Smart Property Tech For Your Real Estate Investments
As any real estate investor knows, there are a host of factors to consider when you’re looking to invest in a multifamily property — from cap rates and operating income risks to asset values and much more. Traditionally, however, smart property technology has not been among these many factors.
For a long time, this made sense. Technologies like access control simply used to be a line item in a building’s budget. They were necessary parts of the property, but they didn’t really bring any special value along with them. Now, however, that’s no longer true thanks to smart building platforms. Connected devices have the potential to increase investor value in three important ways: They operate as valuable resident amenities, provide new operational efficiencies, and offer better asset protection.
Smart property investments that enable functionalities like keyless access and self-showings generate immediate returns through higher rental rates and operational improvements. Although these rental premiums might fade over time, the values of operational efficiencies and asset protection will continue to grow as technology replaces manual processes — think checking for water leaks or keying locks. This technology will also help building operators stay ahead of property needs by taking advantage of features (like HVAC analytics) that enable predictive maintenance.
The bottom line is this: Smart property technology can have both short- and long-term benefits when it comes to the value of a property. With this, modern real estate investors need to start recognizing its potential during investment decisions. However, putting your money toward properties that simply have technology isn’t enough. You need to make sure they have the right technology. To ensure you’re making a good investment decision, ask the following questions about your potential properties’ smart home technology:
1. How do the connected devices communicate?
A connected smart property device is only as good as the connection it relies on. Don’t just assume that Wi-Fi networks will easily take on the job of connecting these devices to the internet and enabling them to communicate with each other. Managing a network of connected devices is a different beast than managing a traditional Wi-Fi network. In most cases, a cellular-first system is a more reliable, cost-effective solution — especially when it comes to devices that you can’t afford to have offline.
Also consider the platform each device in your potential investment property runs on. If there are a bunch of different connected devices in a building, then your property manager won’t want to have to deal with a different platform for each device. Ideally, a property’s connected technology should all work on a unified system that’s easy to manage and facilitates better communication between devices.
2. Is the hardware based on an open standard or a proprietary one?
This might not sound like something you as a real estate investor should have to worry about, but the answer can have a serious impact on the sustainability of the technology in your investment property. A closed standard will lock your building into a specific company’s services, tying the fate of your tech to that company’s fate. That means you’ll be stuck with whatever platform it provides and whatever price hikes or terms of service changes it implements. This also will reduce the value potential of the technology in the event of a sale because your new buyer will be locked into one vendor.
Instead, look for properties with devices that support open standards, such as Z-Wave. This will give you much more flexibility when it comes to which property management system can be used. It also makes it possible to jump to another platform later on if your property manager isn’t pleased with the current solution.
3. How does the software provider handle sensitive information?
Data security is an extremely important consideration when it comes to smart property technology. In the same way that you wouldn’t want to invest in a rental property without a lock on the door, you shouldn’t invest in one that has technology that could compromise residents’ personal information.
Dig into the data policies of the company in charge of a property’s software. How do they store sensitive information? Are they General Data Protection Regulation, California Consumer Privacy Act, and SOC 2 Type II compliant? Will they sell resident data to third parties? If you don’t have the answers to these questions during the investment decision-making process, you’re opening yourself up to issues down the road.
There was a time in the not-too-distant past where investing in smart property technology was a risk because the device could become obsolete by the next year. Now, however, the market has largely stabilized. Today, advancements are mostly happening on the software level, meaning that smart devices have a much longer shelf life than they did even a decade ago. There’s no longer any excuse to shy away from the value that connected devices can offer in rental properties. If you don’t begin taking tech into consideration for your investments today, you’ll most likely regret it tomorrow.
ABOUT THE AUTHOR
Sean Miller is president of PointCentral, a subsidiary of Alarm.com and the leader in enterprise property automation solutions for long- and short-term managers of single-family and multifamily rental properties. Outside of having a lifelong passion for technology, Mr. Miller has almost 10 years of professional experience with B2B and B2C IoT/home automation technology, having previously led global sales and business development for Wemo, Belkin’s home automation business unit, and launched Mobile Link, a cellular-based internet connectivity service for generators, at Generac Power Systems.
