Concerns about a recession continue to grow as mortgage rates rise, cap rates expand, rent growth stalls, and inflation soars. Borrowing money has become more expensive, and property owners and operators are feeling the pinch.
If multifamily net operating income (NOI) is at risk of slowing and the inherent risk of financial loss (i.e., bad debt) looms large, what investments can rental housing providers make to serve their long-term financial goals? And what tactics can they implement to not only mitigate risk but grow NOI?
With a proactive loss protection strategy that focuses on the right metrics and growth opportunities while leveraging the power of data and technology, multifamily properties can reverse slowing NOI growth.
To stave off the negative impacts of an uncertain economic climate and lessen the blow of financial loss, owners and operators need a proptech roadmap that allows them to minimize unrecoverable bad debt by absorbing outstanding balances and vacancy loss.
Reliably recapturing revenue can be achieved by ensuring financial technology solutions empower owners and operators to:
Integrated tech solutions that seamlessly expand the capabilities of the existing workflow free up precious time and manual effort for property teams who are often susceptible to burnout. Reducing administrative burdens goes a long way in improving operational efficiency and accelerating leasing, and thus protects properties from unnecessary financial loss.
Owners and operators need to recognize the importance of leveraging integrated solutions—not just interfacing products—to optimize financial performance and drive asset value regardless of economic conditions. For instance, a fully integrated financial technology platform (like lease insurance) designed specifically to upgrade backoffice workflows (think: optimized claims process) has the added benefit of also streamlining operations in the leasing office, in turn making assets more resilient.
Property teams with the right tools are more productive which ensures properties have a significant competitive advantage when it comes to driving multifamily NOI growth.
In addition to seamless integrations, tech solutions rooted in data allow properties to predict risk and are therefore fundamental to protecting against potential loss. Ledger data combined with AI empowers operators to make better business decisions and future-proof their assets against changing risk, unlike security deposits and deposit alternatives, which mitigate risk in an arbitrary fashion.
Data-driven risk mitigation tools assess risk based on historical data points. For example, lease insurance is a ledger-based data platform that analyzes over a billion risk data points to better predict future rent loss for property management companies. With this model, properties are armed with a rich risk profile that then informs AI predictive analytics to ensure they’re better protected against potential loss.
Along with data, AI technology is essential for interpreting data and making more informed decisions based on that analysis. Specifically, machine learning can drastically improve processes when AI has access to data and analytics. For example, through the use of AI in fintech and insurtech platforms, multifamily companies can make more accurate forecasts for their assets and improve the process of underwriting, asset insurance, and claims. Further, LeaseLock CTO Sudip Shekhawat specifies that “The application for AI in insurtech has been developing a faster claims process and quicker fraud detection.”
Ultimately, the more data, the more powerful the AI. As Shekhawat points out, “It’s critical to remember that without data, there is no AI.” And when ledger data is combined with predictive risk modeling, properties are able to determine optimal coverage to significantly lower the risk of financial loss and maximize NOI. AI optimized loss protection also eases the workload for site teams and allows them to improve leasing funnel performance. So long as tools have a rich database and predictive AI technology, properties don’t have to take on unnecessary risk or sacrifice NOI.
In addition, AI tools can be useful to compare additional market data including retention rates, lease terms, and average vacant days, as well as help multifamily owners and operators profit from properties most investors won’t touch.
Reversing slowing multifamily NOI growth is attainable. Despite all signs pointing toward continued mortgage rate hikes and general economic uncertainty, property owners and operators can become more agile and increasingly savvy in how they manage risk by leveraging data and technology that empowers their teams to maximize account balance absorption and unlock net operating income—not gamble away revenue and write off losses as bad debt.
This requires an investment in financial technology solutions powered by true integrations, large quantities of data, and sophisticated AI. With these proptech essentials, operators can effectively streamline operations, predict risk, and optimize coverage in order to create more resilient, valuable, efficient properties.
Learn more about how to create a future-proof budgeting strategy and convert loss into dependable NOI—download the budgeting guide.