Where the REAL Money is Made in Multifamily (Asset Management 101)

David:
This is the BiggerPockets Podcast Show 739.

Andrew:
So a property manager is somebody who does the day-to-day stuff. An asset manager is big picture, set the direction. So think of like a cruise ship. If you ever been on a cruise, there’s the activities director and that’s the person that works like 18 hours a day. They’re running around always making sure the shows are on time, and dinner starts on time, and the right number of chairs on the deck, and all that little minutia that is important to making for a good cruise. The asset manager is the captain of the ship.

David:
What’s going on, everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, the baddest real estate investing podcast on the planet here today with a treat for you. I’ve got two of my good friends and studly multi-family investors, Matt Faircloth and Andrew Kushman here to talk asset management and property management and operations at a bunch of stuff that will make you money if you get into this space and more importantly help you not lose money if you get into this space in the future.
Today is fantastic. We get into two really, really important points, forming your money-making team and then learning how to communicate with them and train them to communicate with you so that you can scale and build a profitable business, not buying an asset that makes you want to pull your hair out of your head and end up like me. We get into actual stories that these two have experienced as they’ve managed multi-family assets for years now, so that you can learn from their mistakes and avoid your own as well as find the pieces that are most likely to help take you to the next level. Look, it’s no surprise that the economy is shifting. We’re heading into a recession and it’s getting harder and harder to make real estate work now more than ever. It’s important to understand how to actually operate the asset that you’ve been being told for years you need to go buy.
Some of the things that you’re going to learn if you listen today is where to find staff that will help you what to look for, questions to ask property managers, what to look for in a property manager before you hire them, the difference between an asset manager and a property manager, and what maintenance supervisors can do that can increase the NOI of your property and actually make it more profitable. That and more on today’s show. You don’t want to miss it. Before we get into the interview, today’s quick dip is check the show notes. We’ve got a list for you, 27 questions to ask a property manager before hiring them that comes directly from Matt and Andrew’s experience doing this themselves. That is free for you. Thank you for listening. We love you. All right, let’s get into today’s show,
Andrew, Matt, welcome back to the BiggerPockets Podcast live for us, but not for the audience from Lake Tahoe at our winter retreat in GoBundance. Today we’re going to be talking multi-family, but more specifically operation of multi-family. So let’s start off with people that don’t know the difference between a property manager and an asset manager. How would you describe that, Andrew?

Andrew:
So a property manager is somebody who does the day-to-day stuff. An asset manager is big picture, set the direction. So think of like a cruise ship. If you’ve ever been on a cruise, there’s the activities director, and that’s the person that works like 18 hours a day. They’re running around, they’re making sure the shows are on time, and dinner starts on time, and the right number of chairs on the deck, and all that little minutiae that is important to making for a good cruise.
The asset manager is the captain of the ship. Yeah. He’s saying, “All right, we got a storm coming in. We’re going to shift a little. We’re going to shift a hundred miles to the right, go around the backside of the island. We need to make sure we get to this port in seven days.” He’s looking big picture, making sure that’s going to happen. That’s the difference between property management and asset management. And it’s not a perfectly clearcut delineation, especially if you’re doing smaller stuff like fourplexes and 10 units. It is more of a spectrum. And if you’re self-managing and you’re just starting out with your first fourplex, you’re doing both jobs. But as you scale and grow, the difference becomes more and more important. And as an investor looking to create wealth, you’re really going to want to focus on that asset management side. That’s where the real money is made.

David:
So do you feel most investors are the asset managers themselves or is there a size of complex where you are actually going to leverage out asset management as well as property management?

Andrew:
I’d say most investors are the asset managers themselves. For example, I was my own asset manager until about a thousand units. And then once we got into over 2000 units, I started bringing on an asset management team to help with that because it becomes a full-time job. Even if you’re not involved in the day-to-day property management, just managing… If you’ve got 10 fourplexes scattered around town, even if you have an admin person to help with collections and filing evictions and all that, still you’re going to be dealing with the lender. You need to decide, “Am I going to sell this one in one year? Am I going to sell this one in two years? If I do sell it, what am I going to do with the money?” And so there’s a certain point… I think, again, I was my own up until a thousand, and I waited way too long.
And if I finally graduated, it was like Pinocchio. My business was like Pinocchio. It finally became a real business when I added some people to help me with that stuff. I remember that we were actually, maybe here in Tahoe when we were having that conversation about what it would look like to leverage off some of the work without leveraging off the actual vision casting, which I remember was like in your head you saw it as if I hire someone, I’m giving up complete control as opposed to you’re still creating the vision, but they’re executing on the vision that you’ve now cast for them. And I got to say, folks, his career has exploded since then and I’m going to take as much credit as I can.

David:
No, yeah, you deserve some of the credit for that. You seriously do. We had a good couple good long talks and that helped. Well, I certainly benefit from it because we partnered together on [inaudible 00:05:41]. I can’t say that I’m not eating out of that same throughout.

Matt:
I just want to throw one more thing out, that you’ve certainly rubbed off on Andrew a bit because he’s now made two analogies in the first five minutes of this podcast. You’ve made zero so far. So we’ve got a cruise director analogy and we’ve also got the Pinocchio “I’m a real boy” analogy as well.

David:
Andrew’s up to an early lead.

Matt:
Got some catching up with you, David Greene. So I will glad to keep score on the analogy scoreboard here during this podcast.

David:
All right. Matt, I’m going to turn it to you now. God, in the last several years of real estate, we’ve seen so much stimulus. We’ve seen so much people that were getting into the syndication game in particular that had no experience at all. And the rising economy, it really was this perfume that covered up a lot of stink where. At the first minute we see a little bit of interest rate rising. It’s like, “Oh, my God, this what’s been going on the whole time. The lipsticks coming off the pig in a lot of these cases.” What is your perspective on how important operations are compared to just acquisitions, which is where a lot of the attention is?

Matt:
Yeah. I mean, the last 10 years has simply been get into the game. You could have bought a multi-family and literally done nothing with it. Let it run into the ground, let tenants completely not pay the rent, let things go willy-nilly, let the grass grow three feet high, and sold it for a ton more than you bought it for. I mean really anybody could have gotten to this game, and guess what, anybody did. And there are lots of folks that are for 20 grand or whatever willing to teach you how to invest in real estate or whatever. And a lot of people did pay that kind of money to get into the multi-family game. And so now it’s simply been get into the game and get a deal and crush your fingers and you can sell it in a year for a lot more than you paid for it.
That’s worked up until recently with rising rates and the sellers can’t just name their prices when they go to sell properties anymore. And so we’re going to get back down to good old fashioned real estate investing where you’re going to have to invest for cash flow and not appreciation. And, if you’re going to invest for cash flow, if you’re going to make an investment into a thing that is going to reward you for its performance, you have to have good asset management on the asset. You can’t just cross your fingers and allow the rising tide that’s risen for 10 years, right? Well, let’s all high five. That’s been great. It’s helped everybody out. But that’s not the future. Cash flow is going to be king I think for the foreseeable future. And to make that happen, you need asset management, KPIs, business plans, well-run properties, and you might not sell a year after you buy it.

David:
One thing I’ve noticed, when you understand the fundamentals of real estate, first off, the whole thing gets so much more simple than when you ask for a blueprint of, “Well, what am I supposed to do? Tell me exactly what to do.” If you understand that apartments are, like the value of them or commercial property in general is a function of two pieces. You’ve got a cap rate and you’ve got NOI. And you can’t control the cap rate and you can’t control the NOI. That’s very simple. Now there’s things you can’t control the cap rate much like you can’t control the winds, but you can look at wind patterns inside of chart your course in a direction that will favor you. But ultimately, you can’t control that versus NOI, which might to be like the guys in the bottom of the boat rowing. I’m trying to catch up on analogies. You got a lot of them…
You got two factors that determine the value of a commercial property. Then if you go within NOI, there are two factors that control that. You’ve got income and you’ve got expenses. It simplifies things. So operations is a lot about just the art of how do I minimize expenses and how do I maximize income. It’s really that simple. So on that behalf, when we know that’s the only part that you can control within multi-family real estate, and it’s so important. What’s your thoughts, Matt, on if you should self-manage or if you should leverage something that important to a third party?

Matt:
When I first got involved in real estate, I did not go straight into it. There actually are other things you can invest in besides apartment buildings. And so I started investing in single families and small multis and worked my way up through that. And there was a point where Liz and I were running 115 units with a small crew ourselves out of Trenton, New Jersey. And so we self-managed for a very long time. And it can be done. It was in essence a full-time job for me and a small team to do. But the money that we made doing it, ’cause we charged ourself a property management fee, was enough to keep our lights on and keep our family fed and live a fairly good lifestyle.
But there was a fulcrum that it was like a decision point where we were buying a 49-unit that was not in Trenton. It was a good bit away from there. It would’ve forced me to have to start up a new PM company in a new market and that’s what I wanted to do. But my wife, who normally has the better idea than I do, said, “Let’s try hiring a new PM to run this.” And we did and they did a phenomenal job. I still believe we probably would’ve done better, but they did good enough to keep the asset running. And with good asset management tactics, the property did very, very well and that enabled me to scale.
So I think in the beginning for those listening to this that don’t have 2, 3, 400 units of, they maybe have a duplex, if you have a duplex and you want to eventually do this real estate investing business full-time, managing yourself it could be a lucrative enough business to feed your family, keep your lights on for now. And it’ll also really help you develop the parameters of management because I learned the ins and outs of management in doing it myself and eventually I ended up giving it up to another party, but it taught me a ton and it also fed me very well while I did it.

David:
All right. Andrew, throwing to you. In your perspective, what are some of the pros and cons of each option?

Andrew:
Yeah, Matt mentioned some of the pros. One is if you do it, scale it well enough, it can become another income stream. So it can be a balancing factor, stabilizing factor. Another thing that’s often listed as a pro is that you have more control, and that is true, but the assumption there is that control and also that you care about your property more than anybody. So the assumption there is, “Well, if I have control and I care about it more than anybody, then I’m going to do a really good job. Well, caring doesn’t equal competence.” If my wife needs surgery for something, I’m not going to walk into the OR and be like, “Hey, Doc, you know what? I care about her more than you. Let me take this.
No, I want the best. He could hate my guts, but if he’s really good at that surgery and he’s going to do it right, I want him to do that surgery. So that’s a myth of caring equals competence and it doesn’t. But, if you have the skills to go along with it, then yeah, that’s a really good combination. On the flip side, some of the cons of property management is one of the most high headache businesses. You’re basically running a giant HR firm. All you do all day long is deal with people problems and payroll and then delinquent tenants and evictions and courts and all that. And it doesn’t pay that well. It’s a very low margin, high stress business and it can be really draining, the people that I know they do it definitely say that.
And also that’s something to keep in mind, property management is a separate business from real estate investing, so you are running two businesses if you decide to do that. How do you make a decision? We could do an hour long panel on the pros and cons and really dive in into that. It depends on what your end goals are, how many units you have. If you’ve got one fourplex, you’re going to learn some stuff from self-managing that in the beginning. So I would recommend self-managing. Where do you make the transition? That’s stuff to say. Again, it’s a spectrum. It’s like, if you’re a vegan and you’re in into crossfit, how do you decide which one to talk about first? It’s going to be different for every person and it depends on the situation.

David:
You guys are digging deep on this analogy thing, both you two. I mean really you’re very competitive. I’m really enjoying as a spectator sport, watching the analogy back and forth. All right, so on that note, Matt, when it comes to finding a property management company, if that’s something that you’re looking to do, what advice do you have for how to find a great company? Well,

Matt:
What’s interesting is you could just look it up through your friends at Google, just Google PM companies in Albuquerque, New Mexico or whatever. But likely if you’re buying a property, and let’s pick Albuquerque because it’s a fun name to say as the market that you want to invest in, you likely got to the property that you’re looking at through other leads you have, probably a realtor that you’re working with, probably maybe a mortgage broker that’s local, maybe an attorney, maybe other real estate investor friends you have through meeting them on the BiggerPockets forums. So you ask for referrals, you talk to other people that are already active or already live or present in that market. And then you look for leads.
And then you’re going to want to also find out what do they manage, right? Because if a property manager tells you that they can manage the strip center that’s down the street from your property and they can also manage the duplex you’re buying in Albuquerque and they can also manage a hundred-unit apartment building that’s down the street, that’s the wrong property management company. Those are three very different entities that manage things like that. So you want to make sure that their sweet spot, their core, their, and I’ll throw an analogy out, the Goldilocks of them, not too hot, not too cold, just right is the asset that you have. You don’t want them to be everything to everyone because property management’s not that. There is a level of expertise that they need to bring to the table for the property that you’re buying.

David:
So Andrew, when you find a company that you think could be good and you’re looking to vet them, what are some questions that you’d recommend people ask those companies?

Andrew:
We got a whole long list of questions and we can provide a document with, we got 20 something of them. We can provide a link to that in the show notes. But some of the main ones, and Matt alluded a little bit to this, is what is their background? Is it a management company that just started two years ago? And are they a little green and inexperienced or have they been around for decades? And the founders, where did they come from? Were they ex-engineers because you don’t want to trust those guys. Or for example, the management company that we hired was founded by two executives in a much bigger management company that got fed up with the corporate culture and said, “We could do better.”
They jumped out, started their own and have done a really good job. So what is the background of the founders. Matt, you touched on this, asset and class specialization. You don’t want to hire a property management company to run your 10-unit when their focus is self-storage. They’re not going to have the knowledge and they’re not going to have the efficiencies and they may not even care. Some management companies will take on assets they shouldn’t just to get the revenue, but they’re not going to do a good job with it. And also if you specialize in C-class properties, don’t hire an A-class property management company because they will run your C-class way more expensive than it’s able to support. And there’s very different ways of running those. So it’s not just self storage and multi-family, it’s also class. You also want a management company that ideally specializes in your market.
There are some good national level property management companies. My preference is regional ones. So for example, the one we use, they only do the southeast United States so their footprint matches ours. They’ve got like 26,000 units. So they’re big enough that they have efficiencies of scale but small enough that I can call the owners of the company on their cell phone if there’s a real issue and I need to get somebody. So I’m asking questions, “Well, what’s your footprint? How many units do you have?” How many units do they have in your submarket? So if a company has 10,000 units in Dallas and you’re giving them a property in Lubbock, but they’ve never managed in Lubbock, they’re not going to be good in Lubbock. Number one, they’re not going to take the time to go out there. Number two, they don’t know the market. It’s a very different market.
So those are some of the question. And then another one that is critical that I think a lot of people don’t think to ask is you is really feel them out for what ideally Mr and Mrs. Property Management Company, what kind of relationship do you like to have with the owners of the property? Because if they’re the type of property management company that wants you to go away and just read your report once a month, that’s not going to work. That to me is a huge red flag. You want a property management company that sees you as a partner so that you can work together and grow together and build a relationship. And that to me is one of the biggest keys. And like I said, there’s a whole lot more questions beyond that, but when I sit down to interview property management company, those are some of the things I’m asking multiple questions to find out about.

David:
Matt, when it comes to hiring team members, so maybe like you were talking about what Andrew did when he started to scale so that he could get some of the stuff off of his plate that he was all doing himself. What are some things you’ve learned over the years? We’re going to talk to both you guys about this. Advice for other people that have some small multi-family or they have some large multi-family. They’ve been doing everything themselves. They’re burning out, or they want to scale, they want to go more. They’re hearing us talk about, “I want to be a real boy.”

Andrew:
Can’t steal someone else’s analogy. Thank you. Yeah, disqualified analogy reference. Thank you.

David:
Sustain. Andrew just objected off to the side. Your Honor, Objection. Overused. All right. So what are the things that you think people need to look for when they’re hiring or be aware of?

Matt:
The property management and asset management are people businesses. And so people don’t work at jobs forever. And so as a property management company and as an asset manager as well, you’re going to be constantly hiring. I mean, Andrew, you can say both you and I own multi-family properties. It’s always, well this maintenance technician quit or this site manager is found another job or the leasing agent left or whatever. So there’s constantly the effort of replacing seats on the PM side. And so, there’s the conversation of, “If I’m self-managing, I maybe want to hire a new maintenance technician? So what do they bring to the table?” When I first hired, one of my first hires was a maintenance technician and it was all about, I need somebody with a truck and a lot of tools on it. They can fix a lot of different things that knows about a lot of different stuff. The jack of all trades with a truck and a lot of the tools they need for those trades in the vehicle.
So if you are self-managing, that is maybe something you want to consider. So you’re not beholden to hiring third party contractors every time you want to, like hiring a Roto-Rooter every time you want to get a plumbing. Your toilet backs up. It’d be much better to have your maintenance tech with a plumbing rooting machine that he can do it himself. It’ll be 10th of the cost of what a the plumber’s going to charge. So I think it’s about just finding the right person to fit in the role that you’ve got open. So for self-managed, could be maintenance technician or somebody that’s got bookkeeping background that could be your site manager, your office manager to collect rents, bill out rents, those kinds of things. And then I mean, Andrew, I know that that’s something that we’ve talked about before with regards to hiring asset managers. We’ve had to do it. I know you’ve done it too. For team members, for larger companies that are hiring field reps or asset managers for not property management, but next level, right?

Andrew:
And I say one of the most common mistakes that I see large and small is somebody hires somebody for property management and then expects them to do asset management. If you’ve got a leasing agent that’s running… I’ll give you an example when one of the first people that I brought on board was an admin and she started helping with some leasing and dealing with tenants and all that kind of thing. And a lot of times what happens is people bring on that person or a leasing agent or even a property manager if you’re at a hundred units or whatever that might be, and then say, “Okay, cool. This person’s got it. I’m out.” And now what you’ve done is now you’ve made that property manager an asset manager and that is not what you hired them for and it’s probably not their skill set.
So that’s something to be aware of on your side, on the investor side and it is a very tempting thing to do. But when hiring team members, what we’ve found is skills and experience are secondary. Number one is attitude and culture and fit. And when I say cultural fit, it’s not only to you and your team, but also to your properties and your residents. So Matt, you’re talking about maintenance people. That’s what everybody does, “I need a guy with a truck and he’s got the tools and he actually shows up on time. Okay, that is a plus. And he’s been a maintenance guy for 37 years and he is HVAC certified. Great. I’m going to hire him.” But if he smells like a three-day-old subway sandwich that’s been left in the car in the summer and he’s rude to the tenants, that’s going to backfire on you because that maintenance person actually has more face time with the residents than almost anybody else in many cases, right?

Matt:
I’m glad you brought that up.

Andrew:
Yeah. So you’re not just hiring for skills. Skills are important. It’s not like check it out the window and hire anybody that smiles nice, but you have to have the right attitude and demeanor. Same thing with a leasing person. I can’t tell you how many times I’ve gone to a restaurant and either the concierge or the waiter just was so friendly and amiable. I’m like, “I want to hire this person and teach them how to be a leasing agent.”
I mean, yes, you have to have the right location on your property, you have to have the right amenities, but the number one thing is the feeling, people remember feelings, how you make them feel. And so when someone walks in the door and they’re greeted by a smile, or maybe if you got a four-unit, so your leasing person is meeting them at the unit to give them a tour. If that person that you added to your team gives that prospective resident a great personal experience and they were helpful and they were smiling and all that, it doesn’t matter if they know the difference between pig tailing and aluminum wiring versus replacing using CO/ARL outlets. That’s great, but that’s not going to make the big biggest difference.
So whether you’re looking for a leasing agent, property manager, maintenance, any of these positions, again, whether you’re hiring directly or part of third party, number one thing is attitude, culture, and demeanor. You can’t teach that stuff. That is inherent. You can teach skills. And some of our greatest team members that today I just can’t imagine living without came to us with zero multi-family experience, but they had an attitude of curiosity, of learning, friendliness, and just wanting to serve people.

David:
That’s something that’s very valuable for the listeners who want to get into this space or any space in real estate really to understand, we tend to look at this stuff where, “I need a mentor, I need someone to teach me what am I supposed to do.” As if once you have the knowledge, it’ll all just fall into place. But the people we know that are successful at this, you two, neither one of you are people who just have information but your butt holes.
If you don’t know hardly anyone who’s really… Unless they’re just incredibly savvy and they can get away with being a jerk, it’s very rare that you see that, right? In general, you don’t see successful people that aren’t good with other people. And so having that ability to make someone feel good, to make people to feel comfortable trusting you, raising money I don’t think… Bren and I were talking about this, when somebody brings an operating agreement to you or a private place, a memorandum and they’re like, “Here’s the perspective deal,” not only do you not know if it’s going to work out like they said, you can’t even know if they just made up those numbers. How do we ever go back and verify. You don’t have the skill to do that otherwise you probably wouldn’t be the LP in the deal.
You are trusting the human being, the feeling that they give you and then if you’re smart the track record that they have. So learning those skills, it’s like the cap rate versus the NOI. Cap rate plays such a bigger role in the properties value going up than the NOI, but the NOI is a thing you can control. You can skills, but if you can get the people skills down, it has an astronomically larger impact on the value. Just like if you bought a property at eight cap and it compressed to a two cap. It almost doesn’t matter what happened with the NOI. It’s so much bigger. The successful people we see, especially here, get lucky right there. Well, yeah, I mean the way that the math works. That would be more valuable.

Matt:
Yeah. The bottom line’s just don’t be a jerk. People skills and being able to take care of people and address their needs and think the big picture is really one of the largest assets out there that any business owner can have.

Andrew:
All right. Matt, when it comes to a good property manager, what are some skills that they should have?

Matt:
I think that, you don’t want a property manager that is always late for your calls. You can use little cues about, well, I had sent my property manager an email and it took them four days to get back to me. And every week I have a Zoom call with them and they show up 15 minutes late. They’re always scattered. So just all bottomlines are organizational skills. A property manager is literally the best juggler out there. They’re dealing with, I got collections coming up, and I got rent’s doing in the fifth, and I got those three HVAC units stopped working, and that tenant wanted me to call him back, send me a question. So a property manager needs to be in the middle of so many different things and handling a fairly large to-do list, and the to-do list could be a lot of different things all at once.
And so they need to be a hundred percent organized and there are little tests you can use to figure out how organized somebody is or signs you see for people that are unorganized, they need to be as they’re one of the best needs for people persons and warm. The property managers that I have that are really good at what they do. The tenants view them as almost like the parent of the apartment complex. It’s like the apartment building, “This is the mom or the dad that I go to.” And they treat the tenants like they’re their children in some ways because they keep them under their wing, they look out for them, they do everything they need. When the tenant needs something, they’re right on it. And I think on top of that… like a good parent, you resolve needs.
“Oh, your HAVC’s not working, that’s fine.” Well, you also need to be able to be disciplinarian. “Well, you didn’t pay your rent this month, and so I’m not going to just allow you… You it back to me next month. You can’t be a pushover as well.” And they’ve got to have that no BS attitude when it comes to being a property manager. You must have to be like Dr. Jekyll and Mr. Hyde in some ways to be willing to go tough on a tenant and not let them walk on you, but also be likable and respectable to what the tenant is going to respect you and know that you’ve got their back and they’re going to want to stay there for a long time because they know that you’re going to take care of their stuff as it comes up.

Andrew:
Yeah. I mean, when I look at our best property managers, there’s I say eight distinct traits. One, good organization skills. Matt, like you said, they’re handling invoices and payments and checks and evictions.

Matt:
And never drawing the ball.

Andrew:
Yeah. And requests from their owners and all kinds of stuff like that. You being very responsive to resident requests, even the ones that are annoying or seem silly or petty because it doesn’t matter. To that resident, it’s important. And the ability to separate those two things. You can still be annoyed, just don’t let the residents see that. Give them the respect. Matt, you touched on this, a balance of heart and no BS, empathetic, kind, understanding, but rent is due just like the mortgage is due and the property taxes are due you. I’ve seen a lot of investors get into trouble by being too empathetic. There’s a difference between, well, there’s a difference between empathy and sympathy. Empathy is understanding the person, whether they’re Susan’s sympathy is more of like, “Oh, yeah, okay.”

Matt:
Well, you’re getting involved.

Andrew:
Yeah, it’s getting involved. That’s better. Yeah. Sympathy is getting involved, empathy is more understanding. And sympathy is like, “Well, all right. It’s okay. I understand. You can just make up the rent next month.” Guess what happens next month, “Oh, you know what, I got a flat tire.”

David:
I’m going to treat you.

Andrew:
Yeah. This why I don’t manage anymore. I’m too nice. I’m that guy. When they told me, “Well, my car got a flat tire,” I believe them. “Okay, I’ll let you pay me next month and we’ll just do an attack in our next month’s rent and whatever.” There are certain people that are cut out to be property managers that are able to approach the world with a hammer in one hand and a hug in the other. For me, always the hug guy, very, very big heart and everything like that, but I’m not one that is very good on the hammer side with tenants and everything like that. So I got walked on quite a bit as a property manager, so I don’t do it anymore.

David:
You two, you should team up because you’re the hugger and he’s the hammer.

Matt:
Yes, that works out. Right. Right.

Andrew:
And the fourth thing is they got to be able to build good rapport with other team members, whether again yours or third party. Ideally they treat the property like it’s theirs. I’ve got some managers that… It’s amazing. I swear they act like they own it more than I do. And it’s amazing the difference that that makes. And when we try to recognize and honor and reward that, it’s not just, “Oh, cool, I got this person who…” And we encourage that and give them more autonomy to do things. We have a manager that just decided, “Well, I think that side of that building would look better a different color.” She went and painted it. And the regional was like, “What are you doing?” And I was like, “No, no, no, no.” We trust her and guess what, “That looks great. Do the rest of the property.” No, again, not everyone is cut out for that autonomy, but someone who like… Well, they could still bring it up to you.

David:
Exactly. Exactly.

Andrew:
Get this thing and get permission. In this specific example, she knew we were okay with her doing that thing because she’s so good. But you’re exactly right. It’s the sense of ownership. Just noticing, “This would look even better if we painted out this.” I want to do a 90 day challenge where people who are struggling to get a promotion or make more money or have success, just say for 90 days, “Treat everything of the person you work for, if you live in a property, treat it like it’s your own.” If it’s your boss and you think, “If this was my company, what would I want to do?” And see if that doesn’t absolutely change your life.

David:
You know what, you’re right because when we have a resident that comes out and they pick up the trash around the unit, even if it’s not from theirs and you go in their unit and it’s sparkling clean, everything’s nice and organized, we are definitely more inclined to give them a little bit leeway.

Andrew:
Oh, yeah, a hundred percent. It’s like it’s magic. Make people like you and you make people trust you. Like you said, the best point there when she took it upon herself to paint it, we said, “Go ahead and paint the rest of the property.” And you immediately thought, “How do I give them more responsibility, more freedom, more autonomy, more all the things we say we want.” We all complain about the micromanaging boss, but we don’t ask the question of ourselves like, “Well, what might I be doing that needs micromanaging?” Yeah, it’s always a shift in responsibility onto someone else. That’s why I would encourage people to treat things like it’s their own, because when you’re the person who’s the king, heavy is the head who wears the crown and you’re worrying about everything, when you see the person willing to carry the burden with you, it automatically opens your heart to where you want to give more.
Dave Osborne told a story of how Matt King, who’s now the CEO of GoBundance, became his first assistant where Matt said, “Hey, your wife’s coming to visit you. I’m going to go clean up your hotel room before she gets here.” Matt could have even said something, “Not my wife. I don’t care.” But he is like, “If my girlfriend was coming, I would want her to come into a clean hotel room.” I’ll treat Dave like I would treat myself. And lo and behold, he’s now running Dave’s empire.

David:
I think the missed point there is that Matt knew that Dave’s room was going to be an absolute mess when his break.

Matt:
I know. He’s like, “Listen, I know your room’s a train wreck right now and so I’m going to go and help.” The intuition was there.

David:
I mean, Krista, she’s smart enough to say, “Hey, so this thing was added to your calendar today.” She’ll send me a text message, just to say, “Make sure you see this.” She knows me. I will not check my calendar. I look at it in the morning and I see what I have to do and I’m done. That’s part of putting yourself in other people’s shoes and taking responsibility is thinking like, “If I was that person, this is what I would need.” So I think that’s really good advice. You have about two or three more I think.

Andrew:
Yeah. Number one, we touched on this really as someone ideally that’s really engaging with residents and the rest of the team member. Also somebody, and this is when you’re starting to scale up and get a little bit bigger, somebody that can help guide the team. So you get a manager, well then you add a leasing agent, now you’ve got a maintenance supervisor, and then you add a maintenance tech or a grounds person, whatever, that property manager is someone who can have a 10-minute meeting with the maintenance person in the morning and say, “All right. Here’s our work orders. Let’s prioritize them. Go out. Take care of that.” And then she checks in at the end of the day, which one’s got done, which one didn’t, why. “Hey, leasing agent, do this.” And can coordinate and do all of that.
And then finally somebody that is good at delegating work because the property manager can fall into the same trap that we as entrepreneurs fall into. We’re going to do it all ourselves because that’s what got us here. And that’s actually something we’ve had to help some of our property managers grow through is, “No, look, you’ve got a lot of units. Let’s get you a leasing agent and delegate this.” Or you shouldn’t still be doing these invoices day after day after day. This other person should do it. And then you just verify that they did it. So ideally it’s somebody that can delegate work so that they can grow and as you scale. Hopefully they can move up and scale with you.

David:
Now, Matt, will you talk briefly about, Andrew mentioned a leasing agent should be a friendly personality. He’ll see people sometimes working in retail like, “Oh, you should be the one answering the phone when people call or meeting him with you. What are some other things that make someone a good leasing agent?

Matt:
The best leasing leasing agents I’ve seen are ones that are able to a bit of a drive and that are somewhat financially motivated. And the best thing to do with a leasing agent is offer them some sort of a bonus, even if it’s not like a typical realtor will get half a month’s rent or something like that as commissioned. At a larger property management company, it may be just something smaller than that because that leasing agent may lease eight or nine units every couple weeks. So it can add up to be something significant. So it’s got to be someone who sees that, “The more I hustle and the more I grind and help fill this property up or help keep vacant units full, the more money I’m going to make. Have that alignment and that 50 bucks, a hundred bucks, whatever, per signed lease that they get as their incentive on top of their base salary needs to mean something to them.
They have to be hungry for that. I also find that they’re typically charming. They’re good closers, right? You can’t allow a tenant that, “Oh, I’ll just come back and in a week,” or whatever it is. A good leasing agent’s got to say, “Hey, listen, I’ve got three other showings this afternoon. Don’t’ you think you want to turn into rental application? Isn’t this unit great?” And finally, they’ve got to think that what you are providing is the best thing since sliced bread, right? They’ve got to like that, “We had a pool here in this property.” Or, “There’s a grocery store down the street even. It doesn’t have to be a property with a pool. Even if they’re showing your fore family, they’re just listing amenities, know the area. “Did they’re building a new shopping mall down the street, or did you realize the gas station’s adding a Quicky Mart or a drive-through car wash or whatever?”
They got to know the area and let the perspective tenant know like, “This is a good area that I’m moving into. And this is a good unit I’m moving into.” They’ve got to know the amenities as well onsite. They’ve got to be an expert for the property and make everything they’re talking about the most exciting thing ever. So I think those are great attributes for leasing agents and also good at following up, good at closing because not everybody’s going to follow up on a… Is going to sign a lease right then, so they’ve got to do follow through and reach outs and everything. And one more thing, in the modern world, I just described a great leasing agent, but a stellar next level leasing agent is someone who’s good on social media and can do Instagram posts for your property, that can do Facebook posts for your property, that can take ownership of your Google Pin Drop of the social media assets of your property as those are the next level stellar leasing agents.

Andrew:
So speaking of social media, we were doing a weekly call with one of our property management teams and I asked her, “Where did these leases come from?” She’s like, “Oh, this one, this one, this one, these two came from TikTok.” “Whoa, whoa, whoa, whoa, whoa, what do you mean these leases came from TikTok.” “Oh, yeah, I do all these…” So turns out multiple times a day she puts these little TikTok videos out and the property has this huge following and she’s getting leases off of it. And I’m like, “Okay, can you please teach our other managers how to do this?” And some of them are like, “Okay, great. I’ll learn how to do this.” I’ve got one that’s like, “I don’t do TikTok.” I’m like, “All right, fine. I’m not going to force you to do it.” So yeah, social media skills, that was something that our whole team and business learned because that manager was doing it, again, on her own without me even saying anything. And I’m Like, “Wait, wait, wait, you can get lease off TikTok?” “Sure can.”
I’m often the person that someone in my sphere will call with the real estate question, whatever it is. So frequently I’ll get old friends or people that are actually trying to figure out what apartment they should move into. I’m a real estate guys, so they call me, like I know how to answer.

David:
Oh, yeah, that one right there.

Andrew:
[inaudible 00:40:21] an apartment in my life. But I noticed that when they’re in that point of, “Am I going to go with the whispers, the lakes, or the heights?” They’ll create this list of all the amenities they have and then compare the rents. There’s a deep analysis that most tenants are going to go into when they’re picking where they’re moving because ideally they’re going to live there for a while. They don’t want to pack up and move constantly. “This was 2000 a month and it’s in this location, but it doesn’t have a pool and it doesn’t allow pets. This one does allow pets and it’s only 2,500 a month, but blah, blah blah.”
They really put a lot of effort into looking at this and when you’re in a position like that, that you’re that engaged in where you’re going to go, I absolutely believe that a leasing agent that’s following up, that’s selling them on why they’d be happier in the heights versus the whispers or whatever, is absolutely a game changer. That is such a big thing when you’re trying to make a decision and you don’t want to make the wrong one. When you have that reassuring voice that’s making you think… Most people, as weird as this is, receive that as God must be telling me to move to this one because this person called, we always give that credit-

David:
Sign. It’s meant to be.

Andrew:
Divine intervention. They followed up just as I was trying to figure this out. Now after you show them the apartment, they’re probably going home that night to talk to their boyfriend, girlfriend, whatever, and say, “Where do you want to move?” There’s a high probability that’s what they’re doing when you divinely intervene and call at 8:30 to just be like, “Hey, did you have any questions? I’d really like to have you here. I thought we got along really good.” “Oh, my gosh, they want us. We’re welcome.” “We don’t even have a dog. Let’s go over there.” Just that one little thing can absolutely make a huge difference.

Matt:
Let me to add on to that. And the reason for that is most people don’t go the extra mile. And so when you do, it is surprising to people, right? It’s like you normally don’t get followed up with like, “Hey, how was that?” Like, “Hey, you had your oil changed here at this at this shop or whatever. How was it? Were you happy?” I don’t get that phone call. And so when you do, they’d be like, “Hey, they actually care. That’s a good place. Oh, I’m going to go there forever. And we’re lease that apartment because this person actually picked up the phone and called me.” Right?

Andrew:
Matt, you made a really good point earlier that I think highlights the difference between asset management and property management. And when you said talked about aligning your team members’ interests with the success of the property. Most property management companies, if you ask them, “What should we pay this person?” They’re like, “Well, market’s between 24 and $27 an hour, so we’ll set it at 25.” And that’s the answer you’ll typically get. A good asset manager’s going to say, “Okay, great, that’s market.” But if my property has a net operating income of a hundred thousand dollars each year, I’m hitting my targets. If it hits 120, I’m crushing it. So what if I set it up so past a certain target, the property manager gets a certain percentage of every dollar above that. Well guess what, now their income goes up with as yours goes up.
And we’ve done that with a lot of our properties and it’s worked wonders because the property manager know, “Hey, if I work at extra hard on this, it’s not going to just make some investors across the country or some dude in California more money, it’s also going to make me more money.” We have a property manager that makes more than the regionals above him because he has knocked it so far out of the park. And I am so glad to pay him literally double market because when you look at how much he’s making us, it’s almost irrelevant because he’s doing so well. So that is a good asset manager skill is to make sure… Even if it’s your admin person, find some way to align their success with yours so that you’re always growing in the same direction.

David:
So when it comes to maintenance supervisors, this is another pretty big piece because poor maintenance will make people not want to live there anymore. I think most people in general will stay where they are until something happens that disrupts their peace. So the neighbor next door is too loud. Their first thoughts is probably, “Get management to fix it. If it doesn’t get fixed, I’m moving.” Or something’s broken that won’t get fixed. Everyone has a tolerance. And then at a certain point they just get to the point they’re like, “I have to leave to fix this.” And the vacancies are very expensive, both because you’re leasing agent now you have to pay someone to go and refill it, plus the period of time no one’s occupying, it’s vacant. And then the turn, you got to repaint and redo all this stuff. So maintenance supervisors can actually help to keep your expenses lower. What’s two things that each of you guys think that you would highlight as when it comes to maintenance supervisors? What are the most important things that you can recommend?

Andrew:
I mean, I think we’re going to operate on the base assumption that whoever you’re talking about has basic maintenance skills. They know the difference between a Phillips and a flathead, which is about as far as I can get. So I don’t have any better analogies than that. Number one is eager to contribute. And what I mean by that is they are, it’s not just, “Okay, I got these five work orders. As long as I get these done today, I’m fine.” Well, maybe they’re out working on work order number two and they see that the next resident over, their door just jams. It’s gotten absorbed the moisture and it doesn’t fit anymore. So every time they see them coming out and be like, shoving their shoulder. “Oh, hold on a second.” They come over, adjust the hinges, “Oh, look.” And get it fixed for them in like five minutes.
It doesn’t need a work order. And then they’re someone that is eager to help out the manager just wherever things come up. One example I can think of is we have a maintenance supervisor that we recently hired and he comes to our calls with a notepad and has a list of things to go over and then takes notes on the things we talk about so that he can go follow up on them and get it taken care. And we never even asked him to do that. I mean he’s just that eager to contribute and be a part of it. So that’s huge. And then one other one is I would also say, and they’re tied together, is that a maintenance person who understands it’s a team effort.
Yeah. Okay. He’s got five work orders to do, but he may have a contractor that onsite that’s renovating unit that he’s got to make sure the supplies are there and that the manager, property manager is there to make sure he got the supplies order. Because typically maintenance doesn’t order their own supplies. Sometimes that’s not the case, but often it’s a team effort with, “Okay, we need this. The manager makes sure.” And just being willing to step in and help out wherever needed. And being on call is candidly probably one of the worst aspects of being a maintenance person at an apartment complex, ’cause you’re going to get call at 2:30 in the morning on Christmas that someone shoved a teddy bear down the toilet and now it’s flooding the unit.
Not that anyone’s ever going to enjoy that, but somebody that is able to say, “All right, this is part of servicing this community and things like this are going to happen.” And hopefully as a good asset manager, you’ll make that up to them on the back end. We’ve had situations like that and we will send that maintenance person like a gift card like, “Go take your wife to dinner. Our property ruins your New Year’s Eve.”

David:
Okay, we understand. Sorry about that. And thank you for answering your phone and going and taking care. That’s awesome.

Andrew:
Yep.

Matt:
To add into there, it is funny, it just seemed to be a common theme across the property management team, therefore the site manager, leasing agent, whatever is a sense of ownership. And the way a sense of ownership shows up for the maintenance technician is things like, “Well, we’re 20 work orders back this month, so that means that these 20 tenants are waiting on me to do a thing for them are now waiting and that’s not okay. And so I need to pick up the pace. I need to knock out these work orders.” Whatever. A bad maintenance tech’s going to shrug their shoulders and say, “Well, that’s all-”

David:
I get to it when I get to it.

Matt:
Yeah, I get to it when I get to it. And we’ve all seen maintenance techs that have that philosophy and there’s also the hustle maintenance technicians that are like, “Listen, that’s not acceptable. These people need me.” Then that’s a sense of ownership and they really take… Showing up to the calls of the notepad. We’ve had maintenance techs tell us like, “Listen, we were giving unit turns,” meaning when a unit vacates, the onsite maintenance were the guys that were turning the units around. They came to us and said, “Hey, we need a little bit of help. And that world on unit turns ’cause had a lot of agencies show up and they asked us for help because they knew they couldn’t maintain their work order flow and it was not going to be okay for work order balance to get way out of whack because they knew that that was something, that was like ownership.
They knew they were responsible for that. So they said, “Can we bring in a little bit of short term help to help us do some painting, to help us do the trash out?” Whatever. And we said, “Sure, absolutely.” Because we knew they cared. That’s why they asked for that. And it wasn’t ’cause they didn’t want to do the work. It’s because their obligations were going to start falling off the plate.

Andrew:
Yeah. And there’s one last thing I want to address. So anyone listening might be saying like, “That’s great guys that the three of you have all these wonderful maintenance pairs of people. I’m just trying to get someone to actually show up and do something on time.” That’s our problem too right now. I mean, Matt and David and I are at the scale where we have these team members in place, but maintenance is probably the hardest position for us to fill right now. And we have unfortunately hired people that don’t fit these characteristics we just talked about and we’ve had to let them go. So if you’re sitting there going, “Well, that’s great, all these ideal characters. I just want some character traits. I just want someone to show up.” Yeah, we’re having that problem too. It’s not just you. Hopefully if the Fed does create more unemployment, hopefully one of the side benefits is that it’ll get easier to find good people. But that’s a problem that we’re having too. So if you’re experiencing that, don’t feel bad. It’s probably not you.

David:
Everybody’s kissing frogs. We talk about the ideal person. That doesn’t mean that you get them on the first try or even the 10th try. It’s often a actual skill of figuring out how you can find the right people, which is why you treat them so good when you have them because you want them to treat your property, and they’ll probably treat it closely to the way that you treat a lot of the time. Well, thank you guys. This has been fantastic. And it’s on a topic we don’t really talk about very often because it’s just been buy as much real estate as you can, borrow other people’s money, go in there fast, loose, and reckless, just spray and prey and you’ll hit the target a couple times and you’ll make a lot of money. And that target’s getting a lot tighter and it’s getting a lot harder.

Andrew:
“It’s going to work in the future.”

David:
That’s exactly right. So before I get you guys out of here, Matt, where can people find out more about you?

Matt:
They can hear about me on our company website, derosagroup.com, D-E-R-O-S-A-group.com. Or they can follow me on Instagram at themattfaircloth.

Andrew:
Matt’s also written a book for BiggerPockets. What was that book?

Matt:
That was called Raising Private Capital. And that’s something really exciting. And I think that investor relations and the way that you raise more money for your deals and the way that you treat investors that you already have into your deals is going to be something that’s going to become even more, it’s always important, but even more important in the changing economy. So everybody should check out Raising Private Capital at biggerpockets.com/store.

David:
All right. And Kush, where can people find out more about you?

Andrew:
Just search Vantage Point Acquisitions website is vpacq.com. Also call a colleague request me on BiggerPockets so we can connect there. And if you’ve made it all the way to the end of this podcast and at either you’re someone who loves asset management or you’re like, “I really want to learn that,” three out of our last four additions to our team have come from the BiggerPockets listeners. There are some amazing people who listened to this podcast and we are looking for another one. So if you’d like to come work with us in on the asset management side of the business, please go to the website. There’ll be a tab there and a link there to apply. And I look forward to hopefully working with you.

David:
Yeah. And I can co-sign on that. Andrew is my multi-family partner. We buy properties together and the people that have come to work for us have been fantastic. And they have actually made a lot of progress with their own portfolios as well. It’s a really, really good way to learn when you’re working for someone that’s going to hold you to a high standard, teach you things to do things the right way, model for you the right way to approach it. And those habits that are developed are the stuff we talked about earlier with the attitude and the personality that you’re bringing to the job matter a lot. So please, if you’re into multi-family, consider reaching out.
All right guys, I am going to get you out of here. Thank you very much for taking time out of your Lake Tahoe [inaudible 00:53:07] to talk some multi-family with me and our listeners. And hopefully this helps a lot of people. We’ll see you next time.

Andrew:
See you then.

David:
This is David Green for Matt “The Scorekeeper” Faircloth and Andrew “The Hamburgler” Kushman stealing all my analogies signing off.