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L & Tea Time with Michelle: Episode 13

Topic: Technology in Multifamily Building
Guest: JP Rutigliano: Leveraging Technology in your Multifamily Building

MMI: Welcome to L&Tea Time, the show where we give you real information about real estate from the owners and managers who are on the front lines. Today we are happy to have with us, JP Rutigliano of J & L Holding Corp. JP, more than 24 buildings.

JPR: Correct.

MMI: Mostly Manhattan and a little Queens. 65% of your portfolio is free-market, the rest is rent stabilized. Second-generation management. Today we’re going to talk about ways to implement technology in the day-to-day running of your buildings that these are tips you really need to have. In our legal segment, we are going to be talking about how to have better Stipulations of Settlement in Housing Court. So, are you ready?

JPR: Let’s do it.

MMI: Let’s do it. I’m Michelle Maratto Itkowitz, and I’ll be serving the tea.

MMI: JP, thanks for coming back.

JPR: Thanks for having me.

MMI: Today I want to ask you about the transition of a building, or a bunch of buildings, from the old-school way of doing things to using software and technology. So now, I just want to orient everybody, you have two dozen buildings in Manhattan.

JPR: Correct.

MMI: How many units?

JPR: Close to 600.

MMI: Ok, so the old way of doing things: people mailed in a check.

JPR: Correct.

MMI: To pay the rent. Now people can pay by direct deposit, they can pay online, they can pay right out of their checking account.

JPR: Credit cards as well.

MMI: So that works better for the newcomers to the city?

JPR: Yeah, and this all has to do I guess with the demographic of the people that are living in your building. Most of our tenants are the younger generation, people that have done most of their banking on their phone, and don’t know what a check book is, but have a debit card. With the technology options that are available today, there are lot of electronic payment options. We, as property owners and managers, can accept payments directly from their checking accounts or their credit cards, and it’s integrated with software systems that actually handle the processing for you. They’re posted directly to their accounts, so it’s not a manual process of opening an envelope, processing a check, posting it in there, and taking it to a bank. It eliminates all of that busy work.

MMI: What is your advice if somebody is pre-technology, and they want to get to where you are? What would you say is the first step? Do they shop?

JPR: For an owner, and as a property manager, obviously it’s got to be something that you want to do. It’s a lot of change. Some people welcome it, some people don’t, but if you’re looking to save time and money in the long run, it’s implementing change.

MMI: Does it save on staff?

JPR: Yeah, it gets the process much quicker.

MMI: So, the first step, you would say, is just adjusting your head – it’s attitude. You want to do this.

JPR: Correct. It’s definitely attitude. It also depends on your team. If you’ve got people who are used to doing things the traditional way, getting people to change over might be a little difficult, but if you’ve got a staff that’s technologically savvy, it’s not that complicated.

MMI: How do you do the shopping? I mean there’s a lot of software out there. That’s what I want a tip on because some are very big solutions.

JPR: True. There are options out there, and it’s just a matter of doing your homework, and having a budget.

MMI: Should you test all of them?

JPR: All of the software companies will come out, and they’ll give you demos. Obviously, the best way to find out is talking to people who use them.

MMI: They’ll give you references too, or you can find them online?

JPR: You can get them online. There are plenty of places to go to get reviews.

MMI: Do you have a tech guy inside, in-house, that’s interfacing with the tech salesman?

JPR: No, I handle all that. They have options – they call it Software as a Service, which is basically the cloud, and you can also have the computer equipment on site, in your office, which is something I previously had, which I couldn’t get away from fast enough.

MMI: Right. What are the advantages of it being in the cloud?

JPR: You don’t have to worry about nightly backups. You don’t have to worry about software updates. You don’t have to worry about equipment failure. You don’t have worry about anything happening in your office.

MMI: Better access too.

JPR: True. Anywhere with an internet connection, I can log into my system, and do work, or see what’s going on.

MMI: If your system in the office is down, then that doesn’t mean that you’re down.

JPR: Right.

MMI: The transition among the tenants to these online solutions – are there bumps in the road that you have tips on?

JPR: It’s just informing them of what’s going on, and when you’re sending out notices, really think about all the possible confusions of letting them know what’s going on because sometimes with what you think you are trying to explain, the tenant won’t realize what’s going on. When explaining the changes, you want to be thorough with all the details to letting them know, “Hey we’re going to switch to an electronic payment method, you can pay your rent online.” They’re going to want to know every step of the way in terms of things they can and can’t do, so there will be a lot of conversations about that.

MMI: How long did it take them to adopt? The first month probably not everybody did.

JPR: Right. It was a small percentage early on, but with every email conversation or phone conversation that I had with tenants, there were constant reminders of “Hey, you can do this…Hey, you can do that.” It’s taken off.

MMI: You had an interesting caveat with the rent-stabilized tenants, and you did not want to use the technology with them. Explain that.

JPR: That’s a big problem. I would love to have electronic payments with all my tenants, but with the law of rent stabilization, if you accept a payment from somebody that’s not the tenant of record, you’re accepting them as a tenant.

MMI: Actually that’s true with everybody, but the difference is with the rent-stabilized tenant, you’re stuck.

JPR: Right, so the technology behind the electronic payments, and the ACH – the technology that the banks use – is that there’s no way for us to actually verify who’s on that bank account.

MMI: You could be accepting payments month after month from a bank account that’s not the tenant.

JPR: Right, so Jane Smith might be in Apartment 1B, and she might be just out of school, and her parents might be paying the rent, that bank account could be linked directly to them.

MMI: That’s not actually so bad because the parents probably aren’t going to be saying, “I want to be the rent-stabilized tenant.” The problem is if her roommate starts paying, then she leaves, you think you’re going to put in place your next tenant, and you find out you’ve really been accepting rent…

JPR: From somebody that’s not who they say they were. That’s the big problem. It’s more so for the bigger apartments where they’re long-term rent-controlled or rent-stabilized tenants.

MMI: Very interesting stuff. I can’t thank you enough for being here, and it’s great information.

JPR: Happy to be here.

Teaching Segment

MMI: In today’s legal segment, we’re starting a multi-part series on how to make better stipulations in Housing Court. The first thing we’re going to talk about is Judgments. If you do a Stipulation of Settlement, the Holy Grail for a landlord is really to get a Judgment of Possession and a Warrant of Eviction. If the tenant is agreeing in that Stipulation to vacate, then this makes perfect sense. You really want to make sure the tenant goes, and you need a warrant so that the marshal can come in, so you need a Judgment of Possession. But what about stipulations where the tenant is promising to do a long payout, or where the tenant is promising to clean up a hoarder situation, or some other thing that they’re agreeing to do? If you can get a Judgment of Possession in that stipulation, that will give your stipulation teeth. In other words, if the tenant starts to violate, then what you do in the default situation is you’re able to get the marshal to serve the Five-Day Notice. Now, look, in a lot of situations, that’s just going to get you an Order to Show Cause, but at least it’s moving the ball farther down the court if all you’re doing is restoring for further relief. Getting a Judgment of Possession and Warrant of Eviction is great in your stip. As a routine matter, in a non-payment case, first time on, pro se tenant, the Housing Court judges often won’t allow you to have a Judgment of Possession and Warrant of Eviction, and that’s just the way it is. It’s just good to keep in mind that this is really the ideal situation if you can get it. The other type of judgment is a money judgment. It’s good to be able to get a money judgment if the tenant owes arrears, and is saying that they’re going to pay those arrears over time, and/or if they say they’re going to get out because, again, it’s teeth. If you have a money judgment, it gives you the ability to possibly collect on the money judgment. You can hit the tenant’s bank account, you can garnish their wages – these are possibilities. It’s just more teeth in your stipulation, so keep that in mind that money judgments and judgments are good elements of a robust stipulation. Remember, guys, legal knowledge is real estate power.

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