Nationwide, the average apartment rent increased by 14 percent last year, and by as much as 40 percent in cities like Austin and Miami, according to The Washington Post. Renters with low- and moderate-income levels are struggling, as the demand for accessible housing is growing faster than inflation.
For years, proptech has primarily been leveraged in luxury homes and high-rises, as only Class A property owners could justify investing in these devices. Meanwhile, Class C properties have traditionally shied away from implementing proptech due to its perceived irrelevance to their market objectives and potential cost.
Proptech, also known as smart apartment technology, is the use of digital automation to monitor, control and optimize functions within properties. This enables many household amenities — such as appliances, environmental controls and security systems — to function autonomously and be remotely controlled.
Though these communities have traditionally been slow to adopt the latest trends, proptech has quickly become an exception. Despite not initially seeing the value in smart apartment technology, Class B and Class C property owners are now beginning to recognize the operational efficiencies and wider profit margins that are possible when they invest in these devices.
There is no doubt that proptech’s return on investment (ROI) is top of mind for owners and operators debating whether to adopt smart home ecosystems. With scalable solutions that are customized for multifamily properties’ specific needs, owners can maximize ROI across their portfolios. However, what does that look like when it comes to an owner or operator’s overall budget?
Let’s take a look at a multifamily property with 100 units. By charging an additional $20 per month to tenants, owners could break even on equipment costs in 34 months and earn an annual net income of $18,000 after reaching this point. If that same property charges an additional $40 per month to tenants, owners could break even in just 17 months and earn a net income of $42,000 annually after reaching this point. Additionally, there is a potential $6,000 saved in annual cloud service fees.
These solutions also allow owners to find cost-effective answers to expensive problems such as energy consumption, security monitoring, and operational inefficiencies. As a result, proptech is quickly becoming a must-have for any multifamily property looking to stay competitive in today’s housing market.
Driving Down Costs with Operational Efficiencies
The multifamily industry has reached a turning point where owners and operators must acknowledge how their peers are leveraging smart technologies to gain operational efficiencies. The benefits of proptech to the accessible multifamily housing sector are vast, but the top three include:
- Risk Mitigation — Imagine the utilities in your apartments warning you of an impending property disaster before it happens. Or the convenience of monitoring apartment utilities from a single web dashboard, knowing immediately whenever an apartment may need maintenance. Property owners are now leveraging proptech as an essential tool for risk mitigation and asset protection.
Class C property owners prioritize cost reduction, risk mitigation, operational efficiency, lower labor costs, and energy savings — all possible when investing in the right proptech solutions.
A water leak detector can alert managers the moment moisture is detected from a pipe or toilet, allowing staff to swiftly respond to minimize costly property damage and protect their assets.
- Energy Management — With proptech, owners and operators can also combat energy consumption costs. The most effective energy-saving solution for multifamily communities is the smart thermostat.
Smart thermostats regulate temperature spikes and dips while also allowing users to schedule heating and cooling throughout the day. As a result, energy consumption drops, saving money. Additionally, smart thermostats can be installed inside empty units to manage temperature fluctuations and further cut costs.
Unattended vacant units can quickly rack up energy costs. The U.S. Energy Information Administration (EIA) states that space heating accounts for 25 percent of energy usage in commercial buildings. Fortunately, automated temperature control can offset some of these losses, saving up to 58 percent across vacant units, according to research from Alliance Residential Co. Data gathered by the Environmental Protection Agency (EPA) has also indicated that smart thermostats can save residents an average of 8 percent on their monthly utility bills.
Energy optimization is a must for multifamily owners looking to cut portfolio-wide costs. Smart thermostats are powerful revenue-generating amenities. They easily reduce usage and costs and increase net operating income (NOI). By implementing these simple solutions, property owners can begin seeing a return on their investment within as little as 24 months. Meanwhile, residents will save on their energy bills.
- Operations — Over 62 percent of property managers consider optimizing their operations one of the top three professional challenges they face, according to new survey data released at the National Apartment Association’s (NAA) Apartmentalize 2022 conference. Additionally, 74 percent of owners said their greatest challenges are human resources and staffing.
Smart apartment technology streamlines employees’ day-to-day responsibilities. When property staff leverage proptech to oversee repair issues, they decrease the number of maintenance tickets they handle significantly, saving their staff time and cutting payroll expenses. Data insights from smart tech also enable predictive maintenance which can help owners proactively mitigate emergencies to reduce downtime, lower costs and improve overall community performance.
Smart apartment technology also allows managers to offer prospects the option to take a self-guided tour of an available unit. This means owners and operators can host more prospects on average, which improves the frequency of lease signings and, in turn, increases monthly revenue.
In an Apartmentalize 2022 survey, 54 percent of property owners cited maximizing their profits as their top concern. Proptech saves on labor costs as managers can maintain productivity with fewer employees on the clock, thus lowering payroll. This makes an even bigger difference for Class C properties, where every cent matters.
Proptech Is for All Property Classes
Smart apartment technology is no longer a novelty. It’s the cost of doing business in today’s multifamily housing market. Yet that doesn’t mean it has to be cost-prohibitive. More than ever before, owners and operators realize the tangible operational and economic benefits of investing in proptech as a cost-effective solution.
Smart apartment devices are among renters’ most desired amenities. According to the Technology in Apartment Living report released by the NAA, 60 percent of property owners reported using smart home technology to attract and retain residents. A 2022 survey of renters conducted by Rent.com found that 82 percent of tenants want at least one smart device or system in their home, with thermostats and locks at the top of their wish lists. By adding these devices, they can protect their belongings from damage and avoid being liable for any outstanding damage costs.
When you offer amenities that your residents want, you incentivize them to stay in your community for the long term. Satisfied tenants will likely refer their friends and family to your community, which can further increase your occupancy rate and monthly rental income.
Class C properties benefit immensely from even the smallest operational efficiencies. This could mean curbing even a fraction of site-wide energy consumption, reducing payroll without sacrificing productivity, or monitoring facilities to perform predictive maintenance and mitigate costly property damage. Plus, by automating rent collection, security oversight, maintenance processes and more, owners and operators can significantly reduce costs across the board.
Sylvia Crawford is senior director of marketing strategy and planning at Arize, a provider of smart apartment technology solutions for multifamily properties. Under Sylvia’s direction, Arize is focused on developing new technology and expanding its ecosystem of smart products to multifamily properties across the nation.