Final modified on February twenty eighth, 2023
By Megan Eales Monroe
On the subject of client preferences, change is inevitable. Nevertheless, over the previous couple of years, client behaviors have shifted quicker than ever earlier than. And now, with ongoing talks of recession and record-high inflation squeezing everybody’s wallets more durable than ever earlier than, it’s simple to see why extra spending management is now one of many prime priorities for shoppers
However what precisely do these new client behaviors, preferences, and wishes imply for property administration? On the finish of the day, residents are shoppers, and analysis exhibits they anticipate property administration firms to maintain up, together with by providing monetary flexibility and various cost choices.
On this episode of The Prime Ground, we discover precisely what monetary flexibility seems like for residents and the way it can profit everybody.
Hear Now
Meet Our Company:
Adam Feinstein has been at AppFolio for five years and is presently the Head of Product for AppFolio Funds. On this function, he’s answerable for discovering artistic options to the cost wants for property managers, house owners, distributors and residents.
Previous to AppFolio, Adam spent his profession in semiconductor gear manufacturing and is grateful for locating a house in proptech.
Sean Saxena is the Senior Director for FolioGuardTM by AppFolio Insurance coverage Companies. He has been with AppFolio for 10 years, holding management roles in a number of departments together with gross sales and advertising and marketing. Outdoors work, Sean enjoys spending time together with his spouse outdoor, mountain climbing and paddle boarding in Santa Barbara.
Episode Transcript
Megan Eales Monroe: Throughout all the property administration business, safety deposits and hire funds are customary, however the methods during which they’re being collected and managed are altering quickly. A few of this variation is due largely to the widespread adoption of latest know-how and cost strategies, corresponding to cellular and cashless purchases, and even purchase now pay later choices with retailers.
As a result of these new cost choices are so current throughout our on a regular basis lives, it is smart that residents now look to property administration firms to offer some stage of economic flexibility too. One of many largest takeaways from AppFolio’s 2022 US Resident Motivations report is that, now greater than ever earlier than, residents worth monetary flexibility. In actual fact, virtually a 3rd of survey respondents stated that monetary flexibility has turn into extra essential to them than it was earlier than the pandemic.
And in the identical report, renters who had monetary flexibility additionally stated they’d considerably larger ranges of satisfaction with their property administration. However the very best a part of all is that you may provide monetary flexibility round hire funds and even safety deposits, with out racking up added prices, or compromising the safety of your properties. To see how monetary flexibility creates a win-win state of affairs for residents and property administration firms, we spoke with two very particular AppFolio company.
Let’s get to know a bit about them earlier than we dive into at present’s dialog.
Adam Feinstein: Yeah, thanks, Megan Eales Monroe. My title’s Adam Feinstein. I’m the Head of Product for our funds enterprise, and so I’m actually centered on making it simple for everyone inside our property administration ecosystem to facilitate the motion of cash. So serving to renters pay hire, serving to property managers pay out to house owners, distributors, monetary establishments. That’s what my group and I concentrate on daily.
Sean Saxena: Thanks for having me. Yeah, my title is Sean Saxena, I’m a Senior Director right here at AppFolio and I work on threat mitigation-related merchandise. So, my group and I are answerable for creating and managing and providing merchandise that assist shield property managers and renters from threat by way of software program and companies.
Megan Eales Monroe: Though the principle matter of our episode at present is round offering monetary flexibility for residents, we’ll divide up our dialog into two particular components.
The primary will probably be about versatile hire funds with Adam Feinstein. The second a part of at present’s dialog will dive into safety deposit options with Sean Saxena may even be speaking a bit extra in regards to the folio guard safety deposit various which is powered by Obligo.
For extra data on this providing, go to FolioGuard’s web site. We’ll additionally you should definitely hyperlink to extra data within the present notes. Now, let’s formally start our dialog at present with Adam and speak about versatile hire funds.
As we talked about on the prime of at present’s episode, versatile cost choices at the moment are simply a part of our on a regular basis lives. For instance, bank card balances can carry over month to month with minimal funds required, month-to-month mortgage reimbursement due dates can typically be adjusted, and buying virtually every part at present may be completed by way of installments.
So why not incorporate extra flexibility round hire cost schedules too? To kick off our dialog with Adam, we needed to dig into precisely why versatile hire funds are one thing property administration groups ought to contemplate. And we additionally needed to know what he’s seen at present so far as business adoption goes.
Adam Feinstein: Properly, I imply, affordability in housing is clearly a core part of many property administration companies. It’s going to assist us in attracting the suitable residents, and what we’re on the lookout for are options which can be actually win-win, serving to the resident pay hire on time, and actually the extra choices and availability that we give to that, the extra doubtless that the property supervisor’s going to receives a commission on time and never need to take care of late funds or non-payments. And the factor we’re all making an attempt to keep away from is any evictions.
What we’ve seen is a twofold, a hen or egg state of affairs – monetary flexibility associated to gig economic system and transitions by way of how individuals are incomes their revenue is one key pattern that I feel then additionally connects with monetary flexibility.
I feel we noticed these early on with the rise of among the new fintechs, the brand new neo-banks which can be like, “Hey, you may get your cost a day earlier,” type of some issues with earned wage entry. And so, I feel we’re seeing that trickle into hire, and it’s like, how will we make it simple for individuals to pay hire? You get all these payments which can be these recurring payments which may be due on the primary. You’ve bought your hire cost, you possibly have some automotive cost, insurance coverage cost, and so they type of all get jammed up, and other people have bother budgeting and saving and planning forward.
So actually, that flexibility is about making it simple and worry-free for them to have the ability to make this cost, which may be 30 to 50% of their total revenue in any given month and do it in a manner that matches once they receives a commission and doing it with. I’ve heard tales from residents about utilizing Submit-it Notes in all places, utilizing sticky notes, utilizing one thing on their cellphone, all these kinds of issues they’re making an attempt to do. And it’s an actual heavy burden on them, a cognitive load on them. And so if we will make it simpler for them, that’ll enhance their high quality of life, and likewise will assist make sure that hire will get paid on time, and that’s actually what we’re making an attempt to do.
And so, there’s comfort on one facet of it. After which on a extra severe facet, there’s probably a $100 billion liquidity downside that individuals face as they possibly have low financial savings and are paying paycheck to paycheck.
Proper now, there aren’t loads of nice options. Perhaps they’ll use a bank card to pay hire, however possibly they will’t have a excessive steadiness. So possibly they’re going to a payday mortgage or a money advance or a automotive title mortgage, and that’s not nice. So we take into consideration a versatile hire resolution that gives basically some installment cost capabilities that basically map to once they receives a commission to assist guarantee that they’re doing that in a seamless manner, that makes it simply as simple as one thing like Apple Pay, to guarantee that they discover it simple and pleasurable to make use of.
Megan Eales Monroe: Along with comfort, and as we touched on earlier, renters search monetary flexibility, and like a greater diversity of cost choices. And since all shoppers are capable of faucet into monetary flexibility throughout their on a regular basis lives, expectations are altering for property administration firms too.
Adam Feinstein: We’ve seen a very excessive majority of individuals need to pay on-line. I feel that COVID additionally shifted it throughout all demographics and all views. I keep in mind going to a baseball recreation shortly after every part was tap-to-pay. So I actually assume that we’ve seen that shift. We positively nonetheless see communities and areas the place cash orders or digital money cost are one thing which can be prevalent, however that may be a huge declining area, and the bulk is digital.
And once more, you’ll be able to simply think about the place it’s like, okay, I’m able to go pay. And so they’re anticipating, hey, I’m going to have the ability to go into this portal and pay, and possibly it’s a purchase now, pay later mentality, like versatile hire gives. Perhaps it’s Apple Pay, possibly it’s one thing else. And so they go there after which they don’t discover it. What are they going to do? It’s loads of friction. And so they’re not going to go discover their checkbook. They don’t have one, so it’s not serving to. That’s why we actually make investments tremendously in decreasing that friction, assembly comfort, and assembly these client expectations for hire cost.
Megan Eales Monroe: As Adam touched on, there actually are many advantages that include versatile hire funds for each residents and for property administration firms. Not solely do versatile hire funds make the method of paying and gathering hire simpler for everybody concerned. It additionally makes properties extra engaging for prospects, which in flip may give firms a higher aggressive edge.
However what about potential dangers? Do versatile hire funds create any type of threat for property house owners or property administration firms?
Adam Feinstein: No, it’s really fairly the alternative. It’s a assure they’re going to receives a commission on time. And so it actually helps them tremendously, I’d say. So it’s that win-win. We’re actually enthusiastic about the way forward for it.
From a resident perspective, they will come right into a portal. They will say, “okay, yeah, I’ve these totally different choices, totally different cost mechanisms, or I can use a versatile hire providing.” And from there, it’s gathering some mandatory data, in order that these suppliers and companions that we work with can guarantee that they receives a commission. However between right here and there, that supplier’s going to guarantee that the property supervisor will get paid and it’s going to look identical to the resident paid hire. And it’s actually us and our companions which can be working to take that ache away from the property supervisor and facilitate that assortment. So the resident will simply get to pick out, “okay, listed below are the times I receives a commission, right here’s the place I need you to drag out the remaining portion of the hire.” And that’ll type of occur robotically for them and so they’ll be on their manner in direction of well-scheduled flexibility in a cost schedule that matches once they receives a commission.
Megan Eales Monroe: Similar to Adam stated, versatile hire funds could be a win-win resolution. However with many various platforms and choices accessible for versatile hire funds, how do you select which one to make use of and your property administration firm? Listed below are a couple of recommendations on what to search for earlier than you absolutely commit.
Adam Feinstein: Primary is one thing that’s compliant. That’s one thing that I take into consideration daily in my job right here. And we do loads of work to guarantee that we have now a robust perspective on compliance and the place we’re. There are totally different choices on the market that will look totally different as type of the FTC and the CFPB are taking a look at a few of these issues. You may consider type of the purchase now, pay later area actually got here up and is below some little little bit of scrutiny. However we take into consideration compliance options, after which actually ensuring that it’s deeply built-in.
So for us, we consider {that a} deeply built-in, embedded resolution the place it’s simply as simple to select versatile hire as it’s to select some other cost choice is what’s going to essentially make it work. And that’s what we’re wanting ahead to.
Megan Eales Monroe: Along with discovering an answer that’s compliant, discovering one which absolutely integrates along with your property administration system can also be a should, in accordance with Adam. In any other case, you would really be making the expertise tougher on your residents and property administration group.
Adam Feinstein: Yeah I imply, you’ll be able to have unhealthy consumer expertise, primary, and so unhealthy consumer expertise goes to drive questions. Questions are going to drive cellphone calls to our property managers, and now you’ve bought extra work to do. I imply, additionally cost errors and accounting errors because of a poor integration are going to be a nightmare as effectively. And total, it’s who do you have a look at, and the way do you guarantee that issues are working effectively?
In order that’s why we see that embedded resolution is the suitable manner, and we predict that it affords the simple on-ramp and off-ramp if it’s not the suitable resolution anymore, to nonetheless guarantee that the resident is paying digitally and never reverting again to the previous days of paper verify.
Megan Eales Monroe: Though versatile hire funds are primarily being carried out at present by property administration firms who’re early adopters, and all the matter is simply now turning into extra mainstream, we needed to get Adam’s tackle what the way forward for versatile hire funds may appear to be.
Adam Feinstein: I’m actually enthusiastic about having a greater providing that enables individuals to interrupt freed from that burden of worrying about how they’re going to pay hire. The mantra I take advantage of for my group is “let’s make hire fear free.” And I feel versatile hire and most of these choices are a very nice solution to advance that. And so not having to go get a fairly excessive pricey payday mortgage, not having to consider the way you repay it, actually having that flexibility to pick out, okay, I receives a commission on this date and at the present time, or that is when. These are the issues which can be actually nice, and I feel, once more, assist individuals stay in nice communities and assist property managers run their enterprise in the simplest and environment friendly manner they will.
I’ve actual visions of studying extra about what renters are doing and experiencing and getting extra predictive and extra particular to tailoring to their wants. I feel that there’s a complete wealth of private monetary administration instruments that aren’t nice. These items do a superb job, however they’re not built-in with the primary factor that individuals have to pay, which is hire. You want that dwelling over your head. And so I feel this can be a stepping stone in direction of serving to everybody get higher and safer of their monetary future.
Megan Eales Monroe: For half two of our dialog at present, we’re speaking with Sean Saxena in regards to the connection between monetary flexibility and safety deposits. To start out issues off, we requested Sean to present us his tackle the present state of safety deposits at present. We additionally needed to dig into why conventional safety deposits might not be offering the very best expertise.
Sean Saxena: Yeah, I imply, I feel you need your residents to have pores and skin within the recreation, so to talk, proper? So, I feel one of many realities of renting a property or being in property administration is that residents trigger harm. Persons are individuals. There’s going to be some stage of harm, and also you need peace of thoughts in type of alignment throughout each your resident and your property supervisor to be sure to’re actually defending the unit.
I feel gathering from tenants, the safety deposits, has all the time been a ache. I feel on the worst, it may be a barrier to leasing models. You need your move-in course of to be as seamless as doable. I feel flip time is actually essential, proper? You need to just be sure you’re actually diminishing the period of time it takes between when you will have an open unit to whenever you fill the emptiness, and the reality is safety deposits create friction in that course of. You may’t transfer in till you dropped off a safety deposit at your workplace. And so, it’s one other level into an already fairly tight course of.
I feel from a resident’s perspective, it’s a must to hand over a fairly important sum of money. I feel you’re going usually from one place that you simply’ve rented to a brand new place, and so possibly you bought your safety deposit again from the previous place, however it’s a must to flip round and provides it to the brand new property administration firm, after which returning will not be all the time simple both.
I talked to loads of property managers and one of many issues that I’m all the time stunned at is there are important, or extra important than I’d’ve guessed, quantity of residents who don’t money their safety deposit verify. That creates type of a bizarre state of affairs. It’s a ache for property managers. Now you will have this cash sitting in your books and it’s a must to work out the right way to handle it. It’s a ache level, and it’s a must to ahead the verify and discover the suitable place. There’s loads of administrative ache concerned with the safety deposits on each ends.
Megan Eales Monroe: Earlier we explored what monetary flexibility seems like with regards to hire funds. However what precisely does monetary flexibility appear to be with regards to safety deposits? Right here’s Sean once more to clarify.
Sean Saxena: Expertise over the past ten years has helped actually add a stage of flexibility for everyone to determine how they will handle their bills that fits their life-style. Individuals have totally different revenue schedules, totally different monetary conditions. They receives a commission otherwise. Generally individuals receives a commission month-to-month. Generally individuals are getting paid biweekly. Some individuals earn commissions. Some individuals earn bonuses. I feel monetary flexibility actually permits the consumer, the buyer, the particular person paying for issues to align how they pay for issues with how they generate income and the way they handle their revenue.
I feel particularly the place you will have individuals with loads of volatility round how their cash coming in seems like, permitting monetary flexibility round the way you pay for issues is actually helpful to have the ability to type of match and create peace of thoughts for these shoppers.
I feel simply usually everyone needs extra monetary flexibility. I feel one of many issues that it by no means ceases to amaze me is the quantity of issues that you may purchase in installments. I feel this pattern, which has been round for some time now, is type of conditioned how all of us assume, how shoppers assume. Residents are shoppers, and we apply that psychological mannequin to every part in our lives. And so, I do assume there may be an expectation that every part ought to have a versatile timeline for cost. I don’t assume that’s going away. I feel that’s going to extend over time.
I feel we return to among the ache factors round safety deposits. You’ve gotten this very tight window that you simply’re making an attempt to regulate. You need to decrease the period of time it takes to show a unit round, and safety deposit options let you streamline that. It provides you a terrific transferring expertise on your residents. For instance, property managers who work with us at AppFolio know that each new transfer in has the entry to their on-line portal the place they will pay their safety deposit or select to go deposit free which eliminates a necessity for a course of that existed earlier than, the place you will have all this sort of handbook, “Do I would like to gather a verify or a money deposit at transfer in?” This offers flexibility for the renter, and for the property supervisor, it permits you to streamline a leasing course of that already may be fairly sophisticated.
Megan Eales Monroe: As Sean talked about, safety deposit options are an choice that may give renters extra monetary flexibility with regards to transferring. However what precisely are safety deposit options and the way do they work?
Sean Saxena: I feel the opposite factor to name out for safety deposit options is that they’re another. We’re not eradicating the safety deposit. I feel that safety deposits we talked about earlier are essential, the idea and the intention. And so, it’s a solution to keep peace of thoughts and alignment throughout each renters and property managers to guard the worth of the property, whereas giving flexibility for renters and making the method simpler for everyone.
There are a number of various safety deposit various fashions. I feel at a excessive stage, a very good safety deposit various resolution retains residents accountable. It ought to permit a resident to maneuver in with out having to forgo the entire quantity of the safety deposit, however nonetheless create transparency that hey, they’re nonetheless accountable for harm that they might create and that they might trigger to the resident, and there’s some prices related usually with buying the service.
I feel the opposite half is that it ought to be seamless for property managers. Proper now, as a property supervisor, in case you have the unique safety deposit, you will have the money in hand that’s within the financial institution, and if there’s harm, you apply that cash to the harm. Any good safety deposit various ought to permit you entry to that. You must have one thing that makes your life simpler. It doesn’t simply disrupt your workflow however eliminates the effort of gathering and managing.
You recognize, one of many issues that we take very critically at AppFolio is who we accomplice with and what services and products we’re providing and enabling for our prospects. I imply, it’s a part of our AppFolio DNA, prospects are who we’re and the way we have now a enterprise. And so, as we had been on the lookout for companions on this area, loads of rigor went into what product makes essentially the most sense, what firm makes essentially the most sense, and I feel we shortly landed on Obligo as a accomplice for quite a lot of causes, not least of which they’d an identical philosophy round the right way to work with prospects and ensuring that property managers retain all of the peace of thoughts they’d with the standard safety deposit however gained higher service of the flexibility to market a product to their residents that ought to assist with their leasing course of, and actually a win-win-win state of affairs that left everyone within the safety deposit various area strolling away feeling good.
You’ve gotten your renter who now has monetary flexibility however has the suitable expectations set. I feel that is actually essential. So, safety deposit options usually are not all the time simple to know, and I feel we had been actually on the lookout for a accomplice and a mannequin that allowed renters to know what they had been signing up for and what their expectation and accountability can be for them of their tenancy. I feel Obligo actually nailed that.
Their mannequin has a lodge deposit type of mechanism the place, as their renter, it’s very clear that you’re displaying that you’ll be able to pay your safety deposit however not paying it. However that additionally, identical to a lodge deposit, whenever you transfer out, if there may be harm, the property supervisor can cost you for that harm and that basically provides the renter a win. They don’t need to pay their full safety deposit, which is some huge cash, so that’s now accessible to them to make use of for different issues. A property supervisor permits them to offer higher service to their residents and nonetheless retain peace of thoughts. At transfer out, identical to they usually would, they will draw and cost a resident within the occasion that there’s harm.
Megan Eales Monroe: Not solely can safety deposit options streamline property administration operations, whereas nonetheless holding residents accountable, they really create a significantly better expertise too. As a result of as property administration firms know first-hand, safety deposits could be a main supply of economic stress for renters.
Sean Saxena: One of many issues that I discovered fascinating whereas moving into this area some time again is actually the idea of a safety deposit is worse than I’d’ve imagined from a resident perspective within the sense that it creates extra ache than you understand. So, if you consider a safety deposit, let’s say to make use of entire numbers, you progress in someplace, they require you to place up $1,000, and the thought is on the finish of your tenancy, if there’s no harm, you get that $1,000 again. And so, you’re dropping that cash for, let’s, say a yr.
However the reality is, until you purchase a home, if you happen to proceed to hire, the following place you go, you’re out that very same $1,000. And so, the impact is that you simply’re tying up this capital in perpetuity. I feel if you happen to couple that with the monetary flexibility that we see accessible to all shoppers, what that basically means is unlocking capital. It’s like you will have cash that you would be utilizing on different issues, financial savings, spending, buying that’s tied up in a safety deposit.
These options let you get that again and spend it and do what you’ll. I imply, I’ve heard of some humorous tales of individuals taking the safety deposit and utilizing another after which taking that and investing it and watching their cash develop at a a lot quicker price than it might have misplaced if it sat in an account incomes zero curiosity.
Megan Eales Monroe: Like versatile hire funds, safety deposit options are largely being led by early adopters in property administration. However as a result of they could be a win-win for each property administration firms and for residents, they’re shortly rising in recognition. As Sean explains…
Sean Saxena: I feel the utilization of those merchandise has grown loads, and I feel loads of issues clearly modified in the course of the pandemic. I feel one of many large issues was in each business, however particularly in property administration, there was an actual lens on hey, how will we simplify our processes? How will we guarantee that we will go cellular first, that we will go digital, and that we will minimize down on handbook processes and actually make issues simpler?
Safety deposit options permit for that. You concentrate on providing a renter a digital expertise. They undergo their portal, they apply, they get screened, they buy their renter’s insurance coverage, they’re provided a deposit various. You’re capable of do loads in a small period of time at a really scalable price and nonetheless keep a superb service stage. I feel that’s type of the important thing piece right here.
So, software program is a good resolution so long as everyone has pretty much as good if not higher service outcomes, and I feel one of many causes that safety deposit options are on the rise is that, particularly as you keep that win-win-win type of product and repair, everyone walks away feeling higher. I feel with these type of outcomes and merchandise you’ll be able to guess on having a superb development trajectory.
I feel each market’s totally different and each property is totally different, however I feel if you happen to combination experiences, the way you market your self as a property supervisor, the way you market your models, these items matter. I speak to loads of our prospects, and so they spend loads of effort and time ensuring that their models are marketed of their best-in-class manner, that they’re offering best-in-class companies, together with making it very easy for residents to undergo their transfer and circulation in a digital manner. I imply, the reality is I feel all of us have turn into accustomed to with the ability to do issues on-line, with the ability to have the flexibility to log into your cellphone to finish crucial duties, main monetary duties.
And so, I feel main with that and providing that service stage is actually essential. I do assume that’s type of a desk stakes expectation. And so, if you happen to nail that have, if you happen to’re capable of provide issues like safety deposit options, provide a manner for residents to have a really seamless motion and actually improve the service stage and improve flexibility, you’re going to do higher from a aggressive perspective.
Megan Eales Monroe: Though the dialogue round and adoption of safety deposit options has grown over the previous couple of years, that is actually all simply the beginning. From Sean’s perspective, there’s loads in retailer for the way forward for safety deposit options.
Sean Saxena: So, I feel the plain factor to say is no person can predict the longer term. With that being stated, I feel we will rely on two issues all the time being true.
The primary is property managers/house owners are all the time going to require a sure stage of accountability from their renters, and want safety for the models that they personal and handle. I feel the second is that renters are all the time going to need monetary flexibility. They’re going to need to spend much less once they transfer to a brand new place. That’s not going away.
Over the previous couple of years, we’ve seen loads of actually nice developments in software program and companies on this area which have actually helped bridge the hole, and I completely anticipate that pattern to proceed. I feel we will anticipate extra prospects asking and expressing curiosity round the right way to implement most of these services and products, and I feel we will anticipate residents to proceed to anticipate monetary flexibility and actually easy-to-use choices from their property managers.
Megan Eales Monroe: In the long run, it’s clear that providing extra choices round monetary flexibility could be a win-win for each your residents and your property administration enterprise.
Though versatile hire funds and safety deposit options are nonetheless comparatively new for the business, monetary flexibility is now a typical and anticipated a part of shoppers’ on a regular basis lives. As a result of your residents are shoppers too, they’re naturally going to anticipate extra monetary flexibility. That’s why now’s the precise proper time to see how your property administration firm can begin assembly these new rising expectations.
To proceed at present’s conversations round monetary flexibility and rising resident expectations, go to our Trade Insights part on AppFolio.com. There, you’ll discover much more episodes of The Prime Ground plus articles and guides that includes professional insights. Additionally, for extra data on safety deposit options, go to Folio-Guard.com. I’d prefer to thank Adam Feinstein and Sean Saxena for becoming a member of us on the present at present. And thanks for tuning in. We’ll be again once more subsequent month.
