October 16, 2018

JF1505: Eliminating The Maintenance Headache For Property Managers with Ray Hespen

If you have ever managed a property, you know the huge headache that comes with maintenance. Ray and his company, Property Meld, have a solution. They have created an automated software just for maintenance. So turn on this episode if you manage properties and see how Ray can help! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Ray Hespen Real Estate Background:

  • CEO and co-founder of Property Meld, a maintenance automation software company
  • Launched the company in 2014 to eliminate the maintenance headache for property managers
  • Based in Rapid City, South Dakota
  • Say hi to him at https://www.propertymeld.com/
  • Best Ever Book: Outliers by Malcom Gladwell

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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Ray Hespen. How are you doing, Ray?

Ray Hespen: Hey, I’m doing well, Joe. How about yourself?

Joe Fairless: I am doing well, and nice to have you on the show. A little bit about Ray – he is the CEO and co-founder of Property Meld, which is a maintenance automation software company. He launched the company in 2014 to eliminate the maintenance headache for property managers. Boy, is it a headache too for everyone who manages property… And he’s based in Rapid City, South Dakota. With that being said, Ray, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Ray Hespen: Yeah, so first of all, our office is based here in South Dakota, and so everybody gives us kind of a little [unintelligible [00:03:45].18] wondering what we are doing in South Dakota. What we’ve done is started calling the area Silicon Prairie. [laughter]

Joe Fairless: I think I’ve heard that before, by the way.

Ray Hespen: Yeah, somebody’s probably coined it, but we’re gonna try and steal it. Anyways, at the end of the day, any good business model is built on solving a problem, and what’s really interesting about ours is in the property management space, as you all know, and just real estate tech in general, it has historically kind of lagged behind, in terms of what other industries have been given… So the reason that we even came about was ultimately because my co-founder, David Kingman, who’s our CTO, he basically called me one day and said “It’s always terrible to be a renter and have maintenance done on your property.” Through that, and doing enough market research and talking to property management firms and landlords, we understood “Wow, this is ripe for disruption.” That’s essentially the genesis of Property Meld.

Joe, one thing that’s pretty interesting about me – at least I think it’s interesting – people will ask “Did you come from property management? Did you come from being a landlord?” and my background is actually in manufacturing operations. So being able to bring in a fresh perspective in another industry, to try and automate what we can automate in this industry, I think was a pretty interesting connection there.

Joe Fairless: Just so I’m clear – you said your co-founder asked “Is it always terrible to be a renter and have maintenance on your property?”, but why is it terrible to be a renter and have maintenance on the property?

Ray Hespen: So the notion is when people rent, it should be better than you living at the house, right? In a lot of leases, most of the repair items are not the responsibility of the renter. And what happened was in his particular instance – and he had multiple of them – is the fact that he was able to submit a request online, which is a great technology that allows him to do that, but he wanted to know what was going on. It’s a phone call to the management office. They don’t answer the phone. They get a call from a phone number that they don’t recognize and they let it go to voicemail, they assume it’s spam, and it turns out it was the person trying to do the repair. They call back, and they don’t answer, because [unintelligible [00:05:50].01] So you play this pretty insane game of touch and go just to coordinate and communicate, and it’s backed really heavily on pretty manual processes, i.e. the phone call.

If you think about it about every other experience that a consumer gets to have at this point, that feels antiquated and pretty archaic, and it feels like a really slow process to get it done.

Joe Fairless: Okay, I get it. So the renter is able to see the process for where their request is in the pipeline, or the queue rather…

Ray Hespen: Absolutely. And everybody understands Uber or Lyft – when you request somebody, you know where they’re at, you’re able to communicate with them, you know when they showed up, and — it’d be odd, but you know when they’re there; you know when it’s finished. So we basically apply that sort of transportation and ability to communicate to maintenance.

With our system, without a phone call, essentially a renter can submit a request, schedule, be reminded that it’s happening, being notified when it’s complete, asking them how it was… All of it is automatically and very seamless.

Joe Fairless: Got it. So the process where as a renter you submit a request, and you don’t hear back, and you’re wondering “What’s going on?” and it’s been a week or two, this would solve for that, period. My question is, from my experience, a landlord who is not as communicative as they should be, they’re not good landlords, so they’re not going to pay for a service like this because they don’t have their stuff together to begin with.

Ray Hespen: You know, it’s interesting you say that. There are right fits and wrong fits. We identify a right fit. And at the end of the day, one thing I wanted to kind of just point out is the fact that we’re saying we’re improving the renter experience, but ultimately it’s because it’s a pain to follow-up on maintenance for property managers. It’s the only reason that we’ve survived and built the company that we have. So you have the process — we understand what it’s like from the renter side, but if you think about the maintenance coordination that happens… I get the work request, I manage the property, now it’s my job to third-party vendor or a technician – I need to make sure and continuously follow-up… “Did you get a hold of the renter? Is it scheduled? When is it scheduled for? Is it done? Is the resident happy?” All those touch points should be happening within 24-48 hours, and as you continue to scale, it gets really problematic and time-consuming. There’s a certain point where you have to handle a full-time person.

But back to your original point – yes, if you don’t really have a care about that experience, it’s probably ultimately not gonna be a great fit; if you don’t have a care about streamlining that process, it’s not gonna be a good fit. One thing I think just in general – and Joe, this is actually a pretty interesting statistic… One of the big things, we say why you should care about that experience, just apart from online reputation, all the fun that that is now, but retention. If you have an investment property, and you have a renter leave, what does that mean? You’ve gotta go do an inspection move-out, you’ve gotta go through all that fun stuff with deposits. Now you’ve gotta have the place clean, shampooed; what repairs do you have to get done? You have to remarket the property, you have to reshow it, and then sign a new lease. It’s incredibly costly and timely. 31% of leases are not renewed, with maintenance being the biggest reason they didn’t renew. That’s a big number.

Joe Fairless: I would estimate it’s even higher than that. Whatever that study is, I believe you on that study; I think you’re even short-changing yourself. I think it’s north of 50% of people who leave, leave because of some sort of maintenance issue. What I did before I bought my first apartment community – while we were under contract, to be specific – I did research on all the apartment communities that I could find on apartments.com and in other places, that I found on Google, and I just read reviews. And this is also C-class, B-class properties, not A-class… So B or C-class properties, apartment communities in particular – the majority of the issues and the complaints are maintenance-related.

Ray Hespen: 100%. And if you even think about that, Joe, your apartment community, you’ve got your own Google location, right? If someone types in, what’s the first thing that pops up? It’s your Google reviews. [unintelligible [00:10:13].07] think about as the amount of money that you’re spending marketing that particular property, what is the click-through rate, or what is the drop-off that you’re losing because of that? How many people come to your website and they sit there and go “Never mind”, simply because of bad rating?

And like you said, maintenance is the number one driver of negative reviews. Nobody writes a negative review and says “Hey, the move-in process could have been better.” Nobody is adamant enough to write a review — I say that now; somebody will probably e-mail your show and say “Hey, I’ve got one of those…”, but you get my point. You’re 100% correct, it’s driven by maintenance.

Joe Fairless: So on Amazon when I order a package, or I order something, I go to check on the status, it’s like “Order confirmed”, “Order shipped”, “Order at the warehouse”, “Order en route” and “Delivered.” What are the stages of the process for your service?

Ray Hespen: The person managing the property ultimately has a little bit more transparency. What’s really neat about our process is the renter then can submit it and they’re kept up to speed the entire. They submitted it, there’s a confirmation of that; when it’s been assigned, we ask them to update availability times. When a vendor submits to them, or a technician says when they can get inside the unit if that is an option in that management’s process, it notifies them. It reminds them what that scheduled date is a couple of times, and then it lets them know when it’s done.

There’s a few ways that we hit it – either it’s through the in-app experience, which is entirely web-based and you don’t have to rely on somebody downloading it. E-mail and texting is huge.

It’s really funny, I’ve just read an article this morning… It says in 2019 they’re expecting 47% of phone calls to be spam. You have to find another medium to go through rather than phone, because people are just not going to answer. It keeps getting to be a deteriorating —

Joe Fairless: Wow, that makes me sad, actually… Because I hate text messages, I really hate them. I’d rather talk to someone on the phone. Really quick though about the process, because you started talking about e-mail and text, that that’s how people are notified. But just so I understand the actual process – first, they see “I can log in or I get a text/e-mail etc, and it says either my request was submitted”, number one. Then number two, it was assigned to someone. Number three, it shows their availability for when it’s going to be scheduled, and number four, it shows Done. Is it basically those four steps?

Ray Hespen: That’s it. And one other cool thing that I will tell you, Joe, is we talked about satisfaction and why it’s important; a couple reasons – online reputation and retention. But as we’ve done data dives in this, there is a 100% correlation to the speed of repair and the satisfaction. It seems like pretty straightforward, but does anybody have that data? And we’ve got just loads of it.

The other thing that we’re realizing about the speed of repair – it actually depends on the type of repair, too. HVAC issues – they need to get done faster than plumbing, and we can statistically say how much quicker you have to.

Joe Fairless: How much quicker do you have to?

Ray Hespen: You get a day and a half buffer to statistically get the same satisfaction of a renter, of an HVAC issue versus plumbing. You have more time with the plumbing issue.

Joe Fairless: Got it. How much time do you have with the A/C issue?

Ray Hespen: Right now we’re seeing about 3,5 days, but essentially that kind of changes throughout the year.

Joe Fairless: Right, and where you live probably, too.

Ray Hespen: Yeah… Oh man, there’s loads of data on this. But the reason why I say that is usually in maintenance coordination process flows, where you have somebody that has to get inside the unit. You don’t have a key, or using a third-party vendor, and they need to coordinate with the renter. It’s usually a multi-day process to get that scheduled time in. If you talk to people that provide maintenance services to these firms that manage properties, it’s getting a hold of a renter to get it scheduled is the biggest barrier to getting it done quickly.

We schedule 85% of our repairs in less than four minutes without a phone call.

Joe Fairless: How?

Ray Hespen: With our technology. [laughs] With the app. It’s the way that we coordinate between the person providing the services and the renter. Everything from how we collect information upfront from the renter, and their availability, and how we collect information from vendors and when they’re able to get out, and that sort of stuff.

Joe Fairless: So if I have an apartment community, 100 units, do all my residents need to download the app, or can they just go to a website and log in with some info?

Ray Hespen: Yeah, so… Some benefits to applications – you can track push notifications, small things like that. One thing that we really wanted to make sure with our product was simplicity. If we roll out with a client, you don’t want it to sit there and go “Here’s how you download the app…” You don’t need that barrier.

What’s really neat with our technology is ultimately as part of our onboarding process we get the information from the renters and our system submits, and it’s all web-based. So you click a link in the e-mail and you’re on your smartphone; it is built for mobile. 87% of our work requests are submitted from a mobile device, and there’s no barrier of “You have an Apple” or “You have a Droid”, “You need to go here and download…” It just works.

Joe Fairless: There has to be some percentage of renters that get annoyed whenever they have a plumbing issue and they call up the management office and they’re like “Hey, I’ve got a toilet overflowing” and if the manager says “That’s great, but submit that via your app.”

Ray Hespen: Yeah, absolutely. The way that our system works is we have an ability for each firm to essentially put emergency instructions that pop up. When a renter submits, there’s a big red button that says “If this is an emergency and you can define what an emergency is: fire, flood or blood…”, that’s the comical version of that — and you can put your own phone number in there. You want emergencies to come to you. That’s the whole problem, right? It’s your standard repairs that you don’t want to. We need to organize and we need to find an appropriate time to get out there.

Joe Fairless: What’s if it’s not an emergency but they call up?

Ray Hespen: Well, that’s kind of what our technology is designed to do. As part of not only filtering and putting that big button “If this is an emergency, click here”, a renter sits there and thinks “My refrigerator light is out. It’s Saturday night, I can’t get my midnight snack. This is an emergency.” The way that our technology is, they’re gonna click that button and say “Yes, it is an emergency.” That’s when you’re able to detail what is an emergency…

Joe Fairless: Right, I get that, but you’re assuming that they’re clicking a button, versus just calling up the office. That’s my question. So what if it’s not an emergency and they call up the office? What’s the standard process? Is it a) “Hey, renter, go fill it out online,” or is it b) “Okay, we gotcha. I’ve got this written down, and then it’s filed into the system, and you can check up on it later via this app”?

Ray Hespen: Exactly. It’s the latter.

Joe Fairless: Okay.

Ray Hespen: The property management firm can fill it out. But one important thing to know is the education of the renter. When we go out, we actually upsell you, whether it be your community name, or your property management firm, or your entity; whatever they know you as, we say “Hey, this person/entity has upgraded the way they handle maintenance using a system called Property Meld. Not only are you going to be able to submit, but you’re going to be able to submit, schedule, communicate, be able to see where your repair is at at any given time, and be able to reach out to us really easily.” So you’re giving them something.

The adage that I use a lot of the times is you can submit it online, but what are you really doing, as a perceived renter? It’s like “What am I doing? All I’m doing is I’m doing the digital data entry for my person who’s managing my property. It’s not doing anything for me as a renter. It’s just the process that I have to do to get it done.” Now it’s “I’m going to give you the same sort of self-service that you’re used to seeing in other places.” You’re able to order your groceries online and just run over and pick them up; order right from your smartphone, see your packages from UPS at a given time. I can see my Uber where it’s at. We’re giving you this now, and there’s a huge incentive to use it. Every single client that we bring on, that’s kind of a pretty common element that we’re seeing – they’re getting what they want, and you’re giving them a reason to use it, so those phone calls that are hitting your office significantly decrease.

Joe Fairless: You said earlier 3,5 days for A/C repair, from the day of complaint, and then 1,5 days after that we’ve got for plumbing, so 5 days approximately for plumbing. And there’s some variables, depending on geography, and stuff… If any, what’s a maintenance request that would need to be addressed shorter than the 3,5 days?

Ray Hespen: Well, and just so you know, that 3,5 days is a statistical cut-off, where it’s almost impossible to get it satisfied.

Joe Fairless: Okay, thank you.

Ray Hespen: I appreciate you clearing that up. It basically means your goal of your team is not to let an HVAC issue get past 3,5 [unintelligible [00:19:06].10] Whereas plumbing, it’s 5 days. That’s an important distinction. Obviously, with HVAC, a lot of companies try their best to get that done the same day or the next day. But 3,5 days – don’t let it go past that.

Joe Fairless: Anything shorter than that cut-off? Any other maintenance requests?

Ray Hespen: HVAC is the biggest one.

Joe Fairless: Okay.

Ray Hespen: And what’s really interesting too, Joe, there’s a whole lot of data that we’re starting to dig in. We’re looking to try and help educate this space. Even just knowing that you have a 1,5 day shift on being able to get one type of repair done versus the other, it kind of takes away that whole “first in, first out” kind of mentality. There’s a prioritization that needs to happen.

The reality is we’re continuing to delve into this data and try and identify these things that ultimately allow people to run a more efficient operation.

The other thing I wanted to say – when you use this kind of technology, our resident satisfaction for the entire platform is a 4,3 out of 5, and we believe that’s through a few things… Transparency into the process, and the speed at which things happen.

Joe Fairless: It makes sense. How much does it cost?

Ray Hespen: Up to 2,000 units it’s $1/door. The pricing standard is on our website. You can go to www.propertymeld.com and we have our pricing standardized.

Joe Fairless: Cool. The plumbing – let’s say that’s a five-day cut-off, like you talked about, and that’s a cut-off to get satisfied residents; after that, probably not gonna happen. So it shouldn’t be five days, ideally. Is there something with a longer period of time, where you can stretch it out a little bit if you’re feeling a little bit lazy?

Ray Hespen: There’s a few other categories. Landscaping is one of them, for example. A lot of exterior home repairs. But really a good rule of thumb is probably not to go above 5,5 to 6 days for most repairs, just in general. And I know that can be a stretch, but when you’re dealing with more cosmetic issues, is where we see the longer times. And those often times are at the approval of whoever the investor of the property is to repair them a lot of the times. Cosmetic issues a lot of times are not covered in the lease. That’s a discussion that usually happens with the landlord or the investor.

Joe Fairless: Yeah, and regardless of if a Best Ever listener works with you all or not, these are some questions that they can ask their management company, either that they currently have, or when they’re interviewing management companies. The question is “How long does it take you to repair an A/C unit?”

Ray Hespen: Most won’t know. [laughs]

Joe Fairless: Right.

Ray Hespen: Most won’t know. And here’s an important thing for our clients, what we really educate on – if you’re bringing on an investor, they wanna know “How often am I gonna get my money?” If I’m investing in a property and I want you to manage it, there’s two reasons I won’t get my money as an investor. Number one, if my property is not leased, which again, we’ve talked about the maintenance correlation to that. And then the second one is actually maintenance issues.

One thing that we’ve coached our customers as kind of a differentiation is our technology will also let the investor or the landlord that owns those particular properties or that building, whatever it might be – we let them know on service issues when they’re generated, when they’re scheduled, when they’re done as a value-add of service. There’s only two reasons you’re not gonna get rent – one of them is maintenance, one of them is leasing, and then our product obviously as a maintenance-focused product, is gonna let that investor know exactly what’s going on with that property, and an opportunity to get involved, if necessary.

Joe Fairless: Based on your experience as a real estate entrepreneur, what’s your best advice ever for real estate investors?

Ray Hespen: One thing that we’re more or less seeing is this industry as a whole cannot allow the consumer experience of today of a homeowner exceed the experience of a renter, or at least allow the gap to get too far. So we think about these kinds of services where you’re a homeowner now and you’ve got Thumbtack, you’ve got Angie’s List, you’ve got all these things that you can order service on the fly, to get somebody to come and repair something at your house. You’ve got smart home technology that you can implement pretty easily at your own property. So my encouragement is, and at some of the panels that I speak on, is making sure that the renter has a relatively close experience to that. Because ultimately, right now in the industry we have this awesome opportunity that people want to rent, and not buy. What we don’t want to have happen is what existed even 10-15 years ago, where rentals were what you did when you couldn’t afford to buy a home.

So you have to make sure that consumer experience for a renter is high, and we don’t allow the consumer experience of a homeowner to exceed it, because obviously, that’s gonna impact retention, the quality of tenants, that’s gonna impact rent prices that you’re able to pull as well, and the expectations are gonna keep climbing as you have these consumer-grade experiences and homeowner aspect improving.

Joe Fairless: Yeah, that’s great insight. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Ray Hespen: I’m ready.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:24:15].13] to [00:25:00].22]

Joe Fairless: Best ever book you’ve recently read?

Ray Hespen: Outliers.

Joe Fairless: Malcolm Gladwell. That’s a good one. What’s a mistake that you’ve made in business?

Ray Hespen: Not staying focused on understanding what our objective and our mission is. We call that scope creep in the software business.

Joe Fairless: Best ever way you like to give back?

Ray Hespen: Time is the most valuable asset. I love kids, I love inspiring, I love being a positive role model if possible.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Ray Hespen: www.propertymeld.com. You can also reach us at info@propertymeld.com, and check out our social media accounts – Facebook, Instagram and LinkedIn, as well.

Joe Fairless: Ray, thank you so much for being on the show. A very clear value proposition, and how it can benefit property management companies, as well as individual owners, and very interesting, regardless, as I mentioned earlier, if someone ends up working with you all, just learning how long we have to address things in order to have a satisfied resident. From your team’s research, it’s 3,5 days to do the A/C, five days for plumbing, and you’ve got 5,5 or maybe 6 days for some cosmetic things.

Really interesting stuff. I enjoyed our conversation, I learned a lot, and I love how all of it is based on the research that you all are doing, so thanks for being on the show. I hope you have a Best Ever day, and we’ll talk to you soon.

Ray Hespen: Thanks, Joe.


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