Group Rate Internet for SFR with Andrew Smallwood at Second Nature

In the kind of like rigidity of the systems today where, okay, I want to make one change of, I want a longer lease term across these lease. It's like you have to create a whole, it becomes a combinatorial problem of complexity for the property manager. Like when we did this with them, it's just like, you know, like reduce the number of lease packages by 10x. There's still some variability and complexity, but then there's automation and rules built into how that's done.

Yeah.

And presented. And so, yeah, that's, that's a huge thing is like we, we wanted to not just do that, but we said we want to add this whole layer of resident choice, which means, gosh, we're taking that number of lease limits and saying even more complexity. And so we had to figure out upfront, how can we create an enterprise-grade experience where this works across this? Because even for our SMB customers, that's going to reduce friction for them in important ways. It's like an enterprise-grade solution on this side, but a consumer-grade experience for the resident. Of what they're seeing and feeling going through that. It's like what— when I think about Amazon and Shopify, what they did for e-commerce, like how can we do that for lease commerce, right? Mm-hmm. At that key point and make this a really delightful experience for residents that are coming through. I think those two things pushing for both and, and not either or has led us to something we're really proud of.

Friends, welcome back to Peter Lohmann's podcast. We're in season 4.5. I'm just calling it here. We've released too many episodes for this to be anything other than a little half season. And I'm excited today to have Andrew Smallwood on the show with me again. Repeat guest. How you doing, Andrew?

Peter, it's always great to connect. We've had you on the, the Triple Win podcast multiple times, so it's great to, to turn the tables around and have a conversation here.

Yeah, I always love chatting with you, Andrew. It's like we get 10 or 15 minutes at a conference or just randomly on a Zoom, and I always come away energized. I have new ideas. I sort of like— you're like a centering force for me. You sort of remind me about what's important and what we're after. So I love that. And now I get to spend a whole hour, hour with you, which is great. Let's jump right into the big news. Second Nature has a product release and they were generous enough to let me interview you for this. And I'm, I'm excited 'cause I basically know nothing other than one word. What is Second Nature introducing today to the industry?

Yes. Well, all right, we'll start with adding a couple words onto that.

Okay.

That one word, my guess is the word you're thinking of is internet.

Yes.

But you know, really what we're calling this to kind of explain what's special about it is we're calling it group rate internet.

Group rate internet. Okay, cool.

That's right. And so, you know, the way I would think about the problem or the opportunity here, Peter, as it relates to property managers, is internet is a product that 98% of residents are already buying today. And I originally, I'm like, isn't it 100%? And then we find out there's a segment of residents who are like using their phone as a hotspot or whatever it might be. So there's like 1 or 2% out there.

I just assumed they were carrying around an AOL free trial CD. From apartment to apartment.

So now you're taking us way back. Exactly. So this is a product effectively everyone's buying today. 98% are already buying today. And yet, you know, property managers aren't really able to participate in the economics of— nice, nice cup there. If you're listening to this, Peter's raising a purple cup on his end.

Total coincidence, but I love it.

So So 98% are buying this already, but property managers are kind of on the outside of— they're not really, really involved with the process and they're not really involved in the economics. And so second nature, like this is not something we could have done even 3 to 5 years ago ourselves for two reasons. One is we had to develop to a certain point of scale to really bring all the right parties to the table to get attractive economics where this was going to work and, and drive a 10, 20x outcome for the property manager. You know, the second thing is like the competencies that Second Nature has built through running and managing 7 different, you know, resident-facing services and programs today have taught us a lot about all of the intricacies and nuance to make this work. And so like, that's really kind of what we've put together where, um, what a resident gets is, hey, I'm able to get gig-speed internet at a price lower than retail in a seamless, like, very easy setup experience with no extra fees, simple, transparent pricing. That's what the resident gets.

And let me clarify what this is not, because I can already hear people tuning out, and let me stop them from hitting pause on the podcast. This is not just— because I got a little— someone, I saw like a sentence explaining this somewhere. In the like pre-show emails. This is not just like, oh, the— you help the resident decide which provider and like a concierge and like those have been around for forever. And this is completely different than that. This isn't just like a concierge and you get a little commission on whichever ISP they choose that's locally available. This is something completely different, which is why we're even talking about it, because if it was the other thing, that would not be interesting enough to discuss and have a big launch. So th— this is like a, basically you said it in the beginning, group buy. So you guys went out and negotiated on behalf of many tens of thousands, if not more units, special rates that are like, like you just said, way below retail or some somewhat below retail that are going to be available for residents. That's right.

Yeah. So it's not the concierge model, which, which did have some element of rev share, but to, to make a comparison, what we typically see is the conversion rates, but depending if it's digital versus like a call function, can range anywhere from 8% to 40% of residents buying internet through that channel of like the concierge model.

Mm-hmm.

And the commissions to property managers call it roughly in the, you know, $50 range. And so if you're running at $50 on a 40% conversion rate, you're talking about $20 on like an average per resident unit., but that's for the lifetime. Meaning if a resident stays with you 2 years, 3 years, 3.5 years, it's kind of like one and done, right? What this is, is really the second nature model where there's that recurring revenue stream for the property manager. And what I'll say is like pricing and things like that can vary by market, portfolio mix, et cetera. We can get into complexities if we care to, but what we are confident in saying consistently as a national program, property managers are now going to be earning $10 to $15 per month. Per unit enrolled in this, and it's a high adoption program where this is across offered across your units.

$10 per enrolled unit. What's your guess on like the percentage?

When you say percentage, what do you mean?

Like the pickup rate, basically what percentage of, of residents will—

I see.

Yes.

So we've been taking the time to kind of line up the major ISPs because Peter, for your portfolio as an example in Columbus, it's not one ISP that services, you know, 600, 700, 800 addresses. Um, it, it's frankly probably 4, 5, 6 to get 90% plus coverage. And so that's what we've kind of lined up is multiple major ISPs across that. There is gonna be a tail, you know, we expect usually around maybe 15, 20% that are not covered yet. And then we're gonna continue to kind of work down that tail over time.

Okay, got it. So are you thinking that when a new resident moves in, do you think it's still going to be that— would you say it was like 6 to 40% of enrolled units, or what was that range you gave?

Yeah, no, I'd say in the concierge model, we see depending on how it's offered, 8 to 40%.

Okay.

Conversion rate.

Mm-hmm.

Depending on if it's digital, phone, or kind of a mix. In this case, what we're doing is saying, hey, this is going to be advertised, differentiate the properties like the property comes with high-speed internet, it differentiates the property. You're going to be getting it at a lower rate than you could get on your own in a really easy process. And then, you know, it's lease enrolled like Second Nature's other products, you know, is how that's going to be offered to the residents. So we expect high adoption and that's what we're seeing right now in our beta clients.

Okay. Interesting. So for us, let's call, you say high adoption. Let me just, I'll make this number up, not you. Let's call it 50%. So we have about 700 doors. I think we have about, I would say 25% of those will like move in. Well, wait, cause you said it's every month. So 700 doors, let's call 600 of those occupied at any given time, just to be conservative. Let's say 50% of those are enrolled, 300 doors times $10 a month times 12 months, that's $36K a year potential for our property management. That's kind of on the low end, being conservative, kind of based on what I picked up from you.

Yeah. And if we were having a sales call, I'd probably tell you you should be forecasting more like 80 to 80%. Wow. Probably 50% based on what we're seeing so far. We actually had we had a resident from one of our beta customers last week, Peter, who called us and was like, hey, I just, I saw this somewhere. It was like not in the leasing process, but I saw, I got a welcome email or something where it mentioned this. How do I get this? How do I buy this? So like we're seeing, we're seeing like, we're still adding the employees of the management company, you know, this is, I'd say like we've never really seen demand like this. Where we've got about a quarter of a million units that have already, already contracted for this. Wow. Even before announcing it. And yeah, the demand is incredible. The resident value prop's really strong. And so, you know, I would say conservatively you could see a much higher adoption percentage.

So maybe like 50K or so, you know, that's, that's no joke. You know, even for us, that's a, that's a significant fraction of our, our annual profit, you know, potentially. So Really cool stuff. Um, so you got— so Second Nature, in order to facilitate this, had to go to Verizon and AT&T and Comcast or Spectrum and like be like, listen, we're gonna, we're gonna bring you hundreds of thousands of units. We want to basically get a group price. Uh, we're going to handle enrolling and disenrolling and maybe some— I don't know, you probably had to make some sort of concession around handling billing and maybe like level 1 tech support or something in order to get crazy good rates. Um, really interesting. That must have been a, uh, long undertaking.

Multiple years for sure. And it's a first of its kind, you know, type of agreement structure. It, it's funny cuz as we were talking to the team about like how we talk about this, a lot of times we're innovating at the product level. Of like what the product is. And that's not really actually what this is. It's really more innovation around the distribution and how, how this is offered that's creating value for the ISPs and, and property managers and residents and where, where we're sitting in that. It kind of reminds me of like internally, Peter, we got our whole team at Second Nature together in January in New Orleans and we were talking about this. Thad from Stage, our CEO, was saying like if you remember way back when, when Napster and like LimeWire and Kazaa came in and were kind of disrupting the music space, you had these music labels that were like, oh gosh, we have this kind of disruption in the space. And then Steve Jobs kind of like at the right moment in time saw this, you know, what was happening in the market and brought iTunes and said, hey, here's actually a way where we can help, right? Do this in a compliant and legal way.

Mm-hmm.

Uh, you know, this disruptor isn't really gonna take hold. And, and that's kind of what's happened in the internet space because some people may know there's what's called 5G or fixed wireless. Um, which as opposed to fiber or your broadband internet, um, you get a lower speed, 100, 200 down, and it, it's good for the first people that do it. And so oftentimes there's word of mouth to start, but then the bandwidth and the network issues don't really make it. Scalable, uh, to actually reach a large number of people. Your, your service starts to degrade as more people come on. So, okay, that's not scalable, but it's kind of disruptive and bringing competition to the space. And then, hey, we're coming in and saying, okay, here's a way we can actually distribute this and give, you know, the ISPs great subscriber growth, right? Uh, for them, that's important. And in turn, they're going to give us incredible pricing and we're going to be that support. And software layer in between that are going to make this really easy and unified for the property manager as opposed to how do I manage 4 or 5 different vendors and ISPs to kind of put this offering together?

Yeah. And multifamily has gotten involved with internet going back decades. I mean, forever it was the case that you move into a multifamily building, you had one option because the multifamily building owner would would only allow one ISP to bring their wire and distribute it to all the units and everything. And so, and there was even like laws and like there was litigation around this because the developers would, I'm assuming they would sort of let the ISPs bid on who got to come in and then the rates were not great. You know, there wasn't any kind of bulk discount being passed on to the residents. So, but this is different, right? Because that doesn't really, there's no sort of parallel in the single family, the SFR space because every house basically can get multiple ISPs and you're basically using the distribution you have through the property managers to negotiate on their behalf and capture tens, hundreds, millions of units at once when you're speaking with the ISPs. And not, not in the sense of like you're going to collect a fee upfront to let them build wires to all these houses because they're already there, but you're actually negotiating a better rate and then sharing that with the residents and the property managers.

It sounds like. Yeah, that's right. I mean, these— the companies are massive. I'm sure everyone sees like Super Bowl commercials and everything else, right, from these brands, the brands you named and mentioned, you know them because these are big national brands that do a lot of advertising and hey, as opposed to all of that marketing and sales costs and expense, everything else, like Second Nature can help efficiently distribute this in a way that creates great value for a resident and great value for a property manager. And just like kind of reorganizing how that's distributed to, to recreate a more exciting pie for everybody. That's exactly what we're doing.

How does it work with like, let's say we sign up for this And we're already using your insurance products. I'm sure we will. How will it work when a resident goes to move in? I hear that— I heard you say it's going to be at the lease, you know, be part of the lease. Will the resident get to choose their ISP or will RL Property Management choose one ISP that all of our residents— like, how does that actually work? Because if, if we're all making choices anyway, how did you capture a better rate with the ISPs?

Yeah, great question. And so you're right that we will do this programmatically just like Second Nature does for other programs, meaning we will have plug and play. Here's the marketing collateral, here's disclosures in the listing and screening process, here's your lease addenda, right? Et cetera. So that residents are properly educated and informed, right? To, to what they're getting, how it works. And the answer is it's not going to be a, hey, you're, you're choosing different ISPs because, you know, again, it's gonna actually vary by address, which ISPs even service that address. And in some cases there are actually addresses where there is only one ISP serving that address. In some cases there are, are options, but what's being disclosed to the resident, um, to and through the process is like, hey, you're gonna get, uh, gig speed, right? Internet, uh, you know, high, high quality, high speed internet, and it's a flat, simple price that's lower than you can find anywhere else, right? You're also going to be getting dedicated premium 24/7 support. And that's something Second Nature is actually bringing as a support layer here. Wow. To ensure, hey, no matter what somebody's working with, right? Like there's a single unified spot that as a property manager, you don't want to be answering calls, Peter, with everything else you guys are handling about internet connect. Like, so all of that can just 24/7 being thrown over the fence to Second Nature. And then we're offering white glove onboarding to the resident of, hey, we're going to ensure your equipment gets set up or that a professional is there to install at no additional cost. There's no equipment fees, no install fees, etc. That's a benefit to the resident as well. So that's kind of like what the resident is seeing through the staging of the process. And then they're getting supported to get, to get what they need to get connected and move in.

Okay. So when they sign a lease to move in, they're not choosing an ISP, they're just They're just checking a box. Yes, I want gig speed internet with no equipment fees and a reasonable price, or no, I do not. And at the property manager level, I'm also not making any type of decision other than signing up with, with Second Nature. You guys will then take my address list. You will map it against your list of ISPs. Some of them, there'll only be one choice. Some of them, there'll be multiple choices. I'm assuming the highest bidder or whatever gets priority on those addresses and so that's all kind of handled on your backend.

Yeah, I would say we're handling like the serviceability and the coverage. Mm-hmm. And exactly what, what ISP is assigned to that address based on what's going to create the best experience for the resident and the PM. That's how we're, that's how we're doing it.

Okay. Got it. And so what I really like about this, uh, cause I have this, I have this little part of my personality that just hates waste. I've learned, I've learned this about myself. I'm very oriented around efficiency and like reduction of unnecessary steps. And one thing that's always struck me as really stupid about SFRs is every single individual person is— has like all of this redundant stuff. Like everyone has a washer, everyone has a dryer, and yet somehow we're moving that in and out. It's like, well, his washer wasn't as good as the one I'm bringing. And like, like, at least we've agreed that like the oven can stay, right? And the fridge, like normally is staying, but But the internet equipment is another thing that gets moved in and out every time someone moves in and out. It's so inefficient, like a service tech has to come and set it up. So I'm imagining that like it's just going to get installed and it's just going to stay there.

Here's like what I would say, like a North Star vision that we have. And this is something I love about working with Thad is he's got just great, like ambitious experience for how convenient things could be. Yeah. Compared to how they are today. And like, I, I would say like as a north star for us, I think about when you go to an Airbnb, right? Getting connected to wifi is like incredibly simple. Exactly. And very easy. And that's the kind of experience we want it to be in long-term residential when a resident moves in over time as we get the equipment, et cetera, and stuff installed for that next resident, the next one coming through. It's actually going to become simpler and simpler and even easier.

So good.

You can, you can start to market like pre-installed internet. Yeah. Right. As an, and oh, I don't have to deal with a headache with everything else with moving. Like this is going to get better and better over time.

Yeah. It's just like permanently mounted up on the wall and like if there needs to be a hotspot at the back of the house, it's already there. It's already connected to the main thing. Like they pull up with a moving truck, they're connected before they even get out of the moving truck. Like that's, That's the dream.

You're reminding me of like how in other countries, like in the UK, it's like furnished rentals are much more common. Yeah. And the culture there of like, gosh, all this stuff, like getting your stuff out. Totally. And back in every couple of years, like, man, that waste, that inefficiency, et cetera. So inefficient. This is one thing, you know, on the margin, probably compared to that. But yeah, I really think it would be cool to see us move that direction where it gets easier and easier for people to make those transitions.

Yeah, that's really cool. How about speeds? I heard you say gig. So is it like this just standardized across the board gig down?

So we, we are able to offer multiple speeds to residents. There's, there's 2% of the market today. There's a 2% again, but it's a different 2% of, um, people who are using multi-gig speed. And I would think of like your gamers or like people who are like really into this.

And so, In those cases, no comment.

The— but I think there's people who are going to like require that and want that. And it was important to us, hey, if somebody really wants that, they have an opportunity to get it. And this is an easy process, doesn't create friction. And so residents are able to do that and get additional speed, you know, as a part of the process. The reality is internet is kind of like a it's like a fixed cost business from a standpoint of once you've done all the work and put in all the CapEx to get everything—

get in the wire to the house.

Yeah, yeah. Your, your, your cost to deliver 300 versus gig, right? It's like there's not really a cost. And so that's part of the reason why we're saying, okay, I mean, we can really surprise and delight a lot of people where they're getting gig speed at a 500 price, right? And that's really the offering that we're seeing residents are really responsive to.

Yeah. And just the stream, not only the streamlining of like the equipment already being there or like you're, and it sounds like you guys are working toward that, but just not having to worry about calling and like the contracts and like all of that stuff. Yeah.

Um, that's right. Early, early termination fees.

Yeah, that's right.

Yeah.

Simplifies all of that. Um, I'm a little bit of a stickler for upload speed with ISP connection. So I did want to ask you about that.

There's gonna be two different types of connection. Uh, and so I would think of it as like fiber, and you really can't beat fiber 'cause it's like, it's the speed of light across glass.

Mm-hmm.

Yeah.

And so it's too slow for me, Andrew. It's, it's not good enough. It's still too slow.

It, with fiber, you have this opportunity to get what's called symmetrical download and upload speed. Yeah.

Right.

Uh, and so think like gig down, gig up. Yep. Um, In the case of like copper wiring, right, or your typical like cable and broadband, which a lot of that infrastructure is still the only thing available today, uh, at millions of homes, you're going to get gig download speed, but it's going to be a lower upload speed, right, in those cases. And so I would say it's going to be a little dependent on the property, um, you know, what they're getting on upload speed, but it's, it's going to be, you know, the premium connection available for that address.

Yeah. Don't, don't let them jerk you around on these upload speeds, Andrew. When you talk to these big ISPs, I tell you, they really try and skimp on that. Like at my home, it's not so bad here at the office, but my home internet, which is with Spectrum, they tried to sell me like gig down. It was like 5 up. It was like just absolutely outrageous. I was like, no way.

So that's not cutting it.

Uh, all right, cool. And then, you know, everyone knows the worst part about dealing with internet, and I have some other things I want to ask you about besides this topic, by the way. The worst part of dealing with internet is the annual games with the price increases. So how's that going to work if someone renews their lease or if they sign a multi-year lease? Like, what's it—

what does that look like? I'm really glad you asked this question because, because here's like an opinion that Second Nature has, which is we always want to put our customers in control. Like, we have given them the authority to make pricing decisions with their customers. And so, you know, we are always going to give guidance and recommendations based on here's what we're seeing in the market for the kind of outcomes you want. Here's like, here's probably what we would recommend, but it's ultimately going to be the authority of the property manager, right? That what they, how they want to do that and what their policy is around that. And we'll support it. The, you're absolutely right that this is a pain point in the industry of like, okay, I started at this rate and then my pricing went up $40, right? 12 months later. Oh my gosh. Right. It's a massive increase. And of course for property managers, that's hitting a resident right at the time you're asking for a rent increase. Yeah. Right. Not, not great timing. And so, you know, one of the things that we're doing is like there are some price increases and things like that that are pretty modest, like low single digit, you know, that the ISPs are flowing through as a part of this. But it's at that level and not, you know, at this like crazy,, you know, $20, $30 a month. And property managers will ultimately have the choice of whether they want to say, hey, I want to lock in a resident right at this price, or I want to put in a nominal increase of a couple of bucks, right? So to speak, to pass that through. And for a resident, it's going to be lower than what they would be getting on their own if that increase is passed through or if the property manager's deciding to lock it. So I think we'll see both happen through and it's up to the PM.

So the prices that you negotiate, Is it— does it vary by ISP? So like, let's say I enrolled in like half our residents are signed up. I'm going to get a bill from Second Nature. Is it going to be like broken out like this specific unit was this dollars per month, this specific unit was this dollars per month? Is that what it would look like?

Yeah. So one of the things is we're billing in arrears because what we want for property managers is they're always collecting first, right? And there's not a cash conversion issue., you know, for, for the property manager. Um, and so, hey, residents are paying, they're getting their service, uh, they're getting a monthly invoice from Second Nature. And while that'll have like, here's the total amount, there'll also be the address-level detail of here are the properties that were actively serviced in the previous month.

Got it. And the, the ISP price increases, the, the small ones that you mentioned, is that like every year the ISP charge will go up a couple bucks, or is it like the first year for all? I don't know if I'm asking this the right way, but like, is the price increase tied to the length of the lease, or is it just gonna be like a blanket ISP price increase once per year?

Yeah, great, great question. So, so the, the way I would think about this is, you know, Second Nature is essentially just gonna be passing that through. What's happening on that end? And so in the event there's not a price increase, that actually won't be flowing through and we'll give proper notice. 'Cause, 'cause what we, one thing we know about being a property manager is like, hey, increasing all price, you know, to all units on like one day for a lease enroll program, that doesn't work very well.

Right?

Like this has gotta be ingested over the leasing cycle. And so that's why when, when a price increase is coming into place, we're actually kind of like getting ahead of that. And if, you know, if a property manager decides what they want to do about that, we'll kind of just support it rolling through the leasing process.

Okay.

Right.

That's how that would work. Yeah. So that's awesome. I'm really excited about this. This is a novel approach to dealing with internet in, you know, an SFR, possibly in an even in a multifamily context. I assume there's some of the big REITs and stuff have done some, some kind of negotiating, but certainly for scattered site third party, this is, this is new. Before we move on, like anything else you want to share or touch on?

I mean, there's a lot I could say about this. This has a lot of our attention at Second Nature because we're, we're very excited about it. 'Cause I just think when, when we think about a resident benefits package and property managers are often adding $15 a month, you know, in incremental ancillary income, and we've worked so hard over so many years to like stack up 7 different offerings to kind of create that resident value and property management value that's there. It, it was almost like a perfect storm with this one of just like, wow, this is something people are already paying for. And you know, there's the, there's a lot of advertising, marketing, sales dollars going in here where in one product we can essentially double that ancillary income for the property manager while getting, making it more affordable, right? To live in the home and people getting great and premium service. So, I wouldn't say much else, Peter, other than if people are interested, they can go to secondnature.com and, you know, get more information about it if they're interested.

Okay, cool. And is this going to be rolled— do you envision property managers rolling this into their RBP or this be a separate product that they offer?

I do think property managers will probably advertise this alongside their RBP. I think we'll see people try different marketing strategies as far as that's concerned. This may be a little tactical, but for the customers that are starting now, what we're recommending and what we're seeing them do is it is a separate GL than their RVP. And part of the reason for that is, again, if 80% of your properties are covered, it's going to be like on 80, whereas many people with their RVP, it's just kind of like 100%. And so rather than changing the amounts, they're just saying it's here's the RVP, here's the high-speed internet offering, right, to the resident as separate GLs.

Got it. And do you know, this is super tactical, but like, of course, with a master renter's insurance policies, we can't mandate that. We have to break that out of the RBP if someone doesn't, you know, and discount by the same, you know, face value. Or can you mandate internet? Like, could I say that, hey, hey, this is just required if you move into a property we manage, you have to take this option? Or, or like, what's the, do you know if there's rules around that? Yes.

I, I'll say broadly the answer is yes. And second nature, you know, Kim Godsey, who's been on this podcast. We have, we really look at everything. Like anytime we bring a product to market, we're looking at every individual state.

Yeah.

And what the rule, and some of the rules are not like product specific, like insurance, which is regulated as a specific product. And some of it's just generally how you offer anything outside of rent to a resident. So I just want to caveat that there's some states where this will be offered differently, and that's expertise Second Nature will bring to the property managers who contact us. In many states, most states, it's totally fine to make it a lease required thing as long as you're properly disclosing that throughout the process, which will support people in doing that if that's what they want to do. Okay, great.

All right. I want to zoom out a little bit and touch on this move-in lease signing experience. So you mentioned that this is going to be a product that's offered at lease time, like at lease signing, like you can basically sign up, you know, hey, do I want to get gig-speed internet with no equipment costs as part of my, basically as part of my annual, you know, not as part of the rent, but as part of the annual charge. That my property manager is handling. I know that Second Nature has really been focused on this lease signing, lease offering part of the cycle, the, the leasing and resident cycle. You showed me a demo years ago now of a really slick way of handling this. I was just honestly anxious to ask you for an update there. I think last I heard, Some of your customers were beta testing this. Um, I was impressed at that time when it was literally 2 years ago, I think, at Broker Owner, possibly 3 years ago that I saw it. And, uh, I'm like, I want it. It reminded me a lot of— if anyone here has ever used the, the e-signing tool called PandaDoc, if you've ever used that product, you know that it's like so slick and easy, and it has these little breakout explainers, and like, you've never had a better experience signing a PDF than you have with PandaDoc. What you showed me that day reminded me a lot of that, where it was like taking it from this tiny text, just 20-page, double-sided, single-spaced, scanned Word doc that you're just like initialing things you can't even read and then signing, to more like what it would be like when you signed up, like when you signed your company up for like Slack, where it's like, what's your company name? And it's like a single form field on a page and then you hit next and it's like, has a nice animation and it's just kind of fun to fill it out. So that's sort of my impression of what it was a couple of years ago. How would you, you know, how would you characterize it today? And I'm assuming that the internet is playing into this., you know, is gonna be a part of that experience. Yeah.

So I think you are right, Peter, that we showed you and a handful of other folks 2 and a half years ago. I think it was NARPM National. Yeah, it probably was. Um, where we pulled aside and, and I, I just wanna say first, thank you because your feedback there, other people's feedback there and, and all since has really helped to make this what it is today. And it's come a long way since. And it's one we've been more quiet— usually we're very loud about things at Second Nature, and we're very quick to get things to market. In this case, I'm really proud of the company's kind of like discipline on this because getting like the tolerance for error around leasing, it are— in our view, it's zero. Like there's just— you can't get leases wrong, right?

And so we've— and I gotta tell you, we've never made a mistake here on lease at RL Property Management. We've never told someone that the house had air conditioning when it didn't. We've never told them there was a garage when there wasn't. You know, we've never told them that they were, they weren't responsible for lawn care when they were.

Yeah. Oh, I'm smiling because like the, these are the pain points that we hear with people, but again, property managers go to great pains to try to avoid these kind of clerical errors and mistakes because, because of the implications and consequence of that. And so certainly it's gotta be, you know, by definition it's gotta be better than it is today, right? We can't be making this a trade-off. Mm-hmm. But that part, you know, while that's been important, important to get right, the part we are really excited about is what you were highlighting, which is, okay, today the experience for a resident is like, I, I think about this, Peter, of my own journey, like as a renter, I remember like through college and post-college, like living in a big multifamily space or like a Class A space. And a lot of the responsibilities were kind of handled by the owner-operator, right, of that building.

Yeah.

And it was the easiest renting was ever going to get. Right. And then I think about living in a single-family home, a rental home in Louisville, Kentucky, and suddenly I had new responsibilities. There was like a yard to take care of. There were like other things, changing my air filter, like other things that I had to do as a part of that. And then, of course, at the far end of the spectrum, anybody listening to this who owns a home, which is many people listening to this, okay, you've got like a new part-time job called homeownership, right? And everything that comes with. But here's what's hard for scattered site and people in that middle section is it's not totally clear what my responsibilities are. I'm not— when am I educated to the new expectations I should have about this? And so they're just going to bring that Class A multifamily or whatever their experience was before to thinking about it. And so one of the things we wanted to do was say, how do we bring transparency to 40-page text-rich PDFs that people don't read? Right? Because property managers do have this information. It's just, it's buried in a lease in a bunch of legal jargon and everything else. So it's hard for people to understand. Or I'll ask you, Peter, like, do you have like a, people call these like tenant handbooks or like there's welcome emails and what do you guys kind of do to try to educate residents to that?

Yeah, we have like a one-pager maintenance cheat sheet. It's like what to do if your sink's clogged and like it covers a lot of those, maybe some of the edge cases or things that are going to be different from if you're coming out of a luxury rental apartment situation. But of course, you know, I'm not sure anyone even really reads it. And you're right, like, that transition from a rental apartment to a rental home, it definitely hits people hard. They're not expecting— a lot of them aren't expecting it. They don't understand the difference. And frankly, there's a lot of edge cases that I'm not even really totally clear on what my position is. Like, for example, if you move into a rental home with a bunch of fancy landscaping I mean, is it really reasonable to expect the renter to keep that up the way it was when they moved in for 3 years? Now, obviously they're going to cut the grass, but like, do they have to like weed all the beds and trim all the bushes and replace all the flowers that are only for that year? I can never forget if it's annual or perennial and get that mixed up. Are they going to like prune the fruit trees? Are they going to, you know, it's like, I don't know about that. And then same thing, there's, there's a couple of edge cases that for some reason always stand out to me. It's like gutter cleaning. Is another one. Um, the siding, like on some houses with north-facing, uh, if, if like the north-facing wall, depending on how big the overhang is and everything, it never gets sun and it gets mildewy in certain parts of the country. Or are they responsible for like pressure washing off that mildew once a year? Because it looks horrible after a few years, it's all green. And another one that really comes up a lot is like, this is weird, but like it's like the dryer vent cleaning. Like if you're there for 3 years and the dryer vent is filthy, should the resident pay for that? Like what if there's a fire? Yeah, I don't know. Like there's, there's a lot of stuff like that where you could even ask a bunch of property managers that give you different answers because this idea of like a rental home and who's responsible for what there, we haven't quite as a society landed on the defaults. And so you're right, it gets buried in legal jargon and like the tenant certainly doesn't know. Half the property managers probably don't even know because they haven't read the lease.

So it is a big issue. Yeah, like you really nailed it of like the problems that we see and we sink our teeth— like, I just like, this is the stuff I lay awake at night thinking about. Yeah, because it bothers me of just there's all of this finger pointing. Between property manager, resident, property owner, and all of this friction of who is responsible for that and what is the best way to solve this. And I think independent of the services that we offer, like how do we bring transparency and clarity to that and meet people where they are in an unskippable, engaging, dynamic, like content delivery system? And that's like really what drove us. To do this because upfront, really helping people understand clearly, here are my responsibilities, what I'm taking care of. Here's the property manager's responsibilities, what they're taking care of. And as a property manager, being able to meet them right at that key moment and say, okay, now that you know your responsibility, here's also the convenient and great services or way that we've offered, right? You to be able to take care of this as opposed to fully taking care of it on your own or otherwise. And that, that gets, they can one-click to customize and bring that optionality as they go through, make choices. We're bringing agency to the resident of not feeling like, okay, one size fits all, everyone just gets the same thing. Now as a resident, I can personalize, you know, my living experience and how I'm taking care of these responsibilities. And that's one-click easy. And then it ultimately builds the lease document and I can, can sign it and execute it. You know, that has been a lot of hard work to put that together and create what we often call, it's like TurboTax for the lease as opposed to numbers and letters and confusing and everything else. People don't want to become an expert in the tax code personally and like, you know, really do that. Same thing for leases. It's like people don't want to be experts in that. They just want to understand what am I going to be responsible for? This is a big commitment. That I'm making, it's a third of my income, right?

Going in here. Yeah.

You know, for the year, am I clear on that and clear with the right expectations upfront about what I'm going to do and how I'm going to take care of it?

Yeah. And if you've ever tried to programmatically create a lease document at your management company, you instantly resonate with the challenges that Second Nature probably faced in building this product because I mean, everything from like who's responsible to the utilities, to who, you know, is it landlord or tenant responsible for lawn care depending if it's single family, multifamily, all the way up to like jurisdictional requirements. Like we literally Friday had to make a change to our standard lease for a specific city because they now, what was this change they just required? Oh, they dictate to us in what order payments should be applied to the lease. So if a tenant, let's say a tenant owes $600 in rent and $100 in late fees, RBP, other things, well, our standard lease says this is the order that those payments shall be applied in. This city came along and said, by the way, this is the order that needs to be applied in for all units located within our city. So I had to do a little carve out in our logic that builds our lease that reorders that part of the lease. And like, that's just one example, let alone all the other like extra optional features that you're talking about letting residents sign up for. Like if they want to have lawn care or they want to, you know, other things, it just— you try and build this with some kind of like PDF form, you know, merge tag or, you know, mail merge type of thing. And it quickly spirals way out of control and just looks all janky. You try to get the formatting right.

It doesn't work. And Yeah. Yeah. You're, you're exactly right. And one of the things that we did that I think, again, it may have slowed things down, but I think it pushed us to deliver a higher bar initially. We have an enterprise client with tens of thousands of homes all across the US and Peter, they have 267 different lease packages that they send out in order to just be compliant.

Then their lawyer finds a typo. Well, you gotta go update all of these, you know, templates.

Yeah. In the kind of like rigidity of the systems today where, okay, I want to make one change of, I want a longer lease term across these lease. It's like you have to create a whole, it becomes a combinatorial problem of complexity for the property manager. Like when we did this with them, it's just like, You know, like reduce the number of lease packages by 10x. There's still some variability and complexity, but then there's automation and rules built into how that's done and presented. And so, yeah, that's, that's a huge thing is like we, we wanted to not just do that, but we said we want to add this whole layer of resident choice, which means, gosh, we're taking that number of lease units and saying even more complexity. And so we had to figure out upfront, how can we create an enterprise-grade experience where this works across this? Because even for our SMB customers, that's going to reduce friction for them in important ways. It's like an enterprise-grade solution on this side, but a consumer-grade experience for the resident of what they're seeing and feeling going through that. It's like what, when I think about Amazon and Shopify, what they did for e-commerce, like how can we do that for lease commerce? Right? Mm-hmm. At that key point and make this a really delightful experience for residents that are coming through. And I think those two things pushing for both and, and not either or has led us to something we're really proud of.

That's great. That's really cool. And so it sounds like you've taken time to really do this right. And, you know, as a property manager, what should I expect in terms of, you know, product release?

Yes, we are incrementally adding more customers on this now. And I'm, I'm going to be fair to our product and engineering team and not commit a specific date for all customers live on this call. However, Uh, we are continually starting to add incremental customers to this and it's really going to be on a, by the property accounting software that you use, you know, consider it.

What do you call it?

What do you call this product? We're calling it Resident Onboarding and it really starts, it starts from post-application approval through to move-in. Got it.

And what do you, what are you calling the internet product?

You're just calling it internet?

Group Rate Internet. That's right. Group Rate Internet.

Cool.

Group internet. Getting all this down for the show notes, you know, got to get the show notes right. Come on, Andrew. That's right. Important. Okay, great. You know, one of the things I really observe about Second Nature and, you know, you just articulated this really well throughout this conversation is this focus on done-for-you solutions from the property manager's perspective. There's a lot of vendors in our space that solve great— solve important problems in new ways that save us money and time. Undeniable. But they really provide like a DIY platform that your team can use. So they may provide some portal that your team can log into and move residents in and out of something. They may provide a building block solution for a process policies. They may provide an accounting solution. They may provide, you know, an owner benefit solution. But it's very much like you're the one as the property manager who has to run the thing. And my experience has been with Second Nature that you guys are a done-for-you solution. When we signed up for your master renters insurance program, I was like, okay, now where's— what's the login for like the portal? So every time someone moves in and moves out, I, that we can update it because I'm going to make a little process for my team. And our onboarding person was like, oh no, we do all that for you. I was like, what? That's— you're serious? Like, so what, you need a Billium login? They're like, yeah, yeah, set us up a Billium login. Here's the permissions we need. And then we're just going to monitor, and every time a resident moves in or moves out, we're going to monitor all that for you and enroll and disenroll them. And by the way, we're also going to be the one contacting the resident and asking, you know, like if they didn't sign up for our program, we're going to ask them to provide proof of coverage. If they don't have it, we're going to automatically re-enroll them. I was like blown away by this. I still am. That's what— like, that was clearly a decision that somebody made at Second Nature of like, not only are we going to provide a master renter's rent insurance program, but we are going to be a done-for-you solution for property managers. In the facilitation of this offering. So someone made that decision, but why?

Because it's so much more work for you guys. It is. Um, probably, probably what I would say here, Peter, is I think what I've learned in my 8 years being in this industry is I've gone from knowing like this. I'm, I've got a closed fist for anyone listening this much about property management to now, I feel like I know about this month, I've got my fingers about a centimeter apart. And the part that we know really well is the part obviously that we've kind of like productized and focused on of like, how does it make sense to market, offer, communicate, and enroll residents for high adoption and high satisfaction, like resident services, right? And what we were committed to is saying like, we want to not just provide a product because like we see this so often in prop tech where like a product is provided, but then it's kind of up to property managers to actually figure out how to use it and implement it. And I think everyone can relate to— I know in our business we can relate to, hey, we're buying these products off the shelf. Are we getting 100% out of them? Right? Like how much effort it takes to become a power user. And so I think the flip that we had was, okay, if we can learn deeply about our customer, their policies, why they do things, the things that they do, what they really care about, uh, and orient it, orient to that, um, we can effectively help them be power users of everything that we do day one, right? If we own that initial setup and go deep on it. So it's a big investment, uh, you know, on our part to do it, but it has paid off. In the fact that we aren't just owning delivering a software product, right, that you can use. We're owning, aligning, and partnering with you on the experience that you want to have and you want your residents to have. And really, we talk about owning the outcome. Like, I think of this as like own the experience, right? And how do— how does Second Nature, our brand, stand for that easy button experience? Whereas an executive, you can say from concept to execution, I can pull those two points really close together when I work with Second Nature and create all that risk that stands in between. I can just take it out, but we still need to provide the flexibility where when you want to make changes later, and inevitably you will, you do have the ability, right, to self-service and do that or contact us back and we can support you in doing that. And so we have found that's worked great for us. It's something our customers love about working with us. Uh, and it's, it's a whole company commitment, you know, that we make. So I appreciate you calling it out and recognizing it.

Yeah, because it's, you know, the— it's not free, right? I mean, so you guys are paying significant money to, to offer that level of service, uh, and it is, you know, it's not insignificant.

I got to say something about that, Peter, which is like, I, I hear all the time because I work in the marketing with the marketing team, and Second Nature's marketing team is excellent. We often get compliments on our marketing and, wow, it seems like you guys make big investments in marketing. And then I'm like, if you look at our CS org, you know, it's, it's like 10x the size of our marketing teams, right? And so, and it's an incredible group of people and leaders over there as well. And so I think it's a whole company commitment to this is a different way of doing things. And, and yeah, listen, it makes sense for Second Nature to do it, but it's a big investment and we, we appreciate that paying off.

Yeah, I talk, you know, I consult with a number of vendors in our space and, and, Second Nature comes up not infrequently. You know, we, we, we want to make a splash like Second Nature. We want to, you know, how did they get so much attention? And, um, I think people get this idea that, oh, well, well, if we just figure out how to market like Second Nature, we will enjoy a similar level of success. And, you know, as an engineer, I implicitly know, you know, I, I know that's not true. And, uh, This is why, right, the done-for-you part is 10x the size of the marketing function at Second Nature. And that, you know, you can have great marketing, sure, but if the product doesn't back it up, you're going to go nowhere fast, especially in this industry. So I think that really shows. Last question about marketing while we're on the topic, and I'm just, you know, personally, I'll sort of greedily take up 5 minutes of the show here. But yeah, like, doesn't everyone know about Second Nature already? I mean, you guys still continuously invest huge marketing budgets and I'm on the receiving end of some of that budget. Thank you. But like that, you know, there's only about 40,000 property management companies in the US. And isn't it true that all of them have heard of Second Nature by now? And if so, what, uh, what's the plan? Just keep, uh, you know, as somebody who's really a novice in, in marketing, still recovering engineer, I'm curious about how you think about, um, marketing to people who probably already have heard your name before.

So there's a school of thought in marketing, Peter, that we'll just call like a school of marketing that subscribes to the idea of reach and frequency. And the idea is just, hey, how do I reach as many people as possible and just reach them as frequently as possible and just hit them over and over and over again? Right. And then that, that's like the way that you do marketing.

Yeah. And you've heard the thing like, oh, you have to hear it 7 times before you buy. Like you've heard those statistics.

Yeah. And there, there are kernels of truth to that, that I want to like acknowledge, but I don't think of it as like the primary lens through which I think about marketing and the job of marketing. And so when I think about, um, what our, what our job is to do, it's not just are people aware of Second Nature Brands, Second Nature Brands, Second Nature Brands, Second Nature Brands, Second Nature Brands, right? Over and over and over again and just aware that we exist. I think the thing that we think about, and again, talking about our last conversation, it's how do we invest in our reputation as something we continually strengthen and build? And ultimately, if you're a company that's really innovating, uh, you almost have to like refound the company. Every 4 to 5 years and it kind of transforms and evolves into something a little bit different. And many people who are listening to this podcast that have known us for a long, long time know our brand name used to be FilterEasy and that we were just a filter subscription provider. And I, I promise any Second Nature people reading this, we are not rebranding again. Like Second Nature is it for the, the many, many years ahead. It's not a rebrand, but part of the reason we, we had to do that is 'cause we had to, signal to the market, actually, we're doing more than air filters here, right? And so it expanded to resident benefits. And now with what we've talked on, on this podcast, we talk more about resident experience today and resident onboarding today, right? And the 40,000 property management companies, you know, that can work with Second Nature need to understand how the value that we're providing is evolving over time. And it's our job to effectively communicate that. But I also think about most people really index on new customers, right? It's like, hey, doesn't everybody know about you? And just, there's awareness out there. And isn't that the job of marketing? I think about marketing across the entire journey and where most people neglect marketing is their existing customers. Hmm. Right. And the way I think about some of the unique things we do and how we approach our marketing investments is what we're doing at Broker Owner, right? In a couple weeks. And Narwhal National typically on a, on a, annual basis, we make big investments into those events where we do have a lot of existing customers because I think we think about those events as an opportunity to really deeply appreciate our customers. And we think about investing into those relationships rather than just like hitting people with advertisements and saying, hey, have you paid attention to me lately? And I think deepening that relationship with our existing customers and really focusing on that the benefit we get is like, one, it just feels good. It's like a fun way of doing business. Two is we have raving fan advocates where I would say our sales team is not just the 30 quota-carrying reps who are out there. Like we've got hundreds of like Purple Heart bleeding raving advocates out there that we're super appreciative of. And we're just focused on like, how do we continue to deepen our relationship and deepen the value and keep innovating for these people? And help more and more of the market understand that. And so I think those are some of the things that we do differently. And when people think about, gosh, how can I make a splash? I would say make a small number of people extremely happy first where you don't have to ask them. They are unsolicited going out, right? And saying, saying, saying good things on your behalf. Like if you focus on that first and say, how do we build a great reputation and continue to hold that as job number one, you might be thinking about things differently than just reaching a bunch of people with a lot of advertising that a lot of people are going to ignore.

Love that. I think we're going to end on that, Andrew. That was, that was really insightful. And I appreciate you sort of enumerating that in detail. That was, that was very helpful for me.

Absolutely.

Peter, really enjoyed it. Yeah, you too, Andrew. Thanks for coming on today. 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.