The real estate and rental markets remain white hot, even as interest rates rise. Mergers and larger tech companies entering all corners of the housing industry have put greater pressure on small investors – those who might own one, two or five rental properties – and they have to find ways to compete so their investment is protected and the rental remains profitable.
Property management companies such as New Bridge Management (NBM) is an invaluable connector between owner, investor and residents by handling applications, tenant screenings, maintenance services so investors are relieved of any hands-on, day-to-day responsibilities and so residents’ needs are met.
“When a home is well-maintained and residents are happy, clearly they’re far more likely to care for the property and stay longer,” NBM CEO Adrian Harrell told California Business Journal. “Less turnover protects profit and the property for the owners. The legal landscape is ever-changing and we’re on top of it.”
With mergers growing in the industry and large companies such as Zillow entering the space, smaller investors are at risk of being lost in the shuffle as marketing becomes more aggressive and competition to lease vacancies fast grows.
Zillow began to offer services such as paid advertising for rentals and online applications so that individual investors could utilize it for marketing, tenant screening and other services.
That’s just one example of how some technology companies have made a huge impact in the space. Even more companies are developing services such as rent collection and maintenance coordination, which is has brought venture capital into the industry.
There is also a major push for property managers to leverage the technology. They rely on it more than ever before, which can be both good and bad. Property technology, or Proptech, as it’s known in the commercial real estate world, is software that can make every element of owning and leasing automated and existing in a digital environment.
“We have seen a lot of technological advances,” Ms. Harrell says. “In many cases, software platforms help small investors run more efficiently, but in many instances, the personal touch is lost. Ten or 15 years ago, you could use QuickBooks to manage properties, but now most are now utilizing property management SaaS systems that can be an all-in-one for marketing, accounting and account management, leasing, in addition to providing the resident portal for making maintenance requests and paying rent.”
One of the high-tech low-touch areas that grew exponentially during the pandemic were “self-showings.” This is software and lockbox technology that allows a prospective tenant to upload his or her government-issued I.D., followed by a “selfie” so the platform can confirm the person is the one on the I.D.
The system sends a unique lockbox code and the prospective tenant can let themselves into the property. All next steps – including communication with the person touring the property – verification and prescreening or scheduling follow-up appointments go through the platform.
“The pandemic led to a lot of efficiencies,” Ms. Harrell says. “Self-showings and self-inspections – where tenants conduct their own inspection and upload photos and videos of the unit – have increased. There’s no denying at the height of COVID, these socially distanced transactions helped address safety needs but they can be impersonal and put more burden on the prospective tenant to figure out the systems. COVID changed everything in the property-management world, modernizing the processes we utilize daily.”
Another example of how technology is moving into the space and making it more efficient is the application process. Buying a house, renting a condo or apartment has historically required the applicant to show proof of income and employment — tedious and time consuming. The applicant needed to track down old tax returns and paycheck stubs, photograph or scan them, and upload to an email or bring in hard copies. Now, the rental software can interface with ADP or other payroll companies, pull in paycheck stubs and other income information and run credit reports.
What used to be a two-week back and forth, while a unit stood empty waiting for paperwork, can now be resolved in minutes or hours, with no legwork required by the applicant or lessor. This can help the landlord connect with the most-qualified renters in the fastest turnaround time possible.
“By investing in and providing many of these technological services, we’re able to take advantage of economies of scale where an individual investor may not be able to afford or it may be too cost prohibitive for them,” Ms. Harrell says.
“Our targeted real estate investor is the person that probably owns one property to five, six or maybe even 20 but they’re still usually an individual, a smaller investor – not an investment group or syndicate. A lot of companies are beginning to merge so it’s not uncommon for a property manager to say, ‘We manage 3,000, 7,000 or even 10,000 doors.’
“We are engaged with our clients and for them to know that though they’re small — say owners with less than 20 units — their properties are being taken care of and their assets are being looked after. When their residents are being taken care of, their investments can continue to grow.”
Consistent, equitable service helps provide the ROI investors need to stay in the business. They can continue to rent the property as it appreciates, which gives them the options of eventually turning the asset over to their family, if they wish. And as families grow, many take over ownership, so the asset lives beyond the original investor. The best way to protect these properties is for tenants to feel that the house is their home.
“We want to make sure that we help preserve those kinds of relationships for our clients as well as our residents, so that’s why we want to stay small,” Ms. Harrell concludes. “We will grow in terms of adding the number of clients we take on but there are no plans for merging – or as it’s often called these days – ‘collaborating.’”
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