Maintaining high occupancy rates is a top issue for property managers, with 43% of them expecting these struggles to have a significant impact on their business this year, according to a recent Appfolio survey of over 2,000 apartment operators. 

Rising insurance costs are close behind, with 39% of respondents citing this as an issue, followed by taxes and government regulations. 

Most of the issues facing property managers are united by a common denominator: the rising cost of doing business.

“The economics of housing are tight,” Melissa Deen, president of Reno, Nevada-based property manager CloudTen Residential, told Multifamily Dive. “Maintaining quality communities and homes is expensive, as is responsive service. Wages, materials, electricity, gas and water costs are all rising faster than rent rates in many places. Insurance costs are escalating rapidly and there is no income offset for property owners.”

To keep ahead of these cost and performance pressures, many managers are embracing technology — including artificial intelligence — that promises to streamline operations, reduce mundane tasks, lower costs, increase productivity and combat the rising threat of application fraud. Out of the survey’s respondents, 28% reported plans to adopt AI tools, up from 14% last year, while 36% are adopting new technology on the whole. But operating these systems isn’t without challenges, and they should be introduced with care to ensure their effectiveness. 

Leveraging tech

While Red Bank, New Jersey-based Denholtz has been operating commercial and apartment properties since the 1960s, it has only trained its focus on market-rate multifamily in the past few years. The company introduced AI and other new technologies into its management processes in order to stay competitive within these Class A and Class B markets, according to Kayte Peters, Denholtz’s regional property manager. 

“We did audits of our communities to determine where our hours allocations were going in an effort to determine where we might be able to integrate certain technology sources to lighten the load,” Peters told Multifamily Dive. “One of the things that we had noticed was that while we had great lead volume, we didn't have great volume coming off of those leads.”

To fix this, Denholtz took on an AI leasing system to help with basic questions after hours or during times of heavy call volume. This was done to ensure that all calls were answered and that no leads fell through. 

“It really frees up the consultants to have a little bit more time in office to devote to a positive customer service experience for those that are sitting right in front of them,” Peters said.

Handle with care

These systems aren’t without their challenges and experts say that users need to find the best fit out of hundreds of different options. 

At Branchburg, New Jersey-based multifamily developer and operator Larken Associates, teams are trained to use their common sense and best judgment when working with AI — including questioning things that seem off, even if the program says they are correct. 

Jessica Heckman, director of residential property management at Larken, recounted a situation in which an AI screening program double-counted salary checks deposited into a husband and wife’s joint bank account, as it could not distinguish which tenant had made the deposit. This led the system to flag that the tenant’s income was double what they had reported to Larken. 

However, the property manager responsible for the account was able to catch and correct the error with a manual check. 

“What our approach has become is, trust what the AI is telling us, trust what these software programs are telling us,” Heckman told Multifamily Dive. “But you should verify it… you have to use some of these old school tactics.”

The impact of fraud

Another growing struggle for property managers — one that intersects with the tech evolution — is tenant fraud. Ninety-three percent of property professionals have reported experiencing fraud, according to a survey conducted by the National Multifamily Housing Council, and 70% say fraud is more frequent now than it was in the past.

Creating fake identities, paystubs and other documents is easier than ever online, and methods of doing so are becoming more complex — including inception fraud, or creating a fake company in order to validate false pay information. “Fraud is omnipresent and fraud opportunities grow with technology use,” said Deen. “The more connected we are, the more vulnerable we become.”

Tech-based fraud prevention has evolved to combat the issue, and a variety of vendors offer screening services for property management clients. Much like AI, even the most sophisticated fraud-detection technology should be supplemented with human judgment and skill, industry pros say.

Peters meets with Denholtz’s screening provider every other month to learn about software updates and legislative changes. During this time, she’ll also analyze the rejections and collections data for the property, and look for places where the system can improve.

“Fraud has always been a possibility in the rental market,” Peters said. “I just think it's become a little bit more commercialized… It’s really important that we are making sure the correct data is getting put in, looking at the red flags that get thrown up by our screening provider, and really working hand in hand with them.”