Technology advancements in the multifamily industry continue to be wins for operators as well as renters and prospects. Multifamily Executive recently caught up with industry veteran Ed Wolff, chief revenue officer at LeaseLock, to discuss some of these innovations and their benefits.
MFE: When you look across the multifamily landscape, what are some of the notable advancements that the industry has made when it comes to the resident application and move-in process?
Wolff: There’s been a continued push in the apartment industry to make the resident experience—including the application, screening, and move-in processes—simple, convenient, and affordable. Residents today are used to the convenience that technology has made possible in all parts of their lives, and now, more than ever before, they want whoever they're interfacing with to be easy as possible to do business with. They want a one-click transaction, like they get with Amazon or Uber.
For example, many communities are offering an online application process that encompasses one workflow so that applicants don’t have to move from screen to screen. Everything is completed within that one workflow, and the resident doesn’t have to pop out and go elsewhere. They can do it all and follow the workflow seamlessly until they get to the e-signature for the lease and the addendums that accompany the lease.
MFE: To ease the application process and the resident experience, many operators have long sought alternatives to security deposits. Why is that, and why are security deposits problematic for both apartment operators and their residents?
Wolff: For a long time now, I have been of the opinion that—sooner rather than later—security deposits will no longer be in existence. The reason why I say that is they create friction for the resident as well as administrative and other burdens for the site team.
For residents, large, upfront security deposits are an expense they often just can’t afford, especially in a time when 78% of U.S. workers live paycheck to paycheck and incomes aren’t keeping pace with the cost of rental housing. And when they can pay a security deposit, it’s often only because they delayed their move-in to save the required money.
As for on-site associates, there is the time of managing the deposit pools, and there is the friction of dealing with residents who are moving out and are upset about their deposit refund. There’s also the effort it takes to respond to the angry online reviews from so many of these upset residents. Reputation management is more important now than ever before.
MFE: There has been a lot of changes in the deposit alternatives and replacements. How do they compare?
Wolff: Surety bonds are probably the most common alternative to security deposits, and they are a three-party system consisting of the resident, the property, and the bond guarantor. They allow the resident to pay only a portion—typically 17.5%—of the total deposit amount at move-in as a nonrefundable fee.The resident doesn’t have to pay as much money upfront, and the bonds can help operators boost occupancy rates.
Lease insurance is also gaining traction in the industry. Residents pay a reasonable monthly deposit waiver fee in conjunction with their rent. Insurance is then provided to the owner of the property to protect the property against apartment damages and unpaid rent. The coverage offered by lease insurance often multiples more than what a security deposit or surety bond provides, offering owners guaranteed protection from risk.
MFE: When an apartment operator decides to explore alternatives to security deposits—or eliminating them altogether—what should they be looking for in both the product itself and a supplier-partner?
Wolff: When considering moving away from security deposits, it’s imperative operators really dig into the products and solutions they are evaluating.
Some key aspects and questions operators should be asking any provider are: Are the funds pooled, and how and who manages that pool of funds? Is the money going into the program enough to cover the losses coming out for the long term? Is the pool at the property, portfolio or a carrier-level? What happens if that pool dries up? Who is then financially responsible—the resident, the community, or a reinsurer who will only sustain a 40% to 60% loss rate? And if a property needs to make a claim against the resident for damages at move-out, what does that process look like?
I think they need to look at what's covered in terms of damages and risks, and what's not. What kind of protection levels exist? What is the actual cost of the solution? It is also important to evaluate whether the product accelerates the pace of leasing, does it reduce bad debt and could there be an ancillary income component to deploying a program like this?
Finally, and probably most important, how does this product impact both the residents and the on-site teams. Renters today truly want a simple transaction, one-click experience—one with limited decisions to make and one that is completed as seamlessly as possible. On the other side of the table, a seamless leasing process can make things so much easier for an already burdened on-site team. So, it is important to understand how any new solution integrates with your property management software as well as the leasing workflow.
It is all about the resident experience and making it easy to do business.
MFE: Do you have any other recommended best practices for operators when it comes to striking the right balance between protecting their communities from lease skips and damage and the financial constraints of their residents?
Wolff: Understand the product in detail, in terms of what is covered and what is not covered; focus on long-term sustainability using simple math—remember reinsurance carriers will not absorb sustained losses over time. Find a supplier that has a track record of deploying a solution that works effectively and efficiently and that, in the end, creates a positive experience for the consumer.