Differentiation. Everyone’s favorite buzzword. What does it really mean in 2024 and how do you achieve it specifically in the property management industry?
A lot of people have spent a lot of money trying to professionalize the experience a self-managing landlord can provide. When we discuss differentiation, we’re not talking about create a value proposition different from your nearest professional PMC. We’re talking about elevating the professional property management experience above that of self-management.
Join Second Nature’s Andrew Smallwood and Property Meld’s Ray Hespen as they dig into strategies for accomplishing exactly that.
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Season 3 Episode 20 features Tony Cline
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Transcript
Ray Hespen
If you are going to be somebody that's got a little bit more of an A.I. search. And again, I'm not saying that I realize the customer service thing like I did. Do not get rid of that ever. Right. Like we all dealt with bad experiences. But making that not your value prop alone. But if you're focusing more on A.I. and really trying to drive whatever that verbiage is for an investor, the biggest thing you have to be is a measured organization because there is no other way to do it. You have to understand what metrics are being, what contribute to those, and you have to have a plan of how you're going to deliver, period. If you are an organization that is going to really lean on, lean on the the element of I'm going to take the headaches away. Then you just need processes and really like, how do I handle an escalation? How do I do this? How do I do that?
Andrew Smallwood
Hey, everybody just want to introduce myself for those of you that are new here, I’m Andrew Smallwood, Chief Customer Officer at Second Nature and one of the hosts, the Triple Win podcast. It's what we take a lot of things very lightly at Second Nature. We like to have fun. One thing we do not take very lightly is is property managers time and we know how busy you are, everything you have going on so that you would take out a slice of your Thursday to spend with us. It is something that we we really do not take lightly and really appreciate you being here. So excited to have a great conversation with my friend Raven has been from from property melt will be up in just a moment and introduce properly before we do I just want to do a couple of minutes of housekeeping as it relates to a couple of things going on and coming up at Second Nature. And the first of which is Napa has their broker owner conference coming up in North Florida. It's an Amelia Island Omni resort, really great property, really exciting, some really great content, you know, being put on there, referred from broker owners who are trying to learn from their peers and other brokers. This is just a great event, some people's favorite event of the entire year and what Second Nature has done traditionally at our home nationals in the fall is all of these shenanigans that we call our VIP experience. So we're ensuring is a great arrival experience. There's some cool surprises we do throughout the week. It's something we do that doesn't cost anything and there's no strings attached to it. It's really just an appreciation effort that our our whole team gets engaged and we actually committed to doing that at broker owner this year. So we're meeting weekly and in planning up, cooking up all kinds of fun stuff. So we'll have a poll coming up here in just a moment inviting you to that if you want to mark your interest there it is popping up on your screen. Applicant Not sure how it looks on mobile, but I see some of the responses come in and we'd love to know if you're coming to broker owner And one thing we have a limited number of spots but if you're not an RPA member, we're actually working on making it a little bit easier for you to attend. So if you're not in our member but you're potentially interested in going, we may have kind of a special offer for you that we can we can follow up with. So you can mark that if you're 100% not attending and you're like, why do that when I can be right here with you guys? Listen, that's cool too. We want to know who you are and be supportive. So appreciate that. I see. Wow, over half of people already fill that out. You see that popping up? Just a one click. Let us know your plans and excited to work with you guys on that. Okay. Excellent. If I could bring Ray has been to the zoom stage, please. And I'll just imagine like an imaginary round of applause from all the people on mute. Now we're in this digital world, Ray. It's a little different, but great to see you, my friend. For those who you don't know you, would you mind introducing yourself and property? No, please.
Ray Hespen
So first and foremost, I heard you at the beginning. I am Andrew Smallwood's friend. I want everybody to know that. So. Hi, everyone. So my name is Ray Houseman. I've known Andrew in the second Nature team for a very long time. We're both incredibly passionate about property management and what it means to deliver value. And so what we tend to do on this is we run the most popular maintenance platform in the country for maintenance, property, malt. A lot of you probably heard of it. And so a lot of the stuff that we like to do is continue to innovate in the space. We try to think about how the value prop is different, what's changing in the industry, and then, you know, deliver a lot of our findings to the industry so we can all move forward together. And then of course, very selfishly put it into our product and make our customers lives better and winning in that way. So thanks so much, Andrew, for the invite and excited to be on.
Andrew Smallwood
Awesome. Awesome. Yeah. Ray, thanks for being here. And by the way, I'll say this Ray is not on every social media platform. In fact, he's not on many of them, but one that he is on is LinkedIn. I encourage if you're on LinkedIn or log in there, he's a good follow up post some stuff there. There, there's value right away for those just joining if you're not followed. Right, encourage that. Okay. So, hey, we're excited to have a dialog here. Although, you know, being the curious person I am and source of insight, I may lean a little bit more on Ray and I know he's got some interesting thoughts to that to share with the group here today. And we'd love to also hear from you all and keep this engaging. A benefit of being live. We'd love to see, like in the chat, you know, what's resonating that you'd love to double down on other perspectives or other things that you're seeing and experiencing that you'd love to contribute. We'd love for everyone to benefit, right from what you have to share and offer there as well. And we'll even have time to bring some folks up and take some live questions or continue some live conversation together as we go here. We want to get to that as fast as we can, actually. So we're really looking forward to that. All right. So, Ray, I think as a way of starting with we'd love to start with, you know, state of the market, what are some of the trends and ground truth, you know, that we can kind of establish here of what you're seeing and observing as you're talking to folks and in conversations, What do you notice saying that's changing or not changing in the market today?
Ray Hespen
So we're not an operator, but we are almost kind of like an octopus where we get our tentacles out in the industry and like our customers and what they're seeing. And so I think one of the things that that we're really picking up is like, what are people prioritizing differently like this year versus last year? And it's kind of it's kind of led to some interesting questions. And so one of the things, for example, which was kind of like this crazy thing that was probably so different from a year ago, was this concept of everybody went from, I just have to place a lease out for an opening on a platform and it's just going to get loaded with applications and I'm going to be able to ask whatever I want. And now it has very quickly shifted to the power dynamic a little bit where it's like, how do we hang on to them? Because now great conversations are being had that says if we lose renters, rents are compressing. If we're keeping them, they're hanging on. And so anyways, you take these different data points and I think what we're seeing is everyone is really caring now about the resident experience. I'm not going to say it was 180 because most operators very much care, but now it's like one of the most important things. So that's one. And then the second thing is inflation is still very real. A lot of property managers are trying to figure out how to manage with delivering in a way to investors. And it's getting harder when your costs are going up and, you know, rents are not increasing at the same rate. So between those two, it's driving a lot of different behaviors this year, a lot of different focuses than I would say even 12 months ago. I'm like I say, 180, but feels like.
Andrew Smallwood
Yeah, that's interesting. I was just making a note. We've definitely observed the same thing. I think it can be market dependent, you know, where people are feeling this more severely than others. But a lot of people would say, Hey, there's really been a softening, right, in rental demand. I'm seeing, you know, days on market extend out further and it sometimes it feels worse than it really was. It's like, okay, we're kind of back to normal almost, or what normal was a few years ago. But coming back from a direction of seven days on market and getting any price right, you definitely feel it and notice it more. And you know, Ray, I've been talking to probably a dozen property managers just in the past week or two and just ask like, what? What are some of the biggest challenges you're facing right now? What what do you think you're up against and consistently, I'm hearing about, we've really felt the pressure of rising costs and inflation. And it's not just directly on the property manager, but also I'm here like three or four people I talked to, like the cost of property insurance, like it's gone 80%, up 80% year over year. And I'm sure there's like Floridians on this call right now, like 80%, that's no big deal. It's up 200%. But that's like, that's crazy. I mean, that's crazy to think about, you know, the impact and the pressures of that. And so, you know, to your point, how how can property managers help, you know, property owners that are facing pressures and rising costs? There's residents that are experiencing higher costs. There's yeah, you know, they themselves it there's an increase in revenue in some of the rent growth that's been slowing now and there's still pressure on the costs. You know they're feeling it so so what are were some of his things that I can think about and do anything else from a trends standpoint or say to the market you wanted to.
Ray Hespen
I'll throw one thing out there. So we've obviously saw a lot of institutional action this last year that's almost went like zero movement almost. John Burns tends to do some pretty good stuff. We're seeing more build to rent, but like not like we have been and probably more indicative of the interest rate market. But the thing that's really important too, that I think is worth sharing is that a lot of the times we think the institutional investors are the ones who care about cost. But property, well, we've got around 600,000 rental units on our platform. We have really good data on that and probably around 400,000 investors in our platform. So we can kind of see like patterns and behaviors. The big thing that I think is really important to take away is managing costs is not an institutional game. As a matter of fact, we got led to kind of digging into this when somebody had done research on institutional and how am I managing costs against getting more institutional clients. So we kind of took that same approach and we looked at retail investors, you know, your, your mixture of accidental landlords. My one one and two three maybe. And the reality is the same patterns exist if costs succeed to manager, I'm not getting my mailbox money that I want or I'm expecting. I am going to assume wrong operations and I am going to leave. And so so as those pressures continue to go from a rent price, you know, potentially holding or down and the costs going up, the expectation on execution to hang on to customers has to go up. And I think that's for the retail investors. That's a huge what still.
Andrew Smallwood
Well, yeah. You know, something I'll add here, Ray is earlier you were talking about retention and the importance of retention and the cost of turnover. And I think like, you know, this is one where people are realizing it's like, hey, you've got rental, you know, rental prices went up. And so again, like now you're missing more revenue, you know, than you were before on a vacancy. The costs of labor in materials and everything else have gone up. And so that's, you know, there's inflation happening there. And then again, it's longer time on market. So it's like it's rising for a few different places. And so we have seen, you know, it's been critical, you know, focusing on on retention for all those reasons coming together. And I, I feel like, you know, a lot of this is, again, you want to be aware of threats and speak truth to what is going on, not ignoring it so you can do something about it. But I also wanted to add what I think is a positive, you know, for folks here. And that's that, you know, our observation is billions of dollars, I mean, tons of money and capital has been poured into how can we build technology that supports the self-managing landlord, the accidental landlord, to make them more professional? Right. And people have been trying to attack that and go after that for a period of time. And I think what we're seeing is what we've seen for a long time, which is there's some progress there and there's smart people working on it, but there's still challenge. Right. And they're coming up against, I think, the truth that you and I believe, which is that property management is not a two player game. It's a three legged stool and that professional property managers are essential. It's not going to be the people who kind of sort of care on the side, you know, who really make property management and rental experiences excellent for residents that are going to win. It's going to be professionals who are dedicated, passionate people, obviously, you know, on this call and obviously what we're betting our companies on. That's right. Like this is who we're focusing on, This is who we built for. But I think we've seen, you know, validation from our end that, you know, professional property matters are critically important. They're winning more market share incrementally over as a group. And I would expect that trend to continue. What's your take on that?
Ray Hespen
I think very astute, by the way. One, I think there will be more rentals going into the market purely for the fact that half of the mortgages were originated in 2020, 2020, between 2020 and 2022. So everybody's sitting on these low interest loans. A lot of people called people back to the office. The velocity of home transactions is still happening. A lot of people don't want to give up that interest rate, even if it's just psychological. And so I think there's a lot of homeowners that are going to turn into two rentals. So I agree. I think the opportunity is really good, right? If I move away from home, I can't usually afford to carry two mortgages there. Go, I'm going to rent that out. And I got to rent the other one. So I do think the opportunity is really good. But I would agree. I think there is an element and again, I don't think it's I think it's betting on what the outcome is. And I think in every other industry, when you have advantages in economies of scale, you can expect that to win the long game. And so if we think about the advantages of property management, it's buying power, it's vendor relationships, it's being able to department allies systematize like different things that they can do the incremental cost to deliver the same or even better service gets better. So they're under no circumstance as long as we're focused on the right things and delivering in a way. And that's where we put our guns on the industry. We should not lose as an industry. Ultimately it will go to professional property management. I think there's just going to be an element of who kind of moves towards that new value prop of AI can deliver better returns for you than you. NewCo Instead of let me take the headache, because I think that headache one is a real risky one with all the landlord tools that are popped out, the value prop ouster kind of shit a little bit there.
Andrew Smallwood
I want to kind of like transition this out. You're talking about it like, okay, so here's where nursing going on. And what I hear you saying is, you know, your take would be the value proposition of property measure to continue to earn market share and to continue to keep it right. To be in a good position needs to be focused on like hard quantity metrics of performance compared to the alternative, as opposed to some softer benefits potentially of just convenience. And like this is easier and a little less headache. It sounds like you see there's some risk there, you know, of those being compelling or as sticky. Can you just talk more about that and just like how how you're seeing, you know, leaders and property owners are like, think about that or what your observations are.
Ray Hespen
Yeah. So I think in general and all I do is I tend to look at other things that have went through maturation phase and say property management is relatively new as a in mass business. A lot of a lot of people have started up no, no earlier than 2000. Right, Right. So it's still new. It's still in its maturation curve. But I think when you ultimately look at some of the data, what people care about, they care about how much money they're making on a property period now. So all those soft things of things you do additionally is premium. You are going to create a statistical outcome difference. But where the rub is, is eventually what will happen as it goes on is good operators will find a way to deliver the best returns and it is going to be really hard to make that up in soft and the perfect example that I use. I still love going to like my local hardware store, but I know it's really expensive. As a matter of fact, a I got a really big project. I still go to Lowe's, I still go to these other things. And I think over the last like 20, 30 years, we've seen a lot of the smaller hardware stores disappear because you have some of these coming to deliver tighter financial outcomes, which is inevitably what most people care about. And so the delta between that starts to become really important if you're trying to just, you know, leverage, you know, I've got great customer service. There's a point where the dollar matters. And so I think that's inevitably where it's going to happen. And again, people that really focus on customer service as a differentiator is critical. You know, it's just going to keep moving your statistical up, but not relying always, I think is the is the big thing.
Andrew Smallwood
Yeah. How do you imagine like property managers communicating that right, Like here is it. No, I and here's a specific number. It's like underwriting properties specifically. Is there like a brand promise that works across the board? Like, yeah, I hear the value prop and I hear you saying what direction? Like how do you kind of see that evolving? And maybe we're early days there and it could go different ways, but just cares what your thoughts are.
Ray Hespen
It's a great question. You got to match. You got to match the customer's language. So if they don't know and I you should absolutely not use the word in a way. And I think a lot of property managers know their customers better than I do. But, you know, a lot of the investors that we, you know, are familiar with are not thinking and A.I. why they're thinking. I'm looking at my own statement, how much money came to my mailbox. And so being able to talk about increasing the returns, the monthly returns on the property and those things and talking about it that way is starts to become really important because the other thing that you're doing is it's not just competing against from property management company to property management company. We love those because those are people that have acknowledged that they know property management is the best. And ergo, you know, let's just keep doing that. What really the competition is, what can you property manager do for me versus what I can do myself against the landlord tooling that's coming out. And so the bigger delta you can paint in that of here's all the things that I do to increase the return, to de-risk, to make a better financial future for you than you doing it yourself. That's the one. If you get that competition really nailed down, the TAM is huge and it's incredibly defensible, incredibly defensible. As a property manager. So in a way is probably not the right word. I've actually lean on property managers to figure out what what the best term of that is, but I think it's ultimately it's their monthly returns that they're getting the rent minus fees and everything else.
Andrew Smallwood
Yeah, yeah, yeah. Property performance being just key to probably couple different approaches that you know, one thing I see happening in the market that I think is really interesting and I saw Mark Brewer's on the call today. I see a couple other people on like I think there's a conversation happening with property owners of of not also just thinking too much of like a single point in time Like what what was your cashflow this month right. But how can a property manager help you stay in the game longer. Right. And over a period of time rate increase that LTV. Hey, not getting too focused on here's this one back issue with 20 $500, you know, in the moment, like let me react to that. Right. And so helping to put those kind of moments in a context, right, where people can see there's a longer game to play here and if they can play it long enough, they can win. And working with a property manager can help you do it. They aren't just going to help you at a point in time like placing a tenant, you know, for at least a few days faster. Like of course that's a part of where they add value. But this is a strategic partner who can work with you, you know, over time to deliver great property performance. And hey, are you going to trust somebody who gets 600 at bats at this, you know, to, you know, to do this well and do the skillfully versus you're encountering that issue for the first time. Right. I see people talking about that.
Ray Hespen
Such a pointed question. I think, Andrew, you hit something that I glazed over and you're right, the you can't just do the mailbox money. It's the whole strategy, the investment. Right. I'm just like, you don't have a financial advisor sitting there go, one months bad. Why do you trust the financial advisor? You're playing the long game against your strategy of wealth development. So I think that's such a such an important point because the moment something bad happens, if you've got that mentally condition, that you're still the best one to give them the best return. You know, they had to replace nutria system. That sucks. You wiped out your profit for a year. I'm sorry, but do you realize that that thing's going to probably last through 15 years? And let's think about what that's going to do on the value of the property, how much maintenance costs are going to go down in the next few years. And so I think that's a very poignant point you make know that's.
Andrew Smallwood
The right word. Yeah. Yeah. Something I feel like you're touching on here that I see has like a growing it's like sprouting in the industry, right? Is this idea that, you know, as a property manager, I don't want you to think of me as like a trades person or somebody who's just performing the activities right, of property management here. Like, I want you to think of me almost more like an asset manager. Sometimes I see the language people use using that we're thinking about, again, the performance of the asset over time. And hey, I can really be a trusted and strategic partner to you. You know, who who can really help deliver, right? So something quantifiable at the end, you know that, that that's something we've been hearing and seeing a lot. So. Ray that's great. I'd love to come to like, what's your experience of like, okay, this all sounds great. Like if I could if I can get myself to a strategic position that's more differentiated, it's less commoditized, less subject to pressures, and it's really tied to what my customers wire, which is these key outcomes, right? That I think are going to be durable over time. Hey, let's say I'm sold on that and that's a strategy I want to pursue. Like for some people that can sound like going to Mars sounds great, but how do I start taking steps towards that? You know, what are you seeing people do or how are you guys helping in that direction?
Ray Hespen
So I think that I'll I'll kind of the two value props and I'll just say how how operations probably need to like kind of keep running towards or or what are the changes going to be needed. So if you are going to be somebody that's got a little bit more of an and a wide search and again, I'm not saying that I realize the customer service thing. Like I do not get rid of that ever right. Like well dealt with had experiences but making that not your value prop alone but if you're focusing more on an ally and really trying to drive whatever that verbiage is for an investor, the biggest thing you have to be is a measured organization because there is no other way to do it. You have to understand what metrics you're meaning, what contribute to those, and you have to have a plan of how you're going to deliver, period. If you are an organization that is going to really lean on, lean on the the element of I'm going to take the headaches away, then you just need processes and really like, how do I handle an escalation? How do I do this? How do I do that? And so the difference between those two operating models is really which operators are going to lean into which value prop. And so again, I think everyone in the industry is really continue to tighten up in process over the last probably ten, ten years at least since I've been in there. But if the next leap is going to be more towards an ally, how do we become a very measured organization that knows how to create, you know, outcomes not by hopes and fingers crossing, but we operate in a way that we know can drive and deliver on that commitment we've made for our customers. So I think that's the that's the big operational shift that I think we're seeing. And we're we're obviously trying to help push that way as well.
Andrew Smallwood
Yeah, I and forgive me because I have I haven't gotten much more than headlines yet on this, but I saw like Meld 2.0 or something now. So like, how are you guys even thinking about shaping your guys product? Kind of like help people do this. If if you are, I mean if you're doing that.
Ray Hespen
Well so Meld 2.0 like it's been a year and a half in the making, so it's like, okay, we wait for this for a while. But like, the big thing is, is when you understand where the industry is going. So what we've been doing over the last eight years is like building things that ultimately create outcomes. And one of the things we got really fortunate about is we tended to automate a lot of different tasks. And what that does is that creates data if you do it, because if you rely on a human being and they're touching stuff, data gets unclean, it's unusable, you can't do anything with it. A lot of people deal with that. So ever since we kind of realized the power of data and information and being able to make more intelligent decisions, we've kind of looked at what the next phase of the industry is going to be. So we basically rebuilt a lot of our platform to make a lot of the current features like tighter in there. But really what it's set up for is making better decision points that when I am a maintenance coordinator or a property manager, I have to choose between action or action. BE How can I just make that easy? That makes that in a way outcome more, more readily available. And I think like a good example of it. There's a lot of people that have property managers on their team that have never owned a home. All right, Reynolds, continue to be important, newer, you know, a younger generation hasn't on a home. It's really hard to expect them to be an expert in home repair. How much is a hot water heater? What should I do in this scenario? Right. If you've never dealt with it? And so recognizing that's the reality, while we've got to create an ally, you just have to make more intelligent decisions on the daily and make it easy for people to do that in a systematic way. So Meld 2.0 is really the foundation of a lot of other things we're releasing that are going to just help make decisions easier at that point. To that and why not, whether that be to resident retention or actual costs?
Andrew Smallwood
Okay, that's cool. I want to press you for some gold here, Ray. Unlike, you know, since you guys kind of have access this dataset, what are a couple of things that you guys are seeing as kind of like, Hey, hey, we notice, hey, the rising costs and inflationary costs, right, have made preventive maintenance in this area more critical than ever, you know, ever. Or, you know, hey, we're seeing, you know, time to resolution ty out here. Right. I'm just curious if there's a couple of those insights you think would be most valuable, you know, for people listening in here.
Ray Hespen
Yeah. So I'll throw out a couple that we've seen become major KPIs that are really important. And then I'll tell you what kind of the trends of those are. And so I did write some down here. So again, with resident retention being like really crazy, huge emphasis all the way from, you know, if you're getting started to the largest organizations care about resident renewal rate right now so residents having a good way to capture residents that's really important. Speed of repairs is a great leading indicator for that. And then just to make sure that you're managing cost, as we talked about, cost escalations, it is annual maintenance spend as a percentage of rental or just annual maintenance spend. So those are the three that are really important. Now the very interesting thing, and I used to post this quite a bit between 2020 and 2023, I think we saw like maintenance costs cumulatively like increase by like 36% or something like that. I know that HVAC costs are low, went up by like 48%. It's pretty significant. But now this year we're starting to see some of those stabilized like so if you look at average spend per unit this year in the last 12 months, it just really started to quit taking that hike, which is a really good relief. But the thing that our customers are doing, at least that I can see, is that residents that has made a pretty significant move. So just in the last 12 months and I just did a little bit of digging before this for this meeting is the average resident satisfaction is up 12% from a year ago, which is very meaningful. And I will tell you, looking at all the data and property, mold like that has stayed pretty consistently the same. But clearly the operators that are running property maintenance that we saw, property melt are putting more of an emphasis in there that is driving that. And then annual maintenance spend is tending to at least sit in harbor a similar way there. So that's at least calmed down a little bit. So that's that's, that's the observations.
Andrew Smallwood
Yeah, Yeah. So I'm hearing like, just making sure I got this right. Go ahead Ray.
Ray Hespen
I was just saying I was giving you silver, not gold. Everyone probably realized a lot of those happening. But anyways.
Andrew Smallwood
So resident satisfaction, speed of repair, annual maintainence and speed and all that tied to to retention and renewal rate. Yeah. I'm curious like do this Property Meld use like bench marks in these areas. I heard you hear like RSAT you know going up 12% you know do you have anything you've kind of seen where like hey this is a benchmark people might think about either of like average or people that are achieving a certain result are correlating here.
Ray Hespen
Yeah. So I'll tell you, there's a ton of variability in execution and operations, but I'll just tell you, top quartile speed, I'm just kind of looking at it now, top quartile and repair speed right now for a standard single family operator is around 3.2 days on average for all service issue that's open to close, whereas kind of your midpoint is around 6.7 days. So that's a big that's a big gap. It's big delta in there. So that's an example there. On residents side, it actually is a lot tighter. Top quartile operators, at least in our platform, are pulling about a 4.8 and midpoints around a 4.6. So again, you're I would say you're probably more splitting hairs in there, but that's some of the things we're kind of seeing. Again, if you go back, they consistently trend down about 12% in there. So there's some good ranges. And if you do want we do have on our website a club hyphen, mlb.com, a little KPI download we actually and a list all the KPIs, not just the big ones but all the supporting ones and what those healthy measurements are that you can jump on and take a look for yourself about how your other competitor competing.
Andrew Smallwood
Okay, I'm going to get screwed up if I'm trying to remember. It sounds like it's not Club Med, everybody. It's Club Meld. Yeah, I think, here we. Atlas has got a link in the chad for everybody. Thank you for that. Awesome. All right, there you go. KPI cheat sheet. There's a nugget. There's a takeaway worth your price of admission right there.
Ray Hespen
I would just say in there, if you're reading it, because property will measure a lot of things and we've done leading and lagging. The best way to read it is from top to bottom, like get your metrics that are near the top in order and then you can keep going down. So there's the we know everybody's kind of starting out at their own spot. So as you are reading that top to bottom, we try to design whatever was digestible and not like, here's 20 things you should look at. It's like, No, here's the first five. And once you're done with the first five and those are all you can move on to the next five. But anyways thanks. Thanks for the, the plug there.
Andrew Smallwood
Andrew Yeah, yeah absolutely. Rate anything else like tactical or practical or that you're seeing here are some like best practices or maybe they're not even like common practice uncommon practices that shows some promise, you know, that you're seeing from operators of areas they're focusing on or things that they're doing that are working today.
Ray Hespen
So I am seeing sort of a couple of things. I'm seeing a lot more people vertically integrate me, so they're bringing internal technicians and not as a way one to make it to where they don't have to be as aggressive on fees and some of these other things which can some, you know, again, and we're trying to manage that in a why a property. So that's one and it's helps control costs they've got you've got a little bit of leeway. So that's one. The second one we used to see people doing vendor management at really large organizations, but if some of that data and stuff becomes more visible and available to property management companies and this is a shameless plug for something that we track, it makes it a lot easier to know who's driving residents out issues, who's driving cost issues. And so if you can actually get make it easy to see which vendors you got to have conversations with, which ones do you get more work. That is almost an immediate residents and cost management tool. And there's a ton of great vendors in the property management space, and there are some that make lives hard from retaining investors. And so having visibility on that is really important. So those are the two we're probably see in the biggest are movement in taking seriously even a lot further down market than historically has happened just because of the new economy.
Andrew Smallwood
I'll give a brief shout out I see our friend Deb Meld or Deb Newell in the chat and you were talking about bringing maintenance in house. I know, you know, Davis consulted a number of folks who are trying to go through that decision process and thinking about the pros and cons and ways of navigating that. So if that's of interest to you, you may want to they want to reach out to to Deb. So if I'm hearing you right, you know, Ray, if I'm thinking about Bri, I mean, an Alice, one thing is I get control over quality, right? I have the challenge of, you know, driving performance, right? I'm not outsourcing that anymore, but I get more control over that. I get more control over or costs potentially, if I reach a certain point of scale, you know, maybe I can figure out where that is, where it makes sense, you know, to drive ROI for for me, but also a win for the property owner. You know, over time, it's kind of the big thing driving that. Is that right?
Ray Hespen
Yeah. And the best way that I put it is so if you think about multifamily, multifamily went full technician. We try to just keep all of our costs in the house, which is, you know, I could kind of go on a chat about that being too aggressive in house where it historically and single family property management. We've done all third party benders. But the way to think about it is the vertical integration of the business, right? There's a huge part that makes up 12% or 12.7%, maybe more now of the cost to run a property. And you're saying I'm going to take some of that. That is really important to control matters of quality and stuff I'm going to vertically and integrate a portion of the business. So we tend to see people taking anywhere from 30 to 65% internal. That's kind of a thing. Any time you see all of it. Usually it's again, multifamily and there might be some pricing structures there, but it's not a full, it's a introducing it as a tool for the org.
Andrew Smallwood
Yeah, it makes sense if it's something like really specialized underwater basket weaving with a special carpet insulator licensing and you're probably not going to have the volume to want to bring that expertise in. But if you can see, Hey, here's where I have a bulk or critical issues and it makes sense, you know, for us to look at point that in while still contracting out for a third half, you know of the kind of stuff is what you're saying.
Ray Hespen
Yeah.
Andrew Smallwood
Yeah, yeah. Cool Interesting. I'm curious like how have you seen people handle that with mixed portfolios where they have multifamily and single family? Yeah, I've seen them address that.
Ray Hespen
So there's a huge if anybody follows Dom, he's a big he's the guy who runs 2420 in multifamily and there's a big conversation about centralizing multifamily operations. So the really nice thing and I'll just speak about maintenance because that's what I know, the really beautiful thing is Single family is actually leading the way in sophisticated maintenance operations. They are, whereas multifamily is historically like they've known their lease times, they've known tons of metrics, KPIs, the maintenance. They've always just me, like I'm going to put one technician for 100 units and it's been the same ratio for 30 years. And so single family operators are going like, I can figure out how to run a tank to different properties and I can do it in an even more cost effective way than a lot of multifamily operators are, which is pretty interesting. So back to the question, Single-family multifamily. The only time it really matters that we tend to see a lot of multifamily is if you have a large number of units in one particular community. So if you start going to 152 Bob, you can start to justify some of that. But if you are running a lot of four, Plex is 16 plex, you don't how many on site staff single family and multifamily in that way tend to operate very very similarly. It's just when you get to that size and scale where it's like you know, like I said, 150 units in the community. And again, if you're doing fee based management, we don't have to go into that. But like multifamily sometimes a big no, I'm paying for a tuck as an investor paying for the ticket. You're going to run it there. It's like, okay, well, I'm not going to fight you on it, but it's not the most cost effective.
Andrew Smallwood
Yeah, yeah. I'm curious like, what have you seen from customers if you know this off the top of your head of like a they are delivering good satisfaction, right? So it's not about just, you know, efficiency of the cost of experience but hey, driving good experience, but also, you know, hey, we have our maintenance coordinators like they're not just managing 50 to 100 units or even 200 like they're managing X. Like, where are you seeing people based on the systems, automations, tooling, you know, what they've invested in to put in place? Like where does the limits of that seem to be reaching right about now?
Ray Hespen
So I'll tell you, one of the hardest things is like bench marking capacity in the industry, because the thing you can't do right is being like, hey, I don't know what kind of portfolio you're running and this is how many you should have endorsed per coordinator is really are. But one of the things we ended up coming up with is service issues per coordinator and the better metric and so again, that kind of helps us tie back into the age of your property and stuff like that. So we released some coordinator visibility. It's actually really good tool maintenance coordinators tend to love it because they can know where, where they're sitting, where if they're struggling on something, they kind of pinpoint some of their problems and go after it. But we are seeing such a wide range of that now back to centralization, being able to do that now with some technology enhancements, a lot of the maintenance coordinators legitimately don't have to be on site anymore. And that used to be really, really hard to do. They had to sit next to leasing and be like, this person's pissed and I want to renew the lease back. Well, okay, let me see what I can do and dig it up now with kind of the technology that's becoming less and less. But usually we tend to see people being able to run 500 to 1000 doors per maintenance coordinator and even higher if they're running a machine, teams down and there's a there's a melt count for that as well.
Andrew Smallwood
So yeah, that makes sense of the just not 500 doors versus 500 doors. They're not all the same. Not going to all have the same values. Understand why you'd think about that from a service request standpoint. They have a capacity that's great. Before I tee it up to Ray to just say, is there anything else that anything else we want to talk about or chat about that we've missed? I'd love to encourage those of you who are are with us if there's anything in the chat that you want to put, any questions you want answered, or even just something that you want to talk about or that you think is interesting, we're going to have a little time here at the end to continue the conversation and would love to invite you up or invite those questions. And so, Ray, let's buy people a couple of minutes to think about that and type their thoughts in the chat. What what else is on your mind these days? What else should we be talking about?
Ray Hespen
I think, you know, talk about some other things that are working in favor of me personally, it drives me absolutely bonkers. But government regulatory environment is making it harder to be offshoot landlords or at least putting higher risk on them. We're tending to see a lot more lawsuits from residents, renters towards landlords. And so a lot of those are actually becoming more prevalent. And so the ability to back yourself up and everything is again, continue to be much better in the property management space. If you've got good systems that are documenting you, you can walk right into a court and say, Hey, I've got all this here, no gross negligence on my part. That one is a huge bar. So litigation regulatory is huge. And there's even specifically for the maintenance, you know, we bring a lot of people in because if in certain areas that you can get rent credits and everything like that, they fight that. And that is a really sucky conversation with an investor. Next. Sorry, we got to do this because they're saying we didn't do this fix and time and again. So regulatory and litigation is is clearly on on the rise.
Andrew Smallwood
So yeah, and maintenance is one of those categories where it's emotional, it can be expensive. And so it feels kind of like ripe for, you know, where where consumers may have, you know, disagreements and or conflicts, whether they're looking to resolve. So what I'm hearing you say is probably better to have the documents in place, everything else. Hey, this is supposed to be consistent with the least, I suppose, of what somebody's saying. Here's what we can show actually happened. Puts them in a better position.
Ray Hespen
So and I wrote a big note here, and I think what you guys are doing are this really important on this front, being a preventative maintenance expert is now like table stakes in a lot of senses. So we have some customers that are pushing some really large initiatives to get people on preventative programs. I know, you know, second Nature offers a benefits package and that can be preventative for air conditioners with filter change. And so I got super important. We're seeing a lot more people implement things like semiannual HBC inspection. See, I've seen one where a customer is coming up with like a clever like interior honeydew list of things that we will do to ensure the home, the gutter cleanings, the furnace inspection. That's happening while before needed. And so those things in there are immense value. Property managers can make money and they're creating a statistical difference in the cost to maintain the property. And so because costs are getting pretty nuts, we are seeing some people go super happy into that. And just from a psychological standpoint, that is far different than a person who's thinking to self servicing landlord. They do not do prevent or just as far. So it's a great differentiator as well.
Andrew Smallwood
Yeah, I like that. Okay. I'm going to take that opportunity to do a 62nd share here and we can send this. By the way, anybody who wants this, you can just email triple win at second Nature dot com to get a copy of this. But we actually did we got property build support in collaboration. A number of operators that use them participated in this, but the National Rental Home Council wanted to do a study and fact data study and essentially what it was is over a period of 18 months for operators just under 8000 single family rental homes. So controlling for, you know, different geos and different operational practices and obviously seasonality, you know, summer weather, etc.. You know, what happens when you side by side, This group of properties, every fact we're quarter by by date. Right. And address and you compare the properties that were on the standard protocol it's in the lease it's a resident responsibility. We're getting out there once a year. We are an annual heat up check up change there versus every 60 to 90 days. Filter delivery to the property. And there was a 38% reduction in work order volume. Now that doesn't always translate perfectly to 38% in cost. Right. But even if it's your least expensive 38% of your work orders. Right. That's driving down cost significantly. You know, and we spec that it's about average out so different operator agencies 3137, you know almost 50% in Atlanta this was an operator in Memphis, 42%. There are some other, you know, slides and things there. But we appreciate now participating in that. And it's it's been interesting to see, you know, what steps people can take with these scattered site properties to prevent and get ahead of reducing costs. And what a big when that is awesome. Okay. I grew out of age group. go ahead.
Ray Hespen
Just just for your comment there. These are really expensive in the summer. So even if you can get even a little bit of relief, it tends to be something that can wipe out a lot of in a life for an investor if you got to do an emergency call. And so the problem is when you tend to find HBC issues as when they're also super expensive. So I'm just kind of double down on your data there. Sounds good. Everybody knows what.
Andrew Smallwood
I see in the chart. There's Laura Mac with a triple and the second intercom. If you're looking for copies of things or whatever it might be, there's a KPI sheet up there if you were looking for that. And then I see a question of tips on helping with vacancies and I think it's how can we I'm not sure some of the time, how can we maybe reduce some of the time they're in market? And because the question diminished. Thank you. All right. Yes. So reducing reducing time on market, really, I don't know if you've got any ones on that or if we want to open this up.
Ray Hespen
I will tell you, there's a lot there's a lot of people that tend to focus. So when we talk property, all the people coming in, it's like, how can I reduce my turnover? Times have become more popular. But the thing that I kind of find interesting is turnover Time is like a known thing that I think that if I remove turn time by one day Arago my, my gap between my leases is one day, but it's the most controllable thing. And so I'm not going to be able to speak to too much so that I could talk about turnover. The best way to do it. But there's a lot in there. But I would say making sure that as an operator, if you are focused on time, on market and other things, making sure that you also have a good strategy to retain them, because a lot of the times when you battle a symptom that just makes you spin the wheels, when the reality is if you go to the root of how do we statistically improve, how many go to market, that's that's a big win to not saying both aren't important. I'm just let's just kind of get a pattern.
Andrew Smallwood
And I think we can probably link to there's a couple of second nature blogs about where we've just interviewed professionals in the industry about marketing, you know, how you're marketing your property and are there other locations where you can increase the traffic and people that are coming through have qualified applicants? How can you move people efficiently through that process? Could be, you know, another opportunity. It's not one that second nature, you know, does a whole lot of or has expertise in ourself, you know but but we have produced some content on that that could be could be helpful to that. We can we can help connect. So we'll take a note of anyone asking that question and make sure we get that to them. One of the thing that has been interesting that I have seen, Ray, that actually does tie to second nature is we have actually been seeing people and we just recreated actually collateral for this with a typical client will create lease language screening disclosures, marketing collateral, make it really transparent and clear to the resident. Here's here's what you're getting right with resident benefits package and services are convenience the rewarding experience that creates for a resident. We actually recently updated because we were kind of using like a move in flier or something you'd leave on Encounter, you know, for a showing. It was getting used by property managers in the listing itself, but it's kind of tax rich doesn't look great in a thumbnail. You can't quite tell what it is. So we recently updated that. So I would say if you're a current customer of second nature, you may want to reach out to an account manager to get a copy of that, because what we're noticing, we actually had a Karen Jordan out in California had an owner who was like looking at listings and they're like, I follow all of your listings because of, you know, what you guys are offering here and the unique things that that people are not getting from other properties. So for attracting people, you know, to, to the property and disclosing that deploying a resident benefits package successfully, you know, it's a it's a best practice but can have other benefits for people that are screened out in your listings, not just residents.
Ray Hespen
All right. Well, I'm going to throw one other thing to and this is a total this has been really popular in things for people to throw in the home. So when they are touring them and they can kind of see like it's a an experience leading type organization, we've had a lot of customers start asking for these, which we can produce. If you are interested in those, they do cost money, but we don't make money off of it. But that is another thing as well. Just kind of to keep reminding the resident like how the experience is going to be different here than maybe where they were at before.
Andrew Smallwood
So awesome. Awesome. Hey, I see a couple of people, by the way, replying. That's property managers helping property managers in the chat. I love that. Thank you, Jamie. I think I saw Mark Brower even typing out a couple of ways that reducing time of time on time on market. I also see another question here. That's right for you, Ray. We don't have a system to manage data. Is property now the best option?
Ray Hespen
It's a great question and a lot of times I talk data like we're a data company and we're actually a maintenance process software. And so what we've realized, if you create a very systematic way to execute maintenance and there's plenty of automation, it collects data. And so that's the benefit of having something like this. We believe it creates a great experience. It's very efficient, yada, yada, all that sort of stuff. But a lot of what we do and what we're able to service is really unique in the industry is because of that experience, we're able to capture the data. So a lot of people ask, Hey, can I just overlay some of your tools and use X, Y, and Z back? I wish I wish we could. We'd sell it if we could. But the reality is you have to have a great system to capture. And most of the times, if you have a work order platform, you know, there's a lot of there's a lot of great choices out there. But if you do go and look at some of the data in there, they tend to be highly human, reliant on typing it in and therefore a lot of the times incomplete or inaccurate. It's just very difficult. So I would say we are a maintenance process first that happens to surface. The data is probably a better or better way to count it.
Andrew Smallwood
Now, there's not an account, a property accounting platform, but not, not all of our times. Yeah, that's right. Cool. Hey, great question, everybody. Here's what to do. Want to say thank you for everybody having their time here. We're going to bring this one to a close ray and the property multi it was great to work with you in the marketing team leading up to this Really appreciate you guys generously offering and preparing for this. Again there's a KPI cheat sheet up in there. We may see it one more time in the chat just to make it easy for people to find it. That was a great active and free offer there. There's anything you need from second nature. You can email triple when it's second nature. Com And for those of you coming to broker owner, excited to see you there. But those of you not coming to Brook Runner, you may want to check out the events page at the second nature dot com website and see what else we got cookin. I coming up that you can participate in. We love connecting great property managers with other property managers and tools solutions whether it's with us directly or otherwise. It's helped them advance and improve their business so that. Ray any parting thoughts or anything else you want to say where we sign up?
Ray Hespen
Nope. I think everybody that's on here is going to have great impact and they're going to have a great year this upcoming year. If you're somebody who's investing in this stuff, I'm really excited. I think we've got a bright future ahead of us as an industry as long as they focus on the right things. So super thrilled to see everybody here. And thank you so much, Andrew, for the offer and all the other second Nature team members. Laura Garstang There's a lot of you, you guys are great. So thank you so much. Thanks for having me. Really appreciate it.
Laura Mac & Carol Housel
And that wraps up another episode of the Triple-Win Property Management podcast. Thank you for pressing play. We hope you've gained valuable insights and inspiration.
The Triple-Win Property Management Podcast is proudly produced and distributed by Second Nature, where we believe in a Triple-Win, building winning experiences for your residents, investors and your teams with the only fully managed resident benefits package. Visit SecondNature.com to learn more and talk to an RBP expert in your area. If you have any questions or comments or want to weigh in on the conversation, we'd love to hear from you. Email TripleWin@SecondNature.com. That's TripleWin@SecondNature.com. Stay connected with us beyond the podcast. Visit our website at SecondNature.com to stay updated with upcoming property management events and articles. And don't forget, you can keep the conversation going in the Triple-Win Property Management Facebook group. It's exclusively for property managers. To receive even more valuable insights and updates, subscribe to our newsletter. You can find the link to that and much more in the show notes. On behalf of the Triple-Win community, this is Laura Mac, thanking you for tuning. And on behalf of Second Nature, this is Carol Housel. Check back soon for another exciting episode. Until then, keep striving for that Triple-Win.