Episode 68 - How 'Love Thy Neighbor' Turned from a Command to a Business with Pete Kelly of Apartment Life
When we first learned about Apartment Life it sounded too good to be true. The work they do in apartment complexes improves their overall financial performance, grows their online reputation, and strengthens their resident retention rates. With benefits like these, it’s no surprise that they’re taking off, now serving over 3 million residents from coast to coast. In this episode, Pete Kelly explains just how they do it.
We believe this podcast is especially valuable to you for two reasons. One, you get to hear about an incredible business venture in Apartment Life. There’s no doubt you’ll be hearing more about them in the future, and we’re glad we get to share about them early on in this podcast. And two, you get to hear the heart behind the business. Pete Kelly is one of those business leaders who puts his heart into what he’s doing, and it shows in this interview.
We’re excited for you to hear about Apartment Life and the potential they have in the real estate market. But even more so, this podcast gives you the opportunity to hear from a business leader about how his values affect his business and how everything he does serves other people. Tune in and enjoy!
Useful Links:
Best Resources for Real Estate Investors
Neighborliness on Faith Driven Investor
EPISODE TRANSCRIPT
*Some listeners have found it helpful to have a transcription of the podcast. Transcription is done by an AI software. While technology is an incredible tool to automate this process, there will be misspellings and typos that might accompany it. Please keep that in mind as you work through it. The FDI movement is a volunteer-led movement, and if you’d like to contribute by editing future transcripts, please email us.
Henry [00:02:43] Pete is great to have you on the Faith Driven Investor podcast. This is number one, the first podcast we've ever done for the faith driven investor audience. Of course, we're also releasing this on Faith Drive Non-stories. We'll have four different podcasts that are going to be released on both featuring an entrepreneur and faith driven investor. We've come to understand, of course, that financial capital is so tied into what we look at a feature of an entrepreneur that there'd be an opportunity to have a separate podcast series, just focus on what God is doing in the investing marketplace across asset classes like private equity and public equity in real estate. And of course, you're going to talk to us today about real estate and are going to be the kick off episode for the faith driven investor. We're going to do four of these and then going to be looking to launch back into some content that is more specific for the faith driven entrepreneur. We're very grateful to have you on the show as you've gathered. We've been doing this for about a year and a half. And a lot of folks that are part of our listening audience probably don't know much about apartment life. It was a big surprise to me when I came across you all a couple of years ago and came to understand the entrepreneurial story and the problem that you all saw to solve in the marketplace in the way that you've solved it. And how many lives that you've touched along the way. So I think your story in a Perman life story is going to be a great encouragement to both of our audiences. Faith Driven Entrepreneur podcast driven investor and souping. You could get started by just giving our listeners a quick fly over the birth story of apartment life and how long's it been around and what problem did indeed you guys set out to solve.
Pete [00:04:18] Henry, thanks for having me. Well, Apartment Life is a faith based nonprofit built on a business model, and we've been serving the multi-family or the apartment industry for close to 20 years. It was founded in Euless, Texas. And now we're serving communities from coast to coast and now even up in Canada. But basically, we help apartment owners and management companies with two of their greatest needs, which are resident retention and resident satisfaction. So it's a simple concept that more friendships or relationships that a resident has an apartment community, the happier they are and the longer they stay, even when the rent goes up. And so the problem is, is most apartment residents don't know their neighbors. And that's not just true of apartment residents. I think it's true Americans in general. Few years ago, Time magazine ran an article that was titled Why Loneliness May Be the Next Big Public Health Issue. And it was really interesting. They did a study. It was out of Brigham Young University. And they found as they tracked people that people who had a subjective feeling of loneliness or 26 percent more likely to die during the study. So social isolation is as bad or worse than smoking and obesity. So it's not only bad for health, it's also bad for business when people are disconnected from their neighbors. If you're an apartment owner, they're unhappy and unhappy. Residents make for pretty difficult tenants, so disconnected residents are more likely to complain, which is an emotional drain on the onsite staff. They're more likely to post a negative comment or review online, which hurts marketing. They're more likely to leave as soon as they find a cheaper apartment. So that hurts the bottom line. And finally, just because it doesn't feel like home, they're less likely to treat it like a home and take good care of it. So we've got a program basically that connects residents and relationships with one another and makes that community stand out from the competition. It's a sticky community that makes people want to stay.
Henry [00:06:24] So break that down for us. Tell us how it actually works.
Pete [00:06:28] Yeah. So our traditional program, we. Have typically a team of two people that we place and they live in the apartment community. Typically it's a husband or wife. But it could be two singles and they're essentially like a welcome wagon. They greet every new resident when they move. Then they throw all the parties and events for the community. They look for opportunities to care for people, maybe the birth of a child or a job transition and then typically 90 to 120 days before the lease is set to renew. They swing by and then make a visit. We call it a renewal visit. They check in on the residents. Hey, are you having a good time? Are you think about sticking around?
[00:07:07] What we found is that as they do it, it really does create a sticky community. People get to know one another and they feel like home and they stay and their happy. And they post positive online reviews.
Henry [00:07:19] So that's gonna be great for business. It sounds like there's a ministry mindset behind it about the calling and why you all started apartment life. And yet, if you're hitting on solving for customer retention and customer satisfaction, it's probably just really good for business, too, right?
Pete [00:07:36] That's great. Yeah. All of our teams, we recruit from local churches. And so as they go about doing the program, which is not inherently spiritual. They're going to have hundreds of opportunities to make a positive impact on their neighbors lives. So in one sense, it's a very deeply spiritual mission. But from the apartment owners perspective, it just makes really good business sense. Every year we do studies about the impact that our program has. So we do an annual property manager survey. And pretty consistently for the last five years or so, our property managers would attribute on average three point three renewals per month to the program. So over the course of the year, that would be 40 renewals residents who are renewing their lease because of the program. And so if you know what your churn cost is, how much does it cost when you have to replace a resident? Most apartment owners do know that it easily saves over $100000 a year to the owner. We've got actually a well-respected economist in the apartment industry named Ron Witton. And over the last 10 years, he's done multiple studies of the economic impact of our program, not just on resident retention, but also on the onsite staff retention and the leasing process. And they would say that the total impact of the program beyond just lease renewals would be closer to one hundred and eighty eight thousand dollars a year. In the past, he was calculating that one hundred and thirty eight, but in the last year he revised the numbers upward to one hundred eighty eight thousand dollars of economic value to the owner. So there's a really large impact for the bottom line of the owners, and there's also a spiritual impact in residents lives as well on something like this.
Henry [00:09:21] Saving money is just really good for business. Some amount of your customers, the apartment owners, are getting this because they identify with the faith motivation that you all have. But I bet some of the owners are doing it just for pragmatic business reasons. Is that the case? Maybe it isn't. Business owners, apartment owners that don't even share faith that are bringing on board chaplains because it just makes business sense.
Pete [00:09:47] I would say about one third of our clients would be aligned from a faith perspective. Probably one third would be faith neutral and then about one third. It's not even on their radar. This is just purely a business decision for them.
Rusty [00:10:04] I'm interested in this scale. So how many units, where abouts? I mean, because I think there's also an interesting piece to this that we haven't really talked about as if I am a renter and I'm trying to figure out where's the best place to go live. I might well be attracted to someplace where apartment life supports them. So give us an idea of size, scale, where abouts and and how one might might actually find out about that.
Pete [00:10:29] Yeah. Over the last 19 years, we've served about 1.3 million units. That's about 3 million residents from coast to coast. Currently, we're serving about close to 500 communities all across the United States and now up into Canada. So the easiest place to find out exactly where we have communities is to go to apartment life. Dot org and you can see a map, an interactive Google map where you can kind of zoom in on each city and get a sense for where our apartment programs are.
Rusty [00:11:00] And when you think about the future, what are the trends? I mean, I've read back and forth millennials feeling renting is a better way to go versus buying. And there's these big macro trends, obviously a lot of construction in the rental market. But look over the headlights a little bit and tell us what you see coming.
Pete [00:11:19] Yeah. You know, since the Great Recession of 2007, 2008, there's been a reduction in homeownership in the United States and an increase in renters. And particularly in apartment renters. And so, as you pointed out, millennials much slower to jump on the homeownership side of things. But even what we're saying is empty nesters are actually downsizing and moving away from home ownership to living in apartment situations for many practical reasons. They just don't want to have to take care of the property in a longer. So, yeah, coinciding with that there, it's actually been a shortage and single family construction, which has really increased homeownership prices quite a bit and priced a lot of people out of the market in terms of home ownership. And so it's really it's a great time to be an apartment owner in the United States because a lot of people are that's either their default choice or they're intentional choices to live as an apartment runner,.
William [00:12:20] Owner, switch back to something real fast. You talked about the financial benefit of the program. I mentioned the cost of the program. How does it sort of shake out? And secondarily to you mentioned is billed as an amenity. Do you show up in brochures for the apartment? As you know, we have a pool and we have chaplains by apartment life. Have you gotten that type of penetration? Just walk me through the cost and how the program penetrates from a marketing perspective as well. I get it on the back end of renewals I'm interested in on the front end.
Pete [00:12:50] So we have two basic programs that we offer to apartment owners and management companies. And one is our traditional onsite program, which I describe to you. And the cost of that program is really three parts. The first and the largest part is the apartment owner concedes a two bedroom, two bath unit to apartment life that we can use for the program. And that's where we place her onsite team. They live in the apartment and it sets the first and the largest cost for most apartment owners. It's not a major deal because they know that they're always going to have a certain amount of unused units. And so we just say, hey, give us the one that's the hardest for you to lease. So that's the first and the largest cost. In addition to that, there is a monthly management fee, 650 a month that the owner of the management company pays to apartment life. That's what we use to source the teams to train and to coach them in an ongoing manner. So that's the 650. And then finally, there's an event budget that we need to be able to provide for the team to host the events that they've put on. And typically what we encourage is a dollar fifty to two dollars a door and we'll work with apartment owners in terms of what works best for their budget. So that would be for our traditional onsite program. We also in the last two years have developed an offsite model. Not every apartment owner is in a position to consent a unit. And so for those we've created an offsite model where basically we're offering the same program, the same services, but instead of consisting unit, they pay a higher management fee and we turn around and pay the coordinators or the teams an hourly rate for the work that they do for the onsite staff.
William [00:14:31] Oh, that's really interesting. And as you continue down the model, I'm interested, if you would mind sharing what your renewal rate, how happy are your customers with the service you provide?
Pete [00:14:41] You know, we're very, very pleased with the job that we're doing. Typically, what we like to say is good teams or good coordinators create new demand. And so over the last year, it's been fun. We started last year at around 400 programs and by the end of the year we're at four ninety five. And I think that is a testament to the quality of our teams that we've had that we've deployed in the field and the satisfaction of our clients.
William [00:15:08] That's amazing. And from an investing standpoint, I think one of the interesting things is when you kind of cross that threshold right from OK, this is a nice add on to this is actually something people want and interested in. Have you gotten there yet or do you see that coming where, hey, not only is this the side benefit that we offer, but actually something that people are really interested in and actually apartment owners even taken, as they put it on the front page of the brochure right alongside the pool and the pool table and all the great things. You know, also, we have an apartment full of people just here to love you, just here to be with you, just here to plan things for you. Have you gotten that type of penetration yet or do you hope to or do you see that on the horizon?
Pete [00:15:48] William Yeah, excellent question. Yes, actually, that is totally the way that we market it. This is an amenity that's distinguishes yourself from your competition. So any more and the apartment industry. Especially for newly built product. I mean, everyone's gonna have granite countertops. They're gonna all have stainless steel appliances. They're going to have a pool and a fitness center. And so anymore and the war of amenities, everyone's basically marketing the same thing. And what's gonna really set aside them from the competition is that sense of community and connectedness. We like to say that one of the hidden amenities within your community is the residents themselves, that your residents, if there are great neighbors, they make for a wonderful amenity. It makes sense when you think about places that you live growing up that were especially meaningful to you. Chances are they were meaningful because you had friendships there, you had relationships there that made you want to stick around and sink deeper roots.
Henry [00:16:47] That's a great line. Neighbors can be great amenities.
Pete [00:16:50] Thank you.
Rusty [00:16:51] It totally makes sense to me, especially even though actually for the comments you made about empty nesters becoming renters. I think that's very true. I see that happening. But certainly younger in life when you're establishing yourself and apartment life is very, very important. Right. Because you've created a network of people at work. You've got your network of friends from afar or friends that you may know in the local area. But if the apartment can become the new circle of friends, that kind of stickiness, if you will, is super for your renewal rates. But it's also fantastic one for the community because it's really hard to leave your friends, as you said. So they might stay in that community versus just pick up and be recruited off to another city. And then secondly, it's great for employers because, you know, you've got a good group of friends. You go home to a place that you like, you going to people that are supportive and encouraging of you. Amazing how much better your job gets when you have that dynamic going on, too. So there's a nice cycle you've got going on there.
Pete [00:17:58] Rusty, I would completely agree with you. A couple weeks ago, I was talking to one of our teams in Charleston, South Carolina, and we were just talking about the program and how it was going. And they were telling me the story of a particular resident, that they had had an impact in their life. And at the end of the conversation, just in passing, I said, by the way, it's that said residents sticking around. And they said, oh, yeah, they just renewed their lease. And then they went on to say, you know, this month we had 30 renewal visits to do and we were very overwhelmed when we saw the list. And then as we started to go through the list, we realized 20 of them were people that we were friends with. And as we reached out to them, all of them were sticking around because this was the kind of place that they wanted to sink roots. They had friends here,.
Henry [00:18:42] Pete. We're talking about permanent life, really changing the way that multifamily returns come about, because as we look at the signs with date driven investors, a lot of it comes to bottom line return. Can we implement aspects of spiritual migration without sacrificing financial return? And I think that you've made a good case so far about how this might not only not come at the expense of financial return, but actually increase them. And I see that now more clearly, of course, the multi-family real estate. But dream with this a little bit. What does this mean maybe for commercial real estate or shopping center real estate? We're living care facilities. What are some of the adjacent spaces that a real estate investor listening to this call might say, you know what? There's other application here.
Pete [00:19:29] Well, you know, Harvard Business Review came out with an interesting article awhile back called The New Science of Customer Emotions. And what they found is that a customer who is emotionally connected to a company is 52 percent more valuable than a customer who is just highly satisfied. And so there's been a lot of research in this area where the more you're able to emotionally connect your customers or your clients to your brand, they're gonna be repeat customers and they're going to buy more from you more frequently. And so I think it's just a general principle. That's true. It's woven into the fabric of the universe that God created, that relationships aren't just good for the soul. They're good for the bottom line, too. And so I do think that the principles that we're seeing and the apartment industry would hold true for any industry, that the more relationally connected people are to one another, the happier they are. So I think it'd be true of just your business and your employees. I think it would lower employee turnover. I think if you have a great relationship with your customers, they're going to trust you more. They're going to feel like, OK, you're not just out to make a profit from it, but you're looking out for my interests and you really care for me as a person as I'm going to give you more of my business. So, yeah, I think the principles transcend just the apartment industry, but would apply to any industry.
Henry [00:20:52] I think, for instance, about shopping centers, which is often the home of the butcher, the baker and the candlestick maker. And these are people that are. Running small businesses who, of course, employ people in I don't know the name, but has really thought about what chaplaincy looks like as hired by a strip mall operator or a real estate investment trusts, I wonder if the logic of increasing returns from developing relationships, as you just talked about, 52 percent that feel mostly connected. I wonder if that might translate into better financial returns and shopping center a real to do.
Pete [00:21:27] I think it could very well translate. I think one thing that the apartment industry has that's a little bit different than retail is you've got people who are living there, they're spending a great deal of time there. So it's a little easier to enter into people's lives. But again, I think the principles are true. If you care for your customers, if you care for your clients, they're going to keep coming back because they know that you care for them.
Henry [00:21:49] Have you seen this and applied it on senior living centers or any other industries that are adjacent to yours?
Pete [00:21:56] Henry, it's so interesting that you had mentioned that because just in the last couple of weeks we have had people from senior living assisted living communities reach out to us to say, hey, could you bring your program to our facility? And the answer is absolutely. We would be glad to figure out a way to serve the residents. Now, probably it's not going to look like an onsite team. It's probably going to be more of an offsite model. But one of the things that I've heard in the assisted living facilities is that a lot of these residents, they're just depressed, they're lonely. Their kids care for them, but they're not able to visit very frequently. And so just very simply, someone swinging by their room to check in on them and to talk with them and to listen to them is huge. It totally changes the atmosphere of place. So absolutely. I think that there's applications and other sectors of the multi-family industry, student housing.
Rusty [00:22:51] Well, a few weeks ago when just on Faith Driven Entrepreneur podcast pastor who talked about the importance of pastors making workplace visits, so very similar. Very similar. Right. To supportive encouragement that comes from someone from the outside paying attention and showing that they care and being neighborly. And that's what I hear coming that your modeling a different way to love your neighbor. And that's very powerful.
Pete [00:23:19] Absolutely. I think one of the things that gives our apartment life teams and coordinators the advantages, they're not being perceived as necessarily even being a chaplain per say, but they're being perceived as being that neighborly, welcoming presence. The person that's been tasked with greeting people when they move, then throwing the parties and events. And in the context of that, they're just going to have hundreds of natural opportunities to minister to people's lives, to invite them to a local church to have a positive spiritual impact on their lives. But when they first meet a resident, they're not perceived necessarily as the chaplain per say. They're just perceived as the apartment like team who's here to create a sense of community connectedness.
William [00:24:00] As we move towards the close. One of the things we love to ask our guests is just bringing it back to God's word. And it's always showing us new things and wondering maybe a piece of scripture the God's taken you to recently. That could be over the past couple of days, over the past weeks, over the past months, but maybe just in this season, something that's coming alive to you in a new way and maybe influencing your personal life or your professional life either or both, maybe just let us in to where God has you right now.
Pete [00:24:30] Well, and that's so interesting that you had mentioned that, because just a couple days ago I emailed our senior leadership team a passage and second, Peter, chapter one versus three through eight that just really stood out to me as being so essential for what we do. But in that passage, second, Peter won three through eight. Apostle Peter says his divine power has given us everything we need for life and godliness through our knowledge of him, who called us by his own glory and goodness. And then he goes on to say, for this very reason, make every effort to add to your faith. And he really lists several attributes that we need to add to our faith. So he says for this very reason, make every effort to add to your faith. Goodness. And the Greek word goodness as a red day, which means excellence. Sometimes it's translated as moral excellence. But in general, it's just excellence. And so one of the first attributes of our apartment life coordinators is they need to be able to serve with excellence, because if you're not serving the client with excellence, you're not going to be able to keep that mission field open. So assess for this very reason, make every effort to add to your faith, goodness and the goodness knowledge. OK. So in Peter's context, that idea of knowledge had to do with knowing God, which absolutely our coordinators need to know God and they need to know his word. But in addition to that, they need to know their clients. They need to know what their client's preferences are. They need to know how to run an effective part my life program. So they not only need to grow in faith, they need to grow and goodness or excellence, they need to grow and knowledge to knowledge and self-control. So one of the things we like to tell our teams is it takes a lot of self-discipline and control to be an apartment life coordinators, because managers aren't always grateful. Residents can be quirky. Sometimes you don't want to do a welcome or renewal visit after work. So it takes a lot of self-control. And Peter goes on to say to self-control at perseverance. So there's a stick to witness with it. And the perseverance godliness that you need to have a character that reflects who God is to your residents and to godliness, brotherly kindness and a brotherly kindness love. And if you read the living Bible translation, which you don't have in front of me, it says her brother, kindness and love. It says, first, you need to like people. And then as you like them, you'll grow to love them. And it's hard to love your neighbor with God's unconditional love if you don't even like them to begin with. So I think that passage at a second pair is just a great descriptor of what it means to be a great apartment life team or coordinator.
Henry [00:27:12] I agree. I agree. I think that that's really helpful for us in all aspects of our work. That emphasis on excellence and then loving our neighbor, partner, vendor or customer or employee are in this case our neighbor, our physical neighbor, the tenant, the staff at the apartment complex. And just super cool to see the way that you have made such an impact in these communities and been able to measure the impact of what love looks like. And that love actually does translate into customer retention. And it does translate into customer satisfaction. And business is investing really is all is about this. It's about acquiring customers and retaining them. And through apartment life, we've come to understand how you do that, how you address because Frank issue an issue by increasing the customer's online reputation and how you clearly deliver better customer retention. And it's wonderful to do that in a way that is staffed by people who want to love people and point them to God. So we're very grateful for you helping us kick off this series with faith driven investor in its partnership with Nature of Doctrine. And we're grateful for the example that you set for all of us in terms of understanding how our faith might inform us and the way we think about both customer acquisition and customer retention creatively and how we think about that as an investor. If we are investing in real estate, what is the tie in with our faith? Can we do that without compromising financial return? Are we in a spot where we might be able to encourage, maybe even challenge some of the real estate managers? We have about chaplaincy and maybe they don't share our faith. Maybe we're in a real estate fund where it's pretty clear that the principals aren't followers of Christ. But maybe we can point to some pragmatic numbers across four hundred ninety five communities that might encourage them to take a look at this as being an effective way to deliver better returns to you. Their limited partner, you, their investor, and maybe you know somebody who's in the fund management space that does share faith and might be encouraged by this. Pete, I'm so grateful for you and your time and your faithfulness, your calling in your ministry. I'm really grateful for our time together. Thank you.
Pete [00:29:20] Henry Rosty, William, thank you. Thank you for having me. Hey, do you mind if I share one more story in closing, since you're recording it,.
Henry [00:29:28] Please go for it.
Pete [00:29:30] A few years ago, there was a couple from Oklahoma that moved down to Dallas, Texas, in the heat of summer and then moved into one of our communities that had an apartment life team. And as they were moving in, it was probably the hottest day of the summer.
[00:29:44] And the apartment life team saw them moving in and they decided to just show them some neighborly love. They brought some cold water with them and welcomed the new residents as they were physically moving in. So funny, the wife met the team and she's like, I didn't know people still did this anymore in America. Like, I haven't been welcomed into a home. And I don't know when since I was a little girl. And they said, oh, well, we're just really glad you moved in. And there's a great community here. In fact, a lot of the residents in this apartment community, we all go to church together. And if you'd like to join us on Sunday, we'd love to have you. And so a couple said, yeah, we would love to join you at church. And so they got to church. They basically take up the whole balcony and the upstairs of the church. And that couple came and they kept coming week after week, month after month. That about six months later, after they'd gotten really plugged into the church, the wife talked to the wife of the apartment life team and she said, you didn't know this one. You met us. But when you first met us, our marriage was hanging by a thread. And the reason we moved to Dallas is because it was kind of our last chance to have a new beginning. And I just want you to know how incredible it's been that you'd welcome us and to your community and to your friendships and into your church. It's it's totally changed our lives and it's rescued our marriage.
Henry [00:31:09] Wow. Great story. Great story.
Pete [00:31:13] You might be able to figure out how to cut and paste that into a program, but I wouldn't want people to only think we're just about making friends, but we're ultimately about changing lives.