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Multifamily, PropTech, and How Banks Can Keep Up

You can buy something on Amazon with a single click (or polite request to Alexa). You can consult a doctor without leaving your home. You can book a ride to the airport with a few taps on your phone. Technological innovations have made the ultra-convenient commonplace and have radically changed consumer expectations.

Multifamily real estate has taken note. Over the last couple of decades, this sector has used technology to shift toward a more user-driven service model for residents (though some property managers have advanced faster than others). Managers of sprawling apartment portfolios, smaller owner-operators, and even homeowners associations are starting to adopt new tools to deliver a more resident-centric experience in the era of Amazon and Netflix.

One example of this is the increasingly ubiquitous online portals, which is redefining how property management teams connect with a large portion of America’s 43 million rental households. But it hasn’t stopped there. Technology is helping to solve internal workflow inefficiencies, handle maintenance requests, streamline marketing and leasing–you name it. Since the early 2000s, tech firms like AppFolio and Buildium have joined the ranks of more established software firms like the venerable Yardi to transform the PropTech landscape.

Cloud-based, end-to-end solutions are now standard and bring together on one interface the disparate responsibilities of property management teams: accounting, leasing, collecting payments, processing work orders, paying vendors, communicating with residents, and even managing property listings. Residents are also enjoying the benefits; placing a maintenance request or making a payment online is a breeze.

But PropTech isn’t just changing the property management sector. It’s quickly reshaping the relationship between this field and one of its most closely associated industries: banking.

As a banker who works with multifamily owners and operators, I’ve noticed a shift in the conversations that we have with our clients. They want to talk about how we can help them leverage technology to improve their portfolio’s cash flow and maximize their operating efficiencies.

There’s a reason they ask. While it’s relatively easy to find a property management system that fits both their needs and budget, not every bank is equipped to help property managers fully enjoy the efficiency and cash flow benefits these tech upgrades promise.

All shapes and sizes

Property managers’ portfolios, business goals, and residents will determine their specific software needs, as well as the bank account and treasury management services that work best for them.

This is especially true in today’s landscape as the population of renters is growing and becoming more diverse. The rental rate is at its highest level in over 50 years, which is being driven by older demographic groups that historically had lower rental rates.

On top of that, nearly 50 percent of renters are cost-burdened, spending more than the recommended 30 percent of income on housing. This can increase the likelihood of late rent payments and limit the use of online or recurring payments

These are just a few factors that affect how a property management company’s accounts receivable are impacted by the makeup of its portfolio and it underlines the importance of having payment options that fit its resident base. A streamlined online process for rent collection is best, but property managers also need to continue to process other forms of payment like cash and check. This doesn’t mean that you need to bank with an institution that has a branch on every corner. If your banker understands the processes you have in place, then you can leverage technology solutions to accommodate every payment method.

Whatever technology property managers rely on, and however they use it, their bank should be taking steps to ensure its technology fits with the property manager’s software as seamlessly as possible.

Unfortunately, smaller banks with limited resources and larger banks with cookie-cutter offerings often struggle to accommodate each property management firm’s unique setup. While the most significant efficiency gain is often a streamlined receivables process, the ideal banking partner will find ways to support everything from on-boarding new properties to reporting.

With banks, customization is key

The prevalence of API integration and efforts by tech developers to serve the largest number of businesses have resulted in greater compatibility among different types of property and business software. For busy property management teams who rely on multiple systems, this integration can mean fewer manual tasks and far more efficiency.

The ideal banking relationship combines the technical sophistication of the largest banks with the know-how of a banker who specializes in their industry and takes the time to understand their properties, business needs, and the technology they depend on. That calls for a good conversation and a few cups of coffee.

For property managers of all sizes, choosing the right technology is important, however, it’s every bit as crucial to find a banking partner that can help them make the most of these tools while supporting the long-term success of their business.

And, for multifamily owner-operators, having a bank with many resources and a personalized approach to each client has another major benefit. When it’s time to finance renovations, development, or an acquisition, there’s already a strong relationship with a lender. More importantly, this is a lender that understands the business and has insight into the time-saving, resident-friendly technologies that keep its properties (and cash flow) efficient.

The convenience that PropTech brings to multifamily operators and residents is great for day-to-day operations. But for a property’s complex capital requirements, tech is no substitute for relationships.

“Owner-operators should always work with a lender that offers a consultative approach,” says Ed Padilla, the head of our commercial real estate banking at Opus Bank. “The right lending partner will have deep experience with income properties like multifamily, as well as the ability to customize financing not only to the requirements of the transaction, but also to the long-term goals of the business.”

After all, when it comes to multifamily financing–and income properties in general–the latest tech is still no match for the old school solution: sitting down with your banker and finding solutions.

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Propmodo is a global multimedia effort to explore how emerging technologies affect our built environment.

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