Ancillary income is a growing trend but many property managers worry about the additional workload and pushback. In this episode, Andrew talks with an all-star panel during a 2020 IMN conference event as they cover ways how to add value through resident experience that can turn into ancillary revenue opportunities. We hope this episode helps you think big about what you can do with resident experience in the coming year.
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Transcript
Jake:
Pricing is more challenging. It depends on what's being offered, but of course, a discounted fair market value is a really important piece for driving value to our residents. I'd say as positioning, where and when is that collaborating with the partner who we're offering and our marketing team to really get the message out there at the right point and not to overwhelm them, whether that be a whole bunch of automated email campaigns and things of that nature. We know that we don't have success there. And so a lot of the pieces that we look at, it's really important for the organization to embrace as a whole, from a leasing specialist, from a maintenance tech, to really understand what it is that we offer, and what are the right times for everyone to bring it up, I should say? And so that's a piece that we continue to focus on, but I think will be key to our success, is that not just simply presenting an offer, but making sure the organization adopts it and believes in it, and that's how we can truly implement change.
Andrew Smallwood:
Hello, professional property managers. This is Andrew Smallwood, host of the Triple Win podcast. We've got a recording from an IMN Conference event where you'll hear from Andy Propst CEO of HomeRiver Group, as well as three of the top operators and thinkers and ancillary services in the SFR REIT world from Invitation Homes, Progress Residential, Home Partners of America. They manage 20, 70, 80,000 homes in each of their portfolios across a bunch of different cities and markets, and get a little different perspective than just a third party management perspective on ways to add value through resident experience, how they're doing it now, how they're thinking about doing it in the years ahead and the big opportunities they see.
Needless to say, Second Nature was stoked to moderate this panel with our customers and we're excited to share it with you today. Hope it inspires you to think big about what you can do with resident experience in 2022.
I'll do a totally inadequate introduction of our expert panel here, and I'm just going to go around the clock here. So Jake Coleman, if you could just wave your hand from Progress Residential. He's based out of Chicago, but if you don't know Progress, they've got over 40,000 units under management. Cool new initiative with PR3, and getting into some build to rent communities and lots of exciting news happening around Progress. Jake has been the VP of ancillary services there and has been a great leader in this space. Coming next to Jenica Hunt, also in Chicago with Home Partners of America, and they have a really cool platform, over 15,000 homes as part of their portfolios. And as the director of operations, she has been tasked specifically with many of these national partnerships and ancillary services that they've deployed and will have some great points of insight today.
We've got Paul, who I think is in Williamsburg, Virginia today. I'm only guessing by the background. But Invitation Homes, which many of leading the way at 80,000 homes, and Paul has been great there to work with and really has a great strategic vision for how this stuff all works. Lastly, but not least, I'm coming to Andy Propst, the CEO of HomeRiver Group. And you know what Andy, it looks like you're only wearing a two-piece suit versus the traditional three-piece suit we see in person at these conference events.
But Andy's out of Boise, Idaho, and Home River Group, the largest third party manager now with the recent merger acquisition of Property Frameworks, over 25,000 homes managed third party. So Andy, Paul, Jenica, Jake, thanks for joining us. And I'm going to set off just as a quick way of getting started before I ask the first question, I'm just going to share a little framework of what we're seeing and why this conversation is happening around ancillary income and services.
If you think about in the multi-family space, you know, have all these amenities, and if you can't read my handwriting, just listen to what I'm saying, but son of a doctor over here handwriting could be better. We have amenities and multi-family has figured out how to successfully amenitize a number of things and ultimately get a higher level of rent due to those amenities. Then you've probably heard the word fees. And the challenge with fees is that really it's very price focused. Most people kind of don't perceive that as terribly valuable when presented that way. As far as amenities, what we know about how people have been searching for single family homes is they're looking at what school zone, what zip code, what price range am I in?
There's not, at least yet, been the same kind of anonymization, but then we have all of these ancillary services that add value. Some people are calling, resident benefit packages, is a term that's been hot. It was mentioned three different times yesterday over the course of different panels. I'm sure it'll come up at some point during this. This is really, "Hey, how do we package a number of ancillary services that add value to the resident and really define the premium professional resident experience that makes us known as a great landlord and not an unprofessional landlord," while also finding, by adding value to tenants in this way, there's also great profit to be made, right? There's value to be added to bottom lines by adding value to residents and also great operational efficiencies that can occur as well for the operating platforms that are exciting.
So that's kind of what we're here to talk about today. It's becoming an increasingly hot topic just to see companies that have people having VPs and directors of ancillary gives you an idea of where this industry is at least starting to go. But we're pretty early in this journey as an industry. So to get things kicked off, here's the first question. The first question is what's working right now? What's working right now for single family property managers and owner operators? I'm going to come to Andy Propst first and then we'll work our way around. But what are you seeing work Andy at HomeRiver Group as far as ancillary services and revenue?
Andy Propst:
What's working on the ancillary side? One of the initiatives I'm over is ancillary revenue. So I get pretty excited talking about ancillary revenue. That's probably a really geeky thing to say, but we have a number of ancillary revenue opportunities that we charge. Most of those ideas came from collaborating with other property managers at NARPM, talking to folks like yourself at FilterEasy/Second Nature. I can't get that Second Nature thing in my brain, but that's one thing that works really well for us. So I think we have somewhere around 70 to 80% of our single family rentals have adopted the Second Nature program, which is where we send out filters either monthly, quarterly, biannually or annually. And they would get a filter, we would charge for that filter get sent out. I call it the triple win.
The owner knows that his filter's getting changed on a regular basis. The tenant gets to breathe clean air and pay less for their utilities and then we make a bit of a spread there. So we win, tenant wins, owner wins. We get very little pushback on that. You talked earlier about resident benefit packages. We're working with you now to try to combine the Second Nature offering with a couple other offerings that we're betting and putting out there, but I track it. I've got my spreadsheet right here of all the different things.
One thing that we're getting ready to do right now is our holiday gift to the tenants, which is another win-win. We find local companies like a restaurant, a movie theater. This year, movie theaters are closed, so we're looking at maybe doing some bowling alleys, go bowling, and we get a discount. We buy a bunch of gift cards, add a discount. We put it in a nice little letter and we send it out to the tenants. They get $50 in value. We pay $25 for that and we make a pretty good spread, and we spread Christmas and holiday cheer and we get goo Google reviews. We make some money, we help local businesses. It's a big win. So that's something we're all working on in our 20 some markets right now. It's a big undertaking, but we are getting ready to put that out there.
Andrew Smallwood:
That's great. Andy, thanks for getting us kicked off. I didn't even know there was a seasonal holiday gift at HomeRiver Group. That's cool. That's interesting. Great. Paul, anything you'd like to share or add as far as what's working right now at Invitation Homes?
Paul:
Yeah, I think the type of initiatives that we're having success with, maybe not specifically any one particular initiative were those things that kind of touch on a number of different areas. Those things that provide for an enhanced leasing lifestyle for our tenants or residents. That's all often driven via surveying and input from residents. So instead of us pretending that we know every potential amenity they would like, actually reaching out to them and asking them what the value proposition would be from their perspective.
That also plays in, as Andrew just mentioned, to economic impact. That has to be both from a resident perspective as well as any of our perspective, meaning we have to have a very strong value proposition that we offer up to each one of them. Then the third thing, or maybe one of the additional things would be items that not necessarily are potentially revenue drivers for us, but items that help us relative to asset preservation.
So things that may be very specific and required within the lease, if we can find ways in which to make it an easier process for our residents, enhance our offering, enhance the experience to them, often increasing the length of stay that we see on from our residents are all kind of drivers of that. Then the only other thing I'd add would be, obviously I think everyone has much more of a focus these days on ESG and impact from an environmental perspective, which oftentime a lot of these ancillary initiatives are valuable relative to. So that's kind of a long way around, no one particular thing that's got a lot of traction, but our kind of conceptual approach to any project we look at.
Andrew Smallwood:
That's great. Thanks, Paul. And we are hearing more and more about ESG, especially with capital coming to the space and checking that box is something that operators looking at and it's great to see how energy savings simultaneously translate a lot of times into lowering that kind of footprint. So that's great point. Jenica, I'll come to you next. What's working at Home Partners?
Jenica:
Yeah, so like what Paul said along those lines, first is you really have to listen to your residents. So they'll tell you what they want, and they're probably not going to say I'd love a filtered delivery program, so to speak, but what they'll say is something along the lines of they want convenience. Now they don't have to spend their Saturday at Home Depot searching for that particular size and go and get it and bring it home and change it out. It's much easier to get something delivered to your door, which I think macroeconomically, we've all learned that over the past few months that that's a much easier alternative.
So I think for now, listening to your resident and then making sure that you can deliver on that with your systems, your employees all working together to deliver that. So a lot of industry standard things work, like you should be charging late fees, pet fees, application fees. Residents expect to pay those. Then there's things that add value. There's some things like utility concierge services and filter delivery, some insurance programs, things that really are a value add for your resident.
Andrew Smallwood:
That's great. That's great. I think Amazon's already been to my house twice today and has trained millions of us to expect convenience and doorstep delivery for sure. Jake, anything you'd like to add before we move to our next question of just what's working at progress?
Jake:
Yeah, I'd say I agree with all the pieces that everyone on the panel has talked about. I think one other thing that's very encouraging that we've started to see is really recognition and interest from whether it's vendors or potential partners in ancillary space of the single family rental asset class. A few years ago I was on the phone with a cable and internet provider and said, "I've got 30,000 homes or 30,000 units." They'd say, "Wow, that's amazing, let's do a deal." And I'd say, "Well, they're scattered site single family." They'd say, "No thank you. I don't know how to touch. I don't know what that means."
What we've really seen is through education and growth and maturity of the industry is that a lot of those types of vendors and partnership options is that we are now seeing as a worthy of those types of opportunities and I can drive value to a partner in the same way that a multi-family asset or a building can do. And I don't need a leasing office to do it. Our technology is at a point where we have a digital and automated experience and we can really leverage that to make sure that we have value add relationships for our partners and for our residents of course. So I think that's one piece that's certainly interesting and encouraging for the industry as a whole.
Andrew Smallwood:
That's great. Thanks for that, Jake. Moving to our next question in your answers, I heard a couple of points really to the second question is, which is what kind of trends are guiding ultimately your search for relevant resident value ads or the kind of things that residents are telling you that they're looking for? So the word convenience obviously came out and that's obviously a mega trend that we're seeing impact what people want and ultimately what they expect. Is there anything else, and I'll just open this up to the group, that you guys are seeing that's guiding what you're looking for or what's attractive to your companies? If not, then I'll have to callunteer on someone.
Andy Propst:
Yeah, I'm happy to jump in. I mean just more of those opportunities. I mean there's things that pop up all the time that are potential ancillary revenue opportunities that we can charge, but they don't make sense. Some people charge them, some people don't. We've got to make sure it provides value. That it's something that we're not going to get pushback on from the owner, the tenant. Actually the hardest thing that I've found to get ancillary revenue rolled out is getting the team, your own employees, to buy in that we need to start charging this because it does provide value.
We get way less pushback from owners and residents on ancillary revenue than we do from our own team. So you really have to work internally to get it sold that hey, this is something that does provide value and this is how. You can't just say, "Hey, charge this thing because the people that are talking to the residents or the owner are the ones that need to be sold on it."
If they're not sold on it's pretty easy for me to sell the tenant Christmas gift. Initially it was very difficult to say the tenants need to have a filter delivered every three months. Now we've been doing it since 2016, so everybody's on board, everybody gets it. We get very little pushback. In 2010, we started charging an admin fee for every time a tenant moved in. We charged the leasing fee, but now we charge an admin fee to prepare the lease deal with all this stuff. And I got so much pushback on that. We've been charging it for years. We've probably made seven, $800,000 since then, bottom line, and now everybody charges it. They don't even think about it. So once you can get the team on board and you can prove value, the thing that we're looking at right now is this new app.
So when you go into Albertson's or Walmart, you can sign up for rewards,. You get paid to shop there, or you get points. So the thing is when you're paying your rent, you don't get that kind of benefit. There's no reward points. Everybody knows what a grocery card is, but your biggest expense, which is rent, there's no rewards for that. So there's this company called Piñata that provides rewards when people pay their rent. So we're looking into those guys, we're trying them out in some markets to see if there really is value there and there's potentially a rev share there for us too. So it's a benefit to the tenant, huge benefit to us on a rev share opportunity, and we're slowly trying that out because it's a newer platform. Those are some things that we're working on right now.
Andrew Smallwood:
Yeah, I see some eyebrows going up and I'm getting some texts about rental rewards app. That sounds interesting. That's new for a lot of people. Just to add to that, Andy, because we've obviously worked closely with Piñata to actually develop a product for the resident benefit package. For operators, you made a great point of getting the buy-in from the team can sometimes be a challenge, and looking at these ancillary opportunities, not just as what can create revenue and not just what can check some of these boxes of convenience and things from what residents want, but can it preserve the asset? Can it protect the asset? Can it deliver returns for ownership? Can it actually reduce time and admin and energy of the team that's in the field or the ones that are potentially interacting with residents and make their experience their jobs better, whether it's reducing HVAC issues?
In the case of Pinata, we worked with them on, "Hey, every time someone's paying their rent on time, they're getting a benefit from that." And we're seeing actually, it's early, but we're seeing some increased collection rates as a result of that. Ultimately when people are having hundreds or thousands of dollars of rewards that they know won't travel with them wherever else they go, that creates more value and more relationship.
There was a panel yesterday that talked about casual or positive touchpoints with residents. So many property managers get stuck with, I'm only calling or talking to you when something is going wrong, when something's on fire, when something's broken, when it's flooding, when it needs fix. Where's that proactive relationship building, whether it's something showing up on their door, whether it's a reward in an application, or a holiday gift, I guess to your point, to really enhance that relationship with the resident? It makes you as the property manager more sticky. And renewal rates we know in SFR, it's the name of the game, keeping the resident in the asset, preventing the negative experiences and creating the positive experiences that are going to keep them there. So cool. This is great. Before we move to our next questions, if there's anything else anyone would like to add, great. If not, Jake, I'm going to come back to you on how do you think about what's required versus opt out or opt-in across these kind of offerings to the resident?
Jake:
Sure. So I'd say in general, if you're going to make something required, it has to be something where you're making sure that you're really driving value for the resident in that. So examples of that, of course is that through, call it 40,000 homes, if through our purchasing power and we can really get things down, whether it be a filter service, whether it be smart home technology, whatever it might be, if we can be in a position to leverage the scale of the organization to get residents either services that are below market value or give them things that really drive convenience to the points that they made before, those types of things can lend itself to call it more of a required type format.
Outside of that, we're very careful about not forcing things on our residents that really don't drive value for them, because certainly while you might make a few bucks in the short term, you will lose that to the point on renewal and customer satisfaction and you can make any service you want sort of required within a reason. But again, it won't be successful unless it's truly something that the residents find value in.
Andrew Smallwood:
Yeah, that's a great point. Jenica, I know when we spoke in prep for this call that you had a quick, easy framework for what's required versus what might be optional. Could you speak to that a little bit?
Jenica:
Yeah, so I think additionally if you have that something that's going to help you control costs as the owner and operator, then that should be required. Then along what Jake says is if some things they got to perceive a luxury or the benefit is kind of different for different types of households or different types of people, those ones are the ones that you should make optional. There's things like landscaping, I might find that very valuable, whereas somebody who's got a lazy teenager might not find landscaping so valuable.
Andrew Smallwood:
Okay, great.
Andy Propst:
We're a big fan of making nothing optional because if you typically make it optional, they won't adopt it. I know if I went into a car dealership and bought a car, the car dealership makes all their money when you sit in front of the finance guy and he sells you the undercoat package and car washes for life, oil changes for life, et cetera. But if you went in there and said, "Hey, this is part of the car," and you really wanted that car, you're going to buy all that stuff. That's basically our take. We found renewal rates when people are renewing, it's because they had a really good experience when they moved in. The property was clean. The application process was easy. When they got there, everything looked good. They got their key on time, their lease signing was easy.
Then most importantly, when they had maintenance issues, were those handled quickly and were they handled correctly? And were we responsive during that tenancy? That's where we see renew renewals go up, not necessarily based on what we charge them off the bat or on a resident benefit package or filter easy going forward. So we try to make as much of it required because if we didn't, I don't think we'd get much signed up.
One thing is optional, we charge a pet screening deposit or a pet documentation fee. There's a company out there called petscreening.com, they do a great job. We do that in house and we charge a pet documentation fee for that. That's something that we get very little pushback. I think we could probably charge 10 times as much because people will do anything for their pets, but I think it's a reasonable charge. So like I said, we found if the move-in's great, that buys us a lot of goodwill throughout the length of the tenancy and our renewal rates are higher. If the move-in is gone bad for whatever reason, we see where no rates go way down.
Jenica:
To Andy's point, you definitely have to be firing on all cylinders when it comes to move-in experience, customer service, maintenance, things of that nature to really drive your value and drive your renewal rates, length of stay. And then ancillary is the cherry on top of everything. If you can offer them something extra, an extra form of convenience, and particularly if it's going to help you control costs, that's great.
Paul:
Some of this is driven off of a goal at the end of the day from our perspective to potentially offer an all-inclusive lease to a resident. So if there are requirements and there are amenities and it can be more of a cafeteria type of plan, we'd love to be able to do to that, to leverage our denominator, if you will, for the resident's behalf. Things just take a little bit of time, which I'm sure will evolve into what folks are thinking about relative to packaging and what becomes a referral, what's an opt-in, what's an opt-out, what's mandatory, what's embedded in your lease. So it gets a little bit more... Conceptually, it's very simple. Operationally, sometimes the implementation associated with these things is a little more complicated than you would imagine.
Andrew Smallwood:
Great point. We saw early on, when people were new to this industry and operators were getting in, things like pool fees at first we're like, "Well..." I think we've gotten to a point where you just realize it's so expensive to the asset that there's got to be a pool fee. Or whether it's HVAC or some of these big-ticket items, those kind of things typically get prioritized more, things that are already in the lease, but you can make more effective or more convenient for the resident to do to help them be compliant. We're seeing those things get made mandatory more.
Then for the items that are optional, I know what we've seen as a best practice across clients across the country is if it can be positioned as standard, like here's what most residents do, there is an opt-out or you can duplicate this, just sign an opt-out addendum to duplicate the result on your own. We can give you a path to do that. There's some services which our audience should know, legally in many states you can't require someone to purchase insurance from you. At least that's true for a lot of operators. So certainly you have to make sure it's compliant with wherever you're operating. That's an important point.
Okay, great. Moving on here. So let's talk a little bit about looking forward and the future landscape. We've heard examples of different services, and we've heard utility concierge, we've heard rental rewards. Smart Home is one that's in the Q&A, and I'd love to hear thoughts from this group on that. What do you see as just categorically the types of services that you think are going to define the professional management experience and that excite you to at least look at them or think about what it could be like to be a resident in your homes? Let's do this. Let's start with, Paul. Do you want to get this one kicked off?
Paul:
Sure. I mean I think it's ever-evolving. I've now been in the space for around a year and a half, and when we went through kind of discovery out of the gate there are about 60 or 70 different amenity services we identified. So the question is how do you categorize, prioritize and make sure they're in alignment with your residents? But I think there are a number of core products that are relevant to requirements associated with a lease that, from my perspective, we're almost kind of blocking and tackling that we need to be able to provide a strong value relative to optionality, applicable to those. Then as you described, I think there are a number of items that would fall more within the opt-in or opt-out, but as you described, making them an opt-in until we're told otherwise. Then there's the white glove referral type of items, those are plentiful and those are out there and those are things that we'd love to be able to offer on a go-forward basis.
So I think it's going to become much more prevalent, a much better experience from a resident that's working with any of the companies on the screen just as far as their overall experience and the professionalism associated with this space and how quickly it's evolved into what we're talking about. We've been smart home utilizers for a long time. Started as a management tool, evolved into a management tool with much more of a focus on a resident amenity, both from an everyday use as well as a utility opportunity as well for them.
So I think things are starting to come into a little bit better clarity for probably all of us, and with the scale that everyone's gained, it makes it a lot more viable in the short term to really... I know one thing that we've tried to stop doing is calling things fees, right? Because it just is a connotation that's negative I think from a lot of folks' perspective versus amenities or value add items that we're providing. So I think that's the trend to drive it from a resident's perspective, but to make sure operationally and financially it makes sense for the operator.
Andrew Smallwood:
That's great. Paul, thanks for getting us kicked off. Jake, let's come to you next.
Jake:
Yeah, I think the future, and I agree, I think Paul hit the nail on the head with a lot of pieces there, is that when you think about the ancillary world and services and things that might be offered, you have your handful of services that are for a compliance, whether that's the lease end of the property itself, you've got a handful of offerings. There just for the resident convenience, whether that be a preferred internet package for them. Then you have things that blend the two categories like smart home technology, which can be convenience and also obviously can have significant operational savings. I think Paul said it well is that finding that sort of right blend between those things in prioritization and categorizing them and really having what we hope is, in time, a seamless platform for those things, whether they be required or optional or opt-in and opt out and everything that comes with it. But that's, I think, a future that is hopefully not too far off with a lot of those pieces.
Andrew Smallwood:
That's great. Jenica, anything you'd like to add on just the future landscape, what you're seeing and excites you as possibilities for services for residents?
Jenica:
Yeah, I think the resident benefit package going forward, I think we're kind of very early days on what can we add and do we make them optional and things of that nature. So I think there's a lot of runway here and I'm very excited to see what everybody does. But I think the resident benefit package, I think what we'll see is operators that have maybe several different options of packages, there are 60, 70 countless things that you can do. I think looking at the combination of them and giving people that option is really exciting. I think with that, my background's in appraisal, and there's an appraisal term, assemblage value, which is when you take two pieces of land and you put them together and the value is greater than the sum of the parts. So I think that by strategically placing some of these options together in different packages, it actually adds even greater value that than what they are alone. So I think we'll see a lot more of that in the near future.
Andrew Smallwood:
Before I come to Andy, one of the big words yesterday was also connectivity, which is a large part of what's attractive I know to smart home, which is part of the question in the chat. There's been conversations about how getting better insight and visibility in the home and what's happening and impacting the resident's experience there that some of these ancillary services can actually connect to each other to deliver service more dynamically in real time, which is an exciting future to think about. So appreciate you bringing that up, Jenica. Andy, bring us home on this question. How do you see for the future?
Andy Propst:
Specifically, I think it'd be a great idea for somebody, maybe somebody out in the audience or on the panel can do ,take this and run with it. But it's something I looked into a few years ago. We used to have a thing called the tenant move-in guide or called it short, TMIG. The TMIG was awesome. So we went around the local businesses and basically we did some research and we found out the the two biggest life events where you spend the most money, one is getting married, two is moving. So why isn't there something like an app or something that we could offer where we could say, "Hey, you moved into a new area, and because you are a HomeRiver Group tenant, you get all these discounts at restaurants. Here's the doctor that you need to call, here's the dentist, right?
Lowe's, 10% off, whatever. I mean most of these people are moving from out of state, mostly California, moving from California. They don't have these relationships. And who else better to give them those type of relationships than us? And then "Hey, if you're using an app, why couldn't you use that app to unlock your front door, open your garage, the same type of technology we can use to access the property for maintenance?" So there's a whole slew of opportunities there, rev share apps, home tech, which we haven't done a really good job of. I think there's a lot of opportunity there. But we've had a hard time, because we manage for third unlike the other folks on the panel, we have a hard time getting the owners to want to spend that money upfront to implement that smart tech.
The other feedback is everybody has smart tech now. It's so cheap that you could get the whole slew of Amazon smart home tech for a couple hundred bucks and say a couple words and do whatever you want. So when we start trying to get our owners to spend money to take advantage of that, we get a lot of pushback. But I think it's a great opportunity, but everybody's kind of catching up to that pretty fast. So we might have missed that one. But I love the idea of "Hey, these are exclusive benefits because you rent from us. Not only do you get paid to pay rent, but now you can take that money and go buy some stuff at a big discount because you're one of our renters."
Andrew Smallwood:
That's right. There's a great distinction there, Andy, at least for the third party operators of just, "Hey, when you're an owner operator there's one owner to convince." If there's a hardware component involved that requires some investment and time to ROI and probably it's easier to get their attention to look at that than a retail investor who has a day job and this is something they have on the side so to speak. That makes sense. Very good. Well hey, a question I'm coming back to here is approach to pricing and positioning to residents. This has kind of been woven throughout, but just to make sure we talk about it explicitly.
We've talked about what's required versus optional, and the lease as a point of enrollment is a general best practice for a lot of these services. But for pricing and positioning, I'm curious how you guys have worked with your marketing departments of when are these things first introduced or disclosed to the resident? Does that depend based on the service in your experience? As far as pricing goes, certainly there's nobody here charging above fair market value for any service, at least not that I'm aware of. But hey, is it at fair market value, a little bit below fair market value? Does that depend as well? How do you approach positioning the marketing of this and the pricing? And Jake, I'll go to you quickly and then move next.
Jake:
Sure. I'd say pricing is more challenging. It depends on what's being offered, but of course a discounted fair market value is a really important piece for driving value to our residents. I'd say as positioning where and when is that collaborating with the partner who we're offering and our marketing team to really get the message out there at the right point and not to overwhelm them, whether that be a whole bunch of automated email campaigns and things of that nature. We know that we don't have success there, and so a lot of the pieces that we look at, it's really important for the organization to embrace as a whole from a leasing specialist, from a maintenance tech to really understand what it is that we offer and what are the right times for everyone to bring it off... To bring it up I should say. So that's a piece that we continue to focus on but I think will be key to our success is that not just simply presenting an offer but making sure the organization adopts it and believes in it, and that's how we can truly implement change.
Andrew Smallwood:
Jake, thank you so much. Paul, I'm going to come to you next. As far as pricing and positioning. How do you approach that?
Paul:
I agree with Jake. I mean, we won't get anything implemented in the field unless it's a strong value proposition for a resident. The ops vote simply won't allow that to happen. So the value prop has to be strong. It has to fit a need that's been identified by a resident and then we will tend to crawl, walk, run with respect to how we implement these things via a pilot, via do we only offer it on new leases? How do we roll it to renewals? Do we move it to existing tenants that maybe haven't subscribed for a service? So it's got to be overwhelmingly positive relative to an offering for us to be able to push it through that process and implement it across the portfolio.
Andrew Smallwood:
Great. Let's see here. Jenica, I'm going to actually skip you and come back. So Andy, I'm going to come to you first then Jenica.
Andy Propst:
Yeah, I agree with what's been said. I mean pricing price on the ops piece, trying to get it rolled out, team buy-in, it's got to be a great value and I won't belabor that point. But pricing's tricky because you want to be careful you're not talking to other competitors and setting a price. You have antitrust laws there, but most third party companies and sometimes some of these first party, larger institutional guys, you can go to their website and kind of see there's a lot of times they'll disclose what's going on there and you can make a good guess. A lot of times we've been surprised, hey we think the price is this and then we go check out the competition, it's usually a lot higher than what we thought we could charge. So that's been kind of interesting as we look at new ancillary opportunities.
Andrew Smallwood:
Interesting. Jenica, anything else on positioning, marketing when you're disclosing or enrolling residents?
Jenica:
Yeah, I think it's really just being transparent with the resident as far as positioning. As far as pricing is the value that they're derived from, it will help you determine your price. So if it's very valuable to them then you can charge a higher price.
Andrew Smallwood:
Great. I'll just add a quick comment to this before we go to the questions that have come in. We've got a couple more. We answered a couple throughout all this and there's a couple left over that we'll see if we can get to. As far as best practices on positioning an enrollment, what we've seen is there's multiple opportunities in that some people operationally, one will work better for them or they're more comfortable with one point than another. And let me just start with new lease, you're setting new expectations for a new resident and so that becomes a very easy opportunity to start things out. And working back from there when the resident would first see it, well generally it's not at the lease for the first time, and so a couple opportunities before the lease might be the rental requirements, that's a place to put it.
The application can be great because for many of you that's a static type of document where it's a centralized template. And so updating it one time works whereas updating listings as an example, that's a more dynamic update and would require in some cases, depending on your tech stack and what you've got going on, that might require human beings to remember to copy and paste certain language in time and time again. And how reliable is that? There's a number of people who do all of the above, listings, application rental requirements, et cetera, and their agents or whoever's interacting with the tenants are trained. We've seen things like move-in orientation, which you hear coming up throughout this a lot of how important that move-in experience is for driving a lot of outcomes in SFR. That can be a great place. Move-in flyers and move-in packets are a great place to educate residents to a number of these ancillary services.
Renewal being another chance, the renewal notice that goes out 60, 90 days before that. That's a great place to introduce and disclose. So again, it's not sort of a surprise at the point of signing their renewal. And then occupied properties, that's one that I would say we haven't seen the industry really tackle effectively yet of where the juice is worth the squeeze of marketing to occupied residents, whereas you have this very natural enrollment point as a part of a renewal or lease process to leverage a number of these ancillary services at that point, whether that's voluntary and they're opting in or it's just required as a new level of service to the property. All right, I'm going to step off that box, but hopefully that gives some tactical and practical things to the audience that I think they were looking for based on some of the questions and texts I'm getting.
I'm going to come to the Q&A box down below here and I've got a question from Jason. Jason, good to see you. A lot of attention is focused on driving additional revenue in order to enhance ROI. Has the panel given thought to creating an ownership mentality versus a renter mentality? Is there a way to do that through ancillary services where renters are working in partnership with the operator in such a way that it lowers operating in turn costs?
I think there's a lot of people out there who believe, just to add some context here, that you can't get a tenant to do anything. There's kind of this pessimistic view, but I think what a lot of these ancillary services have proven is that, actually, if you make it as easy for them as possible, there are a number of things they can do or will do the majority of the time that prevents you having to send somebody out in an expensive way. So Andy, let me come to you on this question. Any thoughts on this one for Jason?
Andy Propst:
I don't have anything on that one. That never even crossed my mind. That's a very interesting question, but I never say no to anything. I think there's a way to do everything, but I got to wrap my head around that one, Andrew.
Jenica:
Yeah, Andrew, I can probably speak best to that one. Because with home partners, our residents, they also have a right to purchase the home from us so that inherently it drives that kind of ownership mentality. So we see people taking just a little bit more pride in their home and things like that. I know when we signed up with Second Nature it's like, "Well what if they don't put the filter in?" Because you can only get them the right one on their doorstep at the right time, but you can't put it in. So our residents are putting them in, and it's good for them also.
We hope that they're successful in their journey to be a homeowner. And when you do become a homeowner, you know also have to take care of the home on your own. There's nobody to help you. So something like that is really good for our residents to get that practice and understand that so when they are a homeowner, they're not one of those that's, "Why is my electric bill this high?" That they understand they need to change filters, they need to do some of this maintenance on their home. So that's a really good question.
Andrew Smallwood:
That's great.
Paul:
Andrew. I don't know if it's changing their mentality, but it's as you talked about a little bit earlier, move-in orientation, education, communication, clarity with respect to responsibilities. All of those things will have the same potential impact versus changing a mindset from a owner versus a renter. So just things that I think we focus on.
Jenica:
And I don't-
Andrew Smallwood:
I've heard-
Jenica:
...Have to have that ownership mentality. For them if you don't change, say your filter, and your HVAC, your air conditioning goes out and it's a hundred degrees outside and everybody's air conditioner is going out on the same day, we can't get somebody out there like that on that day. So it's going to be them that's uncomfortable in the heat.
Andrew Smallwood:
Perfect. I'm just hearing Tim Lodner's words, Paul, of working in partnership with residents and a lot of people in this COVID era when rent payments and things like that, there's a segment of renters affected they've seen, I think a lot of people who had pessimistic views about residents have been pleasantly surprised is what we've heard from a lot of people. A lot of the residents are more well-intentioned than some of the pessimistic views out there and they've been able to work pretty effectively with them. That's key. Establishing that relationship as a landlord at the move-in as everyone's talked about today is key. Ancillary services is just a part of that.
All right, great. We've got a minute or two left. Any parting words of wisdom? Anything we didn't cover today that you feel people should be thinking? If not, you can just leave it with a statement of how you see ancillary services in general playing out in SFR. So, Andy, I'll come to you first.
Andy Propst:
Yeah, again, I think it's incredible just talking to the people that do this business. How many folks don't take advantage of ancillary revenue. They just strictly live off the profit from the property or whatever their management fee is. There's a lot of additional services that provide value that I think the market in general is catching onto. So I think we're going to see more of these benefit packages, more ancillary services offered, more creative ideas. I saw something about package delivery security. We've looked at that on multifamily. It'd be interesting to see if there's something on that on single family. So I still think we'll see a lot more in the future. If you'd ask me five years ago if there's... We're about tapped out on ancillary five years ago and there's been more that hit the market. So I think we'll see more, especially when it's so hard to find a good rental and people are moving. They're not moving out, so they'll sign a renewal no matter what, because there's really not a lot of options so people can keep charging them.
Andrew Smallwood:
There's a lot of demand in SFR right now. We've heard that a lot of times from a lot of different places today. Jenica, coming to you next.
Jenica:
Yeah, I'm really excited by the opportunity here. I think we've really just started scratching the surface and just think of we all have in the past thought about our tech stack very carefully and just think about this in that same way of lining things up appropriately. And really I think we'll all kind of end up with some variation of something similar, but yet different because it really depends on your resident and their profile, their needs, their demands and their wishes, and then you can have some fun and be creative in lining up appropriate things for them.
Andrew Smallwood:
Great. Jenica, thanks so much, Paul. Yeah, any final thoughts?
Paul:
It's obviously a pretty exciting space. I think the next three to five years is going to be very interesting. So I think folks are getting traction now and really putting some structure around what makes sense for all parties. And it is one area where from an owner's perspective, a manager's perspective, a resident's perspective, and a vendor's perspective, you can easily find alignment on things that make sense to everyone, which makes the partnerships a lot easier to get off the ground and implement it. So we're very focused on it and are excited about for the next few years and initiatives.
Andrew Smallwood:
Excellent. Well we'll just wrap with this before handing it back to Sanu. A couple final thoughts of whether it's a resident benefit package or an amenity package, what we see is people starting out, if you need your first couple of ancillary products or services to give, you're probably not going to have one product and call it a package. So get started if you haven't gotten started with something, any number of the ideas that were thrown out today can be a great place to start. Then once you start to hit four or five, you'll see hey, four or five different line items of fees, it can really start to make sense to bundle this. And it feels like that's really the next chapter for SFR, which you heard referenced today and throughout other conversations in the conferences. How do we talk about what's the premium rental experience and the leasing lifestyle that people really want that's going to be attractive to the market?
How do we make it such a compelling value proposition that it stands independent of rent and it's not confused with rent? And so rent growth is there and that's an independent decision. This is something that you're getting alongside it as a professional service package from the landlord that you're renting from. We're seeing a big impact not just on bottom lines in operational efficiencies, but when you think about every 1% of revenue in ancillary income translating to a few cents in stock prices. When you think about the profitability for third party companies like Andy's of adding this ancillary revenue and profit and what that can do for your business as a sellable asset as well, we're seeing a lot more and more people look into this and really pursue this as a way to drive a great business and multi-family has done it before. There's a professionalization of that industry in a number of ancillary services and product planning. And of course with that, there's a ton of capital and vendor solutions flooding to it. We're seeing the same thing we feel like in SFR right now, so it's such an exciting place to be. Thank all of you for your contributions today, taking your time to share.
Speaker 7:
That's all for this episode of the Triple Win. Thanks. Go out to Carol Hausel and Jeff Tucker for everything they do to put these episodes together. We want to remind everyone that you can find more resources, upcoming events, a link to our private Facebook group where the conversation continues in between these episodes with other professional property managers. All of that you can find at rbp.secondnature.com. Again, that's rbp.secondnature.com. And until next time, keep transforming what it means to be in professional property management by finding and applying your next triple win. We want it to be true that every time we see you, we see a better version of you and your business. With that, cheers.
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