AI, Fraud, and Tech Bloat in Property Management with Dom Beveridge

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I could tell that by asking people, you know, 20% of people said this, 40% said that, they were missing the most important information, which is why does a company like this choose to do this thing? Whereas a company like that chooses to do that thing. And the only way you can really understand that, which is core to understanding things like how people are adopting technology, the only way to understand that is to ask people open-ended questions about it, which is why we've developed this way of just having very structured 30-minute conversations where people can say whatever they want in response to the questions, but they're structured enough that you can compare and figure out what's going on. So it's basically, it's become this nice sort of snapshot on what, what are people working on, what's a high priority, what's changing year over year.

Welcome back to Peter Lohmann's podcast. Today on the show, I have Dom Beveridge, principal at 20 for 20. Don, welcome to the show today.

Thanks. Great, great to be here. Great to be here at last.

Yeah, I'm excited to have you on the show. You know, we got to meet in person for the first time at the PropertyMeld conference late last year and had a great couple conversations and some dinner. And you were sharing with me at that time, and I also saw on stage a lot of the work that you've been doing at 20 for 20, speaking with property management executives in single-family and multifamily. And you've just now released the latest version of your 20 for 20 annual report and survey that is fascinating. And I'm excited to dive into the details of it for the audience and kind of ask you all of my burning questions. It's great because, you know, when you're reading a report and you're just like, yeah, but what about this? Or what do they mean by that? Well, when you get to have the author on your show, you just get to get all your questions answered.

Yeah.

So first share with the audience, what is this report that you've been doing? I think 3 consecutive years now. What is it and what's it for and who do you speak to for the report?

Yeah, well, it's actually the 8th edition this time. Oh, okay. So we've been doing it for a while. So the idea is I interview 20 senior executives. So they're all either the chief operating officer or they're the head of technology, 10 of each, and they represent a range of different multifamily companies. So they all run their function in an operator of institutional-grade multifamily. So we're talking about the kinds of communities that are about 300 units where you have onsite staff and so on. And the range goes from, you know, the biggest third-party managers that have, you know, many hundreds of thousands of units down to owner-operators that have sort of 5,000 Sorry. Yeah, 5,000 units in similar kinds of properties. So that's the sort of scope of it. The why of it is that in multifamily, the companies, although it's a really successful like asset class, the average size of the companies is quite small. It's a very fragmented industry and they're all very different from one another. And so what I found earlier sort of in my career when I would read research into, you know, what people are doing in multifamily, family and technology and so on. I could tell that by asking people, you know, 20% of people said this, 40% said that, they were missing the most important information, which is why does a company like this choose to do this thing? Whereas a company like that chooses to do that thing. And the only way you can really understand that, which is core to understanding things like how people are adopting technology, the only way to understand that is to ask people open-ended questions about it. Which is why we've developed this way of just having very, very structured 30-minute conversations where people can say whatever they want in response to the questions, but they're structured enough that you can compare and figure out what's going on. So it's basically, it's become this nice sort of snapshot on what are people working on, what's a high priority, what's changing year over year, et cetera.

Yeah. So I would characterize it as extremely deep. And not as wide. So we do the PM Trends report. We get hundreds and hundreds of property owners to answer this rigid set of questions. We don't get a lot of color, whereas you are speaking with a small number of people, but you spend 30 minutes with each person interviewing them and getting all of these detailed answers, which are sprinkled throughout the report and very fun to read. I actually have a couple quotes I pulled that I want to ask you about. Some of them are kind of funny, actually. Yeah. So So yeah, the report's fascinating. Obviously go read it. I want to start by asking you, so you, you've been pretty focused on speaking with multifamily executives and I want to start by interrogating the difference here between what my, what I do at my company, what a lot of my audience does, which is scattered site third party versus single site, large multifamily. Obviously we know the difference. Between those two asset classes, but what do we not know about the difference, or what are you seeing that characterizes our approaches to property management differently?

Yeah, it's, it's one of the things I really like about doing the Property Meld conference, like, because you're, uh, you're, you're, you're trying to think about, all right, what's, what, what, what's the same and what's different between these, these, these models. So I, I think the best way to think about it is you're in a 300-unit property. There is like a permanent staff on that property. There's, if we say 300 units, there's typically 3 people who work in the front office, a community manager, an assistant, and a leasing agent. And then there's about 3 people who work in maintenance. And that changes a lot about how the companies, how the organizations operate. Like the maintenance is fascinating. One of the biggest narratives over the years is the multifamily should learn more from the way that single family does maintenance. Like it's very obvious when I go to conferences and listen to the conversation about maintenance, it really makes or breaks success in companies, right? So you, and you don't have onsite teams, which means every time somebody needs something to be fixed, somebody has to make a decision about who's doing it, how much should it cost, when is it getting done? So if you translate that into multifamily where there's like these 3 guys in the property and the work orders come in and they just sort of figure out what they want to go do.

Yeah.

You are fundamentally like less efficient or at least the incentives to be efficient are way lower. That's not to say people don't work efficiently, but it's far less structured than it is. You know, if I look at what the PropertyMeld companies like that are doing in terms of the intelligence that you can apply to their data, that's kind of beyond what even really sophisticated multifamily operators can do because they don't have that basic information on who did this work, when did it start, how much did it cost, that kind of stuff.

It's fascinating. And we can park on maintenance for a second. The models are so different, right? And there's this huge narrative in the multifamily world about, they call it centralization, which is, I had to figure out what that meant cause I'd never heard the word in our space, that's because it's the water we swim in. All we— our whole business is centralized. So there's no word for it. It's just the company is, is, is, you know, how we do it. But basically centralization is the idea that like, can we take some people who are at this property and this property and this property and bring those functions to the corporate back office, so to speak? And so instead of having 3 property managers at a 250-unit property, can we just have 2? And have some of the accounting and some of the other things done at the back office. So you discuss in your report, maintenance has been famously resistant to the centralization effort, as you— for the reasons you just said. You typically have these guys who are there on the property and they're the guys handling the maintenance. In order to centralize that, now you have to look more like a scattered site SFR model where you have techs driving trucks all over the place, which is just a totally different business. And you mentioned that thing about efficiency and like Somehow we've been more efficient. It's a really interesting topic because I think what's going on there, you obviously have just the straight up issue of the properties are scattered all over the city. But on top of that too, and I want to get your take on this, so we've hired guys. So here at my company, we have about 750 doors spread out all over a metro area. We've hired and we have in-house maintenance. We've hired techs for multifamily before. You know, some tech applies for our in-house or for our in-house maintenance tech job. He says, oh, I've worked at this property for 4 years and I worked at this property for 3 years. Well, great. He obviously knows how to work on rental homes and rental apartments. Let's bring him in here. It never works, ever. These guys who have experience with multifamily who come and work, try to work for us as technicians, never— I've never seen them work out. They can't deal with the pace and the intensity and the juggling of multiple work orders and the driving around and all these different properties and all these different tenants. They just can't handle it. And so what I make up is that in single-family, you're optimizing for a different outcome. It's single— sorry, multifamily and single-family. So at a big multifamily property, the technicians are optimizing for speed to repair. Because the expectation in an apartment is, yeah, there's a, there's a tech downstairs. I seen them hang out by the workshop. They're just going to come up and fix my toilet, right? Whereas at a scattered site single-family operation, you're not optimizing for speed, you're optimizing for efficiency. Because if you can't figure out how to get these guys around in an efficient way, you're going to lose money on maintenance like so fast it'll make your head spin. So I don't know, like, It's been really interesting. There's a lot going on, on like my friend John Master, he says like availability is a precondition for speed. And so the techs at a single site property, they have to be available. They're not optimizing for how many jobs can I get done in a day? They're optimizing for all work orders need to be done in 4 hours or less. And so that just doesn't translate over to my world.

Yeah, it's interesting. Various companies have sort of tried to centralize, you know, if I have properties that are close enough together, I'm going to try and do something that's a bit more like the way they do it in single family. And it falls down in these quite weird ways.

They need new guys. That's why it doesn't work. I can tell you that right now.

Right. So, you know, the interesting, some things they say, well, it just didn't work because, and it's things like, If you send somebody to a different building to do a job, they have to remember to bring all their stuff with them. And if they forget anything, then they have to drive back again. It's like, okay, so that just means you're not used to like moving between jobs. But you know, these things become, all right, where do we store all of the stuff between these properties? Like all of these problems that sort of surface that people don't immediately know how to deal with.

They need to hire an SFR maintenance director to bring that.

I was having this conversation with an owner-operator, like about a 25,000-unit Midwestern owner-operator last year. And they were saying like, yeah, we really want to do more of this. How do we do it? And I said, you should just hire somebody who's done that before, who doesn't come to this with the baggage of, yeah, it's the coverage model. It's the fact that there are these people who, you know, just handle work, self-organize as the stuff comes in. If you are without the constraint of having to go from one thing to another the way you are in single family, you sort of never learn to do it. The other thing that's kind of interesting that you hear from people who've tried to centralize some functions, so they might do something like separate turn work out from work order-based work, right? So, yeah, we're going to separate those teams. What you find is that in most multifamily communities, there's this team dynamic between the 3 people who only work in that property. And as soon as you mess with it, everybody gets kind of task orientated, right? So again, they don't have the same pressures. They're not used to the same pressures that single family are. And you just get this kind of cultural way of behaving, way of doing your work that is probably alien to somebody in the scatter site business.

Well, we could solve this for them. I mean, yeah, I think you gave the right advice, which is you just need to hire someone from outside the apartment space who's done— and I actually, you know, when I was last hiring for a director of maintenance, again, we had a ton of applications from the multifamily world for, for this internal role at my company. People who had run, oh, I've run a 20,000-unit portfolio as a director of maintenance. I didn't even interview these people. Because I already knew it wasn't going to work. I would rather speak with a guy who ran an 8-tech plumbing business or a 12-tech HVAC business than a multifamily director of maintenance with 20,000 doors. All day I'd rather hire the plumber.

I agree. The other cultural thing that I think is important, that I think is really different between the two kind of scales of organizations, is that you get this kind of blue collar, white collar thing in multifamily, right? So the people that make the decision, so the person who would sit in your seat in a big multifamily portfolio is fundamentally less close to this than you are. Like what I notice, like when I go to the Appfolio conference, when I go to Raise conference, the property mill conference, and I listen to the conversation about maintenance, one thing that's blindingly obvious is like the owners and the people who run these companies they sort of know how much stuff is supposed to cost. They know how to build a base of suppliers. They know what it means to fix an elevator, right? They just have in mind just a much clearer idea of how you do maintenance. Whereas I think in multifamily, the person in your seat wants to create an environment in which the people who do the maintenance can sort of be effective and the people in maintenance know the nuts and bolts of how to do that job. But that sort of familiarity at a leadership level with this is a good idea, that's a better idea, that kind of thing is just not the same because I think you have a bit of a separation. It also means that maintenance, changing maintenance feels risky to decision makers because they're just not as familiar with it. And it just feels like, So much can go wrong that, that they keep pushing it into the long grass.

This episode is sponsored by Doorloop. They recently put out an ebook called The Property Manager's Guide to Time and Getting Sanity Back, based on a study of hundreds of property managers across the US. And one number from that research really stood out to me. The average property manager is spending 76 hours a month on administrative work and rent collection alone. Think about that for a second. That's basically 2 full weeks of work each month just to keep the machine running, not growing the business, not improving operations, just chasing rent, updating spreadsheets, and dealing with manual processes. How can property managers solve these costly issues? The answer is simple. Switch to a more automated system. Something you know I'm big on. The study showed on average time spent on property management tasks was reduced by about 30% and cut rent collection time by more than 40% when making the switch. In practical terms, that translated into 23 hours a month saved. That's almost 3 full workdays you can get back every single month. A lot of that came from pretty straightforward tools: online rent payments, automated payment reminders, maintenance request tracking, integrated accounting and reporting, and centralized tenant communication. Nothing magic, just systems that remove the manual work most operators are still doing, which again is something I have a huge focus on in my business. If you want to dig into the numbers and see how other property managers are reclaiming their time, DoorLoop put the full guide together. You can download the ebook for free at doorloop.com and we'll link it in the show notes. Thanks again to DoorLoop for sponsoring this episode. What else do you notice? Maintenance is, is probably the the one that first comes to mind as like very different in how it's run and how it's operated. And an example of where multifamily is trying to learn from single family. What else? And maybe the other way, what can single family learn from multifamily where they're ahead of the curve?

Yeah, so the other area that I think is interesting for slightly different reasons is leasing. So when you've got like a 300-unit community, right? So the way the sort of economics of the business works, somebody owns that asset, they have some financial objective for it. There's a pro forma on that property, which means you've got revenue occupancy, whatever targets that you have to make over some period. And that means, you know, I think in single family or in scatter site, you can look at units quite discreetly, like, and you can't do that really in multifamily, like the overall occupancy of a building is really important. So if I have 300 units and I have 5 units to rent, I don't see that as 5 discrete kind of problems the way that I would in single family. I see that as a shortfall in the performance of this asset that has financial stakeholders who expect me to solve that, right? So what that tends to mean in terms of leasing is that leasing, there's just always leasing going on in those buildings, right? So, you know, there's peak periods of the year when you're doing a lot of it, there's periods of the year when you're not doing much of it. But there's always some leasing going on in a way, you know, it's a sort of binary thing, right? In single family, you either need to lease it or you don't, right? Most of the time you don't, sometimes you do. But this activity is kind of constant in multifamily. And what that means is that things like using AI to manage inbound calls and nurture leads through to the tour and that kind of thing, has become this really critical thing because it's very difficult because leasing is going on all the time and it's all peaks and troughs. It's very difficult to answer the phone reliably and follow up reliably. And I think that's a far more critical activity in multifamily because, you know, when you get gaps in occupancy, that's a really, really serious problem for a building. So that means that things like the technologies that you do what I just described, the sort of inbound call handling, lead nurturing and so on become like super critical. I mean, to draw a sort of technological sort of distinction, if I think of like Appfolio, that's really, really good at, I mean, increasingly good at everything, but really, really good at that smaller portfolio, scatter site, smaller multifamily kind of model. They have never had as big of a marketing stack as the Real Pages, the Yardis, the Entradas. And it's because of that problem I was just describing. It's just this constant thing that you have to do a lot of, like all the time in order to secure enough leads to make this building, to make me confident that I can keep this building like full. So, so you have this, it's, it's like, it's a bit more of an industrial scale problem that leasing becomes in that environment.

Yeah, that, that is interesting. And you're right. When I think about leasing our single-family homes and, you know, small multifamily, like 2, 3, 4, 8-unit properties, first they're just easier to lease. Like homes are, for, you know, whatever reason, they seem to be more desirable for rental accommodations. So when you list a rental home in a normal market condition, you're not struggling to lease it. It's gonna lease. It might take 2 weeks, it might take 3, it might take 4 weeks, but someone's gonna rent it. And so you're just not that stressed about it. Like if you talk to the average property manager, including us, you know what our budget is for leasing homes? Zero. We don't have one. We just push it out to the synd— we just push it out, syndicate it. Yeah. We pay, you know, some people pay some money to Zillow, some people pay, you know, some money to like apartments.com 'cause they own homes.com and stuff. But it's essentially zero. It's a rounding error in terms of if you look at that compared to like the marketing budget for an apartment building. So that's the first thing. The other thing is we just have these teeny tiny little clients, property owners who might have 1, 2, 8, 10 homes and we manage 600, 700. And so, you know, there's no pro forma. And if the home takes 4 weeks to lease instead of 2, The owner might be a little grumpy about it, but I'm not going to reorient my whole operation to become a factory floor to get a 5% more efficient leasing, you know, engine out of it. It's just, you know, we just— yeah, the market's a little softer. Sorry, Mr. Owner. Right. Whereas I'm picturing these multifamily properties where it's like you get called up to corporate, you're just like, your job's on the line. It's like the investors are furious if you can't hit the 94% occupancy or whatever it is. It's just a totally different world. So not surprised they've made more advances.

Yeah. And actually the other thing that's, so just strategically to be good at running a portfolio of multifamily companies because of all this stuff we just talked about, it, there's a real advantage to being good at predicting when you're likely to have shortfalls in demand. So people start to look at things like a building's expiration profile. And they start to compare it to what the general trends are in the market. And that means I can be more proactive about buying leads and buying the kinds of leads that fill this kind of unit. And so yeah, I suspect you have to be more proactive to run these buildings, whereas you can be a little bit more reactive in the single family space.

Definitely. One of the themes you identified this year in conversation with these 20 executives was around tenant screening and fraud. Big area of focus. And I'm a little worried this portends problems for us in the single-family world around these same topics. So I wanted to peer into the future a little bit and hear from you what's happening in the multifamily space around these topics.

Yeah. What I actually, I'd really love to think about what's different about you guys in this regard. So if I sort of tell the story of the last couple of years, a surprise thing that I found through these interviews 2 years ago was that fraud had suddenly become this really big priority for senior leadership in multifamily. And I'd never heard that before. So it's like, okay, what's going on? Well, basically what happened was after COVID, you had the eviction moratoria, you had this kind of backlog of bad debts that took a while to work its way out of the system. But what you also had was because there were now these rules that could be gamed, you found that it created this black market for advice on how to get around eviction rules, how to maximize your free stay in a property. And as the eviction moratoria started to go away, these people kind of started to focus on telling people how to cheat the application processes, the checks that people do to screen you when you're applying for an apartment. And so what you found was you had this combination of lots of bad actors, you know, putting bad advice out on TikTok and Facebook groups and so on. You had lots of really high-quality fake documents that were being made to order. Of course, you have people educating people on where to go find the good documents and, you know, $25, I can fool pretty much anybody with my pay stub, my offer letter, my driver's license, whatever it is. And this sort of emerged as this really big problem that everyone felt the need to solve. The other thing, and I'm curious to know how relevant this is in your world, but the other thing that really built this problem over several years was when applications all went online. When it got to the point where you can completely apply for an apartment bow to stern through a website, that creates this opportunity for people to start trying to get through the screening steps in the application process.

Yeah, because they might be willing to submit fake documents through a portal, but they probably wouldn't want to show up in a leasing office with fake documents and a fake driver's license because maybe someone would call the police or something.

Well, right. And also if you think about what criminals are usually like, they're just looking for the easiest way to do stuff.

Yeah. They're lazy.

And if I can just send a bunch of fake documents until I find somebody that accepts them, that's fine.

Right, exactly.

Yeah.

Yeah. So this problem has been hitting our world as well. I would say not as, it's not been as extreme or as aggressive as multifamily. You know, the big multifamily luxury apartments are probably just more interesting to the type of demographic who's doing this. A lot of people moving into single-family homes are like families, and I make up they're less likely to be fraudulent in this way. I don't know, maybe that's not true.

That brings me to the sort of second point about this and something that kind of came out of this year's interviews, because you can tell that there was a big rush to acquire fraud prevention technology and that there's broadly two types of technology that people use. It's either technologies that are primarily designed to figure out whether or not a document has been tampered with, right? So it goes in the backend, code of a PDF document and it figures out whether or not somebody moved stuff around or whatever. So that, that's one type of solution. And the other type is, is, is income-based. So it's going to use open banking protocols to go access Peter's bank account, pull information, and, and figure out whether or not you can afford to live there. And the thesis basically is if I do the second thing right, I kind of get, it kind of obviates the need to do the documents thing. You're going further, you're getting closer to the actual truth because I'm going straight to the bank account. And the thing is, it seems like the more people have come to understand this problem of fraud, the more it's like fraud is a bit of an unhelpful way of thinking about it. 'Cause it makes you think this problem is mostly about these bad scammers, these bad actors who are trying to get into your properties. And that's only really part of the problem. Like if what fraud prevention is really about is addressing bad debt on the front end. And to do that well, it's more about needing to like adjudicate these borderline decisions of can this tenant afford to live in this property or not? Which has got harder because people's W-2 income may is, is not the complete guide to, you know, their, their income stability anymore.

The gig economy. Yeah.

Right. So, so you need a, a layer of algorithmic sophistication to go piece that picture together and figure out how to treat each income source. Yeah. And baseline income. So it's that kind of thing. So anyway, the more experience people get with this, the more they realize that this is mostly a problem of bad debts where it's about these decisions where some of them may be bad actors, but most of them fully intend to pay their rent, but probably can't. And once you, and here's another thing that might only, I'm curious if it applies, if there's an analogy in your world to this, but the thing that it's really motivating people to do in multifamily right now is they realize they've had this conflict of interest because the people who manage properties and the regionals over those properties are the people who make the final decision on whether or not to accept the recommendation on a fraud screening check. And those people are bonused on occupancy.

Yeah, totally.

So it's making people now want to take this completely out of the leasing office and just have a, yeah, central cleaner.

The topic of tenant screening has fascinated me for a decade now, and I have this blog post I wrote many years ago that says, what works in tenant screening? Nobody knows. Because all of the guidance and best practices around tenant screening, including all of this fraud stuff, there's really no science behind it. Like if you ask a property manager what's the minimum income someone should have relative to the rent in order to afford an apartment, you know, a lot of property managers will say, oh, 3 times the rent, that's our requirement, 3 times the rent. And I always say, really? 3 times the rent? It's not 3.1, it's not 2.79, it's exactly 3. Where is that coming from? Well, the answer is it's made up. No one has ever done a comprehensive study on what are the actual correlations between income relative to rent and outcomes, meaning evictions or skips. We're just kind of guessing. And so all of this is, is kind of made up in a lot of ways. Now, obviously, you can, you can definitively decide whether someone has a fraudulent pay stub or not. But what's interesting, too, about this, and you kind of touched on it, is like Do we really care if it's fraudulent if they pay the rent? Like if the rent's getting paid every month? Yeah. Do we really care if they quote couldn't afford it or if it was someone else's driver's license or whatever? I don't know. It's interesting to think about. Yeah.

No, no. So you are, so this is a view, like what one of the most sophisticated operators in terms of their handling of this problem is a really big portfolio of like workforce housing properties. So it's, It's all of their applications are slightly kind of borderline, like they had really bad problems after COVID, like a really long overhang of bad debt. And they tried a lot of different stuff. And what they found was that the way, the thing that correlated the most strongly with closing balances and ultimately bad debts was just their credit score. They found, and so what they found was if we start having a zero exceptions policy on our credit scores, we sort of know that there's going to be some people who aren't who they say they are in our properties, but they're paying the rent. That's the—

Yeah. Yeah. The one exception, and it's interesting you say that because the one exception to what I said earlier about we don't know what's correlated with evictions and skips is credit scores. We do have that data. TransUnion and others have put out white papers, which I've shared in my newsletter before, showing that credit scores are highly correlated and highly predictive of evictions and skips. And I run into property managers all the time at conferences who say, oh, credit scores, I don't even look at those. You know, those, you know, and they have all these excuses and all these reasons and exceptions about how, you know, some people say, oh, it's all about the income. Other people say, no, it's all about their rental history. If I talk to the rental history, you know, talk to the previous landlord, I've even heard property managers say, oh no, I, I go out to their car and I see how messy their car is. I had one property manager tell me, he told me he drove to their current residence and peered in the window to see how messy the house was. I mean, this is what we're dealing with. Like, we're desperate for some real data and real analysis on how to forecast these problems of evictions and skips and who we should be allowing into our homes and rental homes and apartments.

I mean, the critical thing is interesting because people tend to sort of intellectualize it a bit too much. So the people object to it on the basis that this score is really designed for consumer credit. Like it's whether you pay your car loan or your credit card bill, and that's really different from rent. And it's like, well, that's true, but if there's a strong, a really strong correlation between your credit score and how likely you are to evict, it's really useful for those purposes.

Yeah. And these credit scoring companies like TransUnion and others, have built models specific to rental housing. So when you run a Buildium tenant screening through their built-in service, through their partnership with TransUnion, you get a number back. That number is a specific number on a model that's optimized for rental homes and rentals. It's not actually— actually, if that same tenant on the same day applied for a home loan and got a credit score back, it would be a different number because these, these credit scoring companies sell different products that are tuned differently to different providers. So it's actually a whole interesting different world, a little beyond our scope today. But anyway, today's episode is sponsored by Enterprise Bank and Trust. If you run a property management company, you already know that trust account banking can get complicated fast. Compliance rules, software integrations, vendor payments. It's a slog. That's why many property managers across the country partner with Enterprise Bank and Trust. They built a banking program specifically for our industry. Here's one feature that I think is especially interesting. Instead of paying traditional interest on your trust accounts, which many states actually don't allow, Enterprise offers a competitive earnings credit rate program. In plain English, you earn credits that can be used to offset bank fees and even pay for third-party third-party expenses like property management software, bookkeeping services, consulting, crane, and more. That's a pretty meaningful benefit if you are already paying for those tools. But it's not just about the credits. Enterprise also has a dedicated team that specializes in property management trust accounts. They'll help you open and structure these accounts correctly, stay compliant, and integrate with the software that you're already using. They also offer lending solutions if you need financing, for acquisitions, growth, or other opportunities in your business. Bottom line, Enterprise understands property management. If you wanna learn more or connect with their team, go to enterprisebank.com/property-management or just click the link in the show notes. Thanks again to Enterprise Bank for sponsoring this week's episode. So what another big topic on the report was around consolidation of tech.

Mm-hmm.

And I saw a lot of the respondents are focused on reducing— what the way we say it in our world is reducing the number of logins, basically reducing the number of platforms that are— we're asking our people to use day to day to manage these homes. What are you— what were you seeing and hearing from, from these execs on that topic?

Yeah, so it's another one of these things that's been bubbling along for, for a few years. So an important piece of context here is It's fairly uncontroversial. It's like a sort of 80% view in multifamily that people have just been buying too much tech for the last decade or so. The main reason for that is to do with the funding model for tech companies. So I, you know, companies like Camber Creek, RET, Fifth Wall, like these property-specific investors where their limited partners are all property management companies. So the user of the software is investing through one of these vehicles in a portfolio of technology companies. That model became really sort of prevalent and it's been around for a few years and it's had broadly had two impacts on the industry. One, way more companies get funded, right? So there's lots of good ideas that that, that manage to make it to market and have a shot at hitting it big because these vehicles have been created. You've got the right pool of expertise to evaluate opportunities, you've got plenty of money for them. And so on the sort of credit side of the ledger, you know, it's led to a greater abundance of different technologies. The downside of that is there are too many companies getting funded, right? There's companies that wouldn't have made it if that model didn't exist. And the other bigger problem is that if I am an LP in one of these funds, there is an expectation that I roll out that technology because the whole idea of the fund is like, well, come and let's become, you know, investment partners because when you, when we invest in you, you get access to this network of potential customers. Well, what happens with that is a few interesting things. Like as you, as I'm sure you know, like the VC model is not predicated on everyone's a winner, right? It's, and so if the idea is that I basically have to implement most of the technology in this portfolio, I certainly can't say no to all of the technology in this portfolio. then I'm going to roll out some software that I wouldn't otherwise have adopted. Right. And also, this is less obvious, but you can sort of see it over time. If this particular vehicle is attractive to me, it's because I get access to the investors in this fund. Well, that means that you ultimately end up attracting the people who don't think they could have got to that market otherwise. And so you don't end up getting necessarily the cream of the crop. And so if you combine too many companies, not, you know, mix bag in terms of quality and an expectation that you have to roll most of this stuff out, it's a recipe for accumulating too much tech, much of which you didn't really want in the first place. And so what you find is that I spent a lot of time in leasing offices last year for like some client work that I was doing. And it's really normal to have like 40 logins if you're working in a— Yeah.

Yeah. I thought we had a bad— Wow.

Yeah. So that's the— this problem that I've been referring to as tech bloat is a problem that people are— most people recognize that they have it. People are getting increasingly front foot in terms of doing something about it. It's still, most people are not doing anything about it, but about a third of the people that I spoke to, all right, we've got a tech freeze on now. You can't add anything until you subtract. Yep. You've got stuff like that going on now. The other thing though is that you can tell people's perspective on the market is changing, the technology market is changing a lot just because of the the way that AI is changing the way that functionality works.

Yeah, I mean, in our world, things are quite different. I mean, the, the, the dynamics that you just explained about these LPs and like all these different reasons that people roll out these, these prop tech companies, these point solutions, like none of that is really at play in our world cuz we're just so fragmented and the average property management company owner has no investments in any of these, is not an LP in some prop tech company. So, or, or fund or whatever. So we're mostly just picking what we think makes sense for our businesses. But nevertheless, we still have ended up with the average property management company having 1 or 2 dozen logins in addition to their primary, like call it Appfolio or Buildium or Rentvine. And, but even then we're feeling like this is too much. It's too many different logins, it's too many different bills. That not all these things talk to each other nicely. We've got double entry of data whenever we onboard or offboard a tenant or a property or an owner, which happens all the time in our world. So yeah, I, I'm very interested to see how this plays out. And the AI thing as well is making a lot of property management business owners, they're like, well, shoot, I can play around with Replit for 25 minutes and spin up a CRM or an AI leasing responder or whatever, why am I paying $3 a unit, you know, to XYZ company? So there's some really interesting dynamics at play.

Yeah, there are. And, and so it happened that these interviews took place immediately after Optech, like the biggest technology show took place in Vegas in November of last year. And so there was a nice framing of, okay, you, you transit from this conversation about AI to you know, when you walk around the trade show floor, are you looking differently at these technologies? And, um, for the most part, people are. There's this lens that people seem to be applying to stuff now that is, you know, does this application look like too much of a one-trick pony? You know, AI, because AI is not sort of staying in its lane, it naturally spreads in terms of scope. People are very skeptical, increasingly skeptical of stuff that sort of only does, really only does one thing. The other thing is that, so you've got a mix of companies, uh, you know, out of this sample, you've got a mix of companies, some of which are big enough to have an IT development shop in-house, but most of which probably aren't. The ones that have some, uh, have a development team, they're saying things like, when I walk around OpTech, I look at for anything that's new there. And what I then challenge my teams to do is, can you spin this up in Cloud?

Brutal.

Yeah, right. And so that's become the bar that these companies have to go. The other thing that's interesting though, just on the AI front, a sort of more sophisticated view that I've started to hear is about the technology that I already have. So people are starting to have opinions on, all right, when my vendor of this product that I like introduces AI into it, is it Is it sort of transformational enough, right? Is it deep enough into the workflows of the product that this product is going to be competitive with like native AI products that are going to be springing out of the woodwork like everywhere? So, you know, I think, in fact, I'm doing a panel about this in the fall, but I think the difference between like AI-first and AI-enabled is going to become increasingly—

Agreed.

Important in differentiating software.

Yeah, we're seeing that in our space. There's a, there's a newer crop of vendors who serve our market who have popped up in the last year or two or two and a half that have been built, you know, AI native in, in an AI world. And it's incredible how quickly they're able to iterate and how fast they are to take advantage of advances in the AI models and things like that compared to companies who through no fault of their own have been around for 10 or 20 years. It's almost unfair. There's probably some sort of innovator's dilemma thing happening there.

A really good example of this contrast between AI-first and like AI-enabled comes from, you know, one of the things we reported in the paper was there's this big expansion in scope of what people are asking AI to do, like the number of different kinds of conversations that people are having. So it used to be, most of the time people have been using AI since probably about 2018 or something, it's been sort of leasing conversations that it's been automating. But what we found now is people have been using it for delinquency, which is a much more recurring problem than leasing. And it also means it's talking to residents. And what you find is that when companies realize it works to do delinquency, they want it to do service requests, they want it to do renewal conversations, they want it to do maintenance conversations. They want to handle all these conversations with AI. And what happens is that when you have systems that were designed to just leverage sort of natural language processing, machine learning, they just work in such a fundamentally different way to systems that are kind of workflow-based. The, you know, if you think about CRM is a hot button at the moment, you know, CRM is this workflow-based tool, right? That, that's designed to make people take the right next step in sales. What you're finding now that people are getting used to these chat capabilities that keep learning about residents and also keep learning about what creates good outcomes, right? So that, that, that stuff that we, I talked about it in my talk at the PropertyMeld thing. If I understand from a renewal conversation about an issue with maintenance 9 months ago, that starts to change the way that we can frame decisions. What you're finding now is that it's starting to change the way that people, what people want when they look for a CRM, like an AI-native approach to CRM is far more about leveraging all this new insights. And it's more like, it's not us deciding what the software does. It's more like the software is telling us how to improve our processes because it knows all this stuff from all these conversations it's had. And you can see that this actually looks like it's extremely sort of promising in what it might ultimately deliver in terms of understanding sentiment and also understanding what you can do about it.

Yeah, I mean, the CRM is a great example because as I think about what a CRM is doing, obviously a CRM stores— serves as a database of people information, but it also, in most cases, has the ability to turn on some type of a workflow automation, whether you're talking about tenants or for us, like property owners, like, oh, after so many days of not hearing a response, send this email template. If it's been another 2 days, send this text message, right? Well, that works okay. But what I could see working a lot better is an AI agent in the background that's like, your job is to make a sale. Using the information about this customer, this prospect, both through conversations you've already had as well as what you can find on the internet, form a natural follow-up sequence that changes over time and is most likely to result in a sale. That is so different than a pre-programmed drip sequence. You know what I mean?

Yeah, no, no, exactly. If, if Peter respond— is likelier to respond to a message on Tuesday morning. Like, that's a much better way to plan than it's day 2 and day 6 and day, like, uh, whatever, which is the way we think about it now.

And even the language that's used and the frequency of follow-up and just the contents of the message are all going to be different. So it's like having an SDR just running 24/7 or something. So really interesting. Yeah. I had to ask you about this comment I saw from one of the respondents. They said this was in response to some question about AI. I think they said, I also hope continued progress pushes the large PMSs a few steps closer to irrelevance. And apologies if we have any of those sponsoring the show. I'm not sure who sponsored this episode, but I just had to ask you about that. What does that mean?

So, you know, people, it's a long relationship that you have with your PMS provider and it has its ups and its downs. And I think this is a good example of somebody that's experiencing some of those downs at the time that this interview took place. But it was the conversation about how the scope of AI is changing and how, you know, PMS vendors have enormous leverage over their customers. And in an environment where it's much more common in a multi-family company like these ones to plug a lot of functionality into your PMS. You know, you have a tech stack that we, we've kind of already talked about it a bit already. And that means that you've got this competition between the PMS vendor that has its own set of solutions and the choices that the customer wants to make. And sometimes they, they sort of butt heads. Now, one of the, one of the things, if I think about the context of that comment, As AI becomes this increasingly sort of strategic part of, of the tech stack, it's starting to change the way that people think about things like integration. Like, do I, you know, if my PMS has this habit of not playing nicely on integrations, is there a feasible path where I can start plugging things, I can start using my AI agent to be the thing that interacts with this other piece of technology that I really want as well. I mean, I can think of examples where people are already starting to kind of find ways around bad behavior from PMS vendors. And so yeah, I think that was what was behind that.

Yeah, that makes sense. And I'm less familiar with some of the property management softwares in the multifamily space like Yardi and some of those bigger tools, they're just not, you know, it's just different players in our space. I mean, AppFolio is maybe the one that crosses over most. But in any case, certainly AI is changing that, just like you said. I mean, if I can spin up Claude Cowork to do whatever I need to do in my property accounting software, I don't really care if there's an API, if I can get it to work. And if the, you know, you know, I'm not going to pay extra for an API or I'm not going to, It's just things are gonna change, I think, really quickly because these tools are getting better every day.

Yeah. And I don't normally name-check vendors that much, but I do think AppFolio is a really good example here. Like I was really, when they first released Realm, whenever it was, like 2, 2 and a half years ago, whatever it was, I was really impressed. Like they had made that architecture sort of LLM agnostic, so they were building this capability for a world where people are going to want to use their own agents to sort of interact with the functionality and they kind of enabled that. It struck me as a very, a pretty foresighted, pretty coherent way to approach the development of that technology.

Yeah. Yeah. And, you know, it's just a, it's going to be so unpredictable how this all plays out on the ground. And it's hard for me to see where the value is going to flow to. Right? Like, is this, is this AI world going to strengthen the position of the Yardies and the Outfolios of the world? Or is it going to threaten their dominance? Or is it going to be some other third outcome? Like, it's just very hard to sense the direction that we're going with this.

Well, so, so most of it is, is like functionality, right? So it's creating user interfaces, it's creating, you know, it's creating workflows and so on. But there is just this business in rental housing in general of managing this really messy data. Like the AI doesn't work unless you have the right structure around this data. And I suspect that's going to become more and more and more central to the successful platforms. I mean, the two real, the two sort of biggest moats around any technology, I think, are the ability to handle this data and the sort of vertical expertise. Like if you think about something like maintenance, you know, if you're figuring out how to deploy AI on a problem like that, you still have to really, really understand all this stuff, right? This complicated stuff. That we have to do to deliver it. So those things I think become more and more important. And it is probably true that the layer that you interact through just becomes less and less important, right? As, you know, what we think of as a user becomes much more some blend of people and agents.

Yeah, the source of truth for the data, it seems, is going to be very important. And that which essentially is the, you know, the PMSs or the property accounting softwares, you know, they are that, especially to the extent that they can get their various products to a good enough level to where the property management companies are willing to drop these third-party vendors and point solutions and prop tech companies and just say, you know, the built-in tool is good enough. And if it gets all the data in one place so that our AI agents can work better, we're just going to roll with it. That would seem to point to sort of an increased dominance and value ascribing to those companies. But I don't know, from the perspective of an operator in the space, I don't know that I like that because I already feel like they have too much power over me. Yeah. So, but you know, nothing to be done about it, I guess.

The other thing though is, and again, I don't know if it's analogous in your world, but the The resource that these AIs are creating that's never existed before are these just enormous, enormous troves of words, right? So if you, you know, if I'm having a conversation with you about, you know, some maintenance problem, like the words that you choose to describe that, like can completely tell me how you feel about it, like whether or not, what kind of job we did, like all of this information, which AI is really, really good at mining that. Resource, I think people will become more and more aware of how impactful that stuff is. I mean, multifamily companies use numerous different survey tools and if you think about it, the whole enterprise of, you know, to figure out how Peter feels about his rental, I'm going to pay some company to go and manufacture some information by surveying him, right? That just seems like it can't be model that's around for the long term. Like if you, if you, if you are just chatting to something and you tell it in detail using the words of your own choosing exactly what you think about this situation, that is a vastly more useful, uh, any, any—

We don't need to survey you if we have a, a maintenance request or two, you know, in the record books.

Yeah, yeah, yeah, exactly. Exactly. Yeah.

Well, Dom, for folks who wanna read the rest of this report, we barely scratched the surface. Honestly, this has been a fun conversation. Where can people go to find that and either learn more and connect with you or download this?

Sure. You can just go to 20for20.com, 2-0-F-O-R-2-0.com, and it's right there on the homepage at the moment. You can find me on LinkedIn. I'm pretty active there as well. But yeah, give it a look.

Will do. And do you have any speaking engagements lined up for the year? Where can we catch you live on stage? Because you do fantastic presentations.

Oh, thank you. And I have, I have a couple of AI presentations coming up. I've got one going to be at AIM in Huntington Beach, talking about AI sentiment and agentic AI and customer experience. I've got a panel about the concept of AI first and what it has to do with rental housing performance. I'm doing that at Blueprint in September. And I think actually Ray from PropertyMeld and I are co-presenting something at NAA in the summer. So, so those are the Those are the immediate next things. Yeah, I'll probably be doing some AI stuff on my podcast in the next couple of months as well. So, you know, there'll be a lot.

Awesome. Well, we'll make sure we link some of that in the show notes and thanks again, Dom. I hope you have enjoyed this episode. If you like the show and want to get connected to the community, you can follow me on Twitter @pslowman and subscribe to my email newsletter on my website, peterloman.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.