Get your operational house in order: Leveraging technology to reduce multi-family expenses and optimize performance

How can multi-family owners and managers leverage technology to unlock new standards of efficiency and performance?

Operating efficiency is always a top priority for multi-family properties. And these days, operators are facing even more pressure to manage operational expenditures (OpEX) and improve the tenant experience as a wave of new supply hits the market.

Despite strong underlying demand, the US multi-family market is working to absorb record levels of new construction deliveries over the past two years. Reports indicate that more than 500,000 new units were delivered in 2023, which is expected to push the vacancy rate to 6.25% this year. The new supply is slowing rent growth at a time when operators are battling higher interest rates, soaring property insurance costs, and wage growth.

The solution for many multi-family operators has been to lean into technology – more specifically, centralized operations and artificial intelligence – to add value and reduce costs. According to NMHC & One11 Advisors’ 2024 Multi-family Technology Benchmark Survey, nearly half of respondents (48.4%) said they had implemented centralization programs in 2023 and another 51.6% said they plan to implement centralization in 2024. Moreover, a majority of respondents also said they have implemented or plan to implement artificial intelligence (AI) for different applications.

Figure 1 - What innovative new technologies organizations implemented in 2023, and plan to implement in 2024

Growing appetite for centralized operations

Centralization refers to the consolidation of certain tasks or processes, such as accounting, leasing and lease administration, marketing, and maintenance requests. Operators view centralization as an opportunity to be more scalable and to reduce overhead, which creates the cost-benefit of having fewer people on site.

One of the big drivers behind the push for centralized operations is staffing challenges, especially on the maintenance side. The industry has struggled to hire and retain maintenance technicians, which impacts the ability to deliver consistency in staffing and service. On top of that, there is a growing number of people in the workforce who want to work remotely. That has led to a lot of operators now asking, “What can I centralize and what can I make remote?”

Centralization of maintenance has been a “game changer” for N.O.A.H. Property Management. The firm uses a 24/7 remote maintenance solution to receive incoming maintenance phone calls. Its maintenance team then meets each morning to review and prioritize the daily requests. “We have reduced our costs significantly by deploying our in-house maintenance resources to the properties on a rotating basis each week to most effectively serve the units. This has eliminated any downtime for our maintenance team where they are constantly staying busy and less of a distraction to our on-site staff,” says Matt Foster, CEO of N.O.A.H. Property Management.

The key to successfully leveraging AI tools

AI has emerged as a hot topic across all industries – multi-family and CRE included. The reality is that the multi-family industry has been using AI for a long time for tasks such as scoring renter leads from inquiries that come into call centers. Today, operators are discovering new AI tools – ranging from predictive analytics to chatbots that handle leasing inquiries and tenant requests – that drive meaningful efficiency across applications.

For example, N.O.A.H. Property Management is using ‘AI Colleen’ as a resource to collect past-due rents and serve as a text/phone concierge to help answer residents' questions on their tenant ledgers. “We've seen an increase of 5% and hopefully will see more in collected rents. Colleen AI also helps collect rent after a tenant moves out, before we send that resident to collections,” adds Foster.

While AI has a lot of potential to drive operational efficiency, it’s admittedly not an easy space to navigate. As new solutions continue to disrupt the market, technology can be mistakenly viewed as a magical solution to efficiency. At the same time, the popularity of AI has nudged it into ‘buzzword’ territory; oftentimes, people throw out the term AI without really understanding what it means, or if it is the right technology for a particular application or problem. The starting point needs to go back to that fundamental question, what are you trying to solve? Is it greater efficiency? Are you trying to free up your staff so they're not sitting in front of a computer every day? To find success with AI tools, you must first understand what it is you want AI to do.

Figure 2 - Companies are taking a variety of different approaches to addressing the deployment of AI in new technologies

Navigating technology pain points

With technology evolving so quickly, prop-tech can be an overwhelming space. According to the NMHC & One11 Advisors’ 2024 Multi-family Technology Benchmark Survey, the top three barriers to effectively implementing new technology opportunities are:

1. Not enough resources focused on innovation

2. Adaptation to change by internal associates

3. Finding the right solutions to implement

Figure 3 - Top barriers to the effective implementation of new technology opportunities

As the industry continues to embrace new technologies to improve operational efficiency, pain points inevitably begin to emerge. Some of the common problems that One11 Advisors helps clients troubleshoot in property management software are:

• The technology itself isn’t working, which means it is not a sustainable solution for their business needs (now or in the future)

• There's a broken process or an issue with the process so the technology is not matching and performing what the process is meant to do

• Not having enough people (or the right people in the right positions that know how to use the technology), as well as a lack of sustainable customized company-specific application training that aligns with company policy and procedures

User errors are, unfortunately, frequently the root of technological challenges. As such, end-user training is a critical aspect of optimizing performance. Other common challenges for implementing new technologies relate to scalability, data migration, and frustrations that arise when property managers serving multiple clients end up working across multiple systems per client and data migration between systems.

Outsourcing and centralizing non-core business processes can help to minimize costs. According to NMHC & One11 Advisors survey, the top outsourced functions for multi-family operators are cybersecurity, data center maintenance, and desktop support. Operators also have an opportunity to learn from industry peers to better understand what tools and processes other operators have found success utilizing.

Tips to maximize the value of your tech investments

Evaluate your performance: Optimizing your cash flow starts with evaluating KPIs to uncover opportunities is an important starting point. Operators can look for ways technology can help to standardize or improve internal processes to gain efficiency and reduce costs. Some of the best places to invest for long-term gain include:

• Self-guided and virtual tours

• Online applications for leasing applications and rent collection

• Chatbots

• Tenant portals for maintenance service requests

• Lease administration

• Predictive analytics and business intelligence

• Accounts payable process for onsite team using AI

Take a methodical approach: One of the most common mistakes companies make is getting distracted by “bright and shiny” new technology, including AI tools that they think will change the way they do business. But if new technology isn’t paired with the appropriate change management process and training, and the company lacks the people (internally or externally) to support the effective adoption of that application or platform, they may end up misusing the technology and ultimately losing ROI.

Measure your performance: Use your financial KPIs to track operating efficiency and benchmark costs against industry peers and consider connecting your Property Management System technology to your KPIs to help drive efficiency, manage expenses, and reduce turnover.

Conclusion

As multi-family operators face mounting pressures from rising costs, fluctuating vacancies, and increasing competition, tech-enabled process automation presents a crucial pathway to unlocking new standards of efficiency and performance. Centralization and AI are proving to be game changers, empowering teams to streamline operations, reduce overhead, and enhance the tenant experience. However, successful implementation requires more than just adopting new tools — it necessitates a thoughtful, strategic approach.

Interested in generating cash flow and optimizing multi-family operations? Download the guide

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