A Conversation w/ Second Nature’s Deputy General Counsel, Kimberly Godsey

We are still in the days where prospective tenants are still seeking just a roof and four walls, right? But there are some sophisticated tenants out there that are doing more than just shopping for rates. They're looking for those amenities, those perks, those incentives, the smart home technology. We've seen pet-friendly spaces, eco-friendly initiatives, online rent payment, right? Where they can do everything facilitated from their phone that they cannot release. And you want to, number one, as a property owner, really allude to the owner investor. You want some long-term tenants in here. You just don't want the shuffle. You don't want the high vacancy rates. You want someone that's loyal to the program. And how are we going to incentivize that loyalty?

Welcome back to Peter Lohmann's podcast. Today I am really excited to introduce Kimberly Gotze. Kimberly is the VP of Legal and Compliance and the Deputy General Counsel for Second Nature. Kimberly, thanks for coming on the show today.

Oh, thank you, Peter. This is my first podcast ever. I think I blew you away when I told you that. Yeah, so I am definitely excited and thrilled to be invited on and excited to just convey some messaging that our community is awaiting.

Yeah, and I'm really flattered that you took some time out of your busy day to come on the show, especially this being your first. Ever podcast appearance. We've got some great discussion questions queued up. I'm, I'm just like excited to get into some of the nitty-gritty details. Let's start, if you don't mind, and just take a few minutes. I'd love to hear a little bit about your background and how you came to be in your current role at Second Nature.

Absolutely. I am a practicing attorney of going on 13 years now. Um, it surprises me every year here out in Texas. I been in corporate for over 2 decades. I was the non-traditional law student where I worked full-time, went to law school in the evening, and found myself in utilities partway through. So shortly after the bar, amazingly, I was offered a position as in-house counsel for Manolens in the USA, who, if most don't know, is a global utility meter manufacturer. Third-party utility billing provider out here in the MFR multifamily and single-family space, along with military housing and municipalities.

So they manufacture like, like water submeters, electric, absolutely, stuff like that.

Yeah, water and gas, and offer third-party utility billing for not only utilities but all ancillary services, which really earmarked my experience and set me up for success here at Second Nature. So Worked for them for about 11 years, was very, very heavily—

11 years.

Wow.

Years, right? That's a long run these days. You don't hear that as much anymore.

It is a very long run. But I was fortunate to be pretty heavily involved in legislative efforts. I was on the board of the Utility Management Conservation Association, was at every single NAA event, spoke at various events nationwide on how property managers, owner investors can better facilitate ancillary revenue while, of course, maintaining compliance, because you and I both know that varies from federal all the way down to the municipality. So it can be quite complex and definitely a niche area that most attorneys are not truly aware of. So, yes, spent over a decade there, and one of my colleagues had recently joined Second Nature. And, um, he had attempted to, to get me away from there, uh, quite often, uh, at some of his newer, um, uh, endeavors.

Did he invite you to like any of these Second Nature infamous Second Nature parties as a way to—

he was, he was selling me, uh, very— he was selling me very well. And I just, I honestly, I thought he was not telling me the full truth. I couldn't believe a culture as amazing as Second Nature could even exist, right? So, this was my first startup. So, I took a leap of faith and joined Second Nature. And I promise you, it was 3 months in, 6 months in, even 12 months in, I was still pinching myself at the opportunity that I was afforded. So, that's how I pretty much climbed my way here. Have some limited litigation experience, heavy in landlord-tenant, intellectual property, data privacy, corporate board governance. Things of that nature. Just a jack of all trades, one would say, master of none. And, and definitely love my time here at Second Nature.

That sounds like the perfect background for your role. Gives you a lot of firsthand knowledge of the issues that property managers are facing day to day.

Absolutely.

Yeah. I'd love to hear what legislation you're tracking, either at the federal level or the state level or both. Is there anything that property managers should be aware of? Any worrying bills or anything that's on your radar?

How timely you asked this question, Peter. Oh boy. As a few days ago, I'm not sure, I'm sure you're aware, President Biden revealed another one of his initiatives for the 5% rent cap as another proposed opportunity to increase housing affordability. And we all know that some of These efforts are truly artificial means of just trying to influence a market that truly, truly never work. But this following the tailwind winds of his junk fee initiative that came about 2 years ago, and we saw the slight domino effect. Federal Trade Commission came out with its final proposed ruling last year or earlier this year, and there were several states that it kind of followed as well. And so given the fact that while federal may not apply, across the board, there may be some limitations set forth in this rent cap initiative. There's no guidelines that have been produced as of yet. There is states such as California, namely, right, that may immediately follow suit and institute even more stringent requirements than the rent control they already have currently present in many of their cities and municipalities. And since we talk about rent control, that can have a direct impact. I know you've had our CEO and co-founder Thad Tarkenton earlier this year talking about Second Nature's resident benefits package and the value prop and how it's providing a triple win benefit to not only renters but property managers and owner investors. Because our resident benefits package charges can be considered as additional rent, it may be limited in that if something of this nature was actually passed. Hey, we're in the middle of a possible change in leadership. So doubtful that this will come to fruition this year. But what I've seen in my past experience with any type of legislative initiatives, that it comes along at some point in some form or fashion that we typically don't desire. So that's why I'm keeping a close eye on the impact and what we can do. I often go on little tours around the nation just proclaiming the importance or the call to action to our property managers of getting involved, voicing their concerns with their legislator to make sure that things of this nature are hedged off at an early stage. But that's at the federal level. You asked state.

Yeah, yeah.

So California, for instance, the driving force of many legislation in the landlord-tenant law, it was— I have to applaud our California NARPM advocates out there. They had a win a couple weeks ago with California Senate Bill 611 or 611. That allowed them to recently remove problematic language that was going to cause property managers to further have to disclose fees within their rental advertising rates at the start. And I know that was a definite triumph over there, but we're also staying abreast of some California issues coming out of the Department of Real Estate and a few other states. Most legislators have adjourned at this point. So only a handful have some worry concerning rental caps or any excess fee limitations.

Got it. So it sounds like there's some state items going on and, you know, we're not going to go through all 50 states here on the show, but federally sounds like nothing made— no, no major action required by property managers at this point. More of a wait and see and then an encouragement by you to contact our reps and let them know our position on some of this.

Absolutely, absolutely. And to position yourself now, if you're not— if you are not taking advantage of what's available to you, namely Resident Benefits Package, a definite time to do so. Implement it now so you can get on board with any type of compliance oversight moving forward.

You mentioned, um, Biden's junk— quote, junk fees, um, initiatives, or however he's rolled some of this out. Is this something that's like law, or is it like, what should we be doing as property managers? Is this a situation where we just, as long as we disclose everything, we're in the clear? I guess I didn't really understand what the outcome of all that was.

I am so glad you did bring that up because we waited for so long to actually receive the definition, or at least the exclusions of the coined term junk fee. When it first arose, everyone kind of panicked. And just assimilated it to any type of ancillary service. And that's not absolutely untrue. Junk fees, as it's truly defined, are fees that are not disclosed at the point of advertising or point of sale and/or do not have a service or product affiliated or associated with it. So just the fee that's coming out of plain, clear air that's not associated with the service and not disclosed at the onset. One thing we have recommended, while this is a proposed ruling, not actual law, there is a law that's still pending on the books to put it in place. There are some states, namely California, that have passed a law, among others, to require certain disclosures, but could possibly exclude property managers in its entirety. So just as a, as a true recommendation, um, is just to disclose as you have been, uh, just that these services are in addition to, to the rent. You'll receive them, they're fully disclosed within the lease, so there's no surprises or no bait-and-switch pricing issues.

Love it. And my recommendation is just put this everywhere. Put it, you know, add a bullet point or two to your rental listing text, the template you use for all your rental listings. Just add something that says, you know, for every lease there's a resident benefits package. It includes X, Y, and Z. The cost is this. Put it on your rental application, put it in the lease, put it on your website. Like it, it only takes a few minutes to add some of this, some of this disclosure text to everywhere that anyone could reasonably be looking. And then, hey, that's fair, right? Everyone has an option to see that right when they're looking, you know, comparing apples to apples of different homes that are available for rent. They can, in the same way that you have to look at the utility situation— are utilities included, are they not— you can also sort of shop and compare. All right, well, this company is including renters insurance. This company would have to buy it separately. So I think that's a practical takeaway if you're not already doing that and you're offering a resident benefits package, which, by the way, I want to, I want to sort of define because I know not all listeners are going to be familiar with that term. If you're not already doing that, that seems like a pretty practical step to take. You know, whether that's legally required or not in your state or federally, who knows? But just do it anyway. What's it going to hurt?

Absolutely. Best recommendation I've heard thus far, and it's very simple. And of course, if you're a Second Nature customer, you'll receive the benefit of all of those templates mentioned. So you'll be able to use it out the gate. You don't have to think twice. Again, our name is in it. We make it Second Nature for you. We do all the work. So just to cover some high points on resident benefits packages and what they are, because unfortunately, we can't consider that our own term. There are some people in the market—

Did you just try and trademark that?

Absolutely. You know we did.

Couldn't get it through, huh? There was prior art or prior whatever they call that.

Yes, it's just so we definitely, I'll say we allow others to share.

Very good. Very good.

But there are some people out there that offer services in relation to resident benefits package, Second Nature's. Is it includes many solutions offered to help administrate some of the pain points of the property manager, as well as offer plain and clear benefits to the consumer, the end user, the tenant. The tenant's required, for instance, in the lease to maintain and replace filters. So we provide an easy filter subscription service that ships right to your door the time you need to replace. It also requires you to have liability insurance that covers any illegal liability to the landlord. We provide that as an optional tool. In majority of states, pest control is required. There are some nuances and exclusions, but for the most part, it is the requirement for the tenant to maintain that single-family home. And of course, that can be a hassle. I know for me, on a quarterly basis, I pay my pest control service. I wouldn't live without them. So we provide that service as well. And also on the flip side, benefits directly to the resident that I wish were in place when I rented. And that includes increasing, helping you to increase your credit score. Most landlords do not report to the credit bureau. So you can be, you know, just shelling out tons of dollars on a monthly basis without it really truly impacting what your ability to buy a home at one day, as well as rent rewards. You pay your rent on time, you're able to get some points, some gift cards that come in handy. I've spoken to many users of our service, and they're just extremely glad that during birthdays and holidays, they have some free dollars to give out that they've earned just simply by paying their rent on time, which again is the lease requirement. So our resident benefits package, and we have more on the horizon that's going to blow residents' minds, that's going to blow property managers' minds, that it's just a true value-add incentive park for residents to, to, to receive upon moving into the property.

Got it. So to sort of just pitch this from the property manager's perspective, for those who aren't already using a resident benefits package, or if this is the first time you're hearing about this and you're kind of scratching your head a little bit, the main idea is that as a property manager who has potentially hundreds or even thousands of units under management, there's, there's certain types of services that are valuable to your residents. And because you're a property manager and you have direct access to those residents and because you already have like a billing relationship with those residents, it's really easy to bundle up services together that are valuable for the resident and charge them for that. And you can either make that required as part of the lease, you can make it optional, you can make parts of it required, parts of it optional. So you listed off some examples of things that are often included in there. Things like pest control is an option. Renters insurance, which typically is required anyway. Filter delivery services. And that's a big benefit to the property owner because let's be real, tenants aren't going to go out of their way to buy filters, bring them home, and remember to change them in the furnaces and in the air conditioning units. So by having the filters delivered, the resident's like, oh, what a nice feature as, as a resident of this property. And then the benefit to the owner is they may actually remember to change them if they just show up on their doorstep. Right. So that's a great thing. And there's like, you guys have basically a menu of things that you can select from and put together, and then you select the price as the property manager that you charge the resident. And Second Nature provides these services that you, again, can pick and choose packages. And, and, and, you know, you could also put something like this together on your own. Like, there's some, um, things that we— so we have a resident benefits package that we offer to our residents. It's actually required per the lease except for the insurance portion, which we'll get to. Um, and Second Nature helps us fulfill some of those, and some of them that we fill on our own. So there's a lot of different ways you can put this together, but to be real The bottom line is it's, it's quite a profitable activity as a property manager if it's done right, yet it still provides high value to residents and property owners. And so this idea of a resident benefits package or RBP has sort of taken off over the last 5+ years and started to become very, very commonplace within our industry. With that, there's been some concerns. And fears, some founded, some unfounded, about different pieces and parts of, can I make this required? Can I make this part of it required? What's a fair amount to charge? So that's why I was excited to get you on, because you are the ground truth, the source of what's going on. You have the experience and the education to talk about this. So that being said, let's get into, let's get into some of this. So, so one of the main things and part of one of the things that we use Second Nature for is the renter's insurance. Now, renter's insurance includes two portions. You can correct me if I'm getting this wrong. There's a liability portion, which is basically protects the landlord. So if the tenant, you know, leaves the candle burning, it catches fire, the, the property owner can make a claim on the renter's, renter's insurance policy and get basically paid back. That's what the liability coverage is. Then there's a personal belongings portion where the resident's personal belongings are covered in case of covered event, which I'm sure there's a big list of covered events. There's probably some excluded events. Now, some renters insurance packages actually don't include one or the other of those, and that's not great. But I know for a fact that your, your policies do have both of those coverages. Is that a product, this insurance product specifically, that's available and offered in all 50 states? Is that right?

Yes, I will correct one thing.

Okay, good. Please do.

All the way into this, um, the renters insurance, another coined term that we just want to make some clarity on, um, because renters insurance is namely an HO4, what we call in the industry an HO4 insurance product, where that is a policy directly with the resident and the insurer, insurance company, where they then are able to dictate and designate what type of coverage they have for their protection. They were able to negotiate any of the rates. And of course, all of those claims are initiated directly by them to the insurance. The landlord is not involved. Now, what we coin our program is the Renters Insurance Program because while we have several products, one of those being an HO4, access to an HO4 product, our Second Nature Insurance Services, which is our licensed insurance producer entity, is able to offer a slew of products, that being the landlord liability requirement, which is the liability only, which you spoke of, that if any legal liability, one of their invitees or guests falls on the property and sues the tenant and the landlord, there's coverage there. Or if there's any named peril, a fire of some sort, the landlord is covered there for those damages. And that legal liability requirement is typically what is required in the lease. The landlords do not require contents to be covered, but with our resident benefits, package inclusive of the insurance products offered by Second Nature Insurance Services, you're able to— of course, isn't that long?

Uh, yeah, I love that you got that precisely correct, and I, I like details, so I appreciate that.

I, I'm glad you appreciate that because that's very important to, to distinct— uh, create a distinction between the two. Um, but yes, you're able to not only, uh, cover your attendance able to cover for their responsibility for the legal liability portion, but also opt into some contents coverage. It may not be what all HO4 products have, but it's definitely significant in that contents coverage can come in handy and it is net savings over the market overall if they're shopping for best price. And it's easy, right? They just sign up on day one once they sign their lease., and Second Nature Insurance Service is able to auto-enroll them. But they do have the option to go out and seek their own. And most of our property managers require them to agree to terms if they do go out on their own that Second Nature monitors their actual coverage. And in the case that it lapses, because we don't want any owners, investors out there unprotected, that they agree to auto-enroll for that coverage to meet that liability requirement within the lease. It's complete coverage for the tenant in the end and a huge benefit that reaps nothing but savings on their end.

Okay, got it. So what you've just been describing, the renter's insurance portion, that's something you offer in all 50 states, right?

Yeah. So renter's insurance program, we hired outside counsel and this has been ongoing for about 3 to 4 years. To assist in the design of this product with the explicit goal of being compliant across all 50 states. We know all 50 states have a variety of different requirements, and we want to make sure that whatever is offered in that area, and this is also in consideration with the resident benefits package, is of course compliant with that specific state. So that's why we have the variety of the products and in the manner in which we offer them. So yes, it has been overly vetted to ensure, and there's so many gray areas that are still in the law that still exist. And we're— my eyes are on them on a weekly basis to make sure if there's any modifications that are needed, we're able to modify right on site in order to ensure continuous compliance going forth.

Okay, got it. So, and I want to caution property managers who are listening to this who may not have, like, been exposed to this world, do not try to self-implement an insurance policy for your residents, either for personal protection or the legal liability portion, not only do you risk going bankrupt in case of a claim, but also it's highly illegal in all 50 states, I'm pretty sure, to basically create an insurance product that is unlicensed, unregulated, unregistered with the state. So insurance is regulated state by state.. And I know, I know that property managers have tried to do this in the past and some have faced severe penalties for doing so. So if you're hearing this and you're like, oh, that sounds like a great idea, but I'll just do that. I don't need Second Nature. I'll just do that in-house. We'll just require renters insurance and I'll offer it to my residents. Do not do that, please. No, I don't care if you use Second Nature or somebody else, but don't do it on your own.

Please heed Peter's advice. Uh, that is a heavily regulated, industry, insurance commissioners will find you and will place violations or fines and make an example of you. That's what they will do of you. Absolutely. And I did want to point out 3 typical issues that will find property managers in hot water. And this is where it is imperative that you rely on an insurance, a licensed insurance entity to offer this product. And, and that's when you're collecting premiums over and above the actual premium amount that may look or even be presumed to be commissions and you're an unlicensed entity, commissions are not permitted to be shared with unlicensed individuals. So while there's administrative fees out there that may be acceptable, that needs to be set apart and distinguished from the premium. Anything inclusive within that premium that comes across as an upcharge could be presumed a commission and you're an unlicensed that runs afoul, that runs against the, the law. And also, if you're acting in a manner in which you're negotiating rates, coverage, policy information, endorsements, no, you're acting as a licensed insurance agent without a license. And then lastly, want to pinpoint that I see several finding themselves in, in trouble is failing to disclose doing somewhat of a forced placement of insurance without disclosure of those insurance requirements within the lease, without agreement from the tenant, and forcing them to agree to the payment on a monthly basis. We want to run away from that. But again, Second Nature working with— even if you're not coming along with Second Nature, which I hope you would, even if you don't, please refer to a licensed entity that's able to facilitate the management from end to end of your insurance product offering so it can remove you from any of that exposure and definitely decrease your risk.

So again, property managers who are listening to this, if you're working with Second Nature or another renter's insurance, like a master renter's insurance producer or underwriter or whatever the right lingo there is, if you're working with someone like that and they're charging you $10 per unit, you have to charge $10.00 and cents. Do not mark it up even 1% or one penny. Do not charge a fee to the tenant for placement. Do not mark it up. Don't play games. And then the other side of that is if you're rolling this into a resident benefits package, the forced place thing that you mentioned is super important. You have to allow them to opt out of, at the very least, that portion of the resident benefits package and supply proof of coverage of their own. And then you have to reduce the costs by exactly your costs of the resident. So you can't like, they opt out and you only reduce the resident benefits package by $5 a month when it's costing you $10 a month.

Like, it has to be exact. Absolutely. Thank you, Peter, for that clarification.

That is very important. I'm just translating this. It's all running through the property manager filter of like, okay, what's the takeaway here? How can I— because I want to— I really want this to be clear for anyone who's running a management company because there's big opportunities with what we're discussing today. But there are nuances and details that have to be correct. Absolutely. Absolutely. Awesome. So You've mentioned a couple great ways to stay out of trouble for property managers who are thinking about rolling out some type of a resident benefits package or a, a master renter's insurance policy. Any— anything else? We've talked about disclosure, we've talked about forced placement, we've talked about not marking up. Any other like areas that you see folks either making mistakes or ways they could be doing this better, things to watch out for? What are the state commissioners kind of looking around for? How could I even just never get on their radar?

Well, I'll tell you, my, my best recommendation is do not follow the advice of someone that does not have a license to give you that advice. A lot of times what I've encountered are property managers that may be on some type of Facebook forum or social media platform and they're getting this advice from their friends and suggestions of people that may have rolled this certain product out and reaped several benefits from it. But I would not just follow suit. I definitely lean on, if you don't have a service provider to provide you that advice, lean on local counsel because as I stated before, there's state law, there's federal law, but there's also local regulations that you are more in tuned into than even I am. And so you want to make sure that you are aligned with what's required in your area for your properties in addition to the disclosure and the agreement by the tenant. Also, one thing I would recommend is just reasonableness in the cost associated with services. I don't point out specific pricing or anything, but just use your best reasonable judgment. And I'll say this just as an analogy, you know, if I'm selling a piece of 5-cent gum, if I sell that piece of 5-cent gum for $20 versus, you know, only a few, it can be an extreme example that may put you as a target to any, you know, unreasonableness. Unreasonable practices. So use reasonableness in your cost justification for any of your services. We— and then again, retain accurate tenant records as you proceed. It takes one complaint to just ruin it for you, but I've worked with some property managers that do this well and some that don't. And so as long as you maintain your property records, correctly, your tenant records, your— you audit your lease versions, making sure that you're using the proper lease and that you're also obtaining consent when sharing. One of the big things with privacy, these data privacy, obtaining that consent to share that data with third-party service providers, that's key to also keeping you out of hot water.

Okay. And some of that disclosure language, that sounds like maybe it would go in the lease. Is that something that I could get from Second Nature to include? Absolutely, from top to bottom. Got it. Um, and let's pretend for a minute that I am charging, you know, the $100 for the 5-cent piece of gum, or maybe I'm charging $300 a month for my, you know, resident benefits package, some—

or something like that.

And the, um, or actually Let's pretend I'm charging a reasonable rate and I get a— I get an email or a letter from my state insurance regulatory commission or division or whatever. What's the move here? Like, should I contact Second Nature? Should I contact my own attorney? Should I just reply in a friendly way? Should I ignore it? Like, what, what should be my first move if I do get kind of a scary-looking letter from my department of insurance?

Well, I'll tell you, it really depends because typically you may get a letter from a variety of regulators, and insurance would only pertain to insurance, not necessarily the resident benefits package. But speaking of, Department of Real Estate may pertain totally to resident benefits package and exclude insurance. But the one thing you do not want to do is ignore it. Let's just stop there.

Okay. So this isn't like a tenant threat that I can just kind of— yeah, they'll file if it's a problem. I'm just going to ignore this.

I just don't recommend ignoring any regulator correspondence investigation. It will just, number one, signal the wrong message and possibly place you in a heap of trouble. So we want— we want to do something. One thing you can do, especially if you're a Second Nature customer, is we ask ask you to partner with us, forward it to us. If you have local council, of course, keep them apprised of that as well. It really varies because it depends on if the issue that is being brought forth arises from any claims related to what you per se are providing, excludes what Second Nature is providing. I've seen that happen a few times. Or is a result of some action of the property management that has nothing to do with the resident benefits package, or if there is clarity needed as it relates to the resident benefits package or the services that are given to the tenant, we want to be able to provide you with those records, that data, that information to help you respond not only in a timely fashion, but in a more accurate fashion to better protect you and your owner investor. The way we do that is if you keep us informed, um, at the onset of receipt of any issue of that matter.

Okay, got it. That makes me feel a little warm and fuzzy that I can, you know, ring the bell and get, get some help from— absolutely, yeah, from corporate, basically.

Yes, that's exactly why they, they put me on, on staff. They wanted someone that understood the business, the operations of business, and, um, understood the laws nationwide and was definitely able to assist in our client's time of need. We do not sell you these services and just leave you hanging. We trust in what we are able to offer, and we just ask that you, you know, follow our guidance the best you can, and that we'll be able to assist you in your time of need.

All right. I want to shift to the owner's side of this equation. So the property owners who have hired us to manage the property for them, There's been one or two. So the majority of— so first of all, I think it's important to disclose the resident benefits package, you know, to your property owners again. And it's like, okay, it may not be legally required, but it's a good practice to, to disclose that in your PMA or maybe on your website, or maybe you have a conversation with a property owner before signing them on and just say, hey, just so you know, We offer this resident benefits package. It has X, Y, and Z features that help the resident and help you and, and etc., etc. Once— so most property owners, 99% of them either don't care, don't notice, or are fine with it or like it. Once in a while we do reach a property owner who takes the position that this is outrageous. And they should be— we should never be charging this, or if we are, the owner should be receiving this money because it's basically rent that they're not getting. How— what's the way to have a conversation here that's going to be productive with property owners who either don't understand it or outright are hostile to this idea?

Absolutely. Number one, we are— we are still in the days where prospective tenants are still seeking just a roof and four walls, right? But there are some sophisticated tenants out there that are doing more than just shopping for rates. They're looking for those amenities, those perks, those incentives, the smart home technology we've seen, pet-friendly spaces, eco-friendly initiatives, online rent payment, right, where they can do everything facilitated from their phone that they cannot release. And you want to, number one, as a property owner, really allude to the owner investor, you want some long-term tenants in here. You just don't want the shuffle. You don't want the high vacancy rates. You want someone that's loyal to the program. And how are we going to incentivize that loyalty? I'll tell you a personal story of mine. I don't know if you've ever heard of Sewell Lexus being in Ohio because it is a Texas car dealership, but Sewell Lexus, if you ever, ever have the chance to experience them, is a true experience that the car dealership has won me over as a lifetime loyalty partner.

Not sure I've ever heard anyone rave about a car dealership experience, so I'm excited to hear more.

The one— the, the thing that you like run from. Oh my gosh, these salesmen are going to kill me with the pricing. Um, no, I, I did not know. I bought over 10 or so cars in my lifetime. And the Soul Lexus, uh, Soul, they sell more than just Lexus, but Soul in and of itself, um, comes at a premium, comes at a higher rate. Um, but can I tell you, for the first 2 years, I did not have a maintenance payment. I just dropped my car off, I'd have a loaner car sitting there for me with my name, uh, written on the little board, someone with coffee at my, at my door, and, hey, here, do what you got to do. Um, they'd send me video of everything they're doing in my car. Oh, that makes me feel good, right? Because especially as, as a female, as a mother, you go in there and you don't— I don't know much about carports, and I'm just like, okay, they, they're back there willing and dealing and not even doing anything in my car. But no, they explain everything. They don't over, overprice you. Uh, they help you understand, give you several different options.. And my car, when I drop off, I'm a mother of 3, so you can imagine how filthy it sometimes is. And it comes out just as clean and fresh. And the payment, as soon as I'm pulling up with the loaner car, my payment is sent, my invoice is sent via text. I click a button, it's paid. I walk in, my name is on the board, my car is right positioned out. There's no wait. I mean, it's just— they've nailed the maintenance, the loaner cars, the transparency, the comfort, the redu— everything, right? Experience. The experience. And I will pay time and time again for that because just think about the time and, and efforts lost in behind trying to find someone to get you an appointment. Then, oh my gosh, this appointment just for an oil change is going to take 2 to 3 hours of my time, but I got meetings and whatnot. And they have private workspace offices as well, by the way, with video, everything. And so, you know, this takes away from my day. I don't want to have to take off from a busy workday to do this. And, and oh my gosh, what about the invoice? What are they actually doing? Am I going to be surprised? They tell you at the onset what you have coming. And so with that has created a long-term loyal customer. Same with the resident benefits. Hey, yes, you're moving into a home, but with a home comes a lot of issues and concerns, right? With your landscaping, with your filters, with your— if any claims arise, if there's a fire, if there's water damage, and what's going to keep you up at night trying to figure out how to handle all of that? Hey, there's the infiltration of spiders and pests, right? But we give you the options to have that facilitated from your phone.

I love this positioning. I think there— I want to make a distinction between like the way I think a lot of residents think about this or the way they're introduced to this. And honestly, the way a lot of property managers think about this is, hey, here's an extra fee you have to pay, right? And like, of course, no one likes that. And of course, the landlord is thinking, well, that's an extra fee I should be getting. But instead, if the way you position and present this to residents is, um, hey, there's this big scary legal document called the lease, which you've already signed, um, and, and, and you touched on this, renting a home is different than renting an apartment. Renting a home comes with extra responsibilities. You have more freedom. With more freedom comes more responsibility. You don't have any shared walls. You have a yard. But guess what? There's Things that go along with that when you're a resident. And so the way, the way to sort of position this with residents, I think is really powerful is here's this big scary document called the lease. Here's this big scary new experience of renting a home. We've got some solutions for you to help make this easier and to take care of a lot of these details and tasks, whether that's complying with the renter's insurance portion, whether that's dealing with pest control, whether that's dealing with landscaping, whether that's dealing with utilities, whether that's dealing with all the things that go along with this, we've got a package that just takes all of that off your plate and frankly makes it more like renting an apartment for a low monthly fee. Now, as a new resident, that sounds interesting. Like you've just presented a problem, which is this big lease that has all these things I need to comply with. And now you've presented a solution, which is a low monthly fee that's going to make all of that go away. Well, now you've got my attention rather than, oh, by the way, we told you the rent was $900, but basically it's $950 because we have this $50 extra fee with none of the context.

You have to clarify those benefits. You have to set up that value prop to them to sell them on it. And it's easily accepted. And for the owners, investors, Hey, I have to manage this program to get this tenant excited about living here, to get them to sign that renewal. No one wants to move. Who wants to pack up boxes and move somewhere else and then go along the way of finding out who the utilities are, whether it's electric, internet, gas, water? That is another move-in concierge help that's included within the resident benefits package. You can find yourself a loyal customer there in that Hey, you made it seamless for me to move into this house. Even if I have to find another property with your property management company, I want to stick with you because you did it right the first time. You'll do it right again. And that's the selling point to the owners, investors. This is going to take some work on the property manager's side to roll out, implement. With the help of Second Nature, we'll make it easy. But it does take some work, right? And we want to satisfy the What the objective, the complete objective is to satisfy the end user and that being the tenant, making them happy where they are, not just getting a body to fill up property. That's, that's at least that's what you shouldn't be in it for, right? You should be in it to satisfy the end user.

So the dream scenario to paint for the property owner is, is what you just described, the loyalty and also the types of people who are going to be interested in this are the tenants that you want. Right? So Kimberly, you're excited about this car dealership. You're probably an amazing customer for them. You're buying a new car every X years. You're taking it back to them for maintenance. Like, that's who they want for their customers. People with discretionary income, people who take great care of their vehicles. That's the same analogy for who we want as residents. People who have discretionary income, not going to have trouble making the rent. People who want to live in a nice place that's well maintained. That's who you want for your resident. So that's the pitch to the owner is like, this is the types of people that you want living in your home who don't mind paying a little extra to see that things are taken care of. And by the way, Mr. Owner, don't you feel better knowing that we have professional service providers dealing with X, Y, and Z at your property rather than whatever random person off Craigslist the tenant decided to find?

Absolutely. Yeah.

Because there'll be some corrective action to follow if so. All right, great. I really like the conversation that came out of that question. I even feel better about it for myself now that we've talked about it. So I want to get into sort of a nitty-gritty detail around like insurance and guarantees and warranties. These are some topics that come up quite frequently when property managers start chatting. So we've talked about insurance. You've done a great job explaining the HO4, I think it was, and how that's actually separate from the other component of renters insurance or renters insurance program. What about like guarantee warranty? How do we make sure we don't accidentally create an insurance product? There's some other sort of similar programs that property managers are experimenting with right now, like a pet protection program or like kind of like home warranty where you self-fulfill it in-house.

How should I be thinking about some of these things? Yes, you have to be very careful because you're talking about those owner-facing risk products, such as you mentioned, the pet guarantee, rent guarantee, where you're guaranteeing up to a certain amount of coverage. And that's a financial risk model that can be easily defined as an insurance product by insurance commissioners. So there's a thin line that you, that you trail with offering such products. So definitely want to rely on someone that is in that area of expertise, is a provider that has offered it, and not do it on your own. There's a difference between offering, you know, a waiver program of some sort. Hey, this is a responsibility of yours in the lease, but for this charge, we'll waive this requirement versus, hey, I'm going to give you a pet guarantee. You pay me this charge and I will guarantee you up to a certain X number of dollars of damage protection. And that's something that we don't recommend our property managers doing on their own. We definitely recommend them going with a service provider. We have even on our staff our VP of risk, holds over 30 years of experience. He's also one of our insurance producer— licensed insurance producers, and he himself has a wealth of knowledge. You may want to bring him on. His name is Rob McKeith and has a wealth of knowledge in this area. And that's one thing we allude to is managing those risks, identifying what products and solutions you're trying to take to the market or offer to your tenants. And if it will open you up to exposure. So they sound promising. They sound great, right? Who doesn't want to just pay a small monthly fee to have, you know, thousands of dollars worth of liability protection? But you just don't want to cross the line of selling what could be presumed as an insurance product.

Okay. Very interesting. A couple things I want to dig on there to learn more about for myself. The Pet Protection Program is a big one. And are there any third parties that offer administration of that? Because I know most property managers are doing this in-house, but is there someone they could turn to there that you know of?

I believe so, but I can't endorse anyone except for Second Nature. All right, fair enough.

I'm sorry, my apologies. I'll try to research that and put it in the show notes if we can find that out, but not officially endorsed by Second Nature. Fair enough. Absolutely. Absolutely. Okay. And then you mentioned something interesting, a phrase I have not heard before, which is waiver program.

So can you maybe give us an example of how that would work or what that is? Yes, we have seen many property managers out there in the industry, and this pertains even more so to, to some insurance requirements, the legal liability insurance requirement that if permissible within the state law, This is a requirement that you, of course, have to carry some liability insurance, but in the fact that you don't, you can pay this fee to waive this legal requirement. That is a take that several property managers have been successful in doing so. But one thing it does miss out on is liability coverage is still actually a necessity. So that's kind of why we deter away from it because we have a liability product option that's facilitates both a benefit to the protection of the owner and investor, as well as facilitates protection or further contents coverage to the resident. So while it's out there, it's just there's other options that are better suited for you to cover.

Anything you can tell us about future Second Nature offerings, either new releases, product offerings, anything you can tease for those who are already customers or are thinking about it?

Any Anything cooking up in the labs over there? Oh, if you can, if you can see this big smile on my face, you know, I am excited. As, as anyone who has experienced even an ounce of Second Nature knows, there's reason behind the excitement. And I'm so looking forward to the NARPM annual convention here in my backyard in Dallas in October, where we will be unveiling specifically two distinct products that from my our head of marketing states will double the profit per unit with use of RVP. So this is going to blow your mind. But, but even for me, I've been on the back end working with these teams on, from a compliance angle, on many of these products. We do have a resident onboarding software, which is a resident experience platform that's really going to elevate a resident benefits package. I think that hit on it back in April, but it's a true resident experience platform that I can tell you we had, we 4 property management customers at one of our annual events last week, and we teased them with the product, and their jaws hit the floor. So they were excited. They were like, can I get it now? It is going to solve so many pain points for property managers. It's going to be a win-win for the resident experience. The residents are going to be blown away. I'm just excited. I can't mention too much. I don't want to steal away from our product and marketing teams. But we do have some things, um, within the next 3 to 4 months that, that will blow your mind. So stay tuned. If you're, if you aren't a Second Nature customer, plan on being it by fourth quarter of this year.

All right. Very good. Well, I appreciate that little teaser. Thank you so much for coming on the show today, Kimberly. This was a really fun conversation. For those who want to keep up with you and your work at Second Nature, or just kind of what Second Nature is up to, where's the best place for them to do that?

Absolutely. You can find me on LinkedIn, Kimberly Godsey, G-O-D-S-E-Y, easy. You can email my department if you do have any questions. It's easylegal@secondnature.com. You can catch us. I am often at NARPM events if you want to see me in person. I do speak at some of these, so if you receive a flyer or even a webinar, definitely join in where I can answer some specific questions. Online or in person. So those are the ways you can, you can get in contact with me. And Peter, I'm just honored that you had me on the show. I had an exciting time to be able to just share some knowledge to help create some wins for property managers.

Awesome.

Thanks so much again for coming on, and I'll see you at the next conference.

Absolutely. See you in October. If you like the show and want to get connected to the community, You can follow me on Twitter @PSLohmann and subscribe to my email newsletter on my website PeterLohmann.com. I try to share as much valuable property management content as I can on a regular basis. Thanks again for listening and have a great week.