How LeaseLock Is Redefining Multifamily Risk with Janine Steiner Jovanovic

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So you think about it, right? Screenings, it's kind of dangerous a little bit for property owners and operators. It's gotten to be a little, a little risky, right? A lot risky. And then it costs them a lot to process applications. You know, how many applications do they have to process before they get a qualified renter to move in? In the meantime, people are spending the money to apply and pay for that application fee and get rejected potentially. Yeah, the whole system in my mind should be inverted such that a renter can screen themselves and go to a property and say, here's my screen, am I eligible? And then with a very reduced cost, be able to complete an application process and move in knowing that they're going to be accepted.

Welcome to Season 5 of Peter Lohmann's Podcast. This podcast is a show about all things residential property management, from property operations to sales and marketing to growing and managing your team. I'm your host, Peter Lohmann, co-founder of RL Property Management. For Season 5, I have an exciting new guest each week. We go deep into conversation about problems facing professional property managers and the best ways to overcome them. Thanks for listening. Now let's go. Friends, welcome back to Peter Lohmann's podcast. Today I have with me Janine Steiner Jovanovic. I am so happy to have you here today, Janine.

Thank you. It's such a pleasure to be here finally, Peter.

Yeah. So you and I got a chance to connect a couple months ago now, and really it was exciting for me to learn about your background in our industry. And you have an extremely impressive resume and it was fun talking about sort of your history with property management, which extends even when you were a kid. So I'd, I'd love to share a little bit of that with the audience if you don't mind kind of bringing us up to speed on, on your background.

No, my pleasure. Yeah, I did, I did grow up in the business, family business, and had a chance to really learn multifamily from the ground up. And it, it was pretty early on that I caught a technology bug. You know, when I first had the opportunity to work on-site in systems, it was AMSI, so a little while ago, DOS-based. And over time, had the privilege of working on some really cool, interesting projects that were innovative and game-changing and decided that was where I wanted to spend my career. So started out in consulting, PricewaterhouseCoopers, KPMG, they had emerging technology transformation groups for real estate, did all different kinds of real estate with them, and settled back into multifamily, which was really where my heart is, where my passion is. Everything I do now, you know, touches people's lives, people's homes, and I still prefer to focus on the technology side of, of the house. But knowing that, you know, I'm actually making a difference for people's lives makes a huge difference for me.

Yeah, absolutely. I'm curious, back in those days when things were moving from like DOS-based to Windows to eventually web-based, it feels now like things are changing really fast with AI and all the other technologies. Did it feel the same back then as, as technology marched from paper ledgers to computers to online? Like, was this feeling of, wow, things are changing so fast, I can't keep up, or was it— did it feel slower?

It actually felt the same to me. I mean, I was there for the creation of the first web-based systems for property management, and it was equally, I think, game-changing. I'm enjoying the fact that AI is accelerating some of the efforts that are needed today for our industry to achieve its goals. Similarly to, you know, what I saw, the possibilities I saw created back then from the internet. I do think it's very similar.

Yeah. I mean, it certainly feels quick right now. And even in just the last year or two, it feels like it's accelerating. So I've heard, you know, things come in waves and cycles and it feels like another one of them is, is, you know, it's kind of swamping the industry right now.

I would agree with that. You know, I would also caution that, you know, AI is not as mature as we all want it to be. And even though it's maturing quickly, being careful, cautious, planning, piloting any solutions is, is the key to making sure you have a successful outcome.

Yeah. So I want to move now to LeaseLock. So you're CEO of LeaseLock and LeaseLock's actually been on my radar for a while. I did a blog post which some longtime listeners may remember about security deposit alternatives. This was many years ago and LeaseLock has a totally unique model, and I even called it out on the little table that I put together. It's, it's not like any of the other security deposit alternative products. I'd love for you to share sort of the philosophy behind and, and the how it works. And then I think we're going to have a fun discussion about some of the, the details on tenant screening and what works and why security deposits are the way they are and why it's been difficult to displace them.

Yeah. I mean, security deposits have been around since the beginning of rental housing, which is a long time. And, you know, their goal is important, which is to protect property owners from the losses that can happen if a renter leaves and doesn't pay what they owe or, you know, does a lot of damage to an apartment unit. The challenge is that over time, deposits have become very risky to manage. They're, you know, highly regulated. There's increasing attention from lawmakers on them and renter protections are a big focus right now, especially for certain states and even to some degree at the federal level. So there's like a lot of risk associated with just deposit handling in general. So you'll see there's been an increase in legal suits, you know, and so that's just increasing over the last few years. So outside of just kind of that part of it, which can be very costly and, and difficult, you know, there's just the fact that deposits don't cover the cost of bad debt. And, you know, the industry is focused on occupancy for a while now. And since COVID it's been, you know, certainly the priority. It remains the priority. It's challenging to get rent growth for lots of different reasons, whether it's— there's different market conditions, new construction, and, you know, lots of things that are— lots of dynamics that are preventing us to kind of get back to normal rent growth. And what happens is over the last, or what happened is over the last few years with the focus on occupancy, with the challenges on rent growth, you see an increase in bad debt and it corresponds with some of the patterns of discounting deposits. So yeah, the average deposit went from like 1 month pre-COVID to, you know, we're around like 4 or 500 now. So if you look at you know, the REIT earnings calls to some degree, but just, you know, I have access to millions of units of data. You just see the write-offs going up and up and up. And so that just means deposits aren't working, right? If we can't collect enough deposits to cover the cost of the write-offs, we can't grow our rents enough. We already have a challenge with income. You know, a product like ours just is very handy 'cause it can provide a substitute that protects you, you know, a lot more than what a deposit can.

Yeah, there's some really interesting dynamics that happen at apartment communities that are having trouble with leasing or having trouble with rent. They're like, you know, there's pressure from above to fill units, but also keep the average rents high, which is important for financing reasons and valuations if the property's going to be sold. And so something's gotta give, right? If you can't really lower the rent and you can't accept a lower occupancy, you have to make the overall offer more attractive to prospective tenants. And one of the ways you can do that is by reducing the deposit. This isn't as much of a thing in, in my world, single family rentals, but this is a huge lever that gets pulled in multifamily. And I remember when I was leasing from one of these new build apartment communities, They were running like a special for lease-up. It was like a $250 deposit or something. I was like, oh, this is great, right? And so what LeaseLock does, if I understand the product correctly, is it's an alternative to another product we are not super familiar with in our world, which is surety bonds. But a surety bond is an alternative to a security deposit, which I'm sure you could explain better than I can. And then LeaseLock is basically an alternative to that.

Yeah, so the security bond was kind of the original deposit replacement. It's been around for a long time. There are a lot of people offering kind of those direct-to-consumer, help you get in a unit. You know, it's really more targeted for renters that can't afford to get in a unit, can't, or they can't pass screening criteria sufficiently. And you know, so that's one way of looking at it. The, the, The way we design our solution, it's true insurance, not a bond. So it's insurance for a property, not dissimilar from property and casualty insurance. We insure a property or a portfolio and we don't evaluate renters. We don't look at renter credit. We don't, you know, need or care about anything specific to a renter. We're looking at property dynamics the same as you would if you were underwriting a deal or putting a budget together. And you know, the lower the, the better the property's managed, the better pricing and more coverage we can give. And then it's for every renter. So every renter that comes to the door, it's, it's really presented as a leasing amenity to help with leasing similarly to a deposit discount. So we charge a small fee to the property. The property passes on that cost to the renter and enrolls the renter in the lease insurance we provide to the property. So call it $25 a month, which is around our average. A renter can get in and pay that in lieu of having to, you know, leave a deposit. They don't know that there's insurance on their lease provided by LeaseLock. They don't even know LeaseLock exists. They just, you know, know that the property offered them a really cool option, which was to lease deposit-free in exchange for this non-refundable fee.

And then as you were describing the surety bonds there, I was immediately thinking— and I just recently read through Derek's blog post about Failed Math, which is a fascinating sort of analysis of surety bonds and why they don't really work well. They've got an adverse selection problem. And yeah, I mean, if only— if the only people who are taking these bonds are people who sort of don't qualify or don't have the money for a traditional deposit, I don't even need to do any math to tell you that's not going to end well because any product that is attracting only the worst types of customers is not going to, you know, you're— it's like pooling the risk, but all the risk is bad. There's nothing to pool it against. So the strategy of enrolling the whole property totally makes sense to me because it's like, hey, we have to— we know there's going to be losses on with some. We got to offset that. This keeps it affordable for everyone. That makes complete sense.

It's more like health insurance in that way. Yeah. And renters still have a choice. They're not forced to enroll in the program. We get majority enrollment because renters clearly prefer to not have to leave a deposit, but some still want to leave a deposit and that's okay too.

Yeah. So, so it sounds like renters, you know, come to one of your customers' communities and the leasing agent says, great news, we have an all, you know, you can pay the one month's rent security deposit or $500 or whatever it is, or you can pay $2,500 $25 a month or whatever the pricing specific to that property is.

Yeah, exactly right. That's right.

And the, the property owner or the property manager, they pass that along at cost or do they mark up that fee?

We allow them to mark it up just a nominal amount to cover administrative burden because there are still, there's still work involved in managing the program. For example, filing claims, right? So if a resident moves out and leaves a balance and they file a claim, there's effort involved in filing the claim and managing that and applying the payments that we give them. And so we allow them a small markup for that.

Okay. And what, what's like the average take rate on this product at the communities that offer it?

Yeah, it's, it's, there are the communities that offer it the best and really promote it optimally, you know, get 90 to 95% take rate. Oh wow. Yeah. So, and our average is probably closer to 80% because there's a variety of ways that, you know, customers are promoting it. You know, if you do a really good job of, you know, presenting it on your website, if you embed it properly in the leasing process and your chatbot and your self-guided tour, et cetera. So, you know, it's really, I mean, we, we provide a service, and we rely on our customers to advertise that service to their customers. So take rate's often dependent on how they advertise it, but it's, it's pretty high.

Yeah, that's awesome. And what's, what's stopping a property owner from just implementing this themselves? They're just like, they get the idea, they're like, okay, yeah, I could just charge $20 a month, $30 a month. Keep all that money, set it aside in an account somewhere and just pay out claims or just use that money essentially to offset damage to the property.

That's a, it's an interesting idea. You, you know, there's a lot of difficulty with doing that if you're not a REIT, for example, because you have different ownership entities for each property. And you know, there are rules about kind of sharing cost and risk across portfolios where you have different ownership structures. So it does not work where you have JVs or you're doing fee management. And you're also taking a risk that whatever, you know, you're collecting, if you're not really doing a good job of managing your renting, your collections, your move-out process, you're, you're taking on that risk. So if you're upside down, you're going to have to cover it. So I would say some of the really well-run, you know, companies that have a single owner that can kind of control their whole portfolio and spread that risk like a REIT, I know that one or two of them are doing that.

And is that like, because when I think through this, I'm like, all right, but am I offering insurance if I try and do that? Which I know is kind of not allowed in like basically all states.

It's, it's basic. It's so if you're doing that, you're charging a flat fee and you'll call it something like a moving fee, a risk fee, and you'll pull that, that amount. Again, I really only know of one or two companies that are being, that are doing it and doing it successfully.

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Sure. Yeah. You know, I have a master's in comparative literature and I originally wanted to be a professor of the Enlightenment period, fluent in French and German, you know, And then all I knew work-wise was, you know, working for my family, summers, vacations, whatever, leasing apartments, helping in the office. And I definitely fell in love with, you know, real estate. So when I decided to pivot and go into business, I asked my dad, you know, what if he had anything for me? And he's like, well, actually I can't get good data outta my apartment buildings. And he had a handful around the Dallas-Fort Worth area. And he said, I want to, I want you to hire some programmers and build an asset management system for me. And that was just revolutionary in the early '90s. Nobody did that. I mean, he spent $100,000 back then and I got to hire a team of programmers and build really the first commercially available asset management system for apartments. So, you know, that, that was a lot of fun. We sold it to what is now, if you know, a very prominent REIT. And through that process, I got introduced to PricewaterhouseCoopers and they recruited me to come and do more of that for them. And, and it was just, you know, really cool and exciting because I'm working on all these different projects. Some of them were custom builds, some of them were implementations of, you know, ERP systems with a little custom, but data analytics, you know, talk about geeking out. I am a data person and, and When you can pull information together to make better decisions, that's, you know, that's what floats my boat. But over time, I did do a lot of, you know, software implementations. I helped, you know, ended up going to RealPage and helped build their platform out early on, take it public. And I ended up running, you know, about half the company. Insurance ended up being, you know, something that I just fell in love with. So when I was given the opportunity to get involved with LeaseLock, I, I jumped at it. But at the end of the day, I mean, I'm still at heart, you know, I started out a programmer. I'm glad I did. I think it's important if you're gonna run a technology company to actually understand well enough, you know, the actual tech side of things. And you know, maybe I dabble a little bit here and there every once in a while. My, my kids like to make fun of me.

What are you seeing right now in terms of, I mean, when you dig into the data across these millions of units, Is anything jumping out that's changing or that's surprising, whether that's fraud or changes in occupancy, changes in debt defaults? I just— you've got a firsthand look at stuff we're going to read about in the, in, you know, in the news a month or two from now.

Yeah. So and, you know, we're working on a risk analytics solution for, for our clients. We have a few beta customers involved with that because you, you know, you hit the nail on the head. We see it coming in our data. And this isn't new news to you or anybody else. Post-COVID, you know, fraud was introduced in a way that was very novel, and it's continuing to be a problem for the industry and a priority to, you know, address renter fraud, you know, getting responsible renters in the door that, you know, are going to stay through their lease and pay you along the way what they owe you is critical. And so we did see in the data an increase in delinquency and evictions in certain markets where there was just a ton of fraud. And then I saw the industry fix it and apply new products and solutions, and it went back to what I would describe as, you know, close to normal. I still think that screening is a challenge because it's another topic of interest to renter advocacy groups and lawmakers. And so just like with deposits, you know, screening's becoming a challenge to manage. But I do, I do feel like the industry's extremely focused on it. And because of that, I'm not seeing that cause a lot of challenges for a company like ours where we have to track the quality of the lease, the, you know, delinquency along the way and the outstanding balances at move-out. So I think the industry's done a really masterful job in the last 2 years addressing this issue.

What's contributed to the solve? Is there particular approaches or products you've seen that really helped solve this?

A lot of it had to do with just document validation, application, you know, validation. So it's, it's, you know, is the bank statement provided? If it's not a direct— I mean, you can actually connect directly to people's bank accounts now, and that's a lot of the solutions do that, right? And a lot of companies rolled those solutions out in the last couple years. And then if documents are provided, whether it's ID or bank statement or whatever, and they're tampered with, you can now detect those things. And so there's a lot smarter AI-driven solutions to help with screening that, you know, that have solved the problem to a large degree for the industry.

Yeah, I have a weird question. Is fraud correlated with anything? Like, is it correlated with evictions? Is it correlated with skips or bad debt? I would— I have this It sounds like a strange thing to ask, but sometimes I wonder, it's like these people who are willing to go through all this work to create fraudulent documents and fraudulent pay stubs, it seems like it would be stupid to do all that and then get evicted because you couldn't pay the rent. So yeah, I just thought it'd be— it's kind of funny to imagine a world in which there's just no correlation whatsoever and fraudulent applications are just as effective as tenants. They make good tenants, they don't get evicted.

I'm sure it's not true, but There's a, there's, uh, there's no data that's been done, analyzed to explain what you just asked. And it's because it would be so dangerous for anybody to touch that. I wouldn't touch it.

Got it. Yeah. Because I guess in order to really run the study, you'd need to like detect fraudulent applications and then let them move in, which would be, you know, no one's going to do that.

Well, you're, you're also going to, there's, going to end up being PII involved. So let me be clear, the industry and others, I mean, there's a lot of funds that have been raised to defend the industry against, to some degree, villainization over the last few years, which was unfounded in my opinion. But the renter advocacy groups have 10 times more funding, maybe 100 times more funding. To, to go after the industry. So there are just certain things that, certain topics, certain areas that you, we just need to be careful about digging in on.

Yeah. Can you say more about that? Because I'm not too familiar with how things work at those high levels. When you say the renter advocacy groups have like way more money or there's certain things we need to stay away from, I'm curious about that.

Well, no, just the concept of, similarly to the concept of adverse selection, right? We don't want to,, you know, do analysis, you know, dive into information that is, you know, potentially specific to a certain type of renter, a certain category of American, and then, you know, lead to outcomes that are unintended as a result as far as like how we screen. So it's better to kind of remain at a certain level and remain objective. And do your best to be preventative and proactive around, you know, your methods, but in a way that's invisible to the individual that you are actually screening.

Yeah. Tenant screening is something that's long fascinated me. And yeah, I've got this line I always say, which is if you ask 10 property managers a question like this, what should be the rent-to-income ratio? You know, Mr. Property Manager, what's the minimum income you like to see in order to approve somebody for an apartment? A lot of 'em are gonna say 3 times the rent, or maybe they'll say 4 times. And then you ask 'em about credit score and you get 10 different answers, 600, 700, 660, whatever. And there's just, there's no science behind it. There's no data whatsoever. I always think it's funny when they give you the 3 times the rent and income and I'm like, really? It's 3.0. It's not 2.9. It's not 3.13. It's completely made up. It's obviously just like a back of the, you know, this thing that we've all repeated because the people we learned it from learned it from who they learned it from. We've all— we're all just saying it. It feels like we're in the dark ages with tenant screening. Honestly, there's very, very little data around outcomes. There's, there's great white papers. I've read them that show outcomes are correlated with credit score. And we have good scoring products, but we don't have products that take into account the whole picture— credit, criminal, eviction, renter history, and credit. And I worry a lot for the industry because I think credit scores and credit history are eventually going to be outlawed completely from being able to take into account when making a tenant decision. So I'm curious what you see, because your product is very tied up with renter outcomes, you have to be able to price your product appropriately. So I'm wondering if you've done any digging or have some secret, and maybe if you did, you can't share it because that's part of the secret sauce. But just curious your thoughts.

We, we don't get access to screening data. We don't look at screening data. I have friends in the industry who've worked— I ran screening at, you know, another company, you know, over 10 years ago. So I was in screening knee deep. For, for a while. But, you know, we again, we're, we are, you know, we're looking at ledger-based information specific not to the renter, but specific to the property. So we're looking at lease. We care about the lease, not the renter. I will say, though, if I had to predict something and I hope I'm right about this prediction, renters in the next couple of years will be empowered to screen themselves. And it's going to be a question of, you know, matching up your screen with properties that fit. And it's no different than qualifying yourself for a mortgage. You know, we can pre-qualify ourselves for lots of things. I don't see why renters shouldn't be able to do the exact same thing. And it's very expensive to apply for, you know, apartment. The application costs are, So you think about it, right? Screenings, it's kind of dangerous a little bit for property owners and operators. It's gotten to be a little, little risky, right? A lot risky. And then it costs them a lot to process applications. You know, how many applications do they have to process before they get a qualified renter to move in? In the meantime, people are spending the money to apply and pay for that application fee and get rejected potentially. Yep. The, the whole system in my mind should be inverted such that a renter can screen themselves and go to a property and say, here's my screen, am I eligible? And then with a very reduced cost, be able to complete an application process and move in knowing that they're going to be accepted.

I see Zillow making moves in this direction right now.

They are. I will say Zillow has not been very successful at acquiring the application business. I mean, they're, they're powerful listing service and that's kind of their sweet spot. I know they want to get into the application business, but there's a lot of competition from, you know, software providers that provide a fully integrated suite.

Yeah, I've been talking about this a little more recently in our world in particular, you know, rental homes. It's Zillow or, or you're not leasing the apartment. Basically, they control all the major listing platforms and they drive 60 to 70 to 80% of the, of the leads that turn into leases for us. And so if Zillow wanted to get into the tenant screening arena, in my world at least, all they would need to do is say, you're going to let renters run through our screening process. Or you don't get to list your property with us anymore. It would be that simple. And we would say, great, where do I sign? Because we don't have a choice. Yeah.

We don't have a choice. That's interesting. That's an interesting perspective. I like it. I like it.

That I think multifamily operators have a little more flexibility. There's more competition in that space for listings and you have very nice big property websites with budgets to drive marketing and there's other ways to fill units, but in our world it's a little scary.

No, I hear you. Google and, and website are the two top, you know, lead gen sources for multifamily. But I hear you about Zillow's power and influence over single family, FR space.

I want to ask you about your sort of renter-first approach with the product and just your philosophy, which is very much you mentioned on the, on the pre-show that the founder of the company, it all started because he couldn't afford a security deposit. And so baked into the DNA of LeaseLock is this idea that like, hey, renters aren't an asset to be exploited. They're actually kind of our North Star. We want their experience to be great. How does that show up in the product design and the pricing and, and how you work with the property owners?

Yeah, I mean, we've essentially established governors on the product. To protect renters from our product, you know, being used to, you know, take advantage of them. So, you know, some of the, like, we require the product to be used on a majority of leases so that we can maintain the best possible price. So we have that balance of risk that you were talking about earlier on. We also don't overcover, so we don't provide too much coverage because that makes the price go up and sometimes it, could be used to mask operational deficiencies. And that's not what we exist for, right? We exist to accomplish what deposits were intended to do but have failed to do. So we don't offer the program in such a way where we're not designed for, you know, really poor operators who don't do a good job at screening and managing their delinquency. We, we have all different flavors of clients. We have Class A, urban, high-rise workforce, lots of workforce housing all over the country. As long as you know you're a good operator and you're managing your property well, you're gonna be a great client for us. But we, we do have these governors that we've established to make sure that the product's not misused.

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Well, you know, the economics for our business are incredibly healthy. So it works. What we're doing, you know, works and everybody gets to benefit. You know, we make our numbers, our insurance carriers that provide us with reinsurance are happy. The property owner gets the offset for the write-offs that, you know, they want. And the renter gets a chance to live in an apartment unit, move in and live in an apartment unit without having to pay a deposit. For a nominal fee. And so everybody wins. Everybody wins. And, you know, so yeah, this isn't like, oh gosh, you know, we're planting seeds for doing well in the future financially and forfeiting, you know, profits. It's, you know, we can do— It's working now. No. And, you know, I have said before, you know, we could make more money, but we don't because—

Yeah, I was going to ask you about that. The temptation to increase that monthly fee by just a dollar or the temptation to let the property manager, you know, take a larger cut as a way to help your salespeople win more properties must be enormous. It must be huge. Like, the temptation must be big. And because, you know, what tenant's going to complain about an extra dollar per month? It's spread out over so many units. But that would be all margin for you guys. So I really respect because it's got to be a hard line to to hold?

Well, you know, Peter, the vast majority of our clients had no price increase or a price decrease this year. Wow. And I'm really proud of that. And the goal is for us to control the costs for the renter while still being able to offer the industry everything they need and for us to still make, you know, appropriate profits. And we're able to do that this year without increasing costs across most of our, or most of our book.

That's really impressive. How, how does it work, or do you work with people who are managing sort of smaller, you know, 4, 8, 10-unit properties or even SFR?

So, you know, we're, we're an insurance company. We have an underwriting model just like all insurance companies. So, you know, you need a certain amount of information to underwrite Once you get into really small numbers, it's really difficult to underwrite. And so we work through channel partners to get to that space. There are different providers that provide leasing solutions, et cetera, and they offer our program through their platforms.

Oh, okay. And any names that I would, that I would know in our space, like the NARPM world?

Aply. Is our, yeah, is our, you know, primary partner in the space.

And I think when we talked before, you mentioned that it was actually an area of focus is kind of like bringing the solution to more and more even smaller operators or smaller properties. It's— is that like a growth channel for Focus?

Absolutely. It's represented a pretty substantial amount of growth for LeaseLock this year. Working with our channel partner Aply, and we have found there's an increasing amount of interest in the, you know, single-family rental and SFR space in general around having a deposit alternative.

Okay. And what happens if when the tenant pays the monthly, the monthly cost, does that then exempt them from paying what they owe when they move out, whether that's the last month's rent that they didn't pay or damage to the property?

No, actually not. So the way the program works, it's, it's presented, the program's presented as a leasing amenity and the resident pays the small monthly fee while they're living there. And the vast majority of the time they move out and don't have an outstanding balance, but when a resident does move out, doesn't pay maybe their last month's rent or does a lot of damage to a unit. Let's just say that they owed $1,000 and they, the property was unable to recapture that from them after move out. Property could file a claim with LeaseLock. We send them whatever is covered. So let's in this case say $1,000 and then the property's done. It doesn't have to pursue the renter if there was a reason for them not to have been able to collect the full amount of the outstanding balance. Let's say the renter left with $2,000 and they only had $1,000 of coverage from LeaseLock. They could still take the $1,000 the renter owes after the claim is paid, and they can continue to pursue the renter for that outstanding balance. But there's never any communication with the renter that they're signing up for something that's insurance. And as a part of the lease, It says, to be clear, you're paying a non-refundable fee in lieu of having to pay a deposit. You understand you're still responsible for paying everything you owe and leaving the apartment in good condition.

Got it. And then would you guys then try to get recouped from the resident who owed the money?

No, that's another huge differentiator between us and every other product on the market. We do not subrogate. It again fits in with our mission. Of protecting renters and offering them a program that helps them obtain housing with no consequences from lease lock.

Okay. I mean, I hear that you're also kind of letting them get away with something. It would be a different way that I would put that. Like, hey, they kind of owe somebody this money, it seems like. I mean, what's the incentive then if they understood the program to even pay that last month's rent?

They don't understand the program. And I'll give you, I'll give you, I'll give you the, the, the fact that supports why renters don't know. We've been around for a long time and we had our first lease enrolled in the program in 2017. And when you look at the number of renter default at the end of a lease after move out, it's about a third. So about a third of the time a resident will move out and leave some type of outstanding balance. With deposits. With LeaseLock, it's the exact same. About a third of the time, a resident will move out and it will result in a claim. And so we know that it's working, that residents understand their obligations because their, the behavior patterns are the same.

Yeah. Because they don't know that you're not going to go after them and I, I won't tell them.

Well, the property does. Thank you. The property does make an attempt initially after move out to collect from the renter, and they have to, you know, wait 30 days to file a claim so that there is some amount of recovery that happens first 30 days. So I, you know, I think the residents don't necessarily feel like they're off the hook. You have to look at collections also in general. If somebody moves out of an apartment and leaves a balance, I don't know, are you familiar with what the statistics are around here?

Oh yeah, we do it here. I mean, we send our balances to collections.

So I— But how much do you get?

How much do you actually get? I don't know the exact number, but it's very, very small.

Exactly. Yeah. The resident didn't have the intent to pay anyway. So it's no different. Like, you can keep going after them., but it's not going to change the behavior.

That's my point. Oh, I wanted to ask you about the broader prop tech landscape. So you've been an investor, you've been an employee, you've been a sort of almost a co-founder, CEO, very involved in the prop tech or real estate technology space for a while. What's happening right now? Because I can even feel it even from my little corner in Columbus, Ohio, that things have shifted a lot for a lot of our vendor partners over the last, call it, 18 months. I don't know. Help us understand the landscape.

Yeah, I think, you know, there was a tremendous amount of funding being thrown at PropTech before COVID and over the last few years it's dried up for lots of different reasons. So, you know, if you have been using point solutions that were emerging and they weren't sufficiently funded or mature enough in their life cycle, they're having viability issues right now. And so that's impacting the industry, whether you're in, you know, your corner in Columbus, Ohio, or elsewhere. So if you were experimenting with, you know, a small product that wasn't part of a bigger platform, it may or may not be able to survive, right? It's also just become— it's interesting with all the funding that went into prop tech before COVID There were— I mean, in my opinion, my small opinion, there were too many startups doing the same things.

And it's heresy.

Can't—

I can't hear it.

No, I'm kidding. And it, it It led to the use of a lot of products. So you have your core platform. Let's just say you're using something like AppFolio or ResMan or whatever. You know, you're trying all these point solutions. They're all integrated well. And so how much work and effort does that put on a company like yours where, you know, you've got this little fraud detection solution you're using and this little self-guided tour, and none of it's integrated. Yep. And then all of a sudden they're starting to have funding challenges, and maybe the integration is really not as good, and they don't continue to innovate as well. I, I, I see to some degree a return to platform plays and the desire to do more with less providers. And that's also putting pressure on the prop tech landscape.

Another factor I've seen is a lot of operators these days are looking at some of the products that they're using and they're like, my buddy can code this with AI in like 2 weeks. My, my co-founder in Crane, Wolfgang Kroski, he's built a whole backend for Crane that we use, and he's also built like a Kroski OS, he calls it, for his management company that integrates. And I'm talking like with APIs and everything. I mean, it's wild what he's able to accomplish with no programmer background whatsoever. So it feels like the, from the seat of the operator, it's devaluing these solutions that we're used to paying for, paying, you know, 50 cents, $1, $2, $3, $5 a month per unit. People are starting to wonder like, geez, I mean, that's a lot of money for what feels like a fancy XYZ.

Something that I could code up. Absolutely. Especially if it's workflow focused. If you're trying to do something like manage work orders or the renewal process or, you know, something like that. Once you start having to have APIs and you try to do like screening on your own, forget it. You're not going to be able to do that. Most people aren't going to do that. Yeah. It's, it's, it's too complicated. It's too expensive and it's too risky. But I agree with you. For some solutions that they are going to be easily replaceable.

The platform comment is interesting, and I've watched through my involvement in the industry 12 years professionally that when I started, there was no integrations whatsoever. Buildium, AppFolio, none of them allowed you, you know, Rentvine wasn't around. None of them allowed you to connect whatever software you were using to the mothership, to the accounting software. And then it's really swung the other way now where they've mostly all opened up and they have point solutions that are on their marketplaces or on their platforms with direct integrations. And that's been great. And unfortunately it hasn't really solved much of our problem though, as an operator. And the way you really feel this is like every new team member you onboard, you have to set them up with like 8 logins. Just to do basic stuff. You know, they need to get logged into your main— obviously your main accounting software. They need to get logged into your workflow software. They need to get logged into your maintenance coordination software. They need to get logged into Notion, email, I mean, your phone system. Like, I— every PM operator has like 12 to 15 softwares that they're paying for and have users for. And the integrations have been nice because now we're not doing like double entry of data. But we still have all these different softwares that we're having to log into every day. So it's interesting you mentioned about, you know, moving more toward a platform or consolidation. And I'm wondering, it's just, it's fascinating to see these dynamics play out over time. And it doesn't feel like there's been much of an attempt to really solve that issue of the 12 login problem yet.

Well, so a couple of things, right? You guys at your level maybe aren't going to invest in this, but you know, larger owner operators, they're gonna single sign-on as the key to success for some of that. It, it, it achieves some help, but the other is to bury some of those products in the background and have them continue to do what they're good at, but create workflow solutions on top. Like using products like Salesforce, not necessarily Salesforce, 'cause I I know it's, it's expensive, but there are emerging solutions in the prop tech landscape that are workflow-based, kind of like what we were talking about, where it can connect to all your different systems so you don't have to log into 8 places to do something like manage renewals.

That's right.

Or screen a tenant. Or screen a tenant. So I think you're gonna see more workflow-based solutions and, you know, I would, I feel like this is a commercial for Avely, but I do think Avely has successfully done that. And so that's kind of their main thing. What they offer is workflow management for operations and pulling in the data from all the different places so you don't have to log into every single one of your solutions. So I, I, I'm hopeful for even the, you know, SFR space. That there's going to be some, some great options available.

Yeah. I mean, any company that's working on this problem gets my thumbs up because it's just as an operator and as someone who helps other operators and advocates for them, I want solutions that work for our, for our business and for our industry. So anything else we should touch on?

No, I was just going to say it's unfortunate some of the big providers in the SFR space you know, not to name names, but like, you know, they started out as this really cool innovative and they're just kind of getting like all the other dinosaurs that are, you know, slow to innovate and make progress. And it's especially hard right now, as you said, to kind of stay on top of innovation when you're not investing heavily in AI and workflow management.. And I think that's a challenge for your space. It's just the, the core property management systems, they're just slow to, to progress.

Do you find that you'll be able to implement AI with your product either to help with underwriting or any of the backend stuff?

That's a great question. So we've always been AI, so, you know, underwriting is machine learning and database, like, is it, that is AI, but As far as the rest, we, we've spent the last year transforming our entire claims experience. I'm incredibly proud of it. We use AI to make it easier to file a claim, easier to track claims. That's good. And we're able to, we've, we've tripled efficiency and timeframe for claims processing with AI. And that's just one area we're using it. We're using it for, you know, first line customer support. Or to get customers answers to questions instantly. It's really, there's no area of our business where we're not using it.

Love that. Yeah, that makes sense on the claims experience. Like that's, I think that's something that people definitely associate with the claims experience from any business is this is going to take forever, it's going to be painful. So almost feels like, is it even worth it? But if they know they can just submit it and there's some sort of AI processing that's helping just the whole thing go way faster.

That seems like a win-win. Yeah, I'm— we're about to release, you know, a whole document interpretation AI function that, you know, will take like all the documents that you submit and pre-populate a claim. So all you have to do is review and hit submit and you don't have to enter anything.

That's great stuff. Awesome. Anything else you want to touch on before we wrap up?

This has been fun. I'm so So thrilled that you reached out and we had a chance to connect. And I, I look forward to staying in touch and continuing the dialogue around some of these kind of things that are happening, trends in the industry. It'll be most interesting over the next year or two to see whether or not this AI, you know, the AI innovation that we're seeing right now is more of a bubble or if it's really going to be transformative. Agree.

Um, I'm on the fence. Yeah, it will be fascinating. It's a fun time to be in the industry. So thank you so much, Janine. If, if folks wanted to follow along with what you're up to at LeaseLock, where, where should they connect with you?

Oh yeah, absolutely. You know, LinkedIn, connect with me on LinkedIn or check out our website at leaselock.com and you know, it's plenty of good insights there and yeah, that's probably the best way. Okay, awesome. Thanks again, Janine.

Bye, Peter. Thanks. 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.