A (6:50)

Move on.

B (6:51)

Let's illustrate how this plays out practically in the market. Okay, so in the good old days of not so distant past, we could generally assume that most properties would lease up and stabilize within 12 to 15 months. Now, with nearly 1.5 million units that were built in just the past three years, and remember, that's the largest supply wave we've seen since the 1970s, it's now very common for properties to take much longer to lease up. Maybe it's 18 months or even 24 months. And a lot of times you have, you're still trying to lease up your initial units while you're still trying to now protect your first leases and hope they still renew with you. Right, that's that dreaded year two hangar. We see a lot of that right now. Now remember that developers, they can't refinance out of those construction loans until they reach stabilized occupancy. So there's a lot of pressure to get units leased. And to do that, that often means concessions or rent cuts, which are the same thing effectively. And when the newest and nicest properties are ramping up concessions or cutting rents, that helps pull up renters from existing apartments and into those new apartments, which in turn puts pressure on those existing apartments to push concessions as well so they can stay full. And that's how this overhang of new supply and lease up continues to put downward pressure on rents even through the spring, even as new completions continue to plunge downwards. Remember, supply isn't just what's completing now. It's also that prolonged lease up activity that continues to put downward pressure on rents. All right, moving on. Next up, it's time for some rental housing trivia. All right, today's trivia is presented by authentic. If you're an owner, asset manager or developer running multif family, here's the truth about leasing in 2026. A couple of ILS accounts and cross fingers won't get you to stabilization. The properties that are winning are running a tight ship across paid search and social retargeting, email and SMS nurture. All coordinated and with one accountable team. Authentic built that system. They call it demand to door and it's one platform, one partner, one monthly number that scales to your velocity targets. Pod listeners get 50% off setup fees for a limited time. Head to offff.com d2d to see how it works. That's a U t h d ff.com d2d so check it out. Check out Authentic. All right, so today's question what market has the highest number of excess lease ups? If we define excess lease ups in a simple way, the number of newly built apartments in lease up today versus five years ago, where is that delta highest? Is it Austin, Charlotte, Denver, Nashville or Phoenix? So give that some thought and we'll answer that here in a bit. But next it's time for some good question. All right, this segment is sponsored by Inside the Deal, a Siri podcast by Berkadia that takes you beyond the headline into the heart of the transaction. Hosted by Barcadia's EVP and head of production Ernie Kate, each episode pulls back the curtain on a real deal, unpacking the situation, the challenges, the creative solutions, and the outcomes achieved. They'll hear directly from Meadia producers as they share what really happened behind the scenes, the roadblocks they hit and how they navigate the market, and the strategy that ultimately got the deal across the finish line. So if you work in CRE or just want to understand how complex deals actually get done, this is where you'll find the stories, the lessons, the perspectives you won't see in a press release. So follow Inside the Deal, a Siri podcast Abercadia, wherever you get your podcasts. All right, so today's good question. Why do different today data providers report such different occupancy rates? Which is right. All right, so this is a good question indeed, and one I've heard quite a bit. We've seen various occupancy rates from different data providers report anywhere from high 80% range to mid 90% range, which is a huge delta. So who's right? Well, no one's going to like this answer, but let me just jump to it here, then I'll back up and explain. Okay, they're all right. In their own way at least. Okay. But they're all measuring slightly different things with slightly different methodologies and slightly different data sets. And so it's important to Understand those nuances. What they report is maybe, quote, right from a technical perspective, even if it's not always reflective of what you actually see in the market or in your portfolio. So let's break it down this way real quick. You know, so methodologies, what are we measuring? Is it physical occupancy? Economic occupancy is the percent of units that are least availability. Is it based on Internet listing feeds? Is it based on a survey? All of those things matter and can shape the number. When you look at who's reporting the lowest occupancy rates, it tends to be from data providers with Internet listing sites advertising hormones for rent. And those listing feeds may or may not be comprehensive and they can include units being advertised that are currently occupied but will be available at some point in the future. And that, and you know, and to be fair, data providers try to adjust for those kind of things. That's just one of many nuances, by the way. And they try to adjust those kind of things, but listing fees are not the same thing as actual rent rolls. And I see some people try to say like they are, they're not, they're different things. Okay, and then you have survey based providers and that can create other challenges. We back up a little bit. Obviously the asking rents on a website should almost always match what you see on property. But, but in terms of the, the complexity of a rent roll versus a feed of availability, those are different things. Okay, I want to be very clear on that. You know, rents are very transparent, a little bit different. All right, so then we have survey based providers and that could create other challenges. For example, few property managers will participate in a survey these days for fear of litigation risk. And that can make property data collection spotty. Right. And in surveys too, you can get some answers based on physical occupancy, others based on percent leased, which includes again, signed leases that haven't yet moved in. And there's another major methodological factor. Is it stabilized occupancy or is it total occupancy? And how do you define stabilized? Stabilized means it's existing completed apartment property, not one recently built that's still in lease up. So again, I mentioned earlier, we have one and a half million units completed these last three years. That's a lot of lease ups trying to get stabilized. But in the meantime, they're pulling down market occupancy and that'll inflate, I should say depress the total occupancy rate. But in the meantime, it's, it's, it'll also there's also a nuance here. Sorry, here's what I want. Here's the point I want to make. There's also some nuance. It doesn't always get pointed out with even the stabilized occupancy rate. Okay, so let's say that the stabilized occupancy rate in the market is 94%. Okay, then we just got a ton of units that, that just reached stabilization. So let's say 90%, low 90 and a lot of those properties that are coming up are going to be low 90% range. Well, what does that happen? We are at 94% stabilized. Get a bunch of new properties in the mix that are 90, 91% stabilized or occupied, I should say that's going to pull down the average stabilized occupancy rate. Not because occupancy actually went down, but because of the addition of all these new properties in the mix that are technically counted as now stabilized, that previously were not stabilized but are still below the market average occupancy. And so that's why occupants data just gets really messy. And this is why even my own presentation, some of you know this, I don't spend a lot of time talking about market occupancy rates because again, it's just messy. And so when you look at third, third party data providers, I'd worry less about the exact rate and, and more about the direction of occupancy, particularly over a period of time that could be more helpful than just a point in time rate. And so again, just bear in mind there could be some noise around lease ups. And understand that if you really want to get into this, understand the nuances between these data. I'm not going to get all that right here but I just want to give you a high level overview to answer the question that we get. Okay, so clear as mud probably, but I, I probably just made it more confusing for some of you. We're just hoping for a simple answer like hey, use so and so's data. It's the best. And yeah, I could tell you, I just wish it was that simple. All right, next up in the news. All right. In the news is presented by Foxen which provides a suite of value add solutions designed to improve operations compliance and property performance. Rethink renters insurance compliance, rent reporting and pet management with Foxen. Check them out@foxen.com that's F O X E N. All right, so some good news in the news this week. Last week 76 members of Congress, members from both parties signed a letter that strongly urges Congressional leadership to preserve build to rent housing supply by stripping out limitations on build to rent in the Road to Housing Act. So here's what the letter says. I'm give you three key things it tells us. Number one, the legislation would, quote, exacerbate the existing housing deficit and undermine broader efforts within the bill to increase supply. Yep, that's true. Number two, the legislation would quote, push out renters and destabilize housing for thousands of families nationwide and compel housing providers to sell properties resulting in the forced displacement of renters who rely on these homes. Yep, that's true too. Number three, the legislation would, quote, reduce mobility, limit economic opportunity and place additional strain on working families striving to achieve homeownership. And that's true as well. And then there's some good meaty stuff in this letter. It's surprisingly, you know, nuanced. It understands this issue really well. And it really also gets into the legislation. Nation's roots that are ground in all this misinformation of conspiracy theories. Check this out. It says we are also concerned the Senate language would unintentionally restrict capital formation and investment in rental housing markets more broadly. Meaning more broadly, just build to rent, single high rentals. This is bigger right going on, undermining long term efforts to increase housing supply, housing production and affordability. And that's true. I talked about this a few weeks back about how Senator Warren has already expanded her sites to apartments and to manufactured housing as well as which if further pursued, can have a freezing effect on development and investment in those sectors too. So kudos to 76 members of both parties choosing to focus on facts over populist conspiracy theories. Love it. And hopefully sanity is restored. All right, next headline comes from the Wall Street Journal. It says a bill aimed at creating homes is leaving plots empty. Instead, the Senate housing bill would severely restrict build to rent homes. It is already causing projects to pause and financing to dry up. All right, nothing. This is a good story. Glad to see in the Wall Street Journal. It doesn't cover anything new beyond what I've shared previously, but again, just shows this kind of boiling up of just more and more data and evidence that there's some real unintended consequences from this legislation. Maybe intended depending how cynical you are, but certainly things that those of us who understand this space have been saying, what happened? It's already happening. It's freezing development for these new homes that we all need. And it doesn't just lead to discretion. Not be able to build the rent doesn't mean it's going to be a force house instead of it's just not happening at all. And that's a problem. So good to see further light being shined on that through the Wall Street Journal and also want to give a shout out to the New York Times. You know, everyone lets give the mainstream media a hard time for various reasons, but you got to give them credit where credit's due. And here's a good article. It says how many homes do corporate landlords really own? And and so getting to the punchline here, it says only about 140 institutional investors in the US meet the criteria of being 350 plus homes, which is what's targeted by this bill. And that accounts for 0.59% of single family homes. And they're citing partial labs and they say partial labs findings also challenge the extent to which reducing corporate ownership to 350 single family homes would directly benefit individual buyers. Between March of 24 and January 2026, portfolios for landlords of fewer than 100 units grew while portfolios for landlords with thousand or more units shrank. The analysis shows that when large investors sold those homes instead of being released to individual buyers, they are often bought by other investors, albeit smaller ones. And by the way, you know, we had Professor Josh Kovan's podcast earlier and he mentioned this exact thing. He predicted this would exactly happen. That's what's already happening as some investors have exited the market for one reason or another. It just goes to a smaller investor instead. Now and also real quick, I just want to also give a shout out to NPR as well. NPR's Morning Edition did something similar a few days ago. Let me just read the script of what the NPR reporter says at the end of the segment. She says overall the evidence is doesn't show that institutional investors are a major driver of having housing costs, but cracking down on companies building new homes is a good chance of making housing affordability worse. All right. So I just love to see this kind of swarm of major media coverage bringing facts to this topic. So kudos to the Wall Street Journal, to npr, the New York Times, other media outlets for embracing facts instead of clickbait narratives on this topic. And then one last headline to cover for you this week. This comes from the National Multifamily Housing Council's Quarterly investor member Survey on apartment conditions. And so this survey from NHC NMHC members, they ask about market fundamentals, sales volumes, equity and debt availability. And for all four of those categories, the Q2 survey results basically boil down to this which is more of the same, not really any worse, not really any better, just more of the same. And that sounds about right to me. But there's a fifth question that's from the survey. It's a bit more interesting. Let me read this. It said, we asked respondents this round how their expectations have changed since the start of the year for total 202026 sales volumes and multifamily 37% of respondents said they now expect 2026 sales volumes to be lower than they did at the start of the year. And 23% now believe annual sales volumes will be higher, while 29% reported no change in their expectations for 2026 deal flow in the remaining 10% said they don't know. So I thought that was interesting. It's again, not a major shift, but certainly a few more people expecting less activity this year than they did going into the year, which kind of feels like the story from last year as well. And the view even back to the MHC annual meeting earlier this year was, hey, second half better than the first half. Maybe a little bit more pessimism that that might not be the case. But it'll eventually happen, right? I mean, just have to happen sooner than later and hopefully it is sooner than later. Let's come back to our rental housing trivia question of the week. We asked what market has the highest number of excess lease ups? And again, trivia presented by our friends at Authentic. So was it Austin, Charlotte, Denver, Nashville or Phoenix? And the answer is E. Phoenix. And they there are nearly 20,000 more units in lease up today than Phoenix had five years ago. And to be fair, in full transparency, Phoenix didn't have a ton of supply five years ago, but there's a lot now that they're working through. So 20,000 more units in lease up today versus five years ago. And it's especially challenging in the West Valley where so much of it is concentrated. And by the way, if you guessed Austin as an answer, that was a good pick too. But that one was second with about 11,000 more units in lease up compared to five years ago. All right, next up, it's time for today's interview sponsored by funnel, the AI and CRM software trusted by four of the six major REITs and many more leading operators like BH and Cortland. To learn how Funnel can up your properties, centralize operations and automate everyday tasks, visit funnelle leasing.com all right, our guest today is a returning guest. He was with us last year as well, Dom Beveridge, the founder of 2420. And I'll tell you whenever I get, I want to get a pulse on what's happening in the prop tech world. Dom is my go to guy. You know, he's got the rare ability to connect prop tech language with trends in the real world that are applicable for investors and operators. I mean, he connects the dots. Okay. He speaks both languages and like a translator. And every year Dom does the survey of C suite execs and multifamily picking their brains on, you know, in depth on prop tech trends. And it's always an insightful survey to read or even just to skim through a lot of time, a lot of good stuff in there, does a good job packaging it up. And he comes across as very, I think, objective and relevant. He's not, not like a marketing package or a sales pitch or not in like tech language. And so we're going to talk with Dom about his latest survey and in particular I want to ask him about one big theme that jumped out of his report, which was this exhaustion. Exhaustion over all this prop tech and AI stuff. We know we need it, got to stay on top of it, but it can be a lot, right? So we won't add to that exhaustion, hopefully, but instead try to cut through it all in today's conversation.

A (23:07)

All right, welcome to interview portion of today's podcast and I'm honored to welcome

B (23:11)

back Dom Beveridge with 20 for 20.

A (23:14)

So Dom, thanks for coming back and for those of you who, the small group that isn't already familiar with your work, tell us a little about yourself.

C (23:22)

Well, thanks, Jay. It's great to be back. Yeah. 20 for 20 is a consultancy that focuses on operation primarily on operations and technology. And my. I guess the thing that prompted this conversation is the release of the annual survey, which is this paper that I write each year based on 20 deep dive interviews with senior leaders of technology and operations, which basically tells us a lot about what's going on at the moment in the. Particularly in the arena of technology and operations.

A (23:59)

Oh yeah, you do a great job of that. And for anybody listening who really wants to dive deep, I mean, that report is really extensive and comprehensive. And so, you know, Dom, thank you for joining today. I like, you know, you do a good job too of just boiling these down to simple topics we cover in a short amount of time. So that being said, I was really, I want to start with something I was really struck by because I think it, I think it, you know, I don't follow the space nearly as closely as you, but it Just, it just resonated with me. You said the word of the year from your survey was exhaustion. And so what did you mean by that? And why did that theme stick out?

C (24:36)

This was a really interesting thing that kind of sprung up when I was reviewing these 20 sets of responses after the fact. Most of the questions are about what people are working on, like what technology they're evaluating, implementing, what they're trying to change about operations. But this sort of background idea that the last few years have really been a grind was something that you saw across multiple different responses, particularly from people on the operations side of the business. And the way I characterize it is this. There have been two things going on at the same time in the industry. One is that, and I'm sure we're going to come on to this, but I think we'll look back on the last few years as the most productive period in terms of changing ways that we manage multifamily real estate. So much has changed about the operating model, the technologies we use to support it and so on. So lots of people have done lots of things to change the way that they run operations at the same time. As you know, we've been in a high interest rate environments each of the last three years. One of the questions I ask people every year is, you know, do you expect next year to be better, worse or about the same than this year? And basically everybody's answered that question the same way in the, in the previous three years. Right. It's been, well, it's going to be tough the first half of the year. Not much property trading going on, not much rent growth, but things will get better towards the end of the year. And basically people have answered the question exactly the same way for the last three years. And when you look at the cumulative effect of three years of, of those conditions where the rent growth doesn't really come in, most of the markets that we're in, we don't have this trading of properties to the same extent, which you realize really kind of defines how operations work in multifamily. What you get instead is just this much bigger focus on operating performance. And it's funny, operating performance is what most businesses spend most of their time focused on. But you really notice that in a balance sheet business like multifamily real estate, this cadence of onboarding and offboarding properties, this reality that rents generally go up over time, when you don't have those prevailing conditions, what you have is lots and lots of scrutiny on controllable costs. And three years into this combined With a productive period of change in the way that we run operations, it's just taken a toll on people and companies. Operations are feeling a bit exhausted by it.

A (27:23)

Yeah, no, that make. That makes a lot of sense. And I think you, you did a great job boiling all that into one word. Now, speaking of words, there's a buzzword that everyone think also kind of exhausted from hearing, which is AI. And we talked about this last year when you were on as well, and obviously you can't ignore it. It's the reality. And I think most people, they, they, they want to be up to speed on what's going on. At the same time, they could probably be exhausted by some of the conversations about it. But I want to ask you, in terms of what's real, where are we seeing in the last year or so the biggest gains in true AI adoption across multifamily?

C (28:02)

Yeah, there are two big data points for me that stood out about this. One relating to the leaders of technology organizations, one to operators. So on the operating side of this, what happened in 2025 was that AI, just the scope of what people are asking AI to do in operations kind of exploded. Right. So multifamily generally has this bias or this disposition to look for widgets that solve problems that they're already familiar with. Right. So AI, for most. The first time I became aware of AI being used in operations in multifamily was back in 2018. Right. And for most of the period since then, AI has predominantly been something that we use to answer the phone to incoming calls. Right. So we know we have this perennial problem in multifamily that you just can't cover all of the inbound communication to a property. Oh, here's an AI that will handle that for you and will nurture and make sure you never miss a call effectively. Great. That's a solution to that problem. We already understand you'd seen people start to experiment with things like collections, with things like renewals, using AI agents to do that as well. I think what you saw in 2025 is delinquency in particular became something that looks more like a gateway process to much broader adoption. Now, the reason for that is interesting. Really important difference with resident facing processes like delinquency. Whereas leasing stops when you lease collections is something you do every month. And what you start to see with that is that you start to observe the agents learning about the residents and learning about preferences and learning about what kinds of prompts lead you to better solutions. And I think as soon as operators in particular start to see that this works well. There's this very natural compulsion to want it to do all kinds of other stuff as well. So you end up with this big expansion in functional scope, which is what I think happened in 2025. At the same time, the people who are in charge of technology at the same organizations, 2025 was the year when they started to see AI not as being this point solution thing that we have doing various things across our organization, but much more as a legit sort of strategic part of our technology stack. The kinds of things people would say were, we've had enough success with our pilots, we've seen enough of our peers doing well with this. We think we know where the upside is in this. And now AI is this piece of this sort of layer of the tech stack that grew massively in stature in 2025.

A (30:57)

Yeah, no, it's well said and I think question is a good example too of something that human beings just most of us wouldn't want to do, don't like to do. It's hard to ask people to do it. And so it seems like a good use case for what AI can do. You know, I think that actually ties the next question too. Another thing you said that really jumped out to me is, and I, and resonated with me is you said, and I'm going to paraphrase here, you said that the real story of AI in multifamily and I'm sure supply, show, build, rent, single family rentals as well, the real story is not anything super sexy. It's really simply automation. What did you mean by that? So

C (31:35)

when we think about technologies, we don't normally think about them in terms of the underlying technology itself. So if you're. We don't think about salesforce.com as, you know, an HTML company, we think of it as a CRM because there's a thing that it does to add the value. And so thinking about where AI is actually benefiting operations in particular and making things more efficient, it's much more helpful to think about what it is that the AI is automating. So chat is obviously this big element of automation that the AI does. But when you have more and more chat being automated by AI, you create all of these new opportunities to automate other things. Right. If you're having a chat, your chat agent is figuring out that a reason that people push back on renewal offers is to do with maintenance. You've now identified some sort of cause and effect relationship that you can do something about. It's Very difficult to see that if you don't have some sort of digital view of what customers feel about stuff in your properties, it's very difficult to identify these improvement opportunities automatically. And that's kind of what's happening now. Right. So one operator put it really well. They were saying that we kind of want our technology to start telling us how to improve our processes. We normally think about technology in terms of, here's how you nurture a lead. Like, you call after three days and seven days, and whatever the cadence is, you choose how you're going to set that up yourself. But the thing is that AI just knows way more than we ever have about what stuff people respond to well. So the idea of you automate conversations and it's then able to start telling you, well, the most effective way to get this person down the funnel is to take these steps. That level of automation, what people are calling agentic automation, is something that people are starting to kind of get excited about.

B (33:54)

Yeah,

A (33:56)

I think that's a great point. That does add another dimension to it. So that transitions to the next topic, which is when we talk about AI, I don't follow the spaces nearly as close to you as you do, but it seems to me like every conference, you see proptech booths and whatnot, you see advertisements on, you know, newsletters, other things. Everybody's talking about AI, and I think we all just intuitively assume that you know or just don't know what's hype versus reality. So when you, when you talk to operators, I'm just curious, like, how do they. I think you made the point that they're getting a little smarter about discerning, you know, vaporware versus what's actually real, hype versus reality. So what are they looking for to discern those things? How do you know what actually is true besides just trying it out and seeing what works?

C (34:51)

Yeah, it's a really interesting development. And I think there are a couple of different ways that people are starting to look at this differently. I mean, one thing, when I did these interviews, it was shortly after op tech at the end of last year. Right. So everyone had just been walking around the trade show floor looking at the. You're listening to pitches, looking at the sort of latest technology, and it was a nice data point to say, all right, did what was on offer on the trade show floor look any different from how it did last year, given your experience with AI? And the general answer was yes. Right. So the kinds of things people would say were, we're sort of increasingly suspicious of Narrowly focused solutions. Like one thing that AI looks like it's going to start doing is or it's already doing is kind of eroding boundaries between what we think about as normal categories of technology. So lots of things overlap with one another. We have maintenance apps that do maintenance, but then we have other kinds of apps that are using AI to handle parts of the maintenance process. So it's got more complicated, like where am I supposed to get this functionality from? The sort of one trick pony kind of solutions that there were quite a lot of a couple of years ago. People are less and less and less interested in those things because you can tell people have the expectation that whatever technology I currently have is likely to expand into lots of these spaces. So is it really worth integrating another app that only does one thing? That's, that's a big thing. And the other thing I'd say is people are also, I'd say one of the more sophisticated views that I heard is several of the people are getting kind of critical of the stuff that they already have. They're delineating between, you know, this technology that I bought that is, was not designed as an AI first technology. Right. It was a conventional technology to which AI has been added. Well, now people are starting to form opinions on is the, is the AI just an add on to this conventional software or do we think the AI kind of goes deep enough into this, into this solution that it's going to be competitive with all of this native AI stuff that's coming out in the market? So yeah, the companies that are sort of adding AI around the edges are probably going to be at greater risk than the ones that are sort of taking the plunge.

A (37:22)

Well, let me ask about this. I've been hearing this forever, which is that people want platforms, not products, but it always seems like these cool products end up taking off anyway. So are we at a point where it's finally saying, hey, no, it really needs to be part of this platform? Are we actually there yet? Or people just say that I think

C (37:40)

we're closer to it than we were certainly a year ago. I mean, I hear people, technology leaders talking. They talk about the core of our stack, right? So there's already this notion of there are some technologies that everything has to integrate with properly and if it doesn't, then it's going to be pushed to the periphery of our technology stack. I mean, I spent a lot of time at Properties last year just looking at how they were using technology in the leasing office and it's, it's quite Normal to have, you know, 40 plus applications that you're supposed to be able to, to use this. There's plenty of scope to, you know, to, to, to, to, to expand the platform bit and get rid of some of the hangers on, in the, in the, in the technology stack. But, but I think AI is AI. And you know, also the way that people are centralizing and specializing services are putting this natural pressure on wanting stuff to be the same, wanting fewer logins, wanting fewer integrations and so on.

A (38:43)

Yeah, it seems like there's always been this battle between the CTO versus the operations team that says, oh yeah, look at this cool new thing. We need to try this. So maybe at some point the technology guys have to win that argument. So you're probably right there. It's probably sooner than later than maybe I'm just too cynical about it. So let me ask you about another hot topic and one that, you know, a few years ago, I think it was, you know, maybe the number one or number two issue that's leasing fraud. You know, especially after Covid, obviously cases like Atlanta, we saw even very sophisticated operators start to see in REITs having major collections issues in certain markets where there was significant leasing fraud. And, and we've seen, we saw a lot of new technology to address that, much of it with AI or at least talking about AI. So I saw you talk more about fraud prevention in your latest report. So what's the state of fraud prevention today? And specifically, are we at a place where for years it was like the tech catching up to the fraud? Are we at a point where now the tech is ahead of the fraud and blocking most of it?

C (39:53)

So I think fraud has just sort of developed into a really interesting study in technology adoption because you're right, two years ago it suddenly leapt to the top of the list of priorities for a number of reasons. I mean, I think it has a lot to do with the eviction moratoria. Right? Because the eviction moratoria sort of created this market for advice on how to avoid getting evicted by gaming various rules, that it was quite a short step from there into telling people how to get around like screening steps, like when you're trying to apply for an apartment. So you had this combination of this, this, this marketplace of information on how to game game multifamily application processes, and also lots of high quality, you know, AI generated fake ID documents and so on, which meant that this suddenly became this problem that you have to solve, like, I don't want to be the company, you know, bad Actors are going to go from property to property until they find the weak set of checks. I don't want to be the weak property that lets all the bad actors in. So that led to this really rapid adoption of these technologies. I think as the amount of experience people have with combating fraud has grown over the last couple of years, I think lots of people realize it's about a lot more than keeping these bad actors out of properties. If we think about fraud in what we're actually trying to do, we're trying to mitigate bad debt on the front end of the transaction. That's basically what fraud checks are all about. And not all fraudsters, in fact, probably most fraudsters are not really bad actors. They're people who can't quite afford to live in a property raise. And so fraud is a slightly unsatisfactory term because most of the people that are trying to get in who are sort of bad debt risks, probably fully intend to pay the rent. But you need something that's going to enable you to make better decisions both about the marginal income cases and also the bad actors. Right? You want to figure out a way to accept good renters as quickly as you possibly can. And when you start to look at it that way, way you start to think about this more in terms of, well, it's getting more complicated to figure out what somebody's income is, right? The, the proportion, the Gen Z, the proportion of W2 income that makes up their overall income is getting smaller and smaller and smaller, which means it's, you can't really figure out somebody's income just by looking at pay stubs, for example. So you need more sophisticated ways of piecing together their, their income. The other thing that's fascinating is that as people move down that experience curve, they start to realize that we've always had in multifamily, this sort of systematic bias, conflict of interest in the way that we manage fraud. Because if my job is to sort of adjudicate, can this person, does this person have enough stable income to be able to afford to pay rent here? There's going to be lots of cases that are really close to the boundary and the people that we ask to make those decisions are bonused on occupancy. And so the one thing that you're seeing now that I heard again and again during the course of the interviews is, well, what we've really learned is this is basically a process that we want to get completely off site. We want people who understand the technology, we want good, quick decisions, and we Want decisions being taken by people who have no dog in the fight of occupancy. Because that's not helpful.

A (43:56)

Yeah, I want to go back to something you said a minute ago, which is the difference when we talk about fraud. I get this question a lot too on social media debate sometime, which is, hey, people who are struggling to get by, they're thinking about fudging the pay stub, the old stuff like that. I think that what really has been alarming to the industry was this period we had the bad actors, which was a relatively smaller category until more recently. But it's a good point. So how do you. In some cases you have the marginal renter that you're trying to. But you do want to get. I think anybody would tell you they'd rather have somebody who's more likely to pay the rent even more stretched, maybe have some credit issues, maybe maybe a little bit lesser income, maybe higher rent income ratio than somebody just a bad actor. And so the, the nuance. I think you made a really good point which is, you know, how do you at least be aware of those situations and maybe find ways to work with that person who's honest renter, wants

B (44:47)

to pay the rent.

A (44:47)

But as you say, maybe on the margins a little bit. I think that's an interesting topic. I think that everyone should be thinking about on the operations side.

C (44:54)

Yeah. One last thing I'll say about it. I mean, the thing I find persuasive, having been close to this for a while, is this concept of you want fraud checks to be a fast lane for the good guys. Right. So if you're good at figuring out, all right, this person has a. If I piece together all of the income there are, they will be a good renter for this property. We want to get them through the check as quickly as we possibly can. Those same checks also weed out the bad actors because what happens, what we know about criminals is that they will just constantly go to the, to the lowest, you know, the lowest level of defense that they can find. So, you know, they're never going to give you their bank details so that you can, you know, so that you can piece together their income. So yeah, this concept of we want fraud checks to be a fast lane for the good guys seems to me to be quite a good principle.

A (45:50)

Yeah, yeah, it seems like too. It's just, I mean originally the frauds and I'm not again, you know, stuff better than me. But my perception was originally fraud prevention was like the second step after screening. Now it seems to be more of like a one process where screening and fraud prevention go together.

C (46:05)

Correct.

B (46:05)

Is that fair?

C (46:06)

Yes, yes, increasingly, yes.

A (46:09)

Yeah. Let me, as you mentioned, your op tech recently and I didn't go to op tech this year, but I remember when I was, when I would go, you know, one of the things that was always interesting is seeing, you know, that they always had this kind of Shark Tank style pitch session. Anybody's gotch, you've seen this. If you've not been there, it's like, you know, these startups which are mostly companies you haven't heard of necessarily unless you're really in touch with this stuff, they're pitching the what they hope is the next great idea. And so between that walking the floor, but also just, you know, Dom, you have such a good, I think just pulse on the overall prop tech space right now. Looking at multifamily and SFR prop tech startups and startup space in particular, what are the big areas of focus for innovation right now? Or put another way, what areas of the business is the latest wave of startups trying to address?

C (46:57)

So I'm actually putting together a panel about this for later in the year. But I just think by far the most interesting pitches that you hear from startups right now are the ones that are really the ones that are pitching ideas that would not have been possible without AI. So I won't name check providers, but you know, I've been. One of the case studies that I'm looking at is this company that has an AI first way of doing contract management. Right. So, for example, contract management is a perennial problem, largely because if you're over a 50 property portfolio, you have probably thousands of individual contracts of varying value. The idea that somebody's going to put all this stuff in one place and manage it is a bit of a reach. But the idea of using AI to just go everywhere where documents are stored in your organization and look for anything that looks like a contract and read it and structure it and serve it up as intelligence for you. Ideas like that I think are sort of fascinating and durable for as long as anything is durable in modifying. I mean on the development side as well. Another one of the AI first apps that's featuring in this panel that we're doing is basically using AI to go draw up plans for things like renovations. And one of the users of this, one of the users of this app was telling me that just from using digital records that it can find on the Internet, this app always counts the number of windows in a property more accurately than the team of Assessors can. And so when you sort of see things like that, we sort of think about AI in terms of taking out like grunt work, but really there's lots of kinds of work that we do quite inefficiently that if you can completely reimagine using AI. So no, those things are, that tends to be my bias. I'm interested in the thing that you couldn't have done without unless you had AI to. To do it.

A (49:15)

Yeah, I guess. Related question for startups right now. Are you hearing anything about, you know, given what's happening with, you know, prop tech valuations right now? Because there's AI wiping out certain technology companies, is that making it harder for some of these companies to raise capital to get going or even some of the ones already existing? Are you hearing any kind of reverberations from all that?

C (49:33)

Yeah, definitely. And it's very interesting. I mean you have your finger on the general investor pulse, but what you're finding is you're getting quite divergent investment theses. Now in proptech, like people who are investing in or all types of technology, there's this very sort of speculative element for. Okay, well which bit of this technology environment is AI really going to kind of ease? What seems to be the case is if you've got deep domain expertise. So I'll give you a good example. Something like maintenance. There's lots of things in maintenance that you can enhance using AI, but there's just this reality that it's this really complicated domain where it's really hard to beat just having a detailed knowledge of how all the stuff that can go wrong in a prophecy that would not be obvious. But looking at data. So you can think of lots of different areas of technology that are, that are like that, where if I understand a complicated sort of deep industry problem really well and I have the relationships with the people that buy the technology, those companies are the ones that are probably best set to, you know, to, to. To continue to be really successful as, as AI, you know, like I said, erodes lots of, lots of boundaries in, in terms of the way we think about tech at the moment.

A (51:06)

Yeah, no, that's a great point.

B (51:07)

That's a fun one to watch.

A (51:08)

And some, it seems like a little bit overreaction candidly now, meaning the investor market. One more question for you, Dom. You know, we all, we just. It seems to be that you can't talk about prop tech these days and just even the conversation on valuations, you can't talk about prop tech without having

B (51:26)

a conversation about AI.

A (51:27)

But is there any tech innovation these days that is not about or does not include some type of AI or is that just everything has to be AI these days?

C (51:37)

Well, I mean, every tech company is currently frantically reinventing themselves to leverage AI because it's going to make you terribly uncompetitive if you don't. But that doesn't mean every innovation is inherently about AI. I mean, one thing from this year's interviews, I can tell there's a shift in opinions on rewards. Right? This, this is an area that, you know, we've been talking about in the industry for a long time. There have been companies offering various kinds of reward programs. I can tell the industry is kind of changing its mind about how rewards should work and what, what they can potentially be as a lever. You know, I think, you know, residents, customers generally like to be rewarded for stuff, but I think the way multifamily has, has thought about this has been in the way that you would think about hotel rewards. Right? Where, okay, I'm, I'm going to give you some stuff in, in exchange for some behavior that I, you know, you know, a hotel can say some, you know, there are periods during which my rooms are not worth that much to me, but they're still worth a lot to you. Therefore, I can buy your loyalty by, you know, giving you, giving you free stuff. And that's a great win, win. Like, everyone seems to love that if they're regular hotel guests. Well, there are no free rooms really in the, in the multifamily industry, or at least there shouldn't be. So it's.

B (53:06)

Yeah,

C (53:09)

but people have been kind of thinking about this very sort of marginal thing. But you can see around the industry now this idea that we can, we can build like, networks of organizations of merchants in the local market that can, that can really change the game in terms of how I, as a resident get rewarded for, you know, for, for renting and renting an apartment. You know, there's nothing intrinsically AI centric about that, even though there's probably a lot of AI involved in delivering it. But yeah, that, that's an area that I can see that the industry is changing its mind about at the moment.

A (53:52)

Yeah, that's a great point. Well, it's fun to watch because sometimes it gets a little comical. Just AI, AI, AI just is an outsider a little bit. It seems to be. Everyone just has to have that in there somewhere. Well, Don, thanks for your time. Thank you for the work you do to track the space. If anybody doesn't follow your work highly recommend checking out the 20 for 20 report that just came out. If you want to better understand the pulse of what's going on in the prop tech world for rental housing, no one's doing it better. So, Dom, thank you for your time today.

C (54:25)

Well, and thank you. And I'm. I'm a big fan of the pod. It's one of the. One of the few that I listen to every week.

B (54:30)

All right, thank you. Domestic. And that's a wrap on episode 82 of the Rent Roll. Big thanks to Dom for being our guest today. Thank you to JPI Madera, Funnel, Brocadia, Authentic Foxen and Apartment Life for being part of today's episode. And thank you to all of you for spending your time with us. We'll see you next week.