How to Leverage Data in Order to Make Managing Real Estate Seamless
The process of owning and managing real estate can be a time-consuming and overwhelming experience. It's essential to understand the day-to-day tasks needed to keep your property(s) running smoothly.
Pairing the latest technology with a tried-and-true approach to management can help you drive efficiency and profitability. This video teaches how data analytics can help make the process effortless.
Canopy Analytics is a venture-backed real estate software company focused on the operations of large apartment portfolios. It uses data to help multifamily teams collaborate better to perform better. They help clients when their data is spread out and not actionable. They built an AI for asset management that uses predictions, alerts, and workflows to help property teams take real action.
Canopy helps you put your team's time where the money is. With operations visibility at your fingertips, we create top-to-bottom value for ownership groups and residents through better-run properties and more profitable portfolios.
Know more https://www.canopyanalytics.com/
---
How To Leverage Data In Order To Make Managing Real Estate Seamless
Property managers don't enjoy the reporting part and some firms have an overkill amount of admin work required on capturing and collecting data. Ultimately, it's about gaining leverage so that you're free to work on the things that move the needle and not be stuck in admin. This comes down to the processes internally. Maybe you can talk a bit about what works well. What makes a management firm run well? Is there anything you've noticed about the way they structure themselves or the way they operate?
This isn't feasible for everybody but the best operators are owner-operators. It's no dig on third-party property management firms but the one thing that's great about that is there is complete alignment from COO to property management. Everyone is compensated the same way. You have this internal team. There's a lot to be said about that.
I'm not sure if property managers would agree with this but it's almost like a franchise system. Every regional manager has a certain number of clients who are their owners and investors and then they have their property managers, which are like their retail workers. A lot of it is driven by this individual regional manager. If you have a great regional manager, they can run the roost. They're going to tell you which properties are performing the best and why. They're calling all their properties every week, they know which one needs staff, and why they need help.
One of the hard things about property management is it’s a people-driven business. You're serving people but you need all these data analytic skills. The ones that are successful have some owner-operator or some buy-in from the owner, they're supporting them. They use technology, that's common. Head of IT and Head of Analytics are becoming more and more common trends in real estate and they're focused on improving your team and driving your team. The best third-party managers always talk about how they train their team and how they improve it. Those are the ones that are successful.
Property management is a people-driven business. You're serving people, but you also need all these data analytics skills.
What's your opinion if you're new to the property management sector? Where are you going to gain the most experience? Is it in a large firm? Is it in a local boutique? Is it in an owner-operated firm? What are the pros and cons of each of those for your first gig in property management?
You should tie it back to your personal goals. One of the coolest things about property management is there was an idea of infinite growth. Some of the best CEOs we worked with started off as leasing consultants on the level. A great thing to do is join a somewhat established company. It can be a midsize property management firm or a large owner-operator. Both are fine. They're both great but you should try to figure out how you can differentiate yourself. It’s very much a sales and people-driven role because you're constantly selling units and rent increases, which is not something people want. Nobody wants a rent increase.
The firms that are successful and where you can see a lot of bang for your buck are the ones that focus on training and their team. The structure of the firm doesn't matter so much as to who's your manager. How do they motivate you? How do they talk about the goals of the property? How do they make it say it in a way that makes sense to you?
Breaking into real estate, not in terms of getting the first job, but also if you want to become an investor in real estate, the best piece of advice I’ve got was when I was an LP and a fund. I wanted to start operating my own real estate. I was seeking advice and one of these GPs or owners said to me, “If you want to break in, you've got to figure out how you're going to differentiate.” Often people can't differentiate alone on buying real estate. You've also got to differentiate on either the construction side or the management side.
On the management side, get your hands dirty and it's not until you get called up by tenants at random times because the sink isn't working, that there's a problem that they've probably caused, pests or whatever it might be. It's not until you've dealt with those that you're going to understand what can go wrong in real estate because management is a key secret weapon in differentiating and delivering investor returns. That was the feedback I got. I bought a couple of single-family rentals but as soon as I started getting harassed by tenants over the smallest issues, I was like, “Go and bring in a third-party manager. This is not for me to do.” I didn't have the patience for it.
I quickly learned as well that being in property management requires a lot of patience. Sometimes you easily think to yourself, especially if you're capital constrained. The math becomes quite easy. You're like, “Rather than going out and buying a building, maybe I should go manage twenty buildings for someone else and I'll get the same revenue as if I own the building.” It’s completely wrong. It's a lot of work. You shouldn't go into it because you think it's a superior way to make money. You need to focus on where your strength is and what you enjoy.
Going back to what you're saying, every asset manager I know has had to get into the details about property management, whether they like it or not. It doesn't matter if they went to Wharton, they did all this financial analysis and whatever. When it comes down to it, you need to know how to increase a boiler and how to get hot water to residents as quickly as possible. It's a legal and financial potential risk.
You have residents who are leaving, you have all these different laws that are protecting residents and they have expectations around how quickly you resolve issues. The advice that was given was you have to get in the weeds. You need to know how to do certain things, how much it's going to cost, how to negotiate for it, and what's normal in your sub-market. It's important.
The best third-party managers are the ones who are always training and improving their team.
Why do some owners self-manage? Could you give insight into that as it seems to be a particular niche you're succeeding with Canopy?
The reason owner-operators are so successful in their management practice is, firstly, pure alignment from property managers. Everyone is trying to increase NOI. Everyone is targeting the same goal and they see management as their differentiator because they've invested so much time and money into it. They want to retain their team. They're not going to think about firing the property manager. They want to make it work and they want those people to build expertise, both in their submarket, as well as in there.
A lot of what we think about is how we enable the team with data and metrics and there's a lot of alignment there. The other thing is that a lot of owner-operators have some level of development or construction inside of their strategy, either doing value add or ground-up development. That's an intensive process.
You don't want to outsource your big collection process and your relationship with the vendors to another party because it's so important that you're going to make pro forma work that you control those relationships and you understand them fundamentally well. What is interesting about those is they touched the real estate from the most basic nuts and bolts all the way to the sale from the financial perspective. They see huge value in making decisions with data. To them, data is the most important thing because it tells them where they need to focus their time and efforts and they have the control and the staff to do so. They have both pieces.
When it comes to looking at metrics, there are some metrics where there are some serious definitional problems. Maybe you can give examples of this. I can see you smiling because I've dealt with this, too, how one manager defines a certain metric is apples and oranges to how another manager defines it. You've got to break it down. You take this one metric and you dive into it. This metric can mean so many different things to so many different people. Is there anything that comes to mind for you and metrics that are often confusing and you need strict definitions around?
I'm going to give you two examples. Maybe one basic one that's surprising, and then one that is exceptionally complicated. The first one is basically occupancy. This is the number of people who live in this building. It can't be that complicated. What matters is, do you consider more units vacant? What do you think about boundaries? How do you compare the state over time because naturally, you're going to halve down in vacant units or whatever?
There are all these processes in your property management system, which are related to the move-in process that can be done correctly or incorrectly. That's going to shift your vacancy number or your occupancy number a lot. You have to make sure the data entry at the most basic level is done and this should be the most basic metric. The number of companies that struggled to produce this in a meaningful way across multiple things sounds shocking. I'm sure some of your operators are going to be like, “That would never be us.” If you look under the hood and you see what's happening, you might be surprised.
The other part of it, which is a naturally complicated metric that is so important and has so much nuance around but it's not often measured correctly, is the net effective rent increase. What that means is, what was the previous rent, what's the new rent, what's the difference? The reason that number gets complicated is you want to factor in concessions for your new resident as well as your previous resident. Sometimes someone's like, “I'm supposed to move out on the 30th. I need an extra month. Can I pay an extra $100 a month to make it happen?”
Data is the most important thing because it tells us where we need to focus our time and efforts.
If you don't factor that out, suddenly, it looks like you didn't get the bump you got or maybe you got a decrease instead of getting a $50 decrease. There's all this right. It’s getting that number correctly and excluding employee rent. Sometimes your residents or your employees leave or move to another unit. It’s about getting all the data correctly. It's incredible the amount of time people spend on that. It's even more complicated if you try to do it for renewals. When did the renewal start? What was the exact amount? Did you offer any concessions? There are all these things that, if you get into the details, get complicated quickly.
I hate to say this, but it feels like every metric I've come across in real estate suffers from the definition issue. It’s not just metrics. It might also be bids. I’ve got a bid for replacing the roof and that's one of the biggest CapEx projects you can imagine. At first blush, you're like, “Let's go with the cheapest proposal. This proposal is 50% cheaper than the other proposal.”
When you dive into it, you realize these are apples and oranges all over again. As someone who’s trying to make money, how am I supposed to have the competence to decide? Often, I feel a little bit of frustration when managers are like, “Here we go. Here are the five choices. Decide.” You’re like, “I wouldn't know unless I've done the roofing myself or I know this type of roof. Is it a flat roof? What type of roof are we dealing with?”
Even the contracts you get require so much context. This is the danger. Decisions are made every day in real estate like that. It’s a quick three-minute maximum attention span before you jump on to the next issue and then you have to cut this cord short. Now your property management team is waiting another week to speak to you to get approval for whatever. It's a mess. A plug for Canopy. A firm that does this well is using Canopy and they become super-powerful eventually. The ability to make better decisions, catch problems before they occur and make data-driven decisions to optimize revenues.
One of the trends that are in real estate is that the people who are most successful typically execute the same exact strategy again and again. The reason they do that is that they build competency with data. They know exactly who are the right vendors to talk to, how much it's going to cost, and what scope of work matters. It sounds silly but doing something you know that works, again and again, your edges are going to get sharper. What differentiates some of the best real estate investors is 20 years, 30 years in, they know every nickel and dime and how much everything costs.
Sunny, it's been great having you on the show. For our readers, who want to reach out to you, could you spell out the best way to get in contact with you? Also, what's your ideal type of other certain types of people you're looking to reach? Are you encouraged to reach out to you as well?
We work with all sorts of different property managers and owners. The best clients we work with are typically multifamily and owner-operators with 1 to 10,000 units, also, property managers who are looking for something differentiated for their clients. They're a little bit more tech-forward, they want to stand out from their peers and those typically are a little bit larger, up to 15,000 units, maybe even more than that. The best way to reach me is Sunny@CanopyAnalytics.com. I'd love to hear from some of your readers.
Thank you so much for coming to the show.
Thanks for having me, Zain.
---
Subscribe to Zain Jaffer: https://bit.ly/2SWhYW5
Follow the PropTech VC Podcast:
Listen on Apple - https://apple.co/2Izoznu
Listen on Spotify - https://spoti.fi/2STWDwq
Listen on Google Play - https://bit.ly/2H7s6c0
Follow Zain Jaffer at:
Twitter: https://twitter.com/zainjaffer
Website: https://zainjaffer.com/
Current Ventures: https://zain-ventures.com/
LinkedIn: https://www.linkedin.com/in/zainjaffer/
Red Flags in Properties to Avoid https://youtu.be/w6tRNB6WoFg
Single-Family vs. Multifamily: The Difference in Fees https://youtu.be/3kRnV0Ja4Ec
The Ins and Outs of Fees in Short-Term Rentals https://youtu.be/nV726WoFyXk
About Zain Jaffer:
Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780M.
His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as "Forbes 30 Under 30," "Inc. Magazine's 35 Under 35," and the" SF Business Times Tech & Innovation Award." He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.
Important Links
- Canopy
- Sunny@CanopyAnalytics.com
- YouTube - Zain Jaffer
- Apple Podcasts - The PropTech VC Podcast
- Spotify - The PropTech VC Podcast
- Google Podcasts - The PropTech VC Podcast
- Twitter - Zain Jaffer
- https://ZainJaffer.com/
- https://Zain-Ventures.com/
- LinkedIn - Zain Jaffer
- https://YouTu.be/w6tRNB6WoFg
- https://YouTu.be/3kRnV0Ja4Ec
- https://YouTu.be/nV726WoFyXk
