By Scott Andersen, vice president of Sales at Latch. First published on Multifamily Executive.
Smart technologies and the Internet of Things (IoT) are all the rage among forward-thinking real estate developers competing for increasingly tech-savvy residents. But not all such technologies are created equal, and with so many options out there, how do developers make the right investments?
I tackle the tough questions with developers weighing these important decisions every day. Here are the top questions I hear that should be asked of any smart technology being considered for a multifamily property.
There are many technologies that create efficiencies and reduce operating costs from day one. In fact, often the best technologies create operating efficiencies well before they generate upside revenue value.
In addition to those that rely too heavily on long-tail rent appreciation to add value, developers should also be wary of technologies that have long learning curves that can drastically reduce ROI. A smart-technology company should be able to clearly demonstrate the on-boarding process for both management staff and residents, and if the learning curve for you, the decision maker, is longer than a single meeting, chances are it's going to take even longer for your staff and residents.
If your staff and residents aren't on-boarded properly, complexity and headaches will overshadow the efficiencies that justified the investment in the first place.
1. How quickly can the technology create efficiencies and reduce operating costs?
Many technologies have meaningful revenue advantages. We've seen them support higher rents, drive occupancy, and improve retention. But we also know that market conditions can sometimes get in the way. The best smart technologies also generate ancillary revenue streams. Technologies that enable partnerships with third-party service-provider platforms can allow developers to capture a revenue share from those partners.
Other technologies enable concepts like corporate and short stays, thereby driving inventory optimization. Those methods maximize the use of your units, but just imagine what you could do with underutilized capacity in your amenity spaces. The most progressive developers are moving beyond the core and deploying technology to create completely new categories and revenue streams.
2. In addition to rent appreciation, how can the technology enable additional revenue opportunities?
Developers often think of smart technology as a marketing gimmick to attract prospective tenants. But the best technologies are those that drive renewals and create a great user experience.
While smart gadgets may appear cool to prospects, oftentimes the flashiest and most buzzworthy technologies aren't the same ones residents use most often after they move in. The daily-use technologies that simplify your residents' lives can both draw a prospect to the building and improve your retention of that future resident. These are the technologies that have true, long-term value. Examples that enhance some of the most basic functions of living include door access, HVAC, and lighting systems. Your residents interact with those systems multiple times per day.
3. How can I use this technology to market my properties to prospective resident? How will this technology impact leasing and renewals?
Developers should proactively consider what the on-boarding/off-boarding process looks like on turnover. For example, do you need to reprogram or rewire any hardware for the new resident? If so, how easy is it to do that?
Owners and operators also need to understand and manage the data that have been collected and make sure that owner-supplied devices don’t share information between residents. For example, if I turn over a voice-activated speaker with someone else’s credit card info accessible, I’ve created a bad experience.
The utility of a technology platform shouldn't depend on tenant longevity or retention. Not only must it be adaptable for each new resident, it should be optimized for simple and cost-effective turnover management. Be wary of technologies that require new hardware installation, rewiring, or reprogramming of existing hardware, as such additional expenses eat into the operational savings that made them attractive in the first place.
4. What happens to the technology at a turn?
With consumer demand changing so quickly, consumer technology can age at warp speed—just consider how often we upgrade our smartphones. The multifamily industry, however, can’t afford to update technology at the same rates as the consumer market.
The key for multifamily is to invest in technologies that are designed for the long haul and are flexible enough to adapt to changes in resident demand and future innovations. Typically, technologies that encourage regular software updates are more adaptable to future changes in resident demand and future innovations, whereas those that don’t can quickly lose relevance. In an industry where longevity is king, the same rule should apply to the staying power of technologies.
5. How do I know this technology won’t quickly become outdated or obsolete?
I hope this is an obvious question, but it's worth calling special attention to. As the National Multifamily Housing Council pointed out recently, it's one of the most important questions to consider, and a developer or operator should be confident in the company's record on safety and security before moving on to any other topics.
Developers and owner–operators should always ask to see an independent, third-party security review and confirm that it’s from a trustworthy source. This is especially true for any IoT systems that are connected to remote, cloud-based storage platforms. One must also carefully consider connectivity to the network or other devices. Each opens up another vector through which the device can be accessed. You should also look for partners that take great care in how and to what they connect.
6. How do I know it's secure?
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