuming. But you can’t be a cutting-edge property manager or landlord in 2018 without integrating different technologies. We currently have licensed and/or built 14 different technologies to manage our properties. This creates an issue because technology updates from one system may cause an integration issue in the future. We have to constantly monitor our technologies to ensure everything still talks to each other correctly.
What does all this mean to investors? It means property management is improving everyday. Rates can be lower than they were even 10-20 years ago, without compromising service. Where it used to be normal for property management rates to cost as much as 10 percent, I believe 6-7 percent should be standard, in 2018 and beyond.
Additionally, advertising costs should be close to zero, and vacancy times should continue to decline. Amazon is a great example of technology driving down cost. These are all huge wins for investors: a 3 percent increase in net-profit off of gross income can make a massive difference to returns in the real estate industry.
Next week, we will dig more into how technology affects investors in other ways. Hope you can use some of these tips for your own rentals!
How do do you use technology to manager your properties?
Share in the comments below!