You’ve probably heard the phrase “proptech” thrown around at industry events or read about it in industry publications. Savvy property professionals know that property technology (proptech) is the key to future-proofing any multi-tenant building. But with so many solutions on the market, how do you make a wise proptech investment?
Read on to learn more about the beginnings of proptech and where the industry is at today, as well as three crucial steps to ensuring your proptech investment pays off.
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The beginnings of proptech
Since the first luxury multifamily building was constructed in New York City in 1830, developers, owners, and managers have been seeking new technologies to lower operating expenses, increase tenant retention, and reduce turnover — anything to improve the net operating income (NOI) of the property.
That first luxury building had private lavatories, a technology that didn’t make its way into the multifamily industry until nearly 75 years after it was invented. As private bathrooms became the standard, innovations in building materials eventually led to the LEED (Leadership in Energy and Environmental Design) movement, which became widely accepted for its ability to lower ongoing maintenance and operating costs.
Recently, Internet of Things (IoT) devices have found their way into the technology stack for real estate professionals. These devices not only reduce capital and ongoing costs but also improve tenant satisfaction by allowing residents to digitally interact with their living spaces.
On the back of these connected devices, a new industry was born: proptech. This industry comprises companies offering a collection of specially made hardware and custom-designed software, all controlled from a smartphone.
In just the last five years, proptech has come to dominate discussions and attention at real estate conferences, in publications, and during internal strategy meetings. And for some early adopters, it has meant the difference between market-leading investment returns and subpar ones.
Today, the multifamily industry is shifting from high-touch to high-tech as a way to develop, own, and manage more efficient buildings, attract new residents, and retain existing ones. Outside investors have also taken notice of this shift.
“Proptech is reshaping the real estate sector in the same way technological innovation has transformed so many other industries, like Uber’s shakeup of the taxi business and Airbnb’s rapid expansion in the lodging market.”
3 steps to ensure your proptech investment pays off
Unfortunately, using proptech in new developments or existing properties can be expensive, as there are purchase, installation, and management costs to consider. While it’s easy to understand and appreciate the reasons to want proptech in your building — especially if you’re tailoring the living experience to a certain demographic — it can be difficult to avoid the costly pitfalls of investing in new technologies.
Take these three steps to ensure your proptech investment pays off:
- Select the right proptech
- Choose the right installer
- Market your proptech and ensure resident adoption
1. Select the right proptech
No amount of proptech will get you ahead if it’s not the right fit for your building or your tenants. That’s why it’s crucial to select the right products and services before making any proptech investment.
Since there are so many options out there, you’ll need to consider various factors to determine which proptech is right for you.
- Your resident demographic and their needs. Are your residents primarily millennials or baby boomers? Do they live in the suburbs or the city? Do most of them live alone, with roommates, or with family? These are all relevant questions to ask yourself to ensure your proptech meets the needs of your residents’ lifestyles.
- Internal buy-in. Before making a proptech investment, ensure that everyone on your team understands the value and is on board with the purchase.
- Your budget. Take the time to determine your budget. Don’t forget to factor in every related expense. For example, consider the cost of hardware, software, installation, service fees, and maintenance.
2. Choose the right installer
Proptech is a relatively new field, and many of the traditional installers and integrators in the industry are still catching up. That’s why it’s so important to hire a certified installer who knows how to get the job done right. There’s nothing worse than committing to a proptech investment only to have it go south because of an inexperienced installer.
Before getting started, ask your potential installer the right questions to make sure they’ll do a good job.
Ask the installer:
- How long does the installation process usually take?
- Can your building’s infrastructure support new technologies?
- How many people are typically involved in the installation process?
- How many wiring touchpoints or connections are required for the system?
- What will the ongoing maintenance costs be?
3. Market your proptech and ensure resident adoption
Many prospective renters are actively looking for properties with solutions that can solve real issues such as delivery and visitor access. Market your proptech investment as an amenity that will improve the lives of future residents. Show them how easy it is to get their Amazon deliveries or give temporary access to their friends visiting for the weekend.
But don’t stop there.
If residents don’t use the system — or aren’t making full use of it — then the value of the solution decreases. Therefore, it’s critical to implement a plan to increase adoption.
Once the system is installed, put together an onboarding plan. If you’re working with an established proptech provider, they’ll assist you with the onboarding and support of new residents.
By marketing your proptech and ensuring high adoption rates, you’ll garner more interest from prospects and make the most of your investment. Property managers and owners will see higher lead volume and improved retention rates. Plus, they’ll enjoy greater efficiencies in their daily operations. Developers will see reduced material and labor costs.
Proptech is a worthy investment
Above all else, it’s important to remember that you’re making this proptech investment to improve the lives of your residents.
Because people have no issue leaving their rent payments behind. But leaving their homes behind? That’s difficult for anyone to do. Your goal is to create a living experience that your residents call home.
- Start by understanding your residents’ needs.
- Then, get internal buy-in from upper management down to property staff.
- Always stick to your budget and find a trusted provider with a simple installation process and a strong support team.
By following these steps, you’ll be well on your way to seeing a positive return on your proptech investment and delighting your residents.