The properties represented by IREM membership are very much like a fingerprint. Each one is different. And therein lies the challenges of choosing a provider of property technologies— proptech in the vernacular. Property management is such a specialized area with so many different components that vetting a vendor takes a carefully crafted due diligence process.
“Proptech, or real estate technology in itself, is a very different consideration than other technologies, like fintech,” says IREM Innovator-in-Residence James Scott. “Transaction volume, availability of data, embedded systems, not to mention stakeholder complexity, all mean that new real estate technology products need to be assessed with a very considered approach.”
To minimize those alarm bells, Scott and Lori Burger, CPM, the Reno-based senior vice president of Eugene Burger Management Co. (EBMC) and 2015 IREM president, provide some tips you should consider to ensure a successful selection of (and more important, a long-range partnership with) your proptech providers.
Tip 1: Consider integration. “We don’t have the bandwidth to deal with a lack of integration,” says Burger, explaining that EBMC has one primary platform from one major provider, Yardi Systems. “We’ve put all of our eggs in one basket, and any other providers of technology have to integrate with them. So that’s one of the first questions we ask, and if they say no, we tell them they ought to contact Yardi, and then we can talk.”
Tip 2: Take a history lesson. “Have they proven themselves in the industry you serve?” asks Burger. “Does the provider address your specialty? You don’t want to be the trailblazer.” And if they’ve been in the industry, how well have they performed? This speaks directly to management’s technical proficiency. “You have to look behind the curtain of what you’re about to invest in,” says Scott, and that includes knowing the backgrounds of those people at the top. Simply put, “Does the team behind the product have the technological capabilities to ensure that the product can do what it says it can do?”
Tip 3: Follow the money. “Who’s backing the product?” asks Scott, who is also lead researcher at the MIT Real Estate Innovation Lab. “Is there support from a reputable and experienced investor who not only has the financial strength but also the track record to ensure that the product will succeed? For example, the likes of Navitas, Fifth Wall and JLL Spark all have incredible experience in helping companies grow and get to the next level. You want to know that the company is going to still be there in the years ahead.”
Tip 4: Investigate the promises. As referenced above, can the product deliver on what it says it can do? Does it work and integrate with all your other systems seamlessly to achieve your goals? As Scott says, “There’s no magic product that can perform out of the box for every single company, given their specialized needs.”
Tip 5: Ask the compliance question. Related to that is the issue of compliance and the product’s ability to perform. This is especially true for an organization such as EBMC, which manages many homeowner associations (HOAs), in addition to a wide variety of market-rate and affordable multifamily residential and commercial properties. Tracking residents’ compliance with HOA covenants, conditions and restrictions (CC&Rs) is a massive task, says Burger. An application that can both maintain accurate records and integrate with the larger platform is key.
Compliance also means the ability to track vendor compliance, and such issues as insurance coverage. Otherwise, “It’s very labor-intensive for our staff to ensure that a vendor, no matter what kind of vendor it is—roofing, asphalt, whatever—has proper insurance coverage,” she says.
“Lastly, on the multifamily affordable side of our business,” says Burger, “compliance means ensuring we validate that the resident complies with all governmental regulations concerning the program they’re under, such as tax credit, Section 8 or rural housing. This compliance is tedious and requires the utmost accuracy. Property management programs must be able to meet this need with sophistication and precision.”
The nature of change is true not only for tech but for real estate as well. Given that—since no package performs perfectly “out of the box”—the trick is to find a provider that can customize, as Scott and Burger indicate.
“There are so many things that change from day to day in our business—whether it’s state or federal mandates—that you need software that can be manipulated to meet those changes,” says Burger. She adds that her IT people keep a whiteboard filled with information that they’re trying to launch and change.
Tip 6: Look before you leap. Familiarize yourself with all the alternatives before you follow through on any investment, says Scott. “You have to understand the landscape of all the other solutions available in the market. You want to make sure you’ve chosen the product and the provider that brings the highest value.”
Networking with your peers—especially those whose business model closely resembles yours—can shed extra light on the topic.
Tip 7: Evaluate the ROI. “What’s the return on investment?” Scott asks. “If the product is going to create time savings and reduce costs, then it’s a no-brainer.” However, if the system is so complex that your team can’t use it or if the system can’t integrate with established systems or historical data records, it may not be worth the time or investment to implement it across your system. In short, what is the true ROI?
Tip 8: Prioritize security measures. Especially in this age of the Internet of Things (IoT), with so many new sensors and devices, we’re all exposed to cyberattacks. In addition, as Scott indicates, a lot of startups may not have the bandwidth to create bulletproof cybersecurity protection. “The last thing you want to do is tell your customers that their personal information has been exposed in a data breach,” he says.
Experienced property managers know how to vet their vendors to ensure a proper fit of capability and need. To that extent, the choice of tech applications, products and providers is really not that different. With some careful planning, a lot of well-chosen questions and a bit of research upfront, you can create an integrated system to make your processes faster, more efficient and more accurate.