Congratulations! Either you’re already investing in smart technology for your properties, are considering investing while weighing your options, crunching numbers and listening to value propositions of the various companies competing in the space, or you’re a property manager tasked with selling an additional amenity to provide a leg up on the competition. In the end, this technology will not just be something to contemplate but will be an incredible tool driving a new era in modern apartment living.
However, many companies look at just rent premium increases as their default Net Operating Income to assess ROI. While that may be a simple way to gauge value if selling a property, the value play is also impacted by numerous other factors, some of which are listed below:
1. Hardware & Software Platform Decision
How flexible would you like to be? When making the investment, ensuring you’re positioning yourself for future-proofing and scale is imperative, thus being focused solely on specific devices could be a flawed approach. Going the hardware agnostic route with interoperability and connectivity (devices communicate with each other) over proprietary technology allows for positioning necessary to adjust your community with evolving software needs and integrations. Pretty or new devices sometimes don’t play well with other devices. This could impact future adoption and sunk capital.
2. Property Marketing/Brand Execution
There are a few items to consider here. How well are you positioning your property on your website? Are your inbound leads understanding the offering and the opportunity? Is there consistent messaging on listing service sites like Apartments.com or Zillow.com? How are your on-site teams sharing marketing collateral and understanding the importance of this investment? How you position the outreach directly impacts the excitement and lease-up rate, and allows for your team to execute on the ground.
3. Staff Training
Execution is expected but education is immensely important. It’s not only residents who may need some tutorials of what smart technology is and how it will impact their day to day. Leasing agents also need constant education so they know what they’re selling, how to sell, and why they’re selling. Buy-in from your on-site team is imperative to gauge ROI. Leasing velocity, lease-up rate, vacant unit automation, potential overhead savings, and fewer incentives to leasing staff lead to success. Being able to empower your leasing agents to upsell the smart technology effectively reaps enormous rewards to property owners.
4. Class A, B or C Properties
Smart technology shouldn’t be considered a luxury, but a necessity in the world we are moving to. Many Class A properties, especially new construction, have some aspect of smart tech as part of the formula. Class B & C properties have the ability to easily keep pace and we’ve seen upwards of $300/mo/unit in rent premiums (average of $67/month) with smart technology integration for these properties due to having a larger runway to charge greater premiums without scaring folks away.
5. Resident Usage
How are you measuring usage and engagement? Does the community get excited talking about it? Do you position a resident or two as Evangelists to drive participation and visibility? Are you gamifying or trying to find ways to do so? Are you providing the best experience possible through automation where the resident doesn’t need to go into an app to control their smart devices? This all impacts lease renewal rates while the data defines future purchases or sunk cost.
6. Installation Costs
New Construction vs Retrofit. You will need to assess additional installation costs for retrofits as most new construction electricians install during normal construction for no additional cost. However, retrofits also allow testing in increments so gauge more immediate value and ROI.
7. Provisioning Timeline
This aspect is often overlooked and somewhat overlaps into #6. Traditionally, pairing an entire smart apartment with double-digit smart device count could take hours. However, with the right tools for provisioning, you can pair smart units in 10 minutes with the right partner and platform. This saves measurable labor costs and allows for future scalability in a financially viable manner.
8. Proper Onboarding of Property Management Team and Residents
This follows from the staff training piece, but in the end, how well is your team guided by your smart tech provider? How’s their Knowledge Base, videos, training, alignment with your electricians? Each element enhances the offering by the leasing staff while educating residents efficiently, for quicker adoption.
9. Labor and Energy Savings
This is where you can assess true monetary value. We’ve seen properties saving 200 hours per year in on-site labor when they can control vacant units from a dashboard, no resetting devices, maintenance alerts, controlling HVAC high/low in all units. Also creating automation in empty units to monitor and adjust as needed has shown upwards of $35-40 monthly per door in utility savings.
10. Automation, Machine Learning, and Future Proofing
First, it’s important to distinguish remote control vs. smart vs. intelligent. If you have devices simply managed within an app (or multiple apps), that’s remote control. Having those devices communicate with each other is smart. Having a platform that learns behavior and automates numerous aspects of your property as well as your resident day to day is intelligent. Adding smart devices down the road that can seamlessly integrate into your current infrastructure (don’t install iPod docking ports, as much as you may like to live in 2005) is imperative. Layering on software platforms for resident and property experience is mandatory to allow your property to evolve with technology. Those platforms should all sync (eventually) to create a seamless and incredibly intelligent resident experience. The data-driven from this future proofing capability drives value….a yet to be determined value.
Properties need to be able to understand what data is being captured and the ability to monetize this data, both for the property and the resident, will be essential in extracting enhanced value from your properties. Think of situating your properties to capture a small piece of every household good transaction being delivered through your buildings? How about sharing some of that with residents? Data should be used for everyone, and not just large internet companies or retailers. Long term, with the right smart technology infrastructure, properties will see substantial revenues from data, nearly as much as rent itself.
In the end, this smart investment you have (or are considering) will show returns if you handle all the details to market, onboard, train, execute and future proof to ensure your entire team’s engaged and bought in on the importance of this ongoing initiative. It’s difficult to share a value of ‘x’ based on purely rent premium compared to non-smart apartments. Some of the nuances listed above will lead to understanding other savings, operational efficiencies and new revenues that should increase the value of your properties. The resident experience is evolving and ever more demanding. Finding the correct tools and partners to assist you in this process is incredibly important, now more than ever.