The TCO Method ®
Interview Special No. 5
Advanced Multifamily Operations
Special Guest Gino Barbaro

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Property management is a thankless job.

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If you suck at it, you’re going to get fired.

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And if you’re really good at it, you’re going to get fired

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because they’re going to sell the property.

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So it’s a very difficult job to make money in.

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So why don’t you make your job a little bit easier?

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And there’s a couple of ways that you could do that.

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[MUSIC PLAYING]

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Welcome to the TCO method, the only show focused on helping

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you massively increase your net operating income.

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I am Andy McQuade, and thank you so much for tuning in

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to this special interview episode where today I am joined

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by Gino Barbaro, the man, the myth, the legend,

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the king of multifamily real estate investing education.

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As an entrepreneur, he grew his real estate portfolio

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to over 2,000 doors and $250 million in assets

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under management.

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Prior to that, he owned an Italian restaurant for over 20 years

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and was affectionately known as the pizza guy.

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He met Jake in ’09, and together they purchased their first deal

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in 2013.

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Gino left a restaurant in 2016 to go full time

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in multifamily, Gino and his partner, Jake,

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launched the Jake and Gino community in 2016,

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which has become the premier multifamily real estate

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education community, looking to help others invest

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in multifamily real estate.

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He has three best selling books that he has authored,

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Wheelbarrow Profits, The Honey Bee,

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and Family Food and Friars.

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Currently he’s living in St. Augustine, Florida

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with his beautiful wife, Julia, and there’s six adorable kids.

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How old are they?

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24 to nine.

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God bless you.

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I have one.

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We were one and done.

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So he’s 10.

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I’m good.

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He’s got my ADHD.

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Thanks.

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I want to correct a couple of things you said.

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The first thing is I’m a legend in my own mind.

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I’m a legend and no one else is mine,

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especially my wife.

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So let’s get that straight.

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All right.

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The second thing is, yeah, and I always break my investment career.

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Nevertheless, a couple of years I’ve really

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thinking about this life before Jake and life after Jake.

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So life before Jake was a little weird,

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because I had the Shiny Object Syndrome.

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My first deal back in 2002 was a triplex,

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and it was beginner’s luck.

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It was awesome.

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I found a good deal.

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But then after that, mobile home park, strip center,

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couple of duplexes, actually, ironically up in Rochester,

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and then I met Jake.

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And then I got clear the whole map, the process.

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We figured out was by right, manage right, finance right,

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which was our method.

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But it’s really one of those things where it’s been a long journey.

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And for me, you’re talking about NOI,

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and you’re talking about, you know, in multi-family.

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When you’re an entrepreneur, I think people get into real estate.

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They don’t look at it as a business.

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And I had that show, what shall we say?

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That experience saying that restaurants and property management

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are pretty similar.

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It’s customer service.

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It comes down to taking care of the customer

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and having empathy towards that customer

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and really trying to deliver value.

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And that’s where I saw it.

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That’s why I got into multi-family,

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because I like dealing with residents.

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We don’t call them tenants, they’re residents.

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We try to call them units, they’re apartment homes.

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I think that’s some of the things

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you need to start thinking about when you get

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into this multi-family business.

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At Jake and Gina, we like to say we create

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multi-family entrepreneurs.

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Because that’s what you’re doing.

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You’re building a business here.

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You’re not just becoming a landlord.

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And always focus that that resident is the number one priority

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for your business.

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Put in a different way for anybody listening.

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You know, Steven Covey says seek first to understand

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then to be understood.

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And I think as an apartment owner, as someone who has rentals,

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it’s got to be tough getting up at 8 o’clock in the morning

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having your hot order, he did not working when you had to go

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you had to go on a job interview.

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And they call the landlord,

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and a landlord doesn’t respond.

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There’s something happens.

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We all make mistakes.

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I think what you’re trying to do in business is you’re trying

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to really listen to that customer

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and have the emotional intelligence.

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Emotional intelligence is going by the wayside, as we speak.

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But it’s very difficult having property management

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try to deal with that because these people are over-acting.

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They’re not yelling at you.

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They’re yelling at their situation.

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So if you can understand that and try to listen to them

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and try to be proactive with property management.

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So when an issue does come up, you at least have the benefit

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of doubt that you’ve helped them out.

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And to think about it, I was equated to like the electric

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companies.

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You have your power on 29 out of 30 days.

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You lose your power for that 30 minutes.

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They’re the devil.

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But they’ve provided service for the last 29 and a half days.

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And it’s the same thing as property management.

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So understand that sometimes it can be a thankfulest job.

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But it can also be a rewarding job

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because you are creating memories for people.

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You are giving people a place to live.

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And I think that can’t be forgotten.

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You can’t lose yourself just in spreadsheets and just in numbers.

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Absolutely.

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And I think that speaking of spreadsheets and numbers,

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that will reflect in your rank collection rate, your renewals,

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all of the other things because like it or not,

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tenants that stay will make you more money than tenants that

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leave.

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All the costs involved in the downtime

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of lost rent of doing a turn or make ready,

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that is opportunity cost that takes a year or two

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to make back.

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If they just stay there, then those bills are paid.

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If you can get a ton of renewals, get the money in on the top line.

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Like, yes, every dollar you save and cost,

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we talk about all the time on the show.

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Every dollar you save and cost is like $2 to your top line.

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Great.

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But you can only cut so far before you value engineer

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all the value out of whatever you’re doing.

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There’s a point where doing something to cut and save

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has a negative impact on the overall well-being of the business.

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And I think that that attitude in and of itself is a lost art.

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You talk about the emotional intelligence.

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There’s people out there who just want the cheapest,

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quickest, band-aid to put on whatever it is that they’re doing.

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And it eventually hurts their business.

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Now, it’s a different conversation if they’re

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going to buy a property and hold it for two or three years

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and get rid of it.

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But if you’re in it for the long haul, you’re in it for the quality.

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You’re going to buy and hold and run that asset and operate

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that asset for five, 10, 15, 20 years.

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The conversation is completely different than the guy

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who’s just looking to make a quick buck and get out.

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And I think that, you know, I’m not calling anybody out

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on the carpet because there is money to be made doing that.

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And there is a value to it in the community.

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And it generates jobs and income for businesses

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and all the other stuff.

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But it’s a pretty brutal cycle, or at least it can be.

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Even as you’re doing that, though, Andy,

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and your flipping properties, you can still

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maintain a quality property management experience.

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There’s not to say that you don’t.

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And it’s actually beneficial.

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So then when you do sell it, you’re actually selling a business

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that’s marketable.

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You’re selling a business with value.

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So you’re selling a business with systems and processes.

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And as you’re talking about this, what can the listener do

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to actually create that experience?

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I would say the first thing you can do,

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if you haven’t done it, is create some type of customer journey.

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We had a gentleman named Joey Coleman on our show.

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He wrote a book, Never lose a customer in 30 days.

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And we had him on, I think three times.

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And what I love about it, he actually wrote one for employees

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as well.

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Never lose an employee in 30 days.

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What I love about his whole processes,

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you have to understand there is a customer experience.

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And every company has this.

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From the very first touch point that you have an employee

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to where they become, he has the eight phases.

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It’s the eight A’s.

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From assessing the very first touch point you have,

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does that customer walk into your property management?

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Office, do they pick up the phone?

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They see you online?

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All the way up to the advocate, which they’re raving fans.

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How do you get them there?

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And as you’re saying this, Andy, the important thing to understand

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is I read a stat.

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I think it’s about 70% of people who do not renew their leases.

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It’s not because of rent going up.

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It’s because of customer service defects.

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And sometimes it’s not even the property manager’s fault.

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There may be a leaky toilet that the resident never said anything

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to the property manager, but it just was no on them

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and bothering them and bothering them.

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And when it came time to renew, they don’t know why they didn’t

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renew, but they just didn’t renew.

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But if the property manager had a system in place

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where every three months I’m going to go check up

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and I’m going to walk in there and say, hey, how is everything?

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What can we do for you?

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Oh, by the way, I’ve got this toilet.

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You’re being proactive.

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And what Joey Coleman does in the book is he really lays it out

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of starting from that very first assess phase

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all the way to the advocate.

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And I am a true believer of this because I

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had one restaurant for over 20 years.

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And I didn’t have any of these eight phases.

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We won it.

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We were a mom and pop.

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We were winging it every day.

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And it was just transactional.

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And that’s what a lot of mom and pop operators

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in the multifamily space do.

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They don’t have it.

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And they can’t scale.

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They can’t figure out why.

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And I wish I had an assess phase when somebody

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walks into the restaurant.

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How do you greet them when they call on the phone?

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How do you greet them?

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How do you deliver it?

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How are you making those touch points?

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Are you sending out emails?

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Are you sending out gift cards?

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Are you sending out happy birthdays?

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What different touch points are you doing?

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Are you using texts?

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So you’re using snail mail?

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Are you using regular, whatever it is?

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And he talks about it in the book.

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And as you’re talking about this, you’re like, wow.

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I can systematize this.

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And I can try to eliminate a lot of the holes in my business

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by doing this, by being proactive in the property management

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space.

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That’s amazing.

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And it ties in really well with the show.

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00:09:42,600 –> 00:09:47,280
So proactive decision making and looking at what the decision

250
00:09:47,280 –> 00:09:49,800
today is going to cost you throughout the entire period

251
00:09:49,800 –> 00:09:51,480
of time, you’re going to own that is huge.

252
00:09:51,480 –> 00:09:53,880
But we never touch on the customer side of it.

253
00:09:53,880 –> 00:09:55,840
What you just said is huge because that’s

254
00:09:55,840 –> 00:09:58,200
nothing that we ever discussed because that’s not my wheelhouse,

255
00:09:58,200 –> 00:09:58,400
right?

256
00:09:58,400 –> 00:10:00,200
That’s not where my knowledge base comes from.

257
00:10:00,200 –> 00:10:01,640
That’s not my experience.

258
00:10:01,640 –> 00:10:05,360
I’m very much a technical building materials guy.

259
00:10:05,360 –> 00:10:06,160
That’s what I do.

260
00:10:06,160 –> 00:10:07,120
That’s where I grew up.

261
00:10:07,120 –> 00:10:08,320
I understand how they work.

262
00:10:08,320 –> 00:10:10,600
I understand the headaches because they were all my headaches

263
00:10:10,600 –> 00:10:11,800
for decades.

264
00:10:11,800 –> 00:10:15,040
I don’t miss it.

265
00:10:15,040 –> 00:10:16,600
But that’s awesome.

266
00:10:16,600 –> 00:10:22,760
So you and your partner have done this for a decade.

267
00:10:22,760 –> 00:10:26,440
You guys have proven that you have the fundamentals

268
00:10:26,440 –> 00:10:30,920
in place to really do the business the right way, where

269
00:10:30,920 –> 00:10:35,840
we see a lot right now of operators struggling, syndications

270
00:10:35,840 –> 00:10:38,960
struggling because they operated without fundamentals

271
00:10:38,960 –> 00:10:39,920
because it’s 3%.

272
00:10:39,920 –> 00:10:41,800
They didn’t need them.

273
00:10:41,800 –> 00:10:42,800
Fundamentals didn’t matter.

274
00:10:42,800 –> 00:10:43,800
You don’t need to reserve.

275
00:10:43,800 –> 00:10:46,240
We’re just going to take a note for 3% and fix that problem.

276
00:10:46,240 –> 00:10:49,080
Well, when the cost of capital is doubled or tripled,

277
00:10:49,080 –> 00:10:51,400
that game is now completely different.

278
00:10:51,400 –> 00:10:55,040
So why don’t you take me through kind of your journey

279
00:10:55,040 –> 00:11:01,680
when you’re doing an acquisition and asset upgrade, let’s

280
00:11:01,680 –> 00:11:03,120
say, when you’re coming in, whether you’re

281
00:11:03,120 –> 00:11:05,320
going to turn it immediately or whether you’re going to just

282
00:11:05,320 –> 00:11:07,240
manage it?

283
00:11:07,240 –> 00:11:11,560
Where do you see those fundamental differences and how

284
00:11:11,560 –> 00:11:14,080
is that impacting your business and your portfolio today

285
00:11:14,080 –> 00:11:17,080
versus what some of these other companies are struggling with?

286
00:11:17,080 –> 00:11:19,040
The answer to your expert, this is yours.

287
00:11:19,040 –> 00:11:21,080
I’m not, like I said, once again, I’m not an expert.

288
00:11:21,080 –> 00:11:23,040
And I’m constantly learning well.

289
00:11:23,040 –> 00:11:25,760
But the answer to that question is it depends

290
00:11:25,760 –> 00:11:28,280
about upgrades because right now it depends

291
00:11:28,280 –> 00:11:29,600
upon the market cycle.

292
00:11:29,600 –> 00:11:32,720
Five and six years ago, it was valuation with renovation.

293
00:11:32,720 –> 00:11:33,600
That’s what people were doing.

294
00:11:33,600 –> 00:11:34,720
They were renovating because they were buying

295
00:11:34,720 –> 00:11:35,880
at a certain price point.

296
00:11:35,880 –> 00:11:39,240
Now it’s valuation with operation.

297
00:11:39,240 –> 00:11:41,840
But let’s pull it back even further.

298
00:11:41,840 –> 00:11:44,920
And the reason why Jake and I had an amazing 2023, we

299
00:11:44,920 –> 00:11:46,760
close on over 300 units.

300
00:11:46,760 –> 00:11:49,800
And it’s just me, my partner, and we’re not raising capital.

301
00:11:49,800 –> 00:11:50,920
It was all internal.

302
00:11:50,920 –> 00:11:56,960
It’s because our framework, it’s by right, finance right,

303
00:11:56,960 –> 00:11:58,040
and manage right.

304
00:11:58,040 –> 00:12:00,160
Oh, it’s a three-legged framework.

305
00:12:00,160 –> 00:12:01,640
It’s a wheelbarrow.

306
00:12:01,640 –> 00:12:03,120
And you look at the two back legs.

307
00:12:03,120 –> 00:12:06,000
When you buy the asset, the asset’s in place, right?

308
00:12:06,000 –> 00:12:07,040
You bought that asset.

309
00:12:07,040 –> 00:12:07,920
That’s the price.

310
00:12:07,920 –> 00:12:12,640
Once you’ve financed it with fixed rate, long-term financing.

311
00:12:12,640 –> 00:12:14,000
Wow.

312
00:12:14,000 –> 00:12:17,080
Who would thought buying stabilized assets on Bridgett

313
00:12:17,080 –> 00:12:18,200
was a good idea?

314
00:12:18,200 –> 00:12:19,840
Now looking back at it, it was insane.

315
00:12:19,840 –> 00:12:22,520
Jake and I are like, going, how are these deals working?

316
00:12:22,520 –> 00:12:24,000
Or they’re not working?

317
00:12:24,000 –> 00:12:26,560
But at the same point, once you do those two,

318
00:12:26,560 –> 00:12:30,320
and Jake and I are using a type of bridge product,

319
00:12:30,320 –> 00:12:31,480
I wouldn’t call it bridge, but we’re

320
00:12:31,480 –> 00:12:34,640
using loan to cost with community banks or with credit unions.

321
00:12:34,640 –> 00:12:36,520
And they’re five-year products.

322
00:12:36,520 –> 00:12:38,440
So we have five years to renovate these assets.

323
00:12:38,440 –> 00:12:40,880
And within five years, we can refinance them out back

324
00:12:40,880 –> 00:12:44,240
to a community, or traditionally we go to agency at that point.

325
00:12:44,240 –> 00:12:45,560
But what we’re talking about in this show

326
00:12:45,560 –> 00:12:48,400
is the manage right, that wheel of the wheelbarrow,

327
00:12:48,400 –> 00:12:50,160
which is in constant motion.

328
00:12:50,160 –> 00:12:51,600
And you can take this framework.

329
00:12:51,600 –> 00:12:53,920
You can apply it to single-family homes.

330
00:12:53,920 –> 00:12:55,800
You can apply it to buying a business.

331
00:12:55,800 –> 00:12:58,120
You can apply it to any kind of asset

332
00:12:58,120 –> 00:13:00,200
where you’re actually investing in it.

333
00:13:00,200 –> 00:13:02,880
And when we talk about the manage right portion,

334
00:13:02,880 –> 00:13:04,720
it depends on the asset right now.

335
00:13:04,720 –> 00:13:07,160
We’ve gotten some negative publicity going into assets

336
00:13:07,160 –> 00:13:10,120
that are so undervalued that you have to raise rents

337
00:13:10,120 –> 00:13:11,640
and have to just, you know, evict people.

338
00:13:11,640 –> 00:13:13,480
When you’re buying an asset for a two-bedroom,

339
00:13:13,480 –> 00:13:17,080
when rents for $700, and they should be $1,500,

340
00:13:17,080 –> 00:13:18,800
it’s very difficult to raise it.

341
00:13:18,800 –> 00:13:20,200
So you have to do non-renewals.

342
00:13:20,200 –> 00:13:22,320
So you have to be very specific and targeted

343
00:13:22,320 –> 00:13:24,120
on each asset that you’re buying.

344
00:13:24,120 –> 00:13:25,160
So that’s what’s one thing.

345
00:13:25,160 –> 00:13:27,360
And it depends on the asset class as well.

346
00:13:27,360 –> 00:13:29,520
We’re buying B-minus C-assets,

347
00:13:29,520 –> 00:13:32,480
where we’re not going to go in and put granted countertops

348
00:13:32,480 –> 00:13:35,320
and spend a ton of money on the fixtures

349
00:13:35,320 –> 00:13:37,480
because those renters don’t really want that.

350
00:13:37,480 –> 00:13:40,000
They want to save clean affordable place

351
00:13:40,000 –> 00:13:41,360
with LVP flooring.

352
00:13:41,360 –> 00:13:43,240
They’ll get the resurfaced countertops.

353
00:13:43,240 –> 00:13:44,880
We’ll probably do kitchen cabinets,

354
00:13:44,880 –> 00:13:46,840
you know, the for refacing a kitchen cabinets.

355
00:13:46,840 –> 00:13:49,280
We may spend let’s say six or seven grand

356
00:13:49,280 –> 00:13:52,600
on an upgrade to upgrade a union if we have to go in,

357
00:13:52,600 –> 00:13:55,600
but we’ll probably get a two to $300 rent bump on average,

358
00:13:55,600 –> 00:13:59,280
but it really depends upon what the resident needs.

359
00:13:59,280 –> 00:14:01,360
And not what you’re trying to accomplish.

360
00:14:01,360 –> 00:14:03,480
And then obviously your business plan,

361
00:14:03,480 –> 00:14:06,240
are you looking to hold these assets long term?

362
00:14:06,240 –> 00:14:09,080
Or are you the flipper who in two years is going to flip out

363
00:14:09,080 –> 00:14:10,400
and you have 100 units,

364
00:14:10,400 –> 00:14:13,520
you may only do 30 or 40, test it, see if it works,

365
00:14:13,520 –> 00:14:15,600
and then say there’s meat on the bone,

366
00:14:15,600 –> 00:14:17,600
I’m going to flip it to the next person.

367
00:14:17,600 –> 00:14:18,440
We don’t want to do that.

368
00:14:18,440 –> 00:14:22,200
We want to buy really great assets in really great markets

369
00:14:22,200 –> 00:14:24,240
with really good meeting incomes,

370
00:14:24,240 –> 00:14:26,120
with really good unit mixes.

371
00:14:26,120 –> 00:14:28,920
Buy them, fix them up with, you know,

372
00:14:28,920 –> 00:14:32,720
properties that are built in the 90s and 2000s and 2010s

373
00:14:32,720 –> 00:14:36,000
that are newer so that we can hold them for longer term.

374
00:14:36,000 –> 00:14:37,400
And that’s what our strategy is.

375
00:14:37,400 –> 00:14:40,400
That’s why we’re really focused on the East part of Tennessee

376
00:14:40,400 –> 00:14:41,480
and we’re looking for these assets

377
00:14:41,480 –> 00:14:43,200
and we’re fortunate in 2023,

378
00:14:43,200 –> 00:14:45,200
’cause in 2022 they weren’t around.

379
00:14:45,200 –> 00:14:47,600
They were getting bought up by these huge groups,

380
00:14:47,600 –> 00:14:49,680
which now all of a sudden are having problems

381
00:14:49,680 –> 00:14:52,600
with bridge financing and their terms are coming due

382
00:14:52,600 –> 00:14:54,600
and their rate caps are so expensive.

383
00:14:54,600 –> 00:14:57,480
So understand the framework of buying these assets,

384
00:14:57,480 –> 00:14:58,760
being able to finance them,

385
00:14:58,760 –> 00:15:00,720
but then the really important part is how to manage

386
00:15:00,720 –> 00:15:01,960
these assets.

387
00:15:01,960 –> 00:15:07,000
– Absolutely and I think the management is a two tiered question

388
00:15:07,000 –> 00:15:08,320
because there’s asset management

389
00:15:08,320 –> 00:15:10,680
and there’s property management and they need to cooperate

390
00:15:10,680 –> 00:15:14,440
and you can’t force a property manager,

391
00:15:14,440 –> 00:15:17,080
if it’s a third party property manager,

392
00:15:17,080 –> 00:15:19,520
they’re incentivized to not change their ways,

393
00:15:19,520 –> 00:15:21,600
they’re incentivized by how they get paid

394
00:15:21,600 –> 00:15:24,600
to continue doing what they’re doing the way they’re doing it

395
00:15:24,600 –> 00:15:28,680
because if they do things the way an asset manager would want

396
00:15:28,680 –> 00:15:30,400
if they do things to be more efficient,

397
00:15:30,400 –> 00:15:33,480
if they do things to require less repairs

398
00:15:33,480 –> 00:15:35,440
and less maintenance and less calls

399
00:15:35,440 –> 00:15:38,240
and less all of this other stuff, they get paid less, right?

400
00:15:38,240 –> 00:15:40,360
They’re gonna make that flat fee regardless

401
00:15:40,360 –> 00:15:44,720
but then how do they charge an owner for a hot water tank

402
00:15:44,720 –> 00:15:48,160
or a toilet or a whatever if those things don’t break

403
00:15:48,160 –> 00:15:50,080
while they’re managing the unit, right?

404
00:15:50,080 –> 00:15:51,600
And they’re not gonna make a ton of money off it

405
00:15:51,600 –> 00:15:52,760
but it’s cash flow for them

406
00:15:52,760 –> 00:15:54,360
and most of these property managers

407
00:15:54,360 –> 00:15:56,280
when you get right down to brass tax,

408
00:15:56,280 –> 00:15:58,520
they’re not a profitable business entity,

409
00:15:58,520 –> 00:16:00,520
they’re a cash flow based business entity

410
00:16:00,520 –> 00:16:02,840
that is just robbing Peter to pay Paul

411
00:16:02,840 –> 00:16:04,720
every single day of the week.

412
00:16:04,720 –> 00:16:07,800
Given that 95% of them are mom and pop operations

413
00:16:07,800 –> 00:16:09,600
that are just in the business every day

414
00:16:09,600 –> 00:16:11,360
and not on the business looking to scale,

415
00:16:11,360 –> 00:16:13,520
looking to grow, they’re just putting out fires

416
00:16:13,520 –> 00:16:15,760
and running around like chickens with their head cut off.

417
00:16:15,760 –> 00:16:18,480
So the asset management piece

418
00:16:18,480 –> 00:16:19,680
and the property management piece

419
00:16:19,680 –> 00:16:21,560
if you can self manage that

420
00:16:21,560 –> 00:16:24,040
if you can bring in an internal team,

421
00:16:24,040 –> 00:16:25,360
everybody I’ve ever worked with

422
00:16:25,360 –> 00:16:26,840
has had better results doing that

423
00:16:26,840 –> 00:16:29,320
than trying to change what their property manager is doing

424
00:16:29,320 –> 00:16:31,760
because there’s no good way to force that change

425
00:16:31,760 –> 00:16:33,240
and I see the finger getting pointed

426
00:16:33,240 –> 00:16:34,800
in these indications now,

427
00:16:34,800 –> 00:16:36,880
oh the property manager screwed this up for us

428
00:16:36,880 –> 00:16:39,080
or oh the GC that was doing our renovation

429
00:16:39,080 –> 00:16:40,360
screwed this up for us.

430
00:16:40,360 –> 00:16:41,480
I don’t think that that’s true.

431
00:16:41,480 –> 00:16:43,480
I think you just didn’t have the control in place

432
00:16:43,480 –> 00:16:44,960
that you needed to make that asset work

433
00:16:44,960 –> 00:16:46,880
the way it needed to in your pro forma.

434
00:16:46,880 –> 00:16:48,000
That’s what I think happened.

435
00:16:48,000 –> 00:16:50,400
Let’s talk about a couple of ways to do that

436
00:16:50,400 –> 00:16:52,080
but the first thing, once again,

437
00:16:52,080 –> 00:16:55,240
seek first to understand then to be understood.

438
00:16:55,240 –> 00:16:58,000
Property management is a thankless job.

439
00:16:58,000 –> 00:17:00,600
If you suck at it, you’re gonna get fired

440
00:17:00,600 –> 00:17:01,960
and if you’re really good at it,

441
00:17:01,960 –> 00:17:02,800
you’re gonna get fired

442
00:17:02,800 –> 00:17:04,440
’cause they’re gonna sell the property.

443
00:17:04,440 –> 00:17:07,240
So it’s a very difficult job to make money in.

444
00:17:07,240 –> 00:17:10,000
So why don’t you make your job a little bit easier

445
00:17:10,000 –> 00:17:12,400
and there’s a couple of ways that you could do that.

446
00:17:12,400 –> 00:17:14,560
Be really proactive with them.

447
00:17:14,560 –> 00:17:16,520
We have what we call weekly pulses.

448
00:17:16,520 –> 00:17:17,840
We’re vertically integrated

449
00:17:17,840 –> 00:17:19,040
so we manage our own properties.

450
00:17:19,040 –> 00:17:20,560
That’s why we only, quote unquote,

451
00:17:20,560 –> 00:17:22,400
have 1800 units currently

452
00:17:22,400 –> 00:17:24,640
’cause we don’t wanna outgrow infrastructure.

453
00:17:24,640 –> 00:17:26,120
These syndicators are third party.

454
00:17:26,120 –> 00:17:28,120
They were just outgrowing their infrastructure

455
00:17:28,120 –> 00:17:30,080
and we look at it as a business.

456
00:17:30,080 –> 00:17:32,440
If you look at 10 years, it’s a hundred average

457
00:17:32,440 –> 00:17:34,520
of 180 to 200 units a year.

458
00:17:34,520 –> 00:17:38,000
It doesn’t seem like it’s daunting but it adds up.

459
00:17:38,000 –> 00:17:40,600
And when you’re doing what we call weekly pulses,

460
00:17:40,600 –> 00:17:42,320
every week we have our property managers

461
00:17:42,320 –> 00:17:45,880
send out a weekly report of each property that we own.

462
00:17:45,880 –> 00:17:48,480
It’s probably 25 or 30 going out every single week

463
00:17:48,480 –> 00:17:49,800
of every single property,

464
00:17:49,800 –> 00:17:52,360
the KPIs in the property, the key performance indicators.

465
00:17:52,360 –> 00:17:54,800
If you can’t measure it, then you can’t manage it.

466
00:17:54,800 –> 00:17:56,920
I don’t wanna know what the linkuencies are,

467
00:17:56,920 –> 00:17:58,880
April 1st for March.

468
00:17:58,880 –> 00:17:59,880
That makes no sense to me.

469
00:17:59,880 –> 00:18:01,600
I can’t be proactive on that way.

470
00:18:01,600 –> 00:18:04,360
So for them, it’s a benefit to property management

471
00:18:04,360 –> 00:18:06,240
if they collected the linkuencies.

472
00:18:06,240 –> 00:18:08,840
I wanna know how many people came into the office

473
00:18:08,840 –> 00:18:12,040
as we call guest cards and how many people applied.

474
00:18:12,040 –> 00:18:13,040
What does that look like?

475
00:18:13,040 –> 00:18:15,600
Do we need to help you guys take care of that?

476
00:18:15,600 –> 00:18:17,320
What are evictions looking like?

477
00:18:17,320 –> 00:18:18,920
You track evictions?

478
00:18:18,920 –> 00:18:20,360
What are vacant unrented?

479
00:18:20,360 –> 00:18:21,800
That’s a number we’re looking at.

480
00:18:21,800 –> 00:18:23,080
What are collections?

481
00:18:23,080 –> 00:18:24,920
If you do this weekly pulse every week

482
00:18:24,920 –> 00:18:27,240
and get on the call them for 10 or 15 minutes,

483
00:18:27,240 –> 00:18:28,280
and I know most you’re gonna say,

484
00:18:28,280 –> 00:18:30,680
“Well, my property management company doesn’t do that.”

485
00:18:30,680 –> 00:18:31,840
Most of them don’t.

486
00:18:31,840 –> 00:18:33,680
The ones that are good will.

487
00:18:33,680 –> 00:18:35,520
And if you have your asset management,

488
00:18:35,520 –> 00:18:36,720
you made an excellent point.

489
00:18:36,720 –> 00:18:38,720
asset management and property management

490
00:18:38,720 –> 00:18:40,240
are pretty confrontational

491
00:18:40,240 –> 00:18:42,280
because the property manager wants to spend 200 bucks

492
00:18:42,280 –> 00:18:43,280
in a ceiling fan.

493
00:18:43,280 –> 00:18:44,600
When the asset manager is like, “Bro,

494
00:18:44,600 –> 00:18:46,480
I could get a ceiling for 89 bucks.

495
00:18:46,480 –> 00:18:47,520
I’ve got a budget here

496
00:18:47,520 –> 00:18:49,840
that I’m a fiduciary to my investors.”

497
00:18:49,840 –> 00:18:51,240
The property managers of fiduciary

498
00:18:51,240 –> 00:18:53,400
are really to the residents and to the owner.

499
00:18:53,400 –> 00:18:54,640
But what you’re talking about,

500
00:18:54,640 –> 00:18:55,840
there’s that confrontation.

501
00:18:55,840 –> 00:18:57,880
So they need to be working on the same page.

502
00:18:57,880 –> 00:18:59,680
The asset manager needs to create a budget.

503
00:18:59,680 –> 00:19:03,440
The property manager needs to sort of work in tandem

504
00:19:03,440 –> 00:19:04,720
with the asset manager.

505
00:19:04,720 –> 00:19:06,560
And there’s one of the documents that we use

506
00:19:06,560 –> 00:19:08,880
that really helps our whole portfolio.

507
00:19:08,880 –> 00:19:10,440
We call it a property log.

508
00:19:10,440 –> 00:19:13,120
Every single property has its own log.

509
00:19:13,120 –> 00:19:15,960
So we know on 123 Main Street,

510
00:19:15,960 –> 00:19:18,040
we striped and sealed it two years ago.

511
00:19:18,040 –> 00:19:19,920
The roof was done five years ago.

512
00:19:19,920 –> 00:19:22,000
Who is the electric company on that property?

513
00:19:22,000 –> 00:19:23,880
When did we clean out the gutters?

514
00:19:23,880 –> 00:19:25,640
When is the less power washing done?

515
00:19:25,640 –> 00:19:29,480
It has its own specific log to that property.

516
00:19:29,480 –> 00:19:31,440
So when you do have another property management company

517
00:19:31,440 –> 00:19:34,040
come in, it’s right there, all the notes

518
00:19:34,040 –> 00:19:35,240
and everything’s right there.

519
00:19:35,240 –> 00:19:36,960
The asset manager can take a look at that

520
00:19:36,960 –> 00:19:38,440
and say, “Hey, we need the budget

521
00:19:38,440 –> 00:19:41,200
for power washing this year,” or striping seal,

522
00:19:41,200 –> 00:19:43,120
or crap, there’s 30 air conditioning units.

523
00:19:43,120 –> 00:19:44,720
We need to change 10 this year.

524
00:19:44,720 –> 00:19:48,160
That’s how you have that discussion

525
00:19:48,160 –> 00:19:49,840
between both of those entities.

526
00:19:49,840 –> 00:19:52,360
And for syndicators to say that property management companies

527
00:19:52,360 –> 00:19:55,360
dropped the ball, well, when you overpay on your property

528
00:19:55,360 –> 00:19:56,600
and you need to put money aside

529
00:19:56,600 –> 00:19:58,800
and you can’t fix certain things,

530
00:19:58,800 –> 00:19:59,920
there’s an issue with that.

531
00:19:59,920 –> 00:20:02,880
And I think that’s just really lazy

532
00:20:02,880 –> 00:20:05,680
for them to be saying, to be blaming property management

533
00:20:05,680 –> 00:20:06,880
companies for that.

534
00:20:06,880 –> 00:20:08,080
– I don’t disagree with that at all.

535
00:20:08,080 –> 00:20:10,600
I think that a lot of people are just looking

536
00:20:10,600 –> 00:20:13,560
for scapegoats because they told people one thing,

537
00:20:13,560 –> 00:20:16,200
sold them a bill of goods, told them it was low risk

538
00:20:16,200 –> 00:20:17,880
because it was real estate.

539
00:20:17,880 –> 00:20:20,480
Forget the fact that you buy this thing leveraged,

540
00:20:20,480 –> 00:20:24,160
you got 80% on a note with a bank

541
00:20:24,160 –> 00:20:26,520
and then property value declines suddenly

542
00:20:26,520 –> 00:20:29,800
because cap rates skyrocket, you’re upside down 30%.

543
00:20:29,800 –> 00:20:32,320
Your investors that just cashed all your LPs

544
00:20:32,320 –> 00:20:33,160
that went in and they’re like,

545
00:20:33,160 –> 00:20:34,760
“We’ll just sell the property, I’ll take my money back.”

546
00:20:34,760 –> 00:20:36,960
Yeah, well, the properties were 30% less now.

547
00:20:36,960 –> 00:20:38,800
So you actually have no equity.

548
00:20:38,800 –> 00:20:40,360
So you’re actually in the hole,

549
00:20:40,360 –> 00:20:42,600
the bank actually could collect from us on this

550
00:20:42,600 –> 00:20:44,760
in a lawsuit if they chose to.

551
00:20:44,760 –> 00:20:46,120
There’s a lot of moving parts there

552
00:20:46,120 –> 00:20:48,040
that people are not aware of

553
00:20:48,040 –> 00:20:50,400
and there’s people out there now educating people

554
00:20:50,400 –> 00:20:52,800
on how to do LP investments and how to be a good GP

555
00:20:52,800 –> 00:20:55,000
and other stuff, but it’s kind of too little too late.

556
00:20:55,000 –> 00:20:58,040
And when I see all these GPs last week,

557
00:20:58,040 –> 00:21:01,680
literally flipping out because rate cuts were announced

558
00:21:01,680 –> 00:21:04,440
for next year, like this is gonna solve all their problems,

559
00:21:04,440 –> 00:21:06,400
you’re talking about maybe three quarters of a point

560
00:21:06,400 –> 00:21:07,520
if they do three reductions.

561
00:21:07,520 –> 00:21:08,720
That’s not gonna help you.

562
00:21:08,720 –> 00:21:10,440
Your lack of business fundamentals

563
00:21:10,440 –> 00:21:13,640
and understanding the business is the root of the problem.

564
00:21:13,640 –> 00:21:18,400
The macro, if your business plan relies on macro changes

565
00:21:18,400 –> 00:21:21,320
that you can’t control, you don’t have a plan.

566
00:21:21,320 –> 00:21:23,640
Your business is not functional.

567
00:21:23,640 –> 00:21:27,320
Like, I love guys like you and your partner

568
00:21:27,320 –> 00:21:29,920
who understand this, you know.

569
00:21:29,920 –> 00:21:34,920
This is real estate is not a 10X game.

570
00:21:34,920 –> 00:21:38,920
Like, no offense to the guy who uses that phrase all the time,

571
00:21:38,920 –> 00:21:42,080
there’s smoking mirrors there

572
00:21:42,080 –> 00:21:43,600
that are now coming to light

573
00:21:43,600 –> 00:21:47,840
and you need to respect other people’s skin in this.

574
00:21:47,840 –> 00:21:50,280
If they don’t understand it and you take their money

575
00:21:50,280 –> 00:21:54,680
and lose it, you’re going to own that forever.

576
00:21:54,680 –> 00:21:57,080
Like, people are not gonna forget this particular phase

577
00:21:57,080 –> 00:22:00,520
of the economy regardless of what the next 12 months

578
00:22:00,520 –> 00:22:02,800
bring for rate cuts and all the other stuff.

579
00:22:02,800 –> 00:22:04,560
A lot of people are not gonna make it through this

580
00:22:04,560 –> 00:22:06,000
on the skates, right?

581
00:22:06,000 –> 00:22:11,000
So my biggest thing right now is I look at this is,

582
00:22:11,000 –> 00:22:13,040
if I was gonna invest with somebody,

583
00:22:13,040 –> 00:22:14,800
if I was gonna give somebody money,

584
00:22:14,800 –> 00:22:16,440
I would give somebody with a track record

585
00:22:16,440 –> 00:22:19,760
and a business plan who understands reserves

586
00:22:19,760 –> 00:22:22,520
and understands that deferred maintenance costs more

587
00:22:22,520 –> 00:22:23,560
if you defer it.

588
00:22:23,560 –> 00:22:27,160
Like, there’s a ton of things that don’t respect

589
00:22:27,160 –> 00:22:29,800
the time value of money or market fundamentals

590
00:22:29,800 –> 00:22:31,520
that have been done because they worked, right?

591
00:22:31,520 –> 00:22:34,120
The rising tide lifts all ships.

592
00:22:34,120 –> 00:22:35,520
Well, the tide is going out

593
00:22:35,520 –> 00:22:38,480
and now there’s a lot of beach ships on the shoreline

594
00:22:38,480 –> 00:22:40,120
with a lot of people left high and dry

595
00:22:40,120 –> 00:22:42,360
because they don’t have a way out

596
00:22:42,360 –> 00:22:45,880
because their business was floated by free money.

597
00:22:45,880 –> 00:22:48,480
Like stupid ideas and bad business models

598
00:22:48,480 –> 00:22:51,520
like the electric scooters, like we work,

599
00:22:51,520 –> 00:22:55,000
spending too much money, no plan to ever make a profit.

600
00:22:55,000 –> 00:22:57,080
Like, there is a cost to everything you do.

601
00:22:57,080 –> 00:23:00,240
You need to have a way to pay for the things

602
00:23:00,240 –> 00:23:01,840
that you’re buying in a business.

603
00:23:01,840 –> 00:23:05,480
You can’t just continue to leverage public capital

604
00:23:05,480 –> 00:23:07,840
or private capital to pay the bills

605
00:23:07,840 –> 00:23:09,320
and just rob here to pay Paul.

606
00:23:09,320 –> 00:23:11,320
There is a certain point where cash flow drives up

607
00:23:11,320 –> 00:23:12,480
because there’s no profit

608
00:23:12,480 –> 00:23:14,360
and people will stop giving you money.

609
00:23:14,360 –> 00:23:17,080
And I think that’s where a lot of these people are.

610
00:23:17,080 –> 00:23:19,120
So when you’re looking at a property,

611
00:23:19,120 –> 00:23:21,760
when you’re going in on the operations side,

612
00:23:21,760 –> 00:23:23,080
you said you’re vertically integrated.

613
00:23:23,080 –> 00:23:28,080
So this is really your wheelhouse, so to speak.

614
00:23:28,080 –> 00:23:34,200
And you’re, I don’t know if you target distressed properties

615
00:23:34,200 –> 00:23:36,440
or if you just look for solid fundamental properties,

616
00:23:36,440 –> 00:23:38,200
just walk me through what that process looks like

617
00:23:38,200 –> 00:23:42,080
when you’re evaluating anything from a 40 door

618
00:23:42,080 –> 00:23:45,280
to a 300 door property.

619
00:23:45,280 –> 00:23:48,520
What does that process look like for you guys?

620
00:23:48,520 –> 00:23:51,680
Andy, you should know that distressed properties

621
00:23:51,680 –> 00:23:52,800
are really value ads.

622
00:23:52,800 –> 00:23:55,560
Okay, value ad was the marketing term a couple years ago.

623
00:23:55,560 –> 00:23:57,520
Now it’s going back to the distressed.

624
00:23:57,520 –> 00:24:00,400
When I started in 2011, there was a lot of distress brother

625
00:24:00,400 –> 00:24:02,160
and it’s coming back.

626
00:24:02,160 –> 00:24:04,120
And to answer that question, once again,

627
00:24:04,120 –> 00:24:06,120
it depends really on the market cycle,

628
00:24:06,120 –> 00:24:10,320
but we’re doing right now for us creating that by right criteria

629
00:24:10,320 –> 00:24:13,520
on the front end and understanding that when we buy this asset,

630
00:24:13,520 –> 00:24:14,520
we need to manage it.

631
00:24:14,520 –> 00:24:17,520
I am really not that much smarter than anybody listening

632
00:24:17,520 –> 00:24:18,360
on this.

633
00:24:18,360 –> 00:24:19,360
I’ve just got more experience.

634
00:24:19,360 –> 00:24:20,680
I went through the last cycle.

635
00:24:20,680 –> 00:24:22,120
I saw what happened.

636
00:24:22,120 –> 00:24:23,160
I saw the problems.

637
00:24:23,160 –> 00:24:25,400
You can always buy real estate.

638
00:24:25,400 –> 00:24:27,280
You can’t always sell it.

639
00:24:27,280 –> 00:24:29,840
And a lot of us learned in ’08, ’09, 2010

640
00:24:29,840 –> 00:24:33,200
that debt was coming to, but asset prices were lower.

641
00:24:33,200 –> 00:24:35,640
Oh wow, that sounds like what’s going on right now.

642
00:24:35,640 –> 00:24:36,760
So I went through that pain.

643
00:24:36,760 –> 00:24:38,680
I had a property through that process.

644
00:24:38,680 –> 00:24:40,040
I couldn’t get it refinanced.

645
00:24:40,040 –> 00:24:41,960
I had to work with the bank.

646
00:24:41,960 –> 00:24:43,240
I got a modification.

647
00:24:43,240 –> 00:24:45,360
But right now when we’re looking at an asset,

648
00:24:45,360 –> 00:24:49,160
we have what we call our by-rate criteria.

649
00:24:49,160 –> 00:24:53,520
We want a certain median income, at least $50,000 in Tennessee.

650
00:24:53,520 –> 00:24:55,400
That denotes a certain type of renter.

651
00:24:55,400 –> 00:24:58,240
If you’re going to be able to charge three times rent,

652
00:24:58,240 –> 00:25:00,240
don’t let the broker tell you you can raise rents.

653
00:25:00,240 –> 00:25:03,000
If you don’t have the median income at $25,000.

654
00:25:03,000 –> 00:25:05,880
So we’d like at least a $50,000 median income.

655
00:25:05,880 –> 00:25:07,200
And we’ve learned from experience.

656
00:25:07,200 –> 00:25:09,600
We bought a property with $34,000, $35,000

657
00:25:09,600 –> 00:25:11,600
in the income a couple years ago in Kentucky.

658
00:25:11,600 –> 00:25:13,640
It was a difficult property.

659
00:25:13,640 –> 00:25:15,560
It checked a lot of the by-rate boxes.

660
00:25:15,560 –> 00:25:17,960
Now right now we’re buying assets that are a little bit newer,

661
00:25:17,960 –> 00:25:20,400
80s and newer, just because of the price points.

662
00:25:20,400 –> 00:25:24,160
Why buy something built in the ’60s with cast iron plumbing

663
00:25:24,160 –> 00:25:26,040
and with aluminum wiring, when I can buy something

664
00:25:26,040 –> 00:25:28,760
that’s a little bit newer and that’s going to last a little bit more?

665
00:25:28,760 –> 00:25:30,760
We like unit mixes that are two beds.

666
00:25:30,760 –> 00:25:32,480
We love two beds.

667
00:25:32,480 –> 00:25:34,920
And we love town homes as well.

668
00:25:34,920 –> 00:25:37,280
If they’ve got garages even better,

669
00:25:37,280 –> 00:25:38,760
hopefully they’ve got covered decks.

670
00:25:38,760 –> 00:25:41,480
I hate decks because decks are just a nightmare to take care of.

671
00:25:41,480 –> 00:25:42,760
And breezeways.

672
00:25:42,760 –> 00:25:44,960
So breezeways right now we’re covering a lot of our breezeways

673
00:25:44,960 –> 00:25:47,920
with vinyl because those are another night maintenance nightmare.

674
00:25:47,920 –> 00:25:49,880
You don’t look at it for the short term,

675
00:25:49,880 –> 00:25:51,280
but when you’re managing these assets,

676
00:25:51,280 –> 00:25:53,200
these are things you’re looking for.

677
00:25:53,200 –> 00:25:54,960
We like properties that have washer, dryer,

678
00:25:54,960 –> 00:25:55,960
hookups, believe it or not.

679
00:25:55,960 –> 00:25:59,360
That’s a great amenity for a lot of the residents that we have.

680
00:25:59,360 –> 00:26:03,000
If there’s pools on the property depends on the property itself.

681
00:26:03,000 –> 00:26:06,080
With our 132 units we bought back in January.

682
00:26:06,080 –> 00:26:08,160
There’s a 2005 build didn’t have it.

683
00:26:08,160 –> 00:26:09,080
We don’t need it.

684
00:26:09,080 –> 00:26:11,040
The one we bought in July 105 units.

685
00:26:11,040 –> 00:26:12,880
It was an 80s build.

686
00:26:12,880 –> 00:26:13,800
Beautiful asset.

687
00:26:13,800 –> 00:26:15,880
I mean, it’s got a, we’re going to put a nice dog park there.

688
00:26:15,880 –> 00:26:17,480
We’re going to put a pickable court there.

689
00:26:17,480 –> 00:26:21,520
It’s got a really nice clubhouse, fitness center, great pool.

690
00:26:21,520 –> 00:26:22,880
What else are we looking for in assets?

691
00:26:22,880 –> 00:26:25,160
Just trying to get really crystal clear on that.

692
00:26:25,160 –> 00:26:26,200
If there are one beds,

693
00:26:26,200 –> 00:26:27,440
it’s not that we don’t like one beds.

694
00:26:27,440 –> 00:26:28,440
You just got to be careful.

695
00:26:28,440 –> 00:26:30,120
One beds can be a little bit more transient.

696
00:26:30,120 –> 00:26:33,880
There goes a little bit more turnover depending on where the market cycle you are.

697
00:26:33,880 –> 00:26:35,880
Three beds in our market, crush.

698
00:26:35,880 –> 00:26:37,160
We love three bedrooms.

699
00:26:37,160 –> 00:26:40,160
There’s not that many in our market.

700
00:26:40,160 –> 00:26:45,360
The most recent deal we bought, 2001 vintage, 96 units.

701
00:26:45,360 –> 00:26:50,760
We paid 72,000, 75,000 unit because it was coming off a light tech contract.

702
00:26:50,760 –> 00:26:53,400
But it’s if phenomenal deal is, but you know,

703
00:26:53,400 –> 00:26:55,240
there’s, it’s going to be some work on that because it’s coming.

704
00:26:55,240 –> 00:26:56,240
Come here, come here, baby.

705
00:26:56,240 –> 00:26:57,240
Come here, baby.

706
00:26:57,240 –> 00:26:58,240
Come here, baby.

707
00:26:58,240 –> 00:27:01,440
Yeah, but this thing was built so well.

708
00:27:01,440 –> 00:27:04,240
I mean, like, you mean all the breezeways you’re done.

709
00:27:04,240 –> 00:27:05,240
It’s great.

710
00:27:05,240 –> 00:27:06,240
All right.

711
00:27:06,240 –> 00:27:08,360
The walkways are beautiful.

712
00:27:08,360 –> 00:27:10,760
I don’t even, all you got to do is stripe and seal in the parking lot.

713
00:27:10,760 –> 00:27:12,040
It’s got a nice pool.

714
00:27:12,040 –> 00:27:13,960
It’s got a nice office.

715
00:27:13,960 –> 00:27:14,960
It’s got all concrete.

716
00:27:14,960 –> 00:27:15,960
I’m sorry.

717
00:27:15,960 –> 00:27:18,720
I mean, it’s got all metal stairways, stairwells and all.

718
00:27:18,720 –> 00:27:19,720
It’s a really nice asset.

719
00:27:19,720 –> 00:27:23,720
So when we’re looking at it, we’re looking at to see what the components cost to rehab

720
00:27:23,720 –> 00:27:26,000
this thing and what is the capital expenditure?

721
00:27:26,000 –> 00:27:27,000
What capex?

722
00:27:27,000 –> 00:27:29,080
We need to put it into this property.

723
00:27:29,080 –> 00:27:32,520
And I think for anybody listening to this, figure out what your criteria is, what that

724
00:27:32,520 –> 00:27:35,840
buy-right criteria looks like to you because every market is different.

725
00:27:35,840 –> 00:27:37,760
Some markets would have $50,000 a meeting income.

726
00:27:37,760 –> 00:27:40,040
You’d be like, that’s jet’s poverty level.

727
00:27:40,040 –> 00:27:42,000
And some markets like, that’s really good.

728
00:27:42,000 –> 00:27:45,760
Eastern Tennessee bridge, if we get an animal.

729
00:27:45,760 –> 00:27:46,760
Yes.

730
00:27:46,760 –> 00:27:47,760
Yeah, it is.

731
00:27:47,760 –> 00:27:49,160
And for us, Brick, we love Brick.

732
00:27:49,160 –> 00:27:50,640
We like pitch roofs.

733
00:27:50,640 –> 00:27:56,080
It’s not to say that if we get a 1960s flat roof, you know, with one bed, we’re not going

734
00:27:56,080 –> 00:27:56,920
to look at it.

735
00:27:56,920 –> 00:28:01,600
But we know the operational difficulties that we will have with that asset.

736
00:28:01,600 –> 00:28:05,400
And depending on our strategy for looking to hold that long term, something built in the

737
00:28:05,400 –> 00:28:10,000
’60s, if we don’t completely gut rehab or rehab it, you know, in 10 years from now, that

738
00:28:10,000 –> 00:28:11,680
asset’s going to be like 70 or 80 years old.

739
00:28:11,680 –> 00:28:14,400
So we just have to be careful with, you know, that’s our strategy.

740
00:28:14,400 –> 00:28:18,880
So if anybody looking to buy their asset right now, think about what your criteria is

741
00:28:18,880 –> 00:28:21,920
and always think about what your exit strategy is.

742
00:28:21,920 –> 00:28:23,760
Most investors don’t think about the exit.

743
00:28:23,760 –> 00:28:25,800
They only think about, hey, I’m buying this thing.

744
00:28:25,800 –> 00:28:27,760
I’m just going to figure it out as I go along.

745
00:28:27,760 –> 00:28:31,600
Think about what you’re going to do because you don’t have to, you know, as they say in

746
00:28:31,600 –> 00:28:36,360
aeronautics when you’re flying an airplane, takes off, take off, they say are optional.

747
00:28:36,360 –> 00:28:38,280
Landings are mandatory.

748
00:28:38,280 –> 00:28:42,640
You’re going to land that deal whether it’s a refi or a cell, figure out what that looks

749
00:28:42,640 –> 00:28:43,640
like for you.

750
00:28:43,640 –> 00:28:44,640
Absolutely.

751
00:28:44,640 –> 00:28:45,640
That’s huge.

752
00:28:45,640 –> 00:28:49,640
And we have something in my program that we do that’s very similar where we encourage

753
00:28:49,640 –> 00:28:54,080
people when they’re doing the getting ready to do the rehab where they look at how long

754
00:28:54,080 –> 00:28:55,080
they’re going to hold it.

755
00:28:55,080 –> 00:28:56,240
So what’s the disposition plan?

756
00:28:56,240 –> 00:29:01,720
Any going to hold it for two years, five years, 10 years, or you don’t know indefinite, but

757
00:29:01,720 –> 00:29:04,720
look to make those decisions on what you’re going to use and what you’re going to put

758
00:29:04,720 –> 00:29:07,560
there based on who the tenant’s going to be.

759
00:29:07,560 –> 00:29:08,560
Right?

760
00:29:08,560 –> 00:29:12,680
Always build it around the worst case scenario, lowest common denominator tenant that’s going

761
00:29:12,680 –> 00:29:19,800
to move into that unit and have pets or have lots of kids or have whatever and put things

762
00:29:19,800 –> 00:29:23,400
in place that minimized the amount of maintenance that’s going to require when those tenants

763
00:29:23,400 –> 00:29:28,920
move out, whatever it is, whether it’s LVT, LVP, whether it’s a better quality paint, whether

764
00:29:28,920 –> 00:29:37,280
it’s minimizing the maintenance and walk around, just dumb, check the box, things like smoked

765
00:29:37,280 –> 00:29:44,000
detector batteries, thermostat batteries, toilet flappers, just things that you can avoid

766
00:29:44,000 –> 00:29:48,320
thanks to technology that you might pay 15 or 20 bucks more for, but that will pay for

767
00:29:48,320 –> 00:29:52,960
themselves because of the lack of having a call based on that or the lack of having to

768
00:29:52,960 –> 00:29:58,240
replace it every turn as opposed to every two or three turns.

769
00:29:58,240 –> 00:30:04,720
So having a centralized, not centralized, but having a centralized set of standards, right?

770
00:30:04,720 –> 00:30:10,300
A product specification list that says, you need to be using these vendors because they

771
00:30:10,300 –> 00:30:12,680
give us benefits and perks, right?

772
00:30:12,680 –> 00:30:13,880
We spend this much money with them.

773
00:30:13,880 –> 00:30:14,880
They give us rebates.

774
00:30:14,880 –> 00:30:16,560
They give us discounts to give us special pricing.

775
00:30:16,560 –> 00:30:21,240
They make sure that they hit our service requirements as far as when I’m doing a rehab, they

776
00:30:21,240 –> 00:30:25,400
drop a pallet at the door, it has everything I need to turn that entire unit on that pallet.

777
00:30:25,400 –> 00:30:29,560
The guys can do the demo, take the junk out, bring the pallet inside, do the work, they

778
00:30:29,560 –> 00:30:30,880
don’t have to run to the store.

779
00:30:30,880 –> 00:30:33,360
Winshield time is expensive, right?

780
00:30:33,360 –> 00:30:39,080
Having all that stuff pre-settled gives you some level of control, but it also keeps

781
00:30:39,080 –> 00:30:43,440
the stupid tax to a minimum because you’re going to make sure everything matches throughout

782
00:30:43,440 –> 00:30:47,560
the entire property because everything has been specified ahead of time.

783
00:30:47,560 –> 00:30:50,800
You have your vendors lined up because you’re buying from a vendor that isn’t treating

784
00:30:50,800 –> 00:30:52,200
this property as a property.

785
00:30:52,200 –> 00:30:58,680
They’re treating your company as a portfolio and you’re buying across your entire portfolio

786
00:30:58,680 –> 00:31:05,200
of LLCs as the parent to make sure that you’re getting a package price that looks at your

787
00:31:05,200 –> 00:31:06,200
buying power.

788
00:31:06,200 –> 00:31:11,840
All of these things take place before the unit is even acquired.

789
00:31:11,840 –> 00:31:16,120
These are standards and processes that are set up to help you scale because when you’re

790
00:31:16,120 –> 00:31:22,000
ready to buy and close on a property, you just pick up the phone and say, “Hey, I need

791
00:31:22,000 –> 00:31:27,680
you to come and do a due diligence walk with me and we’re going to make a list and you’re

792
00:31:27,680 –> 00:31:30,760
going to get these units, but I need you here for a week.”

793
00:31:30,760 –> 00:31:35,840
Your sales guy shows up and he walks those properties and he takes those lists, builds those

794
00:31:35,840 –> 00:31:41,400
things, and you don’t worry about it again until the day construction starts.

795
00:31:41,400 –> 00:31:45,680
That’s the system that you really need to have in place if you want to be able to just

796
00:31:45,680 –> 00:31:48,720
move and move and move.

797
00:31:48,720 –> 00:31:55,280
That was something that I was taught by a family office that went from, I think there were

798
00:31:55,280 –> 00:32:00,760
three or four thousand doors when I started working with them and in three years, they were

799
00:32:00,760 –> 00:32:04,400
at 12,000 doors and I was on a plane for them every three weeks.

800
00:32:04,400 –> 00:32:09,520
I was flying to South Carolina, North Carolina, Virginia, Michigan, Pennsylvania, wherever

801
00:32:09,520 –> 00:32:11,600
they needed me to go, I would go.

802
00:32:11,600 –> 00:32:15,800
They taught me the system and what worked and how it, what their priorities were and how

803
00:32:15,800 –> 00:32:17,840
to make it go.

804
00:32:17,840 –> 00:32:20,200
My whole system is built off just stealing good ideas from people.

805
00:32:20,200 –> 00:32:22,400
I didn’t invent any of this stuff.

806
00:32:22,400 –> 00:32:29,440
I just, I have, I had this crazy level of access to all these sea level operators and I like

807
00:32:29,440 –> 00:32:30,440
making my job easy.

808
00:32:30,440 –> 00:32:33,480
I’ll take good ideas and use them to get in the door with other guys.

809
00:32:33,480 –> 00:32:35,480
Why would I not?

810
00:32:35,480 –> 00:32:36,720
It’s not me, so how is it?

811
00:32:36,720 –> 00:32:38,880
It’s not my company.

812
00:32:38,880 –> 00:32:40,240
How do you get them to work?

813
00:32:40,240 –> 00:32:44,160
And I agree, everything you’ve said there is the benefits to investing in multifamily.

814
00:32:44,160 –> 00:32:45,800
That is it in a nutshell.

815
00:32:45,800 –> 00:32:50,480
Being able to systematize it, go into the 25 year property where they’re basic boxes, they’re

816
00:32:50,480 –> 00:32:51,480
all the same thing.

817
00:32:51,480 –> 00:32:56,240
Instead of having 25 single family homes, you’ve got a 25 unit that has basic fixtures,

818
00:32:56,240 –> 00:33:00,280
but how do you get property management to get on board with something like that?

819
00:33:00,280 –> 00:33:04,120
Because that’s a no brainer because property management, when you take a property over, we

820
00:33:04,120 –> 00:33:08,160
have our property, actually, we decided on the deal last week on Monday.

821
00:33:08,160 –> 00:33:10,960
I flew up on Monday last Monday.

822
00:33:10,960 –> 00:33:11,960
Our team was there.

823
00:33:11,960 –> 00:33:16,280
We took over Monday our property management run site, closing windows, making sure thermosets

824
00:33:16,280 –> 00:33:20,960
were, we’re set, getting all the keys, but how do you get property management to work,

825
00:33:20,960 –> 00:33:22,680
walk, and lock step?

826
00:33:22,680 –> 00:33:25,960
It’s always trying to make them think that it’s in their best interests.

827
00:33:25,960 –> 00:33:30,360
We’re trying to make your job a lot easier and you’re trying to do, you’re trying to convince

828
00:33:30,360 –> 00:33:34,600
property management that, hey, we’ve got this system here, let’s utilize it together.

829
00:33:34,600 –> 00:33:36,080
How do you get them on board?

830
00:33:36,080 –> 00:33:38,560
A lot of it comes to removing their headaches, right?

831
00:33:38,560 –> 00:33:42,120
You make their job easier by taking stuff out of their hands.

832
00:33:42,120 –> 00:33:44,560
You have a schedule, whoever’s going to run that turn.

833
00:33:44,560 –> 00:33:49,520
I’ve worked with companies who have the actual property manager on site, the leasing manager,

834
00:33:49,520 –> 00:33:52,960
the actual property manager, runs the job as a GC.

835
00:33:52,960 –> 00:33:57,040
I’ve had other ones where they hire third parties and I actually had a client that hired me

836
00:33:57,040 –> 00:34:02,800
to come in and do it and do all their purchasing and procurement for nine months to do this

837
00:34:02,800 –> 00:34:07,600
rehab on a 328 door apartment complex right here in Webster.

838
00:34:07,600 –> 00:34:16,440
It’s an interesting beast and it comes down a lot of times to how are you paying the guys

839
00:34:16,440 –> 00:34:19,640
and incentivizing them in some cases.

840
00:34:19,640 –> 00:34:23,480
If it’s internal, you can just say, we’ll just do this and it is what it is, but you’re hiring

841
00:34:23,480 –> 00:34:26,640
people sometimes from the existing property management company that’s familiar with the

842
00:34:26,640 –> 00:34:30,420
property, you’re bringing people in from outside, you’re expanding your workforce, you

843
00:34:30,420 –> 00:34:34,420
have to train them into the company culture, but at the same time you have to do like a change

844
00:34:34,420 –> 00:34:41,460
management process where you’re dealing with them on a level that you need to take baby

845
00:34:41,460 –> 00:34:44,420
steps and bring them into this and teach them how to do it.

846
00:34:44,420 –> 00:34:49,900
A lot of it comes down to, we have one maintenance guy per hundred doors.

847
00:34:49,900 –> 00:34:52,460
We want that maintenance guy to not be behind a windshield.

848
00:34:52,460 –> 00:34:54,500
We want you to be working and being efficient.

849
00:34:54,500 –> 00:34:58,740
So here’s the benefits to you and it could be anything.

850
00:34:58,740 –> 00:35:00,380
What’s the motivator for them?

851
00:35:00,380 –> 00:35:01,380
Do they have kids?

852
00:35:01,380 –> 00:35:02,380
Do they have a family?

853
00:35:02,380 –> 00:35:05,060
Do they have hobbies that they like to do?

854
00:35:05,060 –> 00:35:07,340
Do they want to be on call 60 hours a week?

855
00:35:07,340 –> 00:35:08,340
Probably not.

856
00:35:08,340 –> 00:35:11,700
Do they want to work 55 hours and then be on call through the weekend?

857
00:35:11,700 –> 00:35:12,700
Probably not.

858
00:35:12,700 –> 00:35:13,700
Are they living on a property?

859
00:35:13,700 –> 00:35:14,860
Yes, no, maybe it doesn’t matter, right?

860
00:35:14,860 –> 00:35:16,540
In some cases.

861
00:35:16,540 –> 00:35:23,580
But you want to make sure that you’re appealing to their sense of self and self worth and

862
00:35:23,580 –> 00:35:27,140
what they enjoy to keep them as part of the team, but you also want to make sure that

863
00:35:27,140 –> 00:35:30,860
you’re paying them in a way that encourages good behavior.

864
00:35:30,860 –> 00:35:35,220
So you put checks and balances in place to make sure that the asset manager, property manager

865
00:35:35,220 –> 00:35:36,220
conversation, right?

866
00:35:36,220 –> 00:35:37,220
You need to be on budget.

867
00:35:37,220 –> 00:35:40,580
Okay, well, my budget is stupid because we’ve got all these old things in the basement of

868
00:35:40,580 –> 00:35:44,380
this unit that where our storage is, and they’re all covered in six inches of dust.

869
00:35:44,380 –> 00:35:45,380
We’re not going to use those.

870
00:35:45,380 –> 00:35:48,500
Okay, well, let’s look at it and we’ll figure out a way to do it.

871
00:35:48,500 –> 00:35:52,820
So you incentivize them to stay, you know, maybe not the property manager, but the maintenance

872
00:35:52,820 –> 00:35:58,300
manager, keep these particular pieces and parts at this level.

873
00:35:58,300 –> 00:35:59,460
Don’t cost us too much money.

874
00:35:59,460 –> 00:36:02,660
Don’t tie up too much cash by filling this with hundreds of things that are going to take

875
00:36:02,660 –> 00:36:03,660
four years to use.

876
00:36:03,660 –> 00:36:04,660
Don’t do that.

877
00:36:04,660 –> 00:36:10,300
Maybe we’ll bring in a system like Apfolio has built in where you have a maintenance recording

878
00:36:10,300 –> 00:36:13,260
table for all the stuff you stock and inventory.

879
00:36:13,260 –> 00:36:17,740
And then as it gets used orders are automatically generated or maybe we have a sales rep from

880
00:36:17,740 –> 00:36:22,540
somebody come in and walk this and take a tally and tell you what to order.

881
00:36:22,540 –> 00:36:27,020
You start by building those processes in that backbone and you don’t let them.

882
00:36:27,020 –> 00:36:29,900
If it already exists, it’s easy to plug and play.

883
00:36:29,900 –> 00:36:33,300
If you’re trying to build it from scratch, every company is different.

884
00:36:33,300 –> 00:36:34,300
Every culture is different.

885
00:36:34,300 –> 00:36:35,300
You don’t know.

886
00:36:35,300 –> 00:36:38,060
And there’s always going to be turnover and churn anytime you change anything because people

887
00:36:38,060 –> 00:36:41,780
do things the way they do, like trying to change a maintenance guy from another company who’s

888
00:36:41,780 –> 00:36:47,700
been at a property for 10 years and telling them, hey, listen, I know you’re used to doing

889
00:36:47,700 –> 00:36:51,780
this, but we need to do this instead because all these copper pipes on this property are

890
00:36:51,780 –> 00:36:54,620
hitting 50, 60 years old and they’re starting to pinhole.

891
00:36:54,620 –> 00:36:58,020
So we’re going to start running instead of more copper, we’re going to specks everything.

892
00:36:58,020 –> 00:37:01,020
When you go into a unit and you have a call, you just replace it all with pecks.

893
00:37:01,020 –> 00:37:02,620
I don’t care what it is.

894
00:37:02,620 –> 00:37:06,980
You’re doing a faucet swap, you’re doing a changeover, pecks it, be done with it.

895
00:37:06,980 –> 00:37:09,820
We’re not going to play that game.

896
00:37:09,820 –> 00:37:13,660
And you get pushed back in some people’s leaf and it’s part of doing business, but it comes

897
00:37:13,660 –> 00:37:18,140
down to incentivizing them to fit in your company culture and reward them for good behavior.

898
00:37:18,140 –> 00:37:22,780
So I’ve got a client I’ve been working with. He’s got 140 doors that he manages.

899
00:37:22,780 –> 00:37:25,460
They’re scattered site, singles, multis, doubles.

900
00:37:25,460 –> 00:37:26,900
He doesn’t have any big multi family.

901
00:37:26,900 –> 00:37:33,300
The biggest I think he’s got is like 10 and he’s trying to figure out a scale and part of

902
00:37:33,300 –> 00:37:38,980
it is building systems so that his guys know where they need to be when they need to be there.

903
00:37:38,980 –> 00:37:40,140
So he’s using app folio.

904
00:37:40,140 –> 00:37:41,140
He bought the iPads.

905
00:37:41,140 –> 00:37:44,980
He’s got the phone tie and he’s got everything automated through the portals on the website.

906
00:37:44,980 –> 00:37:50,500
Now he’s doing all this crazy stuff, but he’s incentivizing the guys to do the maintenance

907
00:37:50,500 –> 00:37:52,700
call once and do it right.

908
00:37:52,700 –> 00:37:58,140
And he bonuses them when there’s no call back for 30 days.

909
00:37:58,140 –> 00:38:02,100
So if they go to fix a toilet, they do it the correctly.

910
00:38:02,100 –> 00:38:03,740
No call back for 30 days.

911
00:38:03,740 –> 00:38:06,500
They get a kicker in their paycheck at the end of the next month.

912
00:38:06,500 –> 00:38:07,820
And it’s different for everybody.

913
00:38:07,820 –> 00:38:11,100
Every company has different cash flow if they need to watch and different budgets if they

914
00:38:11,100 –> 00:38:14,740
need to afford for employee benefits and incentives and all the other stuff.

915
00:38:14,740 –> 00:38:15,740
So it’s got to be a team effort.

916
00:38:15,740 –> 00:38:17,380
This whole thing has to start at the top.

917
00:38:17,380 –> 00:38:20,940
It’s a strategy from the sea level that has to be rolled out, but you have to get buy-in

918
00:38:20,940 –> 00:38:21,940
from the field.

919
00:38:21,940 –> 00:38:28,140
And that’s where the company culture and being consistent as an organization matters, which

920
00:38:28,140 –> 00:38:32,820
is where the standards come in and establishing vendor relationships and vendor scorecards.

921
00:38:32,820 –> 00:38:37,140
And you build these things and these systems in the operation.

922
00:38:37,140 –> 00:38:38,780
And you don’t need to think about it.

923
00:38:38,780 –> 00:38:39,940
It’s all there.

924
00:38:39,940 –> 00:38:42,140
So the decision making time goes to zero.

925
00:38:42,140 –> 00:38:43,140
Oh, this happened.

926
00:38:43,140 –> 00:38:44,740
Well, we have a process for that.

927
00:38:44,740 –> 00:38:45,740
Oh, this happened.

928
00:38:45,740 –> 00:38:46,740
We have a process for that.

929
00:38:46,740 –> 00:38:47,740
And there’s a lot to it.

930
00:38:47,740 –> 00:38:48,740
And it’s different for everybody.

931
00:38:48,740 –> 00:38:51,380
I’ve never walked into two operations and seen the same issues.

932
00:38:51,380 –> 00:38:54,820
But the issues in property management are pretty universal.

933
00:38:54,820 –> 00:39:00,540
So there’s only so many ways you can put a puzzle together and have it look like the picture

934
00:39:00,540 –> 00:39:04,100
you’re trying to build.

935
00:39:04,100 –> 00:39:11,660
How do you, when you’re, I guess, bringing people in and you’re onboarding, right?

936
00:39:11,660 –> 00:39:13,260
You’re absorbing people from other properties.

937
00:39:13,260 –> 00:39:16,620
You acquired what three properties in the last 12 months, basically.

938
00:39:16,620 –> 00:39:17,620
How does that look?

939
00:39:17,620 –> 00:39:21,660
Are you bringing experienced people in from your other properties to say, hey, this is

940
00:39:21,660 –> 00:39:23,820
how Jake and Gino do this?

941
00:39:23,820 –> 00:39:25,700
This is our method.

942
00:39:25,700 –> 00:39:27,340
This is our process.

943
00:39:27,340 –> 00:39:28,580
We’re going to onboard you.

944
00:39:28,580 –> 00:39:29,580
Here’s the time frames.

945
00:39:29,580 –> 00:39:32,340
Do you have somebody from another property come and train them up and actually help them

946
00:39:32,340 –> 00:39:34,740
run the property for a while or what does that look like?

947
00:39:34,740 –> 00:39:35,740
Yeah.

948
00:39:35,740 –> 00:39:38,140
I mean, it depends as you grow when you first start.

949
00:39:38,140 –> 00:39:41,660
And I don’t want anyone getting into this business being completely overwhelmed.

950
00:39:41,660 –> 00:39:46,300
You know, when Jake and I started the 25 unit, 36 unit, the second deal, 136 unit, the

951
00:39:46,300 –> 00:39:49,100
third deal, we just learned.

952
00:39:49,100 –> 00:39:50,500
And it was very different.

953
00:39:50,500 –> 00:39:51,740
The I’m a mentality was there.

954
00:39:51,740 –> 00:39:52,740
I’m going to do this.

955
00:39:52,740 –> 00:39:53,740
I’m going to do that.

956
00:39:53,740 –> 00:39:56,140
But as you start growing, we have regionals now.

957
00:39:56,140 –> 00:39:59,220
We have a COO right now and we actually have Chelsea.

958
00:39:59,220 –> 00:40:00,620
She’s a rock star, what she does.

959
00:40:00,620 –> 00:40:03,380
She was on the property on Monday last week.

960
00:40:03,380 –> 00:40:04,460
She was actually on there.

961
00:40:04,460 –> 00:40:06,700
She’s going to onboard the property manager.

962
00:40:06,700 –> 00:40:10,420
Unfortunately, the person that we had, usually you take over property, the culture is not

963
00:40:10,420 –> 00:40:11,420
there.

964
00:40:11,420 –> 00:40:14,900
There’s a reason why you’re buying a property for 72,000 unit when rents for 700 bucks and

965
00:40:14,900 –> 00:40:18,020
they should be 14 hundred bucks because they’re reading Danielle Steele’s Smuddy books.

966
00:40:18,020 –> 00:40:19,020
They’re not doing their job.

967
00:40:19,020 –> 00:40:20,020
That’s the reality.

968
00:40:20,020 –> 00:40:24,140
The reality is they’re just at the steering wheel.

969
00:40:24,140 –> 00:40:27,220
But it’s not only their fault, it’s, you know, the ownership is fault.

970
00:40:27,220 –> 00:40:29,700
So we want to blame the property managers once again.

971
00:40:29,700 –> 00:40:31,860
They’re just, that’s their expectations.

972
00:40:31,860 –> 00:40:35,540
They’re being led by somebody who shouldn’t own this property and the property was owned

973
00:40:35,540 –> 00:40:36,540
by a trust.

974
00:40:36,540 –> 00:40:38,980
But once again, it was a huge, huge pain point.

975
00:40:38,980 –> 00:40:40,300
They wanted to get rid of it.

976
00:40:40,300 –> 00:40:45,580
But what we’ve done is Chelsea will come in and we’ll hire, trying to hire for culture and

977
00:40:45,580 –> 00:40:51,100
it’s interesting because you can hire property managers from other property management companies.

978
00:40:51,100 –> 00:40:52,100
That sometimes work.

979
00:40:52,100 –> 00:40:56,740
If they’re willing to, even if they can have 10 years of experience, 30 years of experience,

980
00:40:56,740 –> 00:40:59,380
they can be the ones that, if they have the emotional intelligence, they’re like, well,

981
00:40:59,380 –> 00:41:00,580
this is a great organization.

982
00:41:00,580 –> 00:41:02,860
They’ve got 80 people as employees.

983
00:41:02,860 –> 00:41:04,100
Let me see how they do it.

984
00:41:04,100 –> 00:41:06,300
Or you have the ones that are like, I’m in new in this forever.

985
00:41:06,300 –> 00:41:07,300
No, everything.

986
00:41:07,300 –> 00:41:08,300
That’s how I do it.

987
00:41:08,300 –> 00:41:09,300
And it’s like, you know what?

988
00:41:09,300 –> 00:41:10,420
It’s, it’s not going to work.

989
00:41:10,420 –> 00:41:16,260
I would tell everybody, go to these high end restaurants, go to the roots, Chris, the world,

990
00:41:16,260 –> 00:41:18,060
go to the steakhouses of the world.

991
00:41:18,060 –> 00:41:20,780
You may find amazing people working there and we have.

992
00:41:20,780 –> 00:41:25,100
We’ve got a couple on our staff that are really trained up in customer service and really

993
00:41:25,100 –> 00:41:31,060
trained up in how to deal and have that emotional and really deliver that superior experience

994
00:41:31,060 –> 00:41:32,380
to the resident.

995
00:41:32,380 –> 00:41:33,620
And you can teach them.

996
00:41:33,620 –> 00:41:37,020
If you’ve got a system in place, they can learn your system.

997
00:41:37,020 –> 00:41:40,980
That may be one way to quote, unquote, hack the system wherever you’re out there.

998
00:41:40,980 –> 00:41:44,380
You’re trying to hire property managers and you’re finding that you’re having problems

999
00:41:44,380 –> 00:41:46,900
because every time they come on, it’s like, well, I don’t use that folio.

1000
00:41:46,900 –> 00:41:49,260
I use building them and I don’t like this system.

1001
00:41:49,260 –> 00:41:50,780
And we do a seven day turn.

1002
00:41:50,780 –> 00:41:53,620
You’re just going to have to set the expectation on the front end is this is how we do our

1003
00:41:53,620 –> 00:41:54,620
systems.

1004
00:41:54,620 –> 00:41:55,980
Are you willing to work within these parameters?

1005
00:41:55,980 –> 00:42:00,580
And if not, you could just go out of the process and go look for people who you think

1006
00:42:00,580 –> 00:42:03,420
are good fits for property management.

1007
00:42:03,420 –> 00:42:04,420
Absolutely.

1008
00:42:04,420 –> 00:42:07,780
I think the systems are all essentially the same.

1009
00:42:07,780 –> 00:42:10,860
And when you get pushed back on something, it’s a coachability thing.

1010
00:42:10,860 –> 00:42:15,500
Whoever’s in charge of them for their first 60 to 90 days will make or break their career.

1011
00:42:15,500 –> 00:42:22,260
Like if you’ve got a shrub who doesn’t walk the walk, but talks, then they’re going to

1012
00:42:22,260 –> 00:42:23,260
fail.

1013
00:42:23,260 –> 00:42:24,980
Their employees are going to fail.

1014
00:42:24,980 –> 00:42:27,220
So it’s the leadership in a lot of cases.

1015
00:42:27,220 –> 00:42:32,540
It’s the is this somebody who’s going to show up at 5 30 in the morning at the office

1016
00:42:32,540 –> 00:42:36,140
and start their day or is this somebody who’s going to expect other people to show up at

1017
00:42:36,140 –> 00:42:38,620
5 30 in the morning and walk in at 9.

1018
00:42:38,620 –> 00:42:43,020
And that’s going to set the tone for the office because what’s good for you is good for

1019
00:42:43,020 –> 00:42:44,020
me.

1020
00:42:44,020 –> 00:42:47,940
Regardless of what you say, I understand you’re my boss, but I’m going to emulate you because

1021
00:42:47,940 –> 00:42:48,940
I’m learning.

1022
00:42:48,940 –> 00:42:51,820
And if this is the environment, I’m in this is what I’m going to do.

1023
00:42:51,820 –> 00:42:53,620
Like you have to show up.

1024
00:42:53,620 –> 00:42:58,380
And it’s how you show up that matters maybe even more than what you’re teaching these people.

1025
00:42:58,380 –> 00:43:02,060
When you’re done, right?

1026
00:43:02,060 –> 00:43:06,340
You stabilized everything is there.

1027
00:43:06,340 –> 00:43:12,300
How are you incentivizing your employees to want to do more?

1028
00:43:12,300 –> 00:43:13,900
Like you said, you have regionals now.

1029
00:43:13,900 –> 00:43:15,900
Are they coming from internal?

1030
00:43:15,900 –> 00:43:23,420
Are you developing people up and into those roles when they’re a good fit?

1031
00:43:23,420 –> 00:43:25,340
What does that look like for you guys?

1032
00:43:25,340 –> 00:43:26,580
Well, we do have bonuses.

1033
00:43:26,580 –> 00:43:30,140
So bonuses do go out of the hit certain metrics with NOI.

1034
00:43:30,140 –> 00:43:34,540
But more importantly, I think the best thing that we’ve done in the last couple of years,

1035
00:43:34,540 –> 00:43:37,580
what we do is we allow our employees to invest in our deals.

1036
00:43:37,580 –> 00:43:39,380
That’s perfect.

1037
00:43:39,380 –> 00:43:42,820
We call it the Golden Ticket Club and it’s dollar for dollar.

1038
00:43:42,820 –> 00:43:44,620
No fees, no nothing.

1039
00:43:44,620 –> 00:43:46,580
So an employee has been with us for two years.

1040
00:43:46,580 –> 00:43:48,100
They can invest in a deal with us.

1041
00:43:48,100 –> 00:43:50,300
And we’ve had the last five deals.

1042
00:43:50,300 –> 00:43:53,540
We’ve had employees invest in our deals.

1043
00:43:53,540 –> 00:43:58,940
And the amazing thing is you see property managers invest $10,000 all of a sudden, 80 months

1044
00:43:58,940 –> 00:43:59,940
later.

1045
00:43:59,940 –> 00:44:02,740
We have a lot of money back for $14,000 because they deal refinance.

1046
00:44:02,740 –> 00:44:06,500
They get all their money back and they’re still cash flowing every month.

1047
00:44:06,500 –> 00:44:12,620
That will change the mindset of most people on this planet because all of a sudden you’re

1048
00:44:12,620 –> 00:44:14,820
not saying to yourself, “Hash, we raise rents.

1049
00:44:14,820 –> 00:44:15,820
Now you own it.

1050
00:44:15,820 –> 00:44:16,820
Now you’re an owner.”

1051
00:44:16,820 –> 00:44:18,620
And it’s like, “Wow, we need to raise rents.

1052
00:44:18,620 –> 00:44:20,420
Why aren’t we doing these maintenance calls?

1053
00:44:20,420 –> 00:44:21,420
What’s going on?

1054
00:44:21,420 –> 00:44:24,660
It’s just astounding.

1055
00:44:24,660 –> 00:44:29,660
Going from socialism to capitalism when people have skin in the game is truly…

1056
00:44:29,660 –> 00:44:30,660
I love seeing that.

1057
00:44:30,660 –> 00:44:35,900
I love seeing people make that switch to having that victim mindset that all of a sudden

1058
00:44:35,900 –> 00:44:39,900
having the ownership and the responsibility mindset to having a piece of something and saying,

1059
00:44:39,900 –> 00:44:42,740
“Wow, I can make a difference.

1060
00:44:42,740 –> 00:44:45,060
And not only can I make a difference, I can make money doing it.”

1061
00:44:45,060 –> 00:44:46,540
And that’s what I’m there for.

1062
00:44:46,540 –> 00:44:50,100
If you can get to that level where you can have employees start investing in your deals,

1063
00:44:50,100 –> 00:44:53,220
what we have to do is we create obviously create a syndication because it is a security

1064
00:44:53,220 –> 00:44:57,220
because they are typically not working full time on that deal.

1065
00:44:57,220 –> 00:44:58,580
They’re investing passively.

1066
00:44:58,580 –> 00:45:03,540
So just go through the legal hoops that you have to through an attorney, let them talk

1067
00:45:03,540 –> 00:45:04,540
about it.

1068
00:45:04,540 –> 00:45:08,420
It’s been really pretty cool to see as far as the deals go.

1069
00:45:08,420 –> 00:45:10,860
So we don’t raise any outside capital.

1070
00:45:10,860 –> 00:45:14,020
The deals that mean, “Jag, do, we just internal.”

1071
00:45:14,020 –> 00:45:19,540
It’s from our employees and we typically bring about 85 to 90% of the capital, about 10 to

1072
00:45:19,540 –> 00:45:22,100
15% is from the employees.

1073
00:45:22,100 –> 00:45:23,100
That is beautiful.

1074
00:45:23,100 –> 00:45:24,100
That’s awesome.

1075
00:45:24,100 –> 00:45:25,100
Congratulations.

1076
00:45:25,100 –> 00:45:26,100
That’s huge.

1077
00:45:26,100 –> 00:45:32,080
My wife, her company just sold that they were in ESOP for about 10 or 11 years, which is

1078
00:45:32,080 –> 00:45:33,840
an employee owned.

1079
00:45:33,840 –> 00:45:37,580
Having skin in the game is a very big deal for everybody.

1080
00:45:37,580 –> 00:45:38,580
And I think that’s awesome.

1081
00:45:38,580 –> 00:45:39,580
I think that’s a great idea.

1082
00:45:39,580 –> 00:45:40,580
I’m actually surprised.

1083
00:45:40,580 –> 00:45:43,460
It’s honestly the first time I’ve heard anybody say that.

1084
00:45:43,460 –> 00:45:45,540
And it’s genius.

1085
00:45:45,540 –> 00:45:46,540
Like, yeah.

1086
00:45:46,540 –> 00:45:49,760
I wish I could take credit for it.

1087
00:45:49,760 –> 00:45:55,880
I just think Jake at one point said, “I think this is a great way to retain talent.”

1088
00:45:55,880 –> 00:45:58,160
Because I vehemently hate the 401K.

1089
00:45:58,160 –> 00:46:00,360
I think it’s the biggest scam on the planet.

1090
00:46:00,360 –> 00:46:02,360
Why would I want to give the government my money?

1091
00:46:02,360 –> 00:46:04,120
Have it locked up for 30 years?

1092
00:46:04,120 –> 00:46:08,640
Probably make on average 3 to 4% a year once you take away fees and all this crap.

1093
00:46:08,640 –> 00:46:12,280
And when I retire, if I got 3 million bucks in there, I basically have a million and a half,

1094
00:46:12,280 –> 00:46:16,320
because half it’s going to go back to taxes and to enter the rest of that crap.

1095
00:46:16,320 –> 00:46:21,920
So for us, part of our core values in our culture is we want, if we so believe in

1096
00:46:21,920 –> 00:46:24,800
this vehicle, we want to be able to offer it to our employees.

1097
00:46:24,800 –> 00:46:28,240
I think Jake, when he had that epiphany, was like, “I think it’d be great to have a maintenance

1098
00:46:28,240 –> 00:46:32,240
tech go on a property, fix an apartment, and he has a piece of ownership.”

1099
00:46:32,240 –> 00:46:34,040
I think he’s going to have to take a little more pride in it.

1100
00:46:34,040 –> 00:46:37,360
I think he’s going to be, he’s going to have a different mindset going to that unit and

1101
00:46:37,360 –> 00:46:38,480
saying, “I need to fix that.

1102
00:46:38,480 –> 00:46:39,800
I need to fix that.”

1103
00:46:39,800 –> 00:46:41,640
Because at the end of the month, there’s cash flow coming in.

1104
00:46:41,640 –> 00:46:45,160
And if it’s not done or it’s vacant, I’m going to have less money coming in.

1105
00:46:45,160 –> 00:46:46,160
That’s huge.

1106
00:46:46,160 –> 00:46:47,160
That is amazing.

1107
00:46:47,160 –> 00:46:50,440
And I’m going to steal that just so you know, this conversation has just made me

1108
00:46:50,440 –> 00:46:51,440
not–

1109
00:46:51,440 –> 00:46:52,440
Rip off and duplicate my friend.

1110
00:46:52,440 –> 00:46:53,440
I’m kidding.

1111
00:46:53,440 –> 00:46:55,440
That’s awesome.

1112
00:46:55,440 –> 00:46:56,440
Wow.

1113
00:46:56,440 –> 00:46:58,160
That opens up a whole lot more doors.

1114
00:46:58,160 –> 00:47:03,400
Andy, I have to be honest, it is a very lucrative deal for employees.

1115
00:47:03,400 –> 00:47:07,400
I don’t know if they understand the amazing benefits.

1116
00:47:07,400 –> 00:47:12,280
And I’m not just saying this to my horn, but if you really think about it, they’re investing

1117
00:47:12,280 –> 00:47:14,280
dollar for dollar.

1118
00:47:14,280 –> 00:47:17,760
There’s no acquisition fees, there’s no asset management fees.

1119
00:47:17,760 –> 00:47:19,320
They are partners in this deal.

1120
00:47:19,320 –> 00:47:21,160
But they’ve been working with us for two years.

1121
00:47:21,160 –> 00:47:26,160
And the only caveat that I have that I learned from a billionaire in Hawaii, I went to an event

1122
00:47:26,160 –> 00:47:27,600
and I was sitting next to him.

1123
00:47:27,600 –> 00:47:30,000
He’s a billionaire, a private equity guy.

1124
00:47:30,000 –> 00:47:31,000
I don’t even know him.

1125
00:47:31,000 –> 00:47:32,520
His name is Stephen Metter.

1126
00:47:32,520 –> 00:47:33,840
Very, very low key.

1127
00:47:33,840 –> 00:47:37,000
And he had the same type of system that– and I was talking to him about it.

1128
00:47:37,000 –> 00:47:40,560
He says, “The only mistake I made was that I’d have employees come.

1129
00:47:40,560 –> 00:47:42,240
I’d give them equity stake in it.

1130
00:47:42,240 –> 00:47:44,680
They would leave and go compete against me.”

1131
00:47:44,680 –> 00:47:49,760
The only caveat was if you start and you leave the company, great.

1132
00:47:49,760 –> 00:47:53,120
If you leave and go compete against me, I’m just going to buy you back out.

1133
00:47:53,120 –> 00:47:56,240
So if you want to start something like that and say, “Hey, I’m giving this money to a property

1134
00:47:56,240 –> 00:47:57,240
manager.

1135
00:47:57,240 –> 00:47:59,440
She’s getting equity or he’s getting equity in this deal.”

1136
00:47:59,440 –> 00:48:03,440
If they go and start their own property management company or go work for a competitor,

1137
00:48:03,440 –> 00:48:07,600
I have the ability to buy that property manager out of his or her share because the benefit

1138
00:48:07,600 –> 00:48:08,600
is so huge.

1139
00:48:08,600 –> 00:48:14,240
I mean, if you’re working for an entity and you’re a property manager and you can buy a deal

1140
00:48:14,240 –> 00:48:19,740
or be part of a deal for the next five years, at the end of year five, that deal

1141
00:48:19,740 –> 00:48:23,600
and you’re one and you’re two may have already refinanced or you may have already sold and

1142
00:48:23,600 –> 00:48:27,800
got and got crystallization of equity and you’re probably going to make more money from that

1143
00:48:27,800 –> 00:48:28,800
than your paycheck.

1144
00:48:28,800 –> 00:48:29,800
Then you have ownership.

1145
00:48:29,800 –> 00:48:32,460
So it’s such massive benefits.

1146
00:48:32,460 –> 00:48:38,020
Then you’re obviously, you are, I don’t want to say, dragging on the owner’s co-tails,

1147
00:48:38,020 –> 00:48:39,620
but the owner’s got all the infrastructure in place.

1148
00:48:39,620 –> 00:48:44,640
The owner has all those economies of scale and your 30 unit is getting massive benefits

1149
00:48:44,640 –> 00:48:46,180
from the other 1700 units.

1150
00:48:46,180 –> 00:48:47,780
So there’s so many benefits to it.

1151
00:48:47,780 –> 00:48:51,080
So I think you really need to lay it out to the employees to say, hey, if you got and you

1152
00:48:51,080 –> 00:48:54,680
go and put your money into a syndication, they’re going to feed a death.

1153
00:48:54,680 –> 00:48:57,240
You’re not even going to know if the business plan is accurate.

1154
00:48:57,240 –> 00:48:58,440
You know what you got here.

1155
00:48:58,440 –> 00:49:02,860
So just understanding, letting them understand the value that that offer you, giving them

1156
00:49:02,860 –> 00:49:05,520
is truly a really cool deal for them.

1157
00:49:05,520 –> 00:49:09,140
That is huge and it’s way better than the 401K all day long.

1158
00:49:09,140 –> 00:49:12,740
The 401K, I see it as, okay, you’re going to put it in there, your employer is going to

1159
00:49:12,740 –> 00:49:15,880
give you a match, roll it over to every year.

1160
00:49:15,880 –> 00:49:19,520
Once the match hits and it’s finalized and you can, right, without penalty, roll it over

1161
00:49:19,520 –> 00:49:21,020
into an IRA.

1162
00:49:21,020 –> 00:49:25,600
If you’ve got the ability, roll it into a Roth, pay the income tax.

1163
00:49:25,600 –> 00:49:27,720
Don’t do it in New York State.

1164
00:49:27,720 –> 00:49:31,760
Pay the income tax, put it in a Roth and then tax the seed and not the crop and just do

1165
00:49:31,760 –> 00:49:33,160
it every year, right?

1166
00:49:33,160 –> 00:49:37,320
You need to just avoid those 10% penalties and all the other crap.

1167
00:49:37,320 –> 00:49:39,440
Don’t do it if you’re in New York, California, right?

1168
00:49:39,440 –> 00:49:43,300
Where there’s a crazy income tax, wait until you’re in a free state where you can roll

1169
00:49:43,300 –> 00:49:50,260
that over and not pay the state just to show up and make the money, right?

1170
00:49:50,260 –> 00:49:52,340
You’re doing this for a reason.

1171
00:49:52,340 –> 00:49:56,860
You want to build wealth, you want to build generational wealth, you want to do the right thing

1172
00:49:56,860 –> 00:50:01,500
for your family, you want to leave something behind that’s tangible that can maybe make

1173
00:50:01,500 –> 00:50:03,620
your kids’ lives easier.

1174
00:50:03,620 –> 00:50:05,260
Maybe they don’t want to be property managers.

1175
00:50:05,260 –> 00:50:07,060
Maybe they don’t want to be real estate investors.

1176
00:50:07,060 –> 00:50:09,060
Maybe that’s not their thing.

1177
00:50:09,060 –> 00:50:10,060
Great.

1178
00:50:10,060 –> 00:50:14,340
Cash is king, right?

1179
00:50:14,340 –> 00:50:17,020
Don’t leave them a house in New York State that they have to sell and defy the profits or

1180
00:50:17,020 –> 00:50:20,460
have people argue about who’s going to move in and who’s not.

1181
00:50:20,460 –> 00:50:25,060
These are all stupid things that don’t help build a family relationship.

1182
00:50:25,060 –> 00:50:30,260
Having all the stuff, all your legacy set in place, running your legacy like a business

1183
00:50:30,260 –> 00:50:34,900
and making those decisions upfront, knowing what human nature is and knowing how things

1184
00:50:34,900 –> 00:50:37,060
happen when money is involved.

1185
00:50:37,060 –> 00:50:43,740
I love the fact that Jake and Gino are still Jake and Gino after 10 years and doing business

1186
00:50:43,740 –> 00:50:45,460
together and still friends.

1187
00:50:45,460 –> 00:50:47,620
That’s a big deal that you don’t see a lot.

1188
00:50:47,620 –> 00:50:52,020
A lot of people get into business with partners and before long, they’re not friends anymore.

1189
00:50:52,020 –> 00:50:53,020
They don’t want to hang out.

1190
00:50:53,020 –> 00:50:54,100
They don’t want their families hanging out.

1191
00:50:54,100 –> 00:50:58,100
They don’t want anything to do with each other and they can’t wait for one guy to be

1192
00:50:58,100 –> 00:50:59,100
like, “I’m out.

1193
00:50:59,100 –> 00:51:04,200
Buy me out,” or dissolve the company and liquidate the assets between two different companies

1194
00:51:04,200 –> 00:51:07,200
or whatever.

1195
00:51:07,200 –> 00:51:10,900
There’s nightmare stories everywhere of partnerships that have gone sideways.

1196
00:51:10,900 –> 00:51:18,260
You’re work ethic and how you do things and how you think about the business is inspiring

1197
00:51:18,260 –> 00:51:20,000
quite frankly because it doesn’t happen enough.

1198
00:51:20,000 –> 00:51:22,800
There’s so many horror stories of people who are like, “Oh, this guy is a great guy.

1199
00:51:22,800 –> 00:51:24,120
I want to be a business partner with him.”

1200
00:51:24,120 –> 00:51:27,820
They get into business together and a year down the road, the entire thing is disintegrating

1201
00:51:27,820 –> 00:51:29,280
and they hate each other.

1202
00:51:29,280 –> 00:51:31,560
Anybody listening, it’s values-based decision making.

1203
00:51:31,560 –> 00:51:32,880
What are your values?

1204
00:51:32,880 –> 00:51:34,560
What’s your psychology of money?

1205
00:51:34,560 –> 00:51:35,960
What is your relationship with money?

1206
00:51:35,960 –> 00:51:38,040
What is your partner’s relationship?

1207
00:51:38,040 –> 00:51:43,000
Understand all of those because those all fall into play and I think that I’ve gotten

1208
00:51:43,000 –> 00:51:46,760
pretty clear on it and Jake’s gotten pretty clear on it and we just want to build in a business

1209
00:51:46,760 –> 00:51:48,840
that we’re growing 20% a year.

1210
00:51:48,840 –> 00:51:50,360
We don’t have to do any stupid deals.

1211
00:51:50,360 –> 00:51:54,280
We’ve been thinking about a couple hundred really good units, continue to manage them and

1212
00:51:54,280 –> 00:51:57,040
continue to run what he calls a well oil machine.

1213
00:51:57,040 –> 00:51:58,360
That’s what our goals are.

1214
00:51:58,360 –> 00:52:00,640
Figure out where your goals are for 2024.

1215
00:52:00,640 –> 00:52:01,640
That’s beautiful.

1216
00:52:01,640 –> 00:52:02,640
I love it.

1217
00:52:02,640 –> 00:52:07,440
The last thing since we’re coming up on an hour, the last thing I want to pick your brain

1218
00:52:07,440 –> 00:52:08,920
and I appreciate your time.

1219
00:52:08,920 –> 00:52:09,920
It’s awesome.

1220
00:52:09,920 –> 00:52:13,280
This has been a great conversation and I think it’s going to be hugely enlightening.

1221
00:52:13,280 –> 00:52:17,320
When we’re looking at value-ad, outside of just right, I’m a big proponent of doing the

1222
00:52:17,320 –> 00:52:20,800
right thing when you’re managing an asset.

1223
00:52:20,800 –> 00:52:28,760
Instead of just adding to the rent, if it’s a distressed, non-performing, underperforming

1224
00:52:28,760 –> 00:52:31,280
property that needs work, you’re going to raise the rent.

1225
00:52:31,280 –> 00:52:33,640
That’s an NLI increase, right?

1226
00:52:33,640 –> 00:52:37,400
Running things efficiently, that’s kind of like 201, right?

1227
00:52:37,400 –> 00:52:40,520
You pay less for your products, you leverage your buying power, you do all this stuff.

1228
00:52:40,520 –> 00:52:42,240
So 101 is raise the rent.

1229
00:52:42,240 –> 00:52:47,560
201 is fix what you’re buying and how you’re buying it.

1230
00:52:47,560 –> 00:52:49,440
301 adding amenities, right?

1231
00:52:49,440 –> 00:52:57,840
So in-unit washers and dryers, parking passes, maybe some covered parking, maybe some amenities

1232
00:52:57,840 –> 00:53:04,320
on the property that allow you to get gym memberships and that kind of stuff.

1233
00:53:04,320 –> 00:53:07,280
What’s value-ad 401 for Jake and Gino?

1234
00:53:07,280 –> 00:53:08,760
What does that look like for you guys?

1235
00:53:08,760 –> 00:53:09,760
It’s interesting.

1236
00:53:09,760 –> 00:53:14,680
You’ve broken it down and let me give people a framework that we have and we teach our students

1237
00:53:14,680 –> 00:53:16,360
and it’s really fee-based.

1238
00:53:16,360 –> 00:53:23,360
I think the fees for us, the average, between 10 and 15%, of gross revenues because we

1239
00:53:23,360 –> 00:53:25,280
use non-refundable moving fees.

1240
00:53:25,280 –> 00:53:26,280
Those are huge for us.

1241
00:53:26,280 –> 00:53:27,280
We love them.

1242
00:53:27,280 –> 00:53:29,520
They’re like, “Shirty bonds are not insurance.”

1243
00:53:29,520 –> 00:53:34,480
But it’s a great process for us down south here because you can get a four or five hundred

1244
00:53:34,480 –> 00:53:37,840
dollar non-refundable moving fee, which hits the income statement day one.

1245
00:53:37,840 –> 00:53:38,840
You keep that.

1246
00:53:38,840 –> 00:53:40,360
It goes into a pool.

1247
00:53:40,360 –> 00:53:42,080
But the great thing about this is there’s no security deposits.

1248
00:53:42,080 –> 00:53:43,400
We don’t want to have that confrontation.

1249
00:53:43,400 –> 00:53:46,080
We don’t want to be able to deal with security deposits.

1250
00:53:46,080 –> 00:53:48,680
So that’s something that we’ve been using.

1251
00:53:48,680 –> 00:53:53,200
Focus on, I guess, that looking at it and seeing what the current owner has.

1252
00:53:53,200 –> 00:53:54,200
Three types of fees.

1253
00:53:54,200 –> 00:53:56,440
We break them up into one is upfront.

1254
00:53:56,440 –> 00:53:58,200
Front fees.

1255
00:53:58,200 –> 00:53:59,200
At fees.

1256
00:53:59,200 –> 00:54:00,200
Pet fees.

1257
00:54:00,200 –> 00:54:01,200
Security.

1258
00:54:01,200 –> 00:54:02,720
Non-refundable move-ins.

1259
00:54:02,720 –> 00:54:05,800
What does that upfront fee look like for your property?

1260
00:54:05,800 –> 00:54:06,800
That’s important.

1261
00:54:06,800 –> 00:54:08,400
The second one is recurring.

1262
00:54:08,400 –> 00:54:10,000
What are the recurring fees on the property?

1263
00:54:10,000 –> 00:54:11,400
Do you even have recurring fees?

1264
00:54:11,400 –> 00:54:12,880
We’re talking about rubs.

1265
00:54:12,880 –> 00:54:14,480
Ratio utility billing system.

1266
00:54:14,480 –> 00:54:15,480
We’re talking about pets.

1267
00:54:15,480 –> 00:54:17,160
We’re talking about short term leases.

1268
00:54:17,160 –> 00:54:19,120
We take over properties that are doing month to month.

1269
00:54:19,120 –> 00:54:22,720
Well, there’s a fee to going month to month and make sure that you’re charging that.

1270
00:54:22,720 –> 00:54:23,720
Rentus insurance.

1271
00:54:23,720 –> 00:54:26,400
Do you have a rentus insurance where you can actually make money on rentus insurance?

1272
00:54:26,400 –> 00:54:28,960
The third one is occasional.

1273
00:54:28,960 –> 00:54:33,560
Those occasional fees where if there’s trash left outside, you’re penalizing them.

1274
00:54:33,560 –> 00:54:35,280
There’s late fees going on.

1275
00:54:35,280 –> 00:54:37,520
There’s breaking the pet, addendum fee.

1276
00:54:37,520 –> 00:54:39,120
There’s a break lease fee.

1277
00:54:39,120 –> 00:54:40,360
Those are the occasional fees.

1278
00:54:40,360 –> 00:54:44,120
Take a look at how your fee game is compared to what you’re buying.

1279
00:54:44,120 –> 00:54:47,240
If you’re buying a property that has high rents, maybe they don’t have the fees broken

1280
00:54:47,240 –> 00:54:48,240
out.

1281
00:54:48,240 –> 00:54:49,480
They’re just throwing it into the rents itself.

1282
00:54:49,480 –> 00:54:54,080
But understanding that there’s a huge value-ed component to that.

1283
00:54:54,080 –> 00:54:58,200
I think the 4.0, Jake wants to become the Chick-fil-A of apartments.

1284
00:54:58,200 –> 00:54:59,200
That’s his goal.

1285
00:54:59,200 –> 00:55:00,800
His goal is to have that customer service.

1286
00:55:00,800 –> 00:55:05,120
If you can do that in the sea space, I’m not saying we’re anywhere near that, but if you

1287
00:55:05,120 –> 00:55:10,520
can at least try to aspire to that and try to deliver some type of quality customer service

1288
00:55:10,520 –> 00:55:17,320
and quality experience for your residents, like you said, on average, residents, every 50%

1289
00:55:17,320 –> 00:55:21,360
of your portfolio turns over every year, 40%, 50%.

1290
00:55:21,360 –> 00:55:26,160
You can drop that down to 25% or 30% and have the majority of them stay.

1291
00:55:26,160 –> 00:55:30,400
Not only does it create culture within your company, it creates culture within your property,

1292
00:55:30,400 –> 00:55:33,680
then all of a sudden people want to live there and you can get a premium from that as

1293
00:55:33,680 –> 00:55:34,680
well, Andy.

1294
00:55:34,680 –> 00:55:40,880
I think taking care of your space, taking care of your property well, showing it respect,

1295
00:55:40,880 –> 00:55:45,040
in probably 90% of cases, your tenants will do the same, right?

1296
00:55:45,040 –> 00:55:48,440
They have something that’s nicer than maybe where they’ve been before.

1297
00:55:48,440 –> 00:55:50,600
They don’t want to screw it up.

1298
00:55:50,600 –> 00:55:55,280
Especially if it’s like, I don’t know if you guys do an ELHTC or Section 8 stuff, but if

1299
00:55:55,280 –> 00:56:00,840
they’re on one of those programs, a lot of what used to be 20 years ago, Section 8 was

1300
00:56:00,840 –> 00:56:01,840
a sure thing.

1301
00:56:01,840 –> 00:56:04,840
10 years ago, Section 8 was a nowadays.

1302
00:56:04,840 –> 00:56:07,920
It’s like, Ah, Section 8 doesn’t really mean much because they don’t really care if they

1303
00:56:07,920 –> 00:56:12,480
lose because there’s other things that they’re just going to go and get instead.

1304
00:56:12,480 –> 00:56:16,720
That level of respect, that level of consistency, that level of, I’m going to take care of this

1305
00:56:16,720 –> 00:56:21,080
apartment. That’s not the way it was, like people are still big and the, Oh, Section 8’s a

1306
00:56:21,080 –> 00:56:22,080
sure thing.

1307
00:56:22,080 –> 00:56:23,080
Yeah, not really.

1308
00:56:23,080 –> 00:56:24,080
No, it’s not.

1309
00:56:24,080 –> 00:56:25,080
Not anymore.

1310
00:56:25,080 –> 00:56:30,160
Not with the environment we’ve been in since, really, since 2019, 2020 is when that, that

1311
00:56:30,160 –> 00:56:31,920
I think that other shoe dropped.

1312
00:56:31,920 –> 00:56:33,920
So what do you guys do?

1313
00:56:33,920 –> 00:56:37,760
Section 8, you get really great rents as opposed to market, right?

1314
00:56:37,760 –> 00:56:41,000
Section 8 used to get really great rents as opposed to market.

1315
00:56:41,000 –> 00:56:45,400
Now, there’s a case to say market rents are probably very similar to Section 8 is.

1316
00:56:45,400 –> 00:56:49,600
So if you like to have that bureaucratic process where you got to deal with the government and

1317
00:56:49,600 –> 00:56:53,080
you have property managers that are aligned with that and that’s what your system is like,

1318
00:56:53,080 –> 00:56:54,800
great, you can go to that.

1319
00:56:54,800 –> 00:56:57,160
We just don’t, we don’t really like dealing with that space.

1320
00:56:57,160 –> 00:56:59,560
So I’m a big free market guy myself.

1321
00:56:59,560 –> 00:57:05,040
So like everything I do is based off of the risk rewards, you know, do this now.

1322
00:57:05,040 –> 00:57:06,480
It pays for itself later.

1323
00:57:06,480 –> 00:57:10,760
There’s not a lot of that that’s put up with in the Section 8 government world.

1324
00:57:10,760 –> 00:57:15,360
You look at the LHTC programs and they literally just put these things together and then

1325
00:57:15,360 –> 00:57:19,440
suck all the life out of them over however long it’s in the program.

1326
00:57:19,440 –> 00:57:23,960
10 years, 15 years, 20 years, and by the time it’s done, like there’s one here that the

1327
00:57:23,960 –> 00:57:26,000
guy’s been trying to sell since 2018.

1328
00:57:26,000 –> 00:57:31,040
I’ve gotten brokers who’ve called me to try and find a buyer for like six different times.

1329
00:57:31,040 –> 00:57:36,200
And it was built in I think 97 or 98.

1330
00:57:36,200 –> 00:57:43,080
Completed still has original kitchens, original fixtures, original lighting, like it’s brutal.

1331
00:57:43,080 –> 00:57:48,080
They’ve deferred maintenance on roof repairs and just the walkways, broken concrete, drive

1332
00:57:48,080 –> 00:57:49,600
ways all need to be resealed.

1333
00:57:49,600 –> 00:57:51,400
There’s weeds growing up out of them.

1334
00:57:51,400 –> 00:57:55,680
It’s a frequent call spot now for the police department.

1335
00:57:55,680 –> 00:57:57,400
They’re there every day.

1336
00:57:57,400 –> 00:57:59,360
Like that’s a property.

1337
00:57:59,360 –> 00:58:00,800
The guy wants 31 million bucks.

1338
00:58:00,800 –> 00:58:01,800
He wants one point.

1339
00:58:01,800 –> 00:58:03,520
He wants 122 a unit for it.

1340
00:58:03,520 –> 00:58:04,520
That’s like guy.

1341
00:58:04,520 –> 00:58:05,520
It’s worth.

1342
00:58:05,520 –> 00:58:06,520
Yeah, this is a way.

1343
00:58:06,520 –> 00:58:09,040
It’s worth 50 a unit maybe because it needs so much.

1344
00:58:09,040 –> 00:58:11,640
Every unit needs 15 to 20,000 in rehab.

1345
00:58:11,640 –> 00:58:12,960
There’s no way he’s ever going to get that.

1346
00:58:12,960 –> 00:58:14,400
So he’s just going to keep sitting on it.

1347
00:58:14,400 –> 00:58:16,320
He’s never going to sell that thing.

1348
00:58:16,320 –> 00:58:17,320
It’s in a great location.

1349
00:58:17,320 –> 00:58:21,480
It could be turned around to become a nice B minus property, but it’s in New York and the

1350
00:58:21,480 –> 00:58:22,600
guy’s out of his mind.

1351
00:58:22,600 –> 00:58:24,040
It’s a 20 million dollar property.

1352
00:58:24,040 –> 00:58:26,160
He’s trying to get 31, 33 million for.

1353
00:58:26,160 –> 00:58:28,400
It’s not it’s not going to happen.

1354
00:58:28,400 –> 00:58:30,000
So anyway, more power to them.

1355
00:58:30,000 –> 00:58:33,040
You know, I appreciate you coming on.

1356
00:58:33,040 –> 00:58:34,040
Everybody listening.

1357
00:58:34,040 –> 00:58:35,040
Geno Barbara.

1358
00:58:35,040 –> 00:58:38,800
Geno tell everybody where they can find you, where they can find your course, what your

1359
00:58:38,800 –> 00:58:45,280
website is, where they can find your podcast, lay it all out for us.

1360
00:58:45,280 –> 00:58:47,640
Jake and Geno.com is the hub.

1361
00:58:47,640 –> 00:58:48,640
Just go to the website.

1362
00:58:48,640 –> 00:58:50,880
You’ll see the podcast where the Jake and Geno show.

1363
00:58:50,880 –> 00:58:53,640
I do a podcast with my wife on family and communications.

1364
00:58:53,640 –> 00:58:58,520
I love that show and Movers and Shakers podcast where we interview our students.

1365
00:58:58,520 –> 00:58:59,520
Just go to the website.

1366
00:58:59,520 –> 00:59:00,520
You’ll find everything there.

1367
00:59:00,520 –> 00:59:01,520
Andy.

1368
00:59:01,520 –> 00:59:02,520
Perfect.

1369
00:59:02,520 –> 00:59:03,520
Thank you so much for coming on.

1370
00:59:03,520 –> 00:59:04,520
I appreciate you.

1371
00:59:04,520 –> 00:59:08,760
I hope everybody out in whatever format you’re digesting this in has.

1372
00:59:08,760 –> 00:59:10,280
Please enjoy this show.

1373
00:59:10,280 –> 00:59:13,160
So if you’re watching on YouTube, please hit that bell and subscribe.

1374
00:59:13,160 –> 00:59:14,920
If you want, leave us a comment on the episode.

1375
00:59:14,920 –> 00:59:18,320
We’ll make sure that we get some answers for you if you have questions.

1376
00:59:18,320 –> 00:59:23,040
If you are listening on Apple Spotify, I hurt radio wherever it is, please make sure to

1377
00:59:23,040 –> 00:59:24,280
subscribe.

1378
00:59:24,280 –> 00:59:26,120
Leave us a review.

1379
00:59:26,120 –> 00:59:28,400
And as always, go do real estate.

1380
00:59:28,400 –> 00:59:29,480
Thank you so much.

1381
00:59:29,480 –> 00:59:32,060
(upbeat music)

1382
00:59:32,060 –> 00:59:34,640
(upbeat music)

1383
00:59:34,640 –> 00:59:37,220
(upbeat music)

1384
00:59:37,220 –> 00:59:39,800
(upbeat music)

1385
00:59:39,800 –> 00:59:42,380
(upbeat music)

1386
00:59:42,380 –> 00:59:44,960
(upbeat music)

1387
00:59:44,960 –> 00:59:47,080
(upbeat music)