Category: Multifamily
Air Date: 01.05.2020

Adding value to your property can be costly, and sometimes the returns are negligible. Today we speak with Kyle Finney, whose finger has been on the pulse of PropTech for several years. By adding smart tech to your property in the right ways and places, you can up rents while adding exponential value. We open the show by introducing Kyle and hear about his professional history, discovering PropTech, and its uses along the way. We then dive into some PropTech examples and their uses, like smart locks, home automation, and motion sensors. Kyle spends time explaining each of these and how they’re integrated into property. To give listeners an idea of the kinds of returns you can expect by using PropTech, Kyle shares useful case studies. As the show develops we then find out more about Kyle’s company, Arize, and what its value proposition is. Listeners will also benefit from Kyle’s insider advice, especially when he shares the kinds of questions you should ask before making PropTech investments. To finish the episode, we take a look at Kyle’s four keys to success. Be sure to join us today!

Key Points From This Episode:

  • Introducing today’s guest, Kyle Finney, a business development manager at Arize.
  • Kyle gives us a breakdown of his career so far.
  • Find out about what PropTech is and what it can do for companies.
  • Kyle shares examples of PropTech and how homeowners and property investors use it.
  • Hear about what tenants might be expecting over the next year, PropTech-wise.
  • The ROIs that investors can expect from implementing Kyle’s strategies.
  • Why having tech like smart smoke and water detectors can save you thousands a month.
  • Kyle talks to us about Arize and its value proposition.
  • We hear Kyle’s expectations on what the next big wave in real estate will be.
  • Why Kyle’s company focuses more on sensors than cameras.
  • The types of questions you ought to be asking before investing in PropTech.
  • Kyle tells us about the infrastructure behind Arize.
  • Why streamlining your PropTech supplier is a necessity.
  • We finish off by hearing Kyle’s four keys to success.

Tweetables:

“We see a lot of people from the investment side adding PropTech to increase property value.” — Kyle Finney [0:03:38]

“We’re expecting smart locks to replace traditional locks within the next three to five years. And within the next year, lighting control and thermostats are going to be something that many, if not all units have, no matter what the class is.” — Kyle Finney [0:08:53]

“Access control is going to be a big thing. It’s a big deal right now. Even having people over and shooting them an access code for one-time use —they can enter without you having to go out and open a gate — that is a big thing.” — Kyle Finney [0:20:00]

“The reason why tenants prefer motion and entry sensors over cameras is because they don’t feel like their privacy is being invaded.” — Kyle Finney [0:21:22]

Links Mentioned in Today’s Episode:

Kent Ritter

Kyle Finney on LinkedIn

Arize

National Multifamily Housing Council

Alexa

The New York Times

General Electric

Amazon Web Services

Originals on Amazon

If you enjoy the guests and content please subscribe and leave a review.  Your reviews matter and each one has a major impact on the success of the show!

Interested in Investing Alongside me in our next multifamily deal?

Contact me at kritter@birgeandheld.com.

My operating partner, Birge and Held Asset Management has a twelve-year track record creating sustainable wealth for over 2000 investors through high-quality multifamily investments.

https://birgeandheld.com

Thanks for listening!

—Full Transcript Below—

[INTRODUCTION]

[00:00:00] KF: A lot of times what you’re not seeing is if you raise the rent, let’s just say 20 bucks a month, you’ve got an annual rent increase of about $24,000. If you’ve got a building that’s sitting at a five cap, you’re increasing your property value by about $480,000. Then you minus your software costs, which is usually about 5 bucks a month, let’s say it’s on 100 units, that’s $6,000. Your total annual, or not annual, but your total net property value increase is somewhere around $474,000.

[00:00:27] KR: Welcome to Ritter on Real Estate, the show about how to passively invest like a pro. On each episode, I interview real estate experts who give their top investing advice, strategies and tools and I break down their insights into practical steps to avoid the pitfalls and make better investments. I want to help you passively invest like a pro. This is Ritter on Real Estate and I’m your host, Kent Ritter.

[EPISODE]

[00:00:50] KR: Hello, fellow investors. Welcome to another episode of Ritter on Real Estate, where we teach you how to invest like a pro. We’ve got a great guest today, a man named Kyle Finney. He’s the Business Development Manager with a company called Arize. He focuses on bringing with him passion for emerging technologies in real estate. His goal is to help property stand out to increase revenue and attract and retain tenants.

I’m really excited to have you today, Kyle, because I think PropTech is just such – it’s just such a thing to talk about right now. There’s so many options available. I think a lot of folks I hear from when I say PropTech, owners, they’ll say, “What what’s?” I think it’s great to just get everybody educated on what’s going on in the market and what are all these things that are available to people to increase their returns. Really excited to dig into that today.

Let’s start at the beginning though, Kyle. Why don’t you just give us a background and tell us how you ended up where you’re at.

[00:01:54] KF: All right. Thank you for that introduction. Excited to be here. I got my start with technology maybe about six or seven years ago. I’ve always worked in marketing and sales, so I’ve worked with a lot of commercial real estate companies, whether it’s brokers, broker owners, whoever it was, helping them drive different initiatives and adopt new technology, whether it’s for marketing properties, or finding ways to add value through adding different things to their properties, such as motion detectors and things like that.

I got into the technology side with a DevOps company, so it’s all software development. I did business development for that company in Vegas before moving out to Arizona. When I moved out here, I was like, all right, I really want to get back into the tech side of things, but in an emerging market.

I started doing research. I came across smart apartment technology. Obviously, multi-family is booming all over the country. Phoenix is a very hot market for multi-family investment. I said, “Well, how do I capitalize in addition to the real estate side of it? How do I capitalize further?” That’s what really got me interested in the technology in multi-family. That’s how I got there.

[00:03:11] KR: Very cool, man. Very cool. Like I mentioned at the beginning, I talk to people and we talk about maybe some of the things that we’re doing in our own portfolio and mention PropTech and they say, what’s that? What does that mean? When we’re talking about this, frame this up for everybody, what are we talking about?

[00:03:30] KF: PropTech is any technology that you’re adding to a property. It’s just that prop tech. You can add it for a number of different reasons. We see a lot of people from the investment side adding it to increase property value. There’s a lot of things that you don’t really – a lot of investors haven’t been exposed to just yet, where adding something like smart locks may have a really low CapEx cost. In terms of what it can do for your property value, it can be pretty exponential.

I mean, on a $50,000 investment, you could easily raise your property value by a 100 grand, maybe 200 grand, depending on what you’re working with. It’s an interesting play. On top of that, we’re seeing more and more properties and owners putting technology onto their properties, because tenants are demanding it. The idea of PropTech is to just stay with the market and just meet the market’s demands for what’s expected inside of an apartment.

[00:04:22] KR: I got you. I got you. That’s a helpful overview. We talked about smart locks. What are some of the other technologies that you’re seeing folks implement?

[00:04:32] KF: There’s actually quite a bit. I mean, depending on where you’re at regionally, like for example in New York, a lot of the luxury class A apartments, they’re doing things like, automated beds that come down from the ceiling. They’re doing things like, hideaway offices, where a living room opens up to reveal an office type thing. That’s on the really high-end side of things.

On the other side of things, you have things – obviously, you have Alexa. Any type of home automation where you can speak to it, that’s also interconnected with lighting controls, thermostats, things like water leak detectors, smart locks. I’d say, some of the biggest things that everyone is seeing right now would be the smart locks, the smoke detectors, lighting control, temperature control would be the main ones right now. Have you implemented anything on your properties right now?

[00:05:25] KR: Yeah. I’ve been going down this rabbit hole for the past four or five months. Just trying to go through the process of starting and understanding what you just described, like what’s out there and the landscape and all the different folks that are providing these services and there’s a lot. What we’ve really targeted as first and foremost, most important is access control. That really starts with the smart locks. The ability to allow us to control access to the property, both from – I mean, from a leasing standpoint as you have folks coming in and being able to do self-guided tours. From maintenance standpoint to be able to allow contractors in and out of an apartment remotely and just from a management standpoint, just allowing management to have control of the property, where they can sit. They can be sitting on the beach with an app and control access to the property.

That’s where we started, because that’s where we felt the most value – immediate value would be. Then and then from there, we really are looking in through this. The first use case has really been around the leasing process and how do you take it from how do you have a no touch lease? How do you have somebody come in, usually through a digital portal, like a website, be able to interact with an AI chatbot, be able to set up either view a virtual tour right there, or set up a self-guided tour, where someone can actually set an appointment and come in and tour a property through an app, without ever having to physically contact anyone.

It can take them to fitness centers, the pool. As you go through those individual things on the app, stuff’s popping up to tell them about those different areas. Then moving that all the way into the virtual lease, so you can sign up for a lease and do background checks and things right there on the spot. That’s really our first use case is taking that from start to finish.

It’s just been a tremendous learning experience and something, I think, is going to provide amazing value for our portfolio, from a resident standpoint, but management efficiency and just increasing the overall value of the property. I think you’re future-proofing your property by starting to do these things. Like you said, it’s starting to become expectation more and more.

I mean, obviously it varies with different classes. I focus mainly on class B and C properties. What are you seeing as you mentioned, tenant expectation? I mean, what are tenants expecting at this point in time, or what do you expect they will be expecting over the next year?

[00:07:59] KF: Yeah. What we see as far as multi-family trends and then what residents are expecting is we see a trickle-down effect. Class A properties, they’ll start implementing things like, smart home tech. As more and more communities offer that, it’ll trickle down to the class B and class C properties.

In terms of what we’re seeing, we’re seeing a lot of smart locks. That’s the biggest thing. Then the smart thermostats and lighting control. Those are because they’re more cost effective to implement and they produce the best NOI. From the property management standpoint, you have individual operators on these class B and C properties that may suggest this to the owner of, “Hey, we can increase our NOI by changing out the light bulbs for smart bulbs and connecting it to a smart plug and giving the residents the option to control those things from their phone.”

We’re expecting smart locks to replace traditional locks within the next three to five years. Let’s say, within the next year, I mean, lighting control and thermostats are going to be something that many, if not all units have, no matter what the class is.

[00:09:11] KR: Got you. Got you. Yeah, really interesting. I know that Arize, I know that those are some of the things that you guys are implementing and working with folks on. What’s the ROI? What’s the return that investors can expect from doing some of these things? If you give us a ballpark.

[00:09:30] KF: For example, I’ll just give you an example of what we see on average. Our “standard package” would be about 400 to 500 bucks. You implement that, that includes water leak detectors, smart lock, motion sensors, entryway sensors and a hub that connects all of those things. With an investment on that, let’s say it’s 500 bucks, you’re looking at about $50,000. Or I guess, with installation, you could be about $58,000 in CapEx and you could expect to see a return on that within two years.

After that, the thing is and I hope we get into this later on in the conversation, but in terms of net property value increase and I hit on this a little bit earlier, a lot of times what you’re not seeing is if you raise the rent, let’s just say 20 bucks a month, you’ve got an annual rent increase of about $24,000. If you’ve got a building that’s sitting at a five cap, you’re increasing your property value by about $480,000.

Then you minus your software cost, which is usually about 5 bucks a month. Let’s say it’s on a 100 units, that’s $6,000. Your total annual, or not annual, but your total net property value increases somewhere around $474,000, just by implementing a few smart home technology devices. At such a low capex, it’s a great return. Annually, you could be expecting to after you breakeven on 20 bucks a month rent increase, you could expect to bring in about $18,000 a year and profit from them.

[00:11:00] KR: Got you. Yeah. I mean, so that sounds like a no-brainer. That’s a great return on investment.

[00:11:05] KF: It really is.

[00:11:06] KR: You mentioned a $20 rent increase. Is that what you’ve seen operators be able to achieve?

[00:11:12] KF: Yeah, that’s on the low-end. We’ve seen operators and owners increase between $30 and $60 a month, just depending on where they’re at in the market if they can. Phoenix is a big one for that.

[00:11:24] KR: Just from implementing the smart locks and the thermostats.

[00:11:28] KF: Yeah.

[00:11:28] KR: Okay. Got you. Got you. Yeah. I mean, I saw a I saw a similar study from National Multifamily Housing Council, where they had done a survey of residents. I think they had come out to an expected rent increase of about $25 to $35 per month from installing, I think it was really focused on smart locks at that point. Yeah. I mean, it plays out there and you guys are actually seeing the proof of the pudding in your clients. That’s really, really interesting. I mean, there’s huge value there for any investor.

I think this is really scalable too, right? We started by implementing on a 30-unit property. We’re going to be implementing on a 110 unit property and then we’re going to a 750-unit property. It’s something that, I mean, even going down from 30 units. I mean, if you had a 10-unit, 12-unit, I mean, hell if you had a 4-unit, the ROI is still going to be there. I think as investors, this is something you definitely need to be looking into.

Even if at a minimum, it’s just the smart locks and the access control and imagine being able to let your maintenance guy. If you’re managing your own property, you’re going to let your maintenance guy in and out. Or a plumber that needs to get in there without having to physically be on the property, or being able to show the property without physically having to be there. I think that’s a huge time savings, as well as costs.

[00:12:50] KF: Yeah. You get big operational efficiencies in terms of maintenance. I mean, we talk to maintenance supervisors a lot. That’s a big thing, even having to re-key, first of all, that takes time and it costs money to re-key a unit. When you have a smart lock on there and all you got to do is pop into the app and change the master code, it takes a minute maybe to do. If you’re able to integrate that into your property management software and just turn leases over as they come and automate that process, you’re saving a lot of time and money on that.

One thing that I do want to hit on also is just being proactive about your properties, versus reactive in terms of damages. Things like smart smoke detectors and smart water leak detectors, those are going to be preventative things that cost almost nothing to run. I mean, you’re talking about 17 cents a day. It’s 5 bucks a month to run those things. If you have a water leak detector that detects water, or moisture somewhere that it shouldn’t be right away, instead of those things going unnoticed, you might save tens of thousands of dollars down the line and you’re being proactive about it.

When it comes, you’re not like, “Oh, crap. What do I do?” Get ahead of it. Even on that, I mean, in terms of eating away at your profits, you can mitigate that quite a bit by implementing something so simple.

[00:14:03] KR: Interesting. Interesting. Is there an insurance savings in implementing products like that? Have you guys done any research there?

[00:14:11] KF: We have done some research. It is a long and tedious process to get integrated with insurance to actually have a discount on your insurance by implementing these things, but it is something that we’re looking into.

[00:14:22] KR: Got you. Okay, I mean, it’s not an uncommon situation where you have a leak under the sink that the tenant doesn’t tell you about for a month. At that point, it’s become a serious problem, right?

[00:14:35] KF: You’re talking mold remediation. You may have to break drywall and there’s a lot to it.

[00:14:40] KR: Just to be specific for folks, so you guys have – It’s a sensor that would sit under the sink and as it gets wet, it’s sending out a signal?

[00:14:49] KF: Yeah. We operate on real-time alerts. These sensors, they can be placed behind toilets, under the sinks in the bathroom, under the kitchen sink in the laundry room, anywhere where there’s prone to be a water leak. You can even put them in piping structures and whatnot. Yeah, so as soon as those little sensors, there’s two little prongs that sit just millimeters above the floor, or wherever you’re going to put it. As soon as it detects water, both the tenant and the property manager gets an alert that there’s moisture. On the property management side, it’ll let them know what unit it’s in, what time it happened. They can either call the tenant right away. The tenant can call the PM, whatever that looks like and they can go take a look at what that water leak actually looks like and fix it if it needs to be fixed.

[00:15:34] KR: Yeah. No, really good. Really good. I think that that’s a great application as far as being able to just maintain expenses on the property and remediate some of those big, unforeseen hits that will kill your investment.

[00:15:50] KF: Well, to give you an example, one of our clients is a top developer in the US. Over the last three years, they spent about 1.5 million on water damages alone. When we started talking to them about water leaks and water leak detectors and implementing those, it was a no-brainer. Obviously, not every property is going to experience that, but even the smallest water leak, if it puts you about $10,000, that can still be a big hit.

[00:16:17] KR: Sure. Yeah, you have a water heater go out and that could be a big expense. Yeah, very cool. I appreciate the overview. I mean, it sounds like there there’s all types of applications of this technology. The space is really exploding. Talk to me about Arize, specifically. What are you guys working on within this space? Tell us about your products? What’s your value prop that you can share?

[00:16:43] KF: We have two avenues. One of them is on the property management side. We have a property management app that allows PMs to view every property that they manage, view all the devices that they have connected and then they get real-time notifications of anything that’s going on within a property. That is to increase operational efficiencies and also, increase NOI for their properties. Any rent that they’re collecting, if you have a rent increase on that, obviously, they’re netting more operating income.

On the investment side, it’s just all about increasing property value. Depending on what your game plan is, if you plan to add these smart home devices into your renovation plans and you want to hold for three to five, seven years, or whatever, you can expect that net property value increase. When you go to sell it, you’re in a much better position.

We have the smart water leak detectors like we talked about. We have the smoke detectors, the smart locks and entry and motion sensors. That’s our bread and butter. We found that’s the best bang for the buck as well. From the investment side, you’re going to have that low capex and be able to really, really see some big returns.

[00:17:56] KR: Interesting. Yeah. I think the ROI is really important to understand, because this is something that most likely, you’re going to raise additional capital for. It’s going to be additional capital expense and there’s got to be return there, but sounds like those numbers are very compelling. Something that we’ve looked at even going a step further is actually, how do you finance this hardware? We’ve looked at it with partners doing a capital lease for the hardware, to not actually have to raise it up front, which it sends your returns through the roof. It’s become a pillar for some of the deals that we’re doing to increase the ROI above anywhere you’d be able to get without implementing technology like this and having a financing structure and partner like that. I think that’s something that’s really interesting to look into as well, is how do you start to finance some of these other capital items as an investor to just continue to improve your return? 

Question for you about the future. We know where we are now. We’re focused on getting these smart things into the apartments, but where does property tech – where do we go from here and what’s the next wave and what should people be looking out for? Or how does it all come together maybe?

[00:19:14] KF: I think, interconnectivity. I think, eventually, more and more people are finding that convenience within their home is becoming a bigger thing as everyone’s staying at home more. I think, just being able to control anything from your smartphone, or from a tablet, no matter if it’s turning your TV on by asking Alexa or whatnot, I think looking to the future, I’d say, we’re going to see lighting control will be something that’s implemented everywhere. Automated thermostats, I think that’ll be something.

I mean, there’s a bit of a learning curve, but once you get into it and once you’re exposed to it, you’ll start to realize like, “Oh, okay. I want my temperature at this time in the morning, but this time in the afternoon and so on.” Then I think, access control is going to be a big thing. It’s a big deal right now. I mean, even just being able to have people come over, shoot them an access code for one-time use. They can enter without you having to go out and open a gate or something for them is a big thing.

Aside from that, I love all of the crazy things that the property owners in New York are doing. There’s a lot of innovative things going on, just in terms of what you can do with a smaller footprint of apartment space. The New York Times just put out an article recently about some of those things and I just thought it was really fascinating.

[00:20:35] KR: Yeah, that’s really interesting stuff. I was thinking about this. I mean, obviously, this technology is living with you in your home all the time. I mean, there’s got to be some security concerns there around privacy, for one. I mean, how do we mitigate those concerns? How do we make sure that we’re maintaining privacy with having all this technology that’s keeping track of you and what you’re doing?

[00:21:01] KF: That’s a great question. Yeah, it is a huge concern. I’ll speak to what we do and the reason why we do it. We thought about doing cameras and eventually, we might still do that. We are going to do a doorbell cam. What we started to do as far as security has been the motion sensors and then the entry sensors.

The reason why is because motion sensors don’t give tenants a feeling that their privacy is being invaded. You can essentially put them anywhere. If you put them in common areas, like say a lot of club houses are not operating right now because of COVID. It behoove property management to know that people are going in and out of there or not. With the motion sensor, it’ll pick up humans that pass by. It won’t pick up animals, or debris that goes by. If they have security, have the app on their phone, they’ll get alerted. Security can then go over there. It’s a better use of time, as opposed to having someone just patrolling, walking around for 12 hours a night.

Then the entryway sensors. You put them on windows. You’ll get notifications if the window’s been open past a certain amount of time, if a door has been opened past a certain amount of time. That’s how we’ve got around the security issues for in-unit amenities in common areas.

On the data side, so that’s obviously a huge one you hear about big tech firms getting data breached all the time. Yeah. We use bank-level encryption on everything that we do. From the investor side, if you’re dealing with the vendor, I would always ask them how they’re managing your data. You have a right to know and you have a right to know what best practices they’re implementing. You want to know what cloud service they’re using to store and manage your data. If they use end-to-end encryption, that’s going to be very important. Just do your due diligence in dealing with any vendor that you’re going to, are you thinking about using for your properties.

[00:22:48] KR: Yeah. I really appreciate that, giving some advice on what to ask vendors as they’re vetting these out. Because I mean, that was a big process for us was just this – the process of understanding the landscape, all the vendors out there then trying to go through and assess what each one’s bringing and what each one’s using. What are other questions like that that as we’re assessing these technologies, we should be asking?

[00:23:17] KF: Ask about warranties and connectivity issues. Arize, we manufacture our own devices and we develop the software in-house. In terms of connectivity, we never have to deal with third parties. If there’s ever issues, we usually know exactly what that issue is. Or if you have a question, you can call us. You know who to call. Dealing with third-party vendors, say you have a nest thermostat, but then you’re using Alexa and then you’re using GE for light bulbs, you’re using all these different vendors. In terms of connectivity, you’re bound to have issues at some point, because you’re relaying one information that’s built on a software platform that’s communicating with another device that’s set up on a different software platform. This is all communicating over your Wi-Fi signal and things can get interrupted. Always ask, “Hey, what kind of connectivity issues can I expect?” I’d say, that’s the big one.

Also, warranties. Who do I reach out to to deal with the warranty? Because a lot of times, third-party vendors that are selling you these devices, they won’t cover it. You have to make sure that you have the right contact info and you know what warranty you’re getting with each device that you have, which is very important.

On top of that, I’d say battery life is always a good question for each device. Are things battery operated, or are they powered in? That’s a big one. Then also, how often is the software updated? Because you don’t want to be operating something that’s obsolete, because if you implement something like a thermostat and that’s operating on a different system than say, your lighting controls, then if it’s trying to communicate to the single hub, well, that hub may do updates. If you have a product that hasn’t been updated, it’s going to have connectivity issues. There’s a long-winded answer.

[00:25:07] KR: No, man. Those are good. Things you need to be asking about, or vetting in your requirements for these products. Connectivity, warranty, security, the battery life and updates. I think that’s a good list of the place to start. That was one thing I’ll just share as a lesson learned from us is it can be a daunting process to go through and decide what one, which types of technology should you be looking at? Where should you start? Then which vendors should you use and who should you partner with?

I think, it’s important to start with your requirements first. That really helped us stay, I think, efficient with our time and be really intentional is understanding okay, what are our requirements? What do we need? Things that could talk about connectivity, the warranty, the security. Have those down and have a grid that you could evaluate each vendor on and then make it more of an objective approach, versus something that’s subjective, because it can be – if you’re trying to compare 5-10 different products, it can become a daunting task. That’s my tip of something that helped us get through the process.

Just another question as we were thinking about this, talk about connectivity. I mean, what’s the infrastructure that sits behind all of this? What’s the technology that we’re operating on? I think, you mentioned Wi-Fi, but are there other technologies that you’re using as well? Give us a little bit of an overview there and maybe pros and cons.

[00:26:40] KF: We might get a little technical here, but that’s okay. I’ll explain everything. Like most of the world, we operate on AWS, Amazon Web Services. Everything, like Netflix, a lot of websites, eBay, they operate on AWS. It’s just a cloud infrastructure. When we get into connectivity and security, the security side is going to be important to understand in terms of having cloud-based servers. When you’re using bank level encryption, they’re building these things just all with cyber security protocols.

On the connectivity side, so our hub which connects all the devices and communicates with AWS, it’s set up on a ZigBee protocol. It’s a stronger connection than Wi-Fi. That protocol is just communicating between devices. If you have say, I don’t know, a smart lock and then you have your hub inside, you don’t have to operate on the Wi-Fi signal, because ZigBee wave, I guess, if you think about it as radio waves, it’s going to be able to travel through walls and refrigerators and other electronic devices much easier than a Wi-Fi signal. You’ll find that with Wi-Fi signals, you see Wi-Fi repeaters, or smart plugs that act as Wi-Fi extenders, because Wi-Fi signals, they’re not that strong. I always say to people, if you can find devices that do operate on the ZigBee protocol, that’s going to be your best bet. Your next best would be what’s called the Z-wave protocol. It’s not as strong, but it is more compatible with more devices. You’ll find a lot of third-party vendors using their hubs and devices operating on a Z-wave protocol. I hope that made some sense.

[00:28:30] KR: Yeah. It’s essentially just different types of, I mean –

[00:28:35] KF: It’s different strengths of signal, basically.

[00:28:37] KR: Yeah, different signals, similar to we’re all used to Wi-Fi, but there’s different kinds. There’s Wi-Fi, there’s ZigBee, there’s Z-wave. Yeah, now very good. I think that makes sense. How about Bluetooth? I mean, because some of the things that we’ve looked at operate on Bluetooth, and so avoid having that network in place.

[00:29:01] KF: Yeah. I mean, with Bluetooth, it’s all going to come down to what your device is actually connecting to. Yeah. I mean, you’re going to use Bluetooth to connect to some devices, like say your Amazon Alexa. That’ll pull um information from the web via your Wi-Fi signal, but then it’s going to communicate to your phone through Bluetooth and stuff like that. I mean, depending on what device that you have set up, yeah, you might have the option to do Bluetooth, or it’ll just be all connected via your Wi-Fi connection.

[00:29:34] KR: Okay. Got you. Got you. Well, yeah. No, I think that’s very detailed. I think a good thing to understand, I mean, just what type of, I don’t know what you call that protocol, or connectivity that the thing is sitting on, really does have a big impact on the connectivity. The other thing is the uptime of these things, because if you have things sitting on the network, you’re going to have downtime.

If you have things on your property that are always “offline,” then you’re really eliminating all the value right, because you’re having to have maintenance guys go out check them, reset them, figure this stuff out. I think that protocol is very important.

[00:30:14] KF: That’s the other thing that I’ll touch on briefly is in dealing with, if you have five different devices from five different manufacturers, that’s five different potential risks for having downtime on your devices. Like you said, I mean, if one goes down, then it’s pointless having it. When you have so many devices that have the opportunity to go offline, you’re putting yourself in a bind, or potential binds, versus going with a company that does manufacture and develop both hardware and software in-house. You don’t have to worry about that downtime.

[00:30:52] KR: Yeah. Yeah. That makes a ton of sense. I mean, there’s different approaches. You guys are the single source, single provider model and you’re bringing it all together and there’s benefits that everything connects and talks and it’s built to connect and talk to each other. There’s another approach that’s more of a best-in-breed approach, where you’re looking at the – The path that we took as we were approaching, just looking at who’s the best in class for each product and then making sure the important thing that they all connect. Then that really requires a middleware to sit over that and allow those to all integrate so you can have that one app experience.

If you take that approach, you don’t want to have your tenant having to open up one app for thermostats, one up for lights, one app for locks. That’s just not a good experience, so you need to think about things like that. There’s different approaches, I think, to get to the same place and again, it just depends on your requirements and your goals. This has been really good content. It’s been a little bit different than a lot of the other shows that I’ve done, but I thought really important, because technology plays such a large role in our day-to-day lives. It can play such a large role in our investing.

I mean, and that’s why I bringing this to the highlight, because I personally believe that technology is completely changing the multi-family investing game. I think if you’re not leaning into it, you’re going to be left behind quickly. I think, even when I started a lot of this research a few months ago thinking that man, we’re really going to be ahead of the curve and realizing how much it really is in place already and how some operators are really, really taking advantage of this to do some cool things and realizing wow, we need to get on the ball and get caught up.

We put together a tech committee now. We’re focused on it and we’re putting our plans together for 2021 to really be a tech-enabled firm. It’s something that if you don’t get on it, I feel as an investor, you’re just leaving dollars on the table. A lot of the folks that are listeners are passive investors. They’re folks that are investing in other people’s deals. What I would say for you all is if you’re working with a sponsor who’s not thinking about technology, then you’re not getting the return that you could be getting.

I think that needs to become part of your vetting process. What technologies are you using? Taking some of this great info that Kyle shared to know some of the pitfalls. What technology are they using, how do they connect, how do they talk are really important. I think, just even asking that question of what property tech are you implementing and how are using that to drive value back to investors is really critical. Really good info, Kyle. I appreciate that today.

As we wrap things up, I want to get into our keys to success round. Just four short questions. First one, what is the one question that investor should be asking their deal sponsor, or about a deal if they’re evaluating themselves?

[00:33:59] KF: I’d definitely ask what PropTech, like you just said, what PropTech are you guys implementing, or what have you been looking into, or do you plan to implement this? Because I’ve talked to other investors that are implementing these things and there are dollars left on the table if you’re not implementing smart tech. Yeah. I’d say, that’s a big question there.

[00:34:20] KR: Yeah. I think that just goes – That’s great point. It goes back to the importance too of I try to communicate on the show of as investors, we have to do our homework. This show is part of doing that homework. It’s like, you have to be educated on what’s out in the market. You can’t just rely on the sponsors to do that for you. You need to know what’s out there, so that you can be making the right decisions.

Kyle, what are you most proud of in your career?

[00:34:49] KF: I’d say, having – This is actually totally outside of the realm of smart apartment tech, but I’ve started a marketing company and I sold that several years ago. That was a my biggest achievement. Working on an exit strategy to create passive income for myself after I left the company. That was the learning process for me. It’s the first time I’ve ever done that and it’s my most prized accomplishment to date.

[00:35:16] KR: That’s great. You hit the magic word, passive income. I love hearing that. What book should everybody be reading?

[00:35:24] KF: One of my favorites has been Originals by Adam Grant. I don’t know if you’ve heard of it.

[00:35:33] KR: I haven’t heard of it.

[00:35:35] KF: Yeah. Adam Grant, he spent a big chunk of his life studying people that have pioneered what they do for their industries. He’s followed the story of Warby Parker. I don’t know if that they’re the online glasses company. They took the Zappos business model of selling shoes and applied it to eyeglasses. Within their first year, they had a billion-dollar valuation. They were up there with Nike and all these other big companies as a startup.

He follows paths of people that have achieved some huge level of success through an original idea, through dissenting opinions, no matter if they’re working for companies, or starting it themselves. I think it’s really interesting to hear that. Because as multi-family investors, you’re doing something that not a lot of people, the average person is doing. It takes a lot of grit. You got to grind, do a lot of homework and research and be able to make those decisions that not a lot of people are willing to make.

[00:36:32] KR: Yeah. That’s a great point. I love how you brought that back. I definitely have to check out that book. Very cool. Last but not least, what is your number one key to success?

[00:36:44] KF: I’d say, consistency. I think with anything in life, you don’t achieve any results unless you’re consistent with it. No matter how you’re feeling about how a day is going, or how a week is going, or how a month is going, as long as you are taking your steps every single day to reach your goal, you’re going to hit some level of success. I’d say, my key is consistency.

[00:37:08] KR: Yeah. I love that. So much of life is just showing up. It’s so true. Yeah, just consistency over and over. Awesome, man. Well, thank you for bringing in so much education and value today, Kyle. I think our audience just had a jam-packed session and so much good info. I think, people have to go back and listen a couple times and make sure they’re absorbing it all. Hey, that’s okay. That’s awesome.

Last but not least, how can folks get a hold of you? How can they check out Arize?

[00:37:38] KF: I’d say, start by checking out arizehub.com. That’s arizehub.com. If you need to get in touch with me, it’s just kyle.finney@arizehub.com, with any questions, comments, concerns, whatever it might be, I’m always open to responding that way and at least getting introduced that way.

[00:37:57] KR: Cool. Go out and check out Kyle and check out Arize and all the cool stuff they’re doing in PropTech and see how that can add value to your properties. Kyle, thank you so much today and hope you have a great rest of the week, man.

[00:38:09] KF: All right. Kent, I really appreciate you having me on and I look forward to future communication.

[00:38:13] KR: Absolutely.

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[00:38:14] KR: Thanks for listening to another great episode of Ritter On Real Estate. Hit the subscribe button to make sure you don’t miss out on the content that will make you a better investor. Also, visit kentritter.com for articles, videos and tools curated just for passive investors.

Until next time, this is Kent Ritter with Ritter On Real Estate. Now go out and invest like a pro.

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