Multifamily Market: Why Security Dealers Should Make the Investment

Crypto. AI. Mutual Funds. Gold. What do these disparate items have in common? It should be pretty easy to guess. They’re all solid investments that can potentially produce solid returns. 

To that list we can add another entry. Perhaps not as sexy but just as promising: multifamily housing. That’s because multifamily housing presents a variety of lucrative opportunities, whether it involves investing in it, owning it or supplying any one of a thousand products or services to this market segment. 

Investing is a particularly attractive entry point into the multifamily market. A recent article in Forbes explained, “Multifamily real estate, such as apartment buildings and duplexes, can be a profitable investment for several reasons. These properties can offer a range of benefits to investors, such as steady income, potential appreciation, economies of scale, and a hedge against inflation.” 

MFH Opportunities Abound

There certainly are plenty of investment opportunities to go around. The number of multifamily housing starts (for properties with five or more units) in 2021-2022 was the highest two-year total since 1985-1986, according to data from the U.S. Census Bureau. And while occupancy is expected to drop a bit this year due to the massive number of apartments expected to complete this year (590,000 new units, according to one report), demand for quality multifamily housing will remain relatively strong through the end of the year. 

Consider: Today, 37 percent of households are renting, the highest percentage in the U.S. since 1965; that amounts to over 46 million households. And while that includes people who rent in single-family, landlord-owned homes, the vast majority are renting in traditional apartment buildings, including multi-building complexes. 

While the numbers are very encouraging, it also corresponds to a drop in single-family ownership. Many younger people, especially couples, are eschewing single-family purchases. Although there are multiple reasons, one of the primary factors is the overvalued price tag on single-family homes in many cities across the country, particularly in urban areas. 

As these homes get further out of the reach of those chasing their single-family dream, the need for quality, amenity-rich multifamily housing will continue to flourish — perhaps not at the same levels of the past two years but still at a respectable rate to make multifamily investment a very good bet. What’s more, as both the economy and real estate market stabilize, the multifamily sector will be energized in the mid- to long-term, including an expected healthy finish by the end of the year. 

So, what does this all mean to you as a dealer or distributor of smart home devices, i.e., smart locks, security systems, etc.? Don’t spend all your time focusing on the single-family residential sector (still a strong market, by the way). Remember to include a strategy to capitalize on the multifamily housing trend. Smart home tech — especially security-related devices — is in high demand among renters. 

What’s more, smart home tech can be a competitive differentiator for a building owner and allow them to charge higher average rental fees. All things being equal between two apartment buildings, there’s a good chance that the renter will choose the one with smart locks, water detectors, and security cameras in all public areas. In fact, a survey conducted by Rent.com showed that “a significant majority of renters (82 percent) want at least one smart device or system in their homes.” 

And it’s not just renters clamoring for this technology. The availability of modern and innovative smart home software and hardware makes property management far easier, as it can help reduce overall energy costs, increase management efficiency, and pinpoint potential unit damage before it occurs — not to mention allowing owners to charge higher average rental fees. As such, the demand for all sorts of tools under the umbrella of PropTech (a term that encompasses any application of digital technology or platform economics in the real estate industry, including smart home tech) will increase. 

Formulating an MFH Strategy 

While your multifamily selling approach strategy can take various forms, there are two basic elements that need to be baked into any multifamily sales effort: 

Ensure that you carry products to fit the multifamily demand. More and more vendors (Kwikset included) are coming out with products specifically designed to meet the unique security and smart tech needs of the multifamily housing sector. Maybe you carry some multifamily offerings, but it’s likely you can carry more. Acquaint yourself with the products in the various tech segments, such as locks, cameras, sensors and security systems. And remember, there are products meant specifically for the individual units, as well as other products built for common areas. 

Some can work with both applications. A water leak detector, for example, is a perfect example of a smart product specifically designed for use inside a unit. One or more detectors can be placed around areas prone to potential leaks so that the tenant can be alerted when a water event occurs. All these detectors, of course, would be integrated into a comprehensive dashboard that allows the building manager to monitor all activity — and take appropriate action quickly. 

Approach and sell. Needless to say, these enterprise-level products don’t sell themselves, no matter how well-made they are. So, you’ll need to get your sales team proactively focused on this lucrative multifamily market. Decision makers can be difficult to identify since they can vary from property to property. It may be the building owner. It may be the manager. It may even be the head of finance. Chances are, it’s going to be a combination of several positions who will all provide input. The best approach? Start as high up the food chain as you can get. If you can find the property owner, that’s where you should begin your pitch. 

It should be noted that with new construction, the decision-making landscape might be a bit different. You’ll naturally have owners and managers, but you might also need to involve the integrator overseeing the entire tech scheme of the building (or buildings, if it’s a complex). They may not have the final say on a major purchase like this, but they will be heavily involved in the process. 

Staying on top of business and market trends is essential for success in any business. As a dealer, multifamily is a trend you need to examine closely. It may hold a key that opens multiple doors to multiple opportunities.