#DoorGrowShow - Property Management Growth

DGS 134: Mobile Home Investing with Andrew Keel 0

Transcript

Jason: Welcome, DoorGrow Hackers, to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, impact lives, and you are interested in growing your business and life, and you are open to doing things a bit differently, then you are a DoorGrow Hacker.

DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it, you think they’re crazy for not because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income.

At DoorGrow, we are on a mission to transform property management businesses and their business owners. We want to transform the industry, eliminate the BS, build awareness, change the perception, expand the market, and help the best property management entrepreneurs win. I’m your host, property management growth expert, Jason Hull, the founder and CEO of DoorGrow. Now, let’s get into the show.

My guest today is Bobby Sharma. Welcome, Bobby Sharma.

Bobby: Thank you, Jason.

Jason: Bobby is with a company called BetterCapital. Bobby, you have quite an extensive real estate experience. I grew up in Rancho Cucamonga, Alta Loma, California. We were touching bases for the show. You got your start in real estate somewhere in the Inland Empire.

Bobby: In the Inland Empire, yeah. Riverside, California. I did what's called house hacking. Back then, there was no such term. I was 24 years old, worked in Corona, California, and lived in Riverside, California. That's how I got my start in the real estate world.

Jason: Define house hacking for those that are not house hackers.

Bobby: I was single. I ended up buying a house—three bedrooms, two baths—with the intention of maybe I'll get a couple of roommates, and they'll help me with the mortgage. I put an ad in the Riverside Enterprise, I don't know if you recall that newspaper. This is the late 1980s, early ‘90s.

I got two roommates, great guys. They were my roommates for a long time, also single. One was a plumber, one was an X-ray tech. Long story short, they helped me pay for most of my mortgage. Not quite 100%, but most of my mortgage.

Jason: Nice. All right. And that was your first foray into real estate investing. This sparks something for you. You thought of it, but your roommates, apparently, didn't. They're willing to pay rent.

I lovingly refer to the Inland Empire as the armpit of California.

Bobby: Absolutely.

Jason: I had a good childhood growing up there. Now, I'm in Austin, Texas which I'm really enjoying. I got out just before the craziness of the pandemic, and California's gone insane. It's gone insane with all the stuff that's going on right now.

Bobby, give us a little bit of history since that first experiment and give us a little background—qualify yourself. Help the audience understand your experience in real estate or surrounding the property management rental industry.

Bobby: Absolutely. Thank you, Jason. Since then, I was 24 back then. Then, I had to take a break. I got married. I didn't do much in real estate. But about 10 years ago, when I saw the market really collapse—that was in 2010—I moved up to Silicon Valley. I was a software developer back in Southern California. But I always wanted to be in Silicon Valley, work for one of these technology companies that Silicon Valley is famous for. Sure enough, I worked for one of them.

In 2010, I just saw the market collapse here in the Bay Area as well. I said you know what? I have some savings, so I started going out and picking up some homes that needed a little bit of work. Long story short, I also started a real estate meetup group in the Bay Area, in the East Bay. We call it the East Bay Meetup near Oakland. There weren't a lot of meetups going on, but most of them were in San Jose or San Francisco, and the people were fighting the commute.

Long story short, I ended up starting a meetup in the Oakland area. Fortunately, that meetup has now become the largest real estate meetup in the Bay Area. I've got about 5000 members. We used to meet up every month.

Out of that, I ended up becoming a landlord, buying out of state, and working with property managers. I love my property managers. Without them, I wouldn't be successful. I totally get the importance of property management.

We own a bunch of rental properties—a lot of single-family, a lot of multifamily, but a lot of it is out of state for cash flow reasons as in cash flow in California. We ended up with several hundred doors out in the Midwest, mainly.

Jason: How did BetterCapital come about, and what is it?

Bobby: Just like a lot of people in my meetup group, we're active real estate investors. I have rental properties. I'm a private money lender. I have syndications. In a couple of properties out in Ohio, I do what's called seller financing. We own a bunch of rental properties, a bunch of real estate assets.

I was tracking everything through Excel, but that was just not cutting it for me. You can't store documents inside of Excel. Things were scattered all over my computer, in my Gmail, and in my Dropbox—leases, insurance, tax bills, reminders, and everything.

What I did was I worked with a technology partner of mine, and we put all the essential tools to track your portfolio. We're not AppFolio. We're not Cozy. We're not TenantCloud. We're not a property management software, but we talk to a bunch of property management systems. We are like a portfolio measurement and portfolio management tool for real estate investors.

Jason: Explain the measurement part.

Bobby: Yeah. What we do there, Jason, is if you bought a property five years ago, you're getting your checks every now and then. Your property manager is depositing the checks in your bank account. Sometimes it's not what you expected because there was a repair, or you don't know what your loan balance is on the property.

What we do is we track the actual deposits in your account. We track your loan balances. We track the equity in your properties across the board, and then we give you a return on investment. What did you invest in that property, and what's your annual return on investment? What's your equity growth?

The analogy I like to draw is if you log in to your Schwab, E-Trade, or Robinhood account, you can see the equity of your stocks. How much did you gain in your stock if you bought Apple five years ago? Or you bought Amazon 10 years ago, how much have you gained? We didn't have something like that for real estate investors.

What we built was a tool. It has the ability to store documents. It has the ability to put reminders to track your equity growth, to see in a graphical manner how this property performed over the past year, this year, over the past five years, and then since you bought it.

We have a lot of mathematical formulas that run in the background and then you can track. We want people to see how much wealth they have created, or how much equity they've created because we want to encourage them to purchase real estate assets.

Jason: I would be curious if they can measure this better, and they can see the performance, do they tend to invest more?

Bobby: Exactly. That's the whole idea, right? Real estate over time has so many benefits. Sometimes, especially property managers, they are so busy with day to day operations that they forget to remind the investors, the landlords, about the benefits of owning real estate.

Yes, there are bumps in the road. There's going to be a turnover here and there. There's going to be an eviction here and there. But if you look at it across a long period of time, it turns out that it's one of the best ways to invest, to grow your wealth, and to plan for your future.

What we want to do is we want to help property managers and realtors—those are our partners. Property management, which is your audience, as well. If we could help your current set of landlords grow their doors, maybe you bring a portfolio of new assets that they can purchase. But you can demonstrate that, look, if you bought this property with us in Tulsa, Oklahoma, in Dallas, Texas, or El Paso, Texas. If you've owned this property, here's how much equity you've gained. Here's how much your cash flow was last year. Here's how the property performed.

Then, you can then have a really strong case to go back to them and say, listen, here's another similar property that is available on the market. Would you like to maybe consider adding a door or a couple of doors to your portfolio?

Jason: It sounds like this is a largely effective tool for the investor. You have a way that investors can see and manage their entire portfolio. They have, say, 100 properties, or maybe they have like 20, 30 doors or something. They can see this portfolio. Then there's a way they can invite their property manager in to also see this portfolio, keep this updated, or to connect to it?

Bobby: Absolutely. The property managers and realtors play a very important role. The owner can always invite their property manager to see the property in the system or communicate with that property manager. The other is that the property manager can invite the landlords to the system as well.

When they upload a list of their landlords, we create what's called a preferential relationship and the exclusive preferential relationship between the property manager that loaded up the landlords in the system. That way, if you have a new portfolio that you want to maybe broadcast to your existing landlords, you can broadcast it to our platform.

You can also let them know that, hey, listen. Here's a similar property that gives you the same kind of returns. It's in the same area. You may want to consider looking at purchasing this one. We want to help the property managers and the realtors have that exclusive kind of relationship with the landlords.

Jason: There's this performance side of it. Maybe if an investor is looking at getting into a property, is there any forecasting that's similar? Is there a forecast inside? Like, here's a possible future roadmap of what this investment could do.

Bobby: Very good question, Jason. That's on our roadmap. One of the things we want to do is forecasting or projecting the performance of a property that may be on the MLS or it may be in the portfolio of the property manager. Maybe somebody's looking to sell that portfolio.

In the future, we will have what's called a forecasting calculator. You can submit that property. You can punch in all the numbers, and then the system will forecast. Within our platform, they'll be able to see the projections.

We also have a way for the user to say, okay, if the application is forecasted at 3%, they can adjust that. They can say, what if it only appreciated 2%? Or if the rent appreciation was 5%, what if it was only 3%? And so on. We will give them that tool, but yes, that is on the road map.

Jason: Very cool. Now, does this have an API integration? Because a lot of property managers, they are not going to want to go in and up the second system. They've got their property management back office. They're using Rent Manager, AppFolio, Buildium, or Propertyware typically. Is there a way of either scraping that data into those systems or maybe through an API connection pooling all that data in?

Bobby: Very much so. We talk to the most popular property management applications out there. Most of them have APIs. If they don't have APIs, we allow the user to import an Excel file. Very easy to do. It takes about less than two minutes to set up a property in the system. Once they get really good at importing data, it takes about five minutes to import the data if they're new. But once the property is set up in the system, then it literally takes 30 seconds to update a property every month.

Once a month, what are the main items that you're looking at? It's once a month, typically. Maybe sometimes twice a month. You're looking at, did your rent come in? Did you pay your mortgage? Did you pay your insurance and taxes? Did you pay your property management fees? But it's really very simple to bring that data in.

We have bank integration. You can also pull the data from a bank. By the way, the property manager doesn't have to do this. The landlord can do this. The only thing the property manager has to do is load up the client list the first time and then reestablish that. The first property manager to load that landlord into the system gets the exclusive relationship. That's the first-come, first-served relationship that they have. But after that, the landlord should be able to go in and update the system. And it's very easy to do that.

It's in their best interest to see the performance of their assets, right? So they do a bulk of the data entry.

Jason: That exclusivity sounds really exciting (I'm sure) to the property management business owners that are listening. Because this could be something that they could upsell as a feature for their more invested investors, those that have lots of doors. It can be an upsell or a premium price point on their premium plan that they offer for the more savvy investor clients.

Now, related to that—and I don't know if this is a possible future feature request or idea—but a lot of property managers love owning their brand. Would it be possible to white label this service that it's their thing if they have that?

Bobby: A very good question. Our service is free to the landlords. As long as they're not over 15 or so doors, it's free. But to answer your question, we do plan for the larger property managers to have their own white-label co-branded service. Not a problem. It's available.

Jason: Okay, very cool. What else can this do?

Bobby: We built this platform for investors like myself. Look, I'm a big champion of real estate agents and property managers. Their jobs are often thankless. We forget how much work they do behind the scenes. Managing properties, not an easy task by any means.

We are big cheerleaders and supporters of property managers, of real estate agents. At the same time, the landlords need to be able to track their system a little bit better. Our goal is, we call it the three T's.

Tracking. To my meet up for the past 10 years, I've been providing education. I've been an evangelist for better real estate investing. We bring in experts on whether it's fix-and-flip, buying remote properties remotely, syndications, private money lending, asset protection for real estate investors—just about any topic that has to do with real estate. We've been teaching that in our meetup.

We're going to embed that into the system. If the landlords, the property managers, and real estate agents want to become better at something, we're going to have an expert present once a month. Tracking, training, that's our second key.

The third T is the transaction. If the property managers, realtors, have a deal that is what I call investor-grade that they want to send out to their members, then we want to enable transactions. We're not Redfin. We're not one of those sites. But we allow them to communicate about it. It could be a pocket listing. It could be a property manager where the landlord is retiring or doing a 1031, but he wants to sell off his portfolio without putting it on the MLS, for example.

Let's figure out how to communicate within the system to the potential buyers because the people that are in the system who are happy with their performance and their relationship with their property manager, they will want to acquire more doors. Those are our three Ts—tracking, training, and transactions.

Jason: It's almost like a trading platform. Is this essentially like the E-Trade for real estate investments instead of the stock portfolio?

Bobby: It is. That's very much our vision. The training is there. The transaction piece is not there. But that's what we're building right now.

Jason, in a nutshell, it is E-Trade for real estate because we don't compete with the AppFolios, the YardEase, the Buildiums of the world, but we partner with them. We don't want the property managers to change what they're doing. Whatever they're doing is fine. We will learn to live alongside the systems they have in place.

Jason: This seems to be just such a missing piece to give investors a real tool. Most property managers are just so caught up on just at least, at the very bare minimum of giving their investors a statement or a report at the end of the month. But there's a big difference between managing as a real estate investment and just looking at the expenses for the month, the rent, and whatnot, and seeing a report. Seeing it as an actual investment, and maybe even seeing a chart to see what's actually going on. You get a sense of whether you're losing or gaining.

It seems like such a simple, brilliant, missing puzzle piece in the ecosystem. Kudos to you for coming up with this. Now, are there other things like this out on the market?

Bobby: I think people are finally realizing that a similar tool is needed. There are a couple of players out there. What we have done is we have taken a comprehensive approach to real estate investing. What are people interested in?

They're interested, obviously, in tracking, like the performance of their assets. That's done in Excel, and it's done on a very ad hoc basis. It's not real-time, and it's a lot of keystrokes. What we want to do is we want to automate a lot of that so that once you put the property into the system, then a lot of the updates are done automatically.

The other piece is nobody's providing education. I truly believe that as property managers, it's equally important to educate the investors about the challenges, right? If there are evictions, if there are turnovers, let there be some transparency. What we want to do is we want to prepare our users to become better investors. Part of that is understanding the challenges or the opportunities that property management companies and realtors face.

A property manager's job is not easy at all. You have to be really thick-skinned to be a property manager. Well, let's appreciate that so that when your rent is a little bit lower than expected, or you have a turnover that's taking a little bit longer. If the investor, the landlord is better educated, maybe they won't get upset as much. They will understand, okay, you know what? This is winter in Michigan, and it's going to take a little bit longer to put a tenant into the house or the property.

We want to provide education to make them a better investor. They will appreciate the role of the property manager a little bit more.

Jason: That's the role of the property manager. I mean, property managers are the unsung heroes of the real estate investing category or industry. They make tenants better. They make the owners better. They hold everyone to a higher standard, and they make properties better all around. Good property managers really do change the world.

I love what you're talking about how the education piece is going to improve the quality of clients. It's going to take their client from where they are now, give them a greater understanding, which most likely increases their logical need to use a property manager. They understand, oh, this is a bit more complicated than these home TV shows and reality shows made it out to be flipping a house or renting it out.

This is worth touching on because I think there are some small-minded, scarcity-minded property managers. Maybe they're newer to the industry, but they're thinking, oh, no. The only reason people will need me is if they're not educated. But I think the reverse is true. The more educated a client becomes, the more they can see clearly the liabilities involved, the dangers, the potential pitfalls, the time, and they don't want to touch it. They want to let go of that piece. They want to be an investor. They don't want to be a shitty part-time property manager.

Bobby: Exactly.

Jason: They do that full time.

Bobby: You nailed it, Jason. Your perception is right on. The better-educated, the better-informed, the landlord, the investor is, the easier it'll be to work with them versus a total newbie who thinks it's just very simple to hire a property manager. That every month, magic, a check will show up. It just doesn't work that way, especially now in the pandemic era that we're living in, it's even more challenging.

This is the time when property managers need to communicate more, not less, about what's going on in the court systems, the eviction process, and so on and so forth. You're right. The members in my real estate meetup group, the ones that are well-educated about investing are the ones that are buying more rental properties. The ones that are not educated, they just bought their primary home, and they never buy a rental property. The extent of their real estate investment is their primary home.

Sometimes, they outgrow that primary home. Then, they buy another home, and they keep the old one as a rental. They're not proactive in going out there and learning about rental properties and the benefits of rental properties with the tax advantages and so on. That's where our partners, real estate property managers, realtors, and educators can really come in and help out.

Jason: I think the tempting mistake that a lot of software people coming into this industry is that they try to cut out the property manager. I've seen this over and over and over again. They think, well, we could replace this critical relationship and negotiation piece with software. That can't be done in the hospitality industry, it certainly can't be done in the property management industry, and it also can't really be done in the real estate industry significantly because these are relationship things. There are negotiations, there are people involved, there are feelings, there are humans, and there's a lot that software can do. But software really should be enabling and facilitating those things. Not trying to replace those things.

I love that you're incorporating property managers. I think this a wise move as you're moving forward. It allows you to connect with a lot of people that have investment portfolios. And it doesn't try to cut the property manager out of that in which we end up with a whole bunch of [...] then we end up with a bunch of crappy property managers, which are just people DIY-ing their management, and not really doing a great job.

Then they have software tools that are supposed to say that it makes it easy, but things have fallen through the cracks. Laws are getting broken, tenants aren't protected, owners aren't protected, and silly stuff is being done. Very cool stuff.

Is there anything else you'd like the audience to know about BetterCapital before they go? If so or if not, how can they get ahold of you? And how can they try this thing out?

Bobby: Thank you, Jason. First of all, it's a pleasure to be on your show. I really enjoyed it. I've watched your videos, so thank you for doing what you're doing for your community, which is your audience of property managers. You're doing a fabulous job. Thank you for that.

Look, our goal is very simple. We want to serve the real estate community in general. From newbies to seasoned investors, we want to give them tools. I'll be the first one at any of my meetups. If they're buying a property remotely, they need to engage with a good property manager because it's literally a marriage between you and the property manager for the next 10, 20 years. However long you hold that asset, that's how long that relationship needs to last.

It's very easy to get a hold of me. It's bobby@bettercapital.us. We couldn't get the dot-com, so we got the dot-us. It's bettercapital.us. Look, we're in what's called a beta version right now. We're coming out of the beta version. We'll go live very soon. But we'd love to get your feedback. We'd love to incorporate your feedback into our product. We'd love to make you a partner. We'd love to see the property management companies that choose to work with us, we want to see them succeed. We'll highlight them, we'll showcase them, and we'll work with them.

Jason: Awesome. Property managers, if you're listening, this is your chance to help shape this tool to be something you really want. You can be the ultimate beta tester, and then you'll have the ultimate product that would really serve your needs. Take him up on that offer.

Well, Bobby, I appreciate you coming on the show. Thank you for your gracious words. I hope you have some success with this.

Bobby: Thank you, Jason, and likewise. Hopefully, we'll stay connected. I'll keep you posted on our progress.

Jason: Awesome. All right, check them out at bettercapital.us. For those that are somehow new to this show because you just stumbled upon it. I was going to say, it was interesting hearing, thank you for doing the podcast. I was thinking, sometimes it's a thankless job. But I'm like, wait a second, he's thanking me. But sometimes, it is a thankless job. I'm putting out free content. We pay a good chunk of change to have this podcast produced and to put out there. My team does social media marketing to get it out there as well. We do make money, don't get me wrong. We get paid really well to help property management businesses get paid really well.

But if you want to do something to reciprocate—besides becoming one of our clients—make sure to like our stuff. Follow us. You can subscribe on YouTube and follow. Leave us a review on iTunes. We'd really appreciate it.

If you're looking to grow your property management business, you are struggling or trapped in one of these growth sand traps, maybe around 50 or 60 doors. The solar [...] sand trap. You can't figure out how to get ahead. You don't have the revenue to hire your next person. You can't seem to get more doors than you're losing and you just stay stuck there. Or maybe you're in the second sand trap, 200-400 doors, and you just can't figure out how to get the right people to do what you want them to do.

You're getting overwhelmed because your team is always asking you all the time, all the questions. You're feeling overwhelmed, and you realize you are the biggest bottleneck in your business. There is a roadmap out of that. Very easy to get out of. You can listen to some of the previous episodes. But reach out to us at DoorGrow. We would love to have a conversation and see if you'd be a fit, see if we could help you grow your business and be the property managers making a difference out there in the world.

Until next time, everyone. To our mutual growth. Bye, everybody.

Download this Episode

Sep 22, 2020

As a property manager, have you considered investing in mobile home parks? Not interested? Not your thing? Some people won't touch it with a 10-foot pole.

Today’s guest is Andrew Keel of the Keel Team. Andrew’s here to convince you otherwise. He talks all about mobile home park investing as an attractive and appealing asset class.

You’ll Learn...

[02:00] Sticker Shock Stigma: Why investing in mobile home parks is a good idea.

[02:48] Longing to be a Landlord: Leverage other people’s money to buy properties.

[03:30] Yellow Letter: Knew nothing about mobile homes, but knew it was a great deal.

[04:00] Shoutout to Lonnie Scruggs: Learned how to make money with mobile homes.

[05:10] Temp to Forever Cashflow: Use capital to buy and manage mobile home parks.

[07:07] Three reasons why to invest in mobile home parks:

Highest returns out of any form of real estate.
Demand for affordable housing is off the charts.
Supply is limited.

[12:40] Bottleneck in Business: Finding good quality deals big enough to move on.

[14:54] Boots on the Ground: Third-party property management for mobile home parks.

[18:58] Utility Infrastructure: Most important aspect and most expensive to replace.

[20:12] Tax Shelter: Mobile home park business of depreciation and improvements.

[20:57] Models: Community owners own homes vs. every home is park-owned rental.

Tweetables

“Some people won't even touch it with a 10-foot pole. That artificially creates a moat to this investment class.” Andrew Keel

“I knew I wanted to be into real estate. I knew I wanted to be a landlord, but I didn't have a lot of money.” Andrew Keel

“The demand for affordable housing for this country is off the charts.” Andrew Keel

“The stigma of living in a mobile home is not as strong in the midwest as it is in other parts of the country.” Andrew Keel

“We are looking at a more scalable model to have the tenants own their homes. Then, we just have lot rent.” Andrew Keel

Resources

Keel Team

Deals on Wheels: How to buy, sell, and finance used mobile homes for big profits and cash flow by Lonnie Scruggs

Mobile Home University (MHU) Boot Camp

HUD

NARPM

DoorGrow on Instagram

DGS 133: Reduce Overhead Costs and Streamline Time Tracking with Timeero 0

Transcript

At DoorGrow, we are on a mission to transform property management businesses and their owners. We want to transform the industry, eliminate the BS, build awareness, change the perception, expand the market, and help the best property management entrepreneurs win. I’m your host, property management growth expert, Jason Hull, the founder and CEO of DoorGrow. Now, let’s get into the show.

Today's show is going to be all about Mobile Home Park Investing. My expert guest is Andrew Keel of the Keel Team. Andrew, welcome.

Andrew: Thank you.

Jason: Andrew, before we get into this idea of Mobile Home Park Investing which, I'm guessing a lot of property managers right now are like not my thing, I'm not even going to listen to this one. I'm going to skip this episode.

Before you do that, Andrew's going to convince you that it might be a good idea.

Andrew: I'll give them my best shot. I think one of the reasons why I like the asset class so much is because of that stigma that a lot of people see. That initial sticker shock of the asset class. That's a huge part of why the industry is so attractive, some people won't even touch it with a 10 foot pole. That artificially creates a moat to this investment class.

Jason: Right. Just a little protection built in, okay. Some of them were thinking that's kind of like having a trash heap around the property. Nobody wants to come in. Maybe it doesn't look very appealing.

Before we get into that, Andrew, tell everyone about you. You've got a lot of things going on. Give us a little background of how you got into real estate investing, property management, how did all this start for you?

Andrew: Yeah, sure. I started flipping houses around Central Florida and wholesaling residential contracts. I did that for about two years. I was trying to become a landlord but I started with nothing. My parents went bankrupt when I was in college, lost the house I grew up in. I knew I wanted to be into real estate. I knew I wanted to be a landlord, but I didn't have a lot of money. I initially thought, hey, I need to have a lot of money to be a landlord because I can't afford to buy these properties. That was before I learned how to use other people's money and leverage other tools.

I started flipping houses and I got a deal through a yellow letter that I mailed out on two mobile homes in Ocala, Florida. That's just a couple of hours north of where I live in Orlando. These were nice, vinyl-sided, single roof homes that were manufactured in the mid-1990s. I could buy both of these for $2200 cash.

I was like I don't know anything about mobile homes but this is a great deal. I just knew it. I had two titles, I left that day. I gave them the cash.

I came home and got on YouTube. I typed in how to make money with mobile homes? I was like I don't know, there's got to be a way to make some cash off these things. I came across a guy named Lonnie Scruggs. He used to teach this class, and he has a book called Deals on Wheels. It talked about buying mobile homes, fixing them up, and selling them on contract to an end buyer. That's exactly what I did with those two mobile homes. I was able to fix them up, just clean them up basically. Some new paint and some new flooring.

I sold them for $3000 down and $250 a month for five years. I did that on both of them and I only paid $2200 cash for both. I was like wow! This is a great model. It's not forever cash—that was my end goal—but this is great, temporary cash.

I ended up doing that 19 more times and bought individual mobile homes through various parks throughout Central Florida. I sold them on contract. After doing that, I met some mobile home park owners. Again, I had this idea in my head that you need to be extremely wealthy to buy mobile home parks—the whole community.

Through talking with them, they gave me that epiphany of using other people's money. I could be the sweat equity that would manage the properties. That was a huge Aha! moment for me. I immediately became glued to the asset class, read every book, went to every seminar, went to the MHU Bootcamp a few times, and just became a sponge for the asset class. That was a defining moment for me—getting into that industry.

After I went to one of the bootcamps, I met a passive investor there that was just looking to invest and didn't want anything to do with the operations. He happened to be in the finance industry and worked really long hours but had a ton of cash that he wanted to deploy into this asset class.

He partnered with me, and we bought the first mobile home park. It ended up being a really huge success. After that, we ended up buying four more communities since that one went so well. Since then, I have brought on more investors from friends and family to others outside of that. We do syndications now. We aggregate money from a pool of investors and then purchase these assets into a single purpose LLC.

It's been a very awesome ride. It's been exciting. It's been blood, sweat, and tears into this at this point. Now, we're at 23 communities which is amazing and a blessing. We have a ton of people that work for us now and are awesome members of our team. That's a little about how I got into where I am today.

Jason: You never just woke up when you were a kid and said I want to grow up to do mobile home park investing.

Andrew: No, that's not how it went at all. I just kind of fell into this but I believe mobile home parks are a mode of investment for a few reasons. One of those that's really important is it has the highest returns out of any form of real estate. Right away, I was attracted to it.

Number two, that makes it that much better, the demand for affordable housing for this country is off the charts. I think you can talk to any real estate expert and they would tell you that.

Number three which is the main reason, number one, put it on the top of your list of why mobile home parks are a great asset class to invest in is because the supply is limited. Any other asset class whether it's self storage, multifamily, whatever, it's easier to develop those and get those approved.

Where mobile home parks have this stigma, there's this not in my backyard initiative where people don't want a mobile home park built right next to their subdivision. It's very hard to get zoning approved for a new mobile home park development.

Number two, from an economic standpoint, mobile home parks are loss leaders for municipalities. On average, they cost around $11,000 a year to put a child through public schooling with the cost of the school, the teachers, et cetera. In mobile homes, the owners of the mobile homes, they only pay maybe $50-$100 a year in their personal property taxes on their mobile home that they pay at the DMV just like you would pay taxes on your vehicle, or both, or so forth.

The taxes are very low, but say a family of four that has two kids in elementary school, that would be a huge loss to the local municipality every year for having that family in their municipality. That's a big reason, the supply is shrinking. On average, there's 10 mobile home parks across the country that are torn down every year. It's continuing, it's getting more than that. More and more, they're torn down and put into better land uses for multifamily and whatnot. It's very rare, if any at all, are being developed from the ground up. It's very interesting from a supply standpoint.

Jason: Are you involved in getting them developed?

Andrew: I'm not. There's lower hanging fruit in communities that are already established, to be honest. It's less expensive to go in and fix the existing infrastructure. The majority of mobile home parks, I think 80% of them, are owned by my mom and pop owners. It's not an institutionalized asset class like multifamily and self storage.

With that, you're able to come in and increase value very quickly through increasing that operating income, whether that's through modest rent increases, billing back utilities, increasing the occupancy. A lot of these communities have been owned by a mom and pop for 30-40 years. They have a lot of equity. A lot of these are paid off pretty clear.

With that, we've been able to acquire five communities with stellar financing because they're able to be more flexible since they don't have some of the restrictions that a bank would have on a mortgage.

It's a very exciting asset class. It's new to a lot of people but it's definitely a mode of investment. It's not something that you want to go to the country club and brag to your friends about. It is also very unique in that aspect because that stigma does keep some investors out of it and keeps cap rates significantly higher.

Jason: Okay, okay. The first thing you mentioned is it has the highest returns. Qualify that a little bit, compare it maybe just a little bit, let's back this up. Some people listening, maybe their ears perked up when they heard that.

Andrew: Yeah. If you're familiar with commercial real estate, properties are valued off of their income, there's the income model. Cap rates for mobile home communities are typically between 8% or 12%. If you compare that to multifamily, you're not able to get as big of a spread between the interest rate you're paying on your loan and the cap rate that you're purchasing the property for.

The cap rate is the net operating income divided by the purchase price, for those of you who aren't familiar with that. Basically, we aim to get at least a 3.0 spread between our interest rate that our loan we have in the community, and the cap rate that we're paying. If we're able to create that Delta, we can offer our investors 20% cash on cash return annually.

Jason: All right, okay. I’m taking notes. If you can offer investors that, it's not too difficult to get investors you're funding?

Andrew: Yeah. We've been very fortunate to have a lot of people reaching out to invest with us. At this point, I would say the bottleneck in our business is finding good quality deals that are big enough to move the needle. There's a lot of communities that are between 50 and 100 lots that are a good place to play in. The communities that are bigger than that offer even more economies of scale in terms of expenses versus income. Those are the ones that are getting eaten up by institutional buyers at this point.

Some of the REITs, some of the large private equity firms, are now playing in this space because they've seen high returns. They know supply is limited and demand is off the charts. They're going after those larger properties. Those are harder for us to compete with because those cap rates are getting compressed.

Jason: This is just in your local market that you're willing to work and target? Is that correct?

Andrew: We have communities all the way from Georgia to North Dakota, all the way down to Tennessee, and all the way across Pennsylvania. We're right in the center for the most part—the center of the United States. We did that for a couple of reasons, it was mainly strategy. Hurricanes primarily don't go across the midwest. However, there was a polar vortex last year, that was absolutely crazy. Hurricanes, it's protected against those.

The stigma of living in a mobile home is not as strong in the midwest as it is in other parts of the country. For the most part, we aim to purchase communities in the middle of the United States.

Jason: Got it. How difficult is it for somebody that's currently focused on single family residential, or maybe they're doing commercial, or maybe they're doing multifamily, to add this in as another business—basically another arm of their business and to work on this?

Andrew: That's a great question. First off, I think we should say that third party property management for mobile homes communities, that's like across the nation, it's basically unheard of. There's like two or three companies that do it and they're not doing it at a high level. It's very tough because it is management intensive.

Even though a lot of these communities don't own the mobile homes themselves, they just own the dirt underneath them, your maintenance costs less. There's just other reasons why it's a little bit difficult to manage these communities on a large scale because of the turnover and things like that that do happen.

Jason: You're managing just the parks, you're not managing individual rental properties.

Andrew: Correct. We get a lot of rent off the ground. Now, as a necessary evil of the business, when a home goes up for sale or say we come to own one of these homes, we have to then sell it to the tenant for them to become a tenant-owned resident and rent out the land to them.

There's probably about 20% of our total units that are homes that we've sold to the tenant on contract. They're still responsible for maintenance but it's sold to them like a rent credit program, is what we call it, where they're making payments monthly to then pay off the home. Then, eventually, they will just pay lot rent.

Jason: We didn't say this at the beginning, we probably should qualify you a little bit more by saying how many units are you over right now? How many are under management?

Andrew: We are at 1497 units right now. That's across 23 parks.

Jason: All right. How critical it is to have boots on the ground in all of these 23 locations?

Andrew: It's paramount, in my opinion. We have an onsite manager at every single location. That's typically a resident that had the nicest home, we converted them into an onsite manager. All they are is just basically an eyes and ears person that communicates with our corporate office. It keeps us abreast of what's going on in the community. That has been really important for us to just be able to understand what's going on.

Typically, we go after someone that has a fixed income like Social Security and they have one of the nicest homes in the communities. They're retired and they're home. They're like the community watchdog. They keep us up to date on what's going on. Then, our corporate office which we have 14 corporate offices, offsite management employees, handles everything from the financials, to the project management, to collections, to bookkeeping, et cetera.

Jason: Got it. These are all parks that you have some sort of an ownership in, correct?

Andrew: Correct. We only manage parks that we have ownership in right now.

Jason: Got it, okay. For those listening, if somebody has a property management business, maybe they're a real estate investor and they're wanting to get into this, what advice would you give as the first initial step?

They're looking around. They notice there's a mobile home park or two that probably could use a little love. Maybe the mom and pop owners would be willing to have a conversation. What's the first step that you think they need to be aware of? What knowledge do they need to gain first?

Andrew: Yeah, that's a great question. I would say you need to go and get educated. You need to go to the MHU Bootcamp that's offered by Frank and Dave. That's like the industry leading educational platform that teaches everything from how to find deals, how to value them, and how to manage them.

Within that class, you'll learn about the utility infrastructure. The utility infrastructure is by far the most important aspect of these communities because that's the most expensive to replace.

For example, a community that's on the city water or the city sewer is more attractive because there's less risk on that half. Versus a community that's on a well and septic. A well and septic, there's a lot more testing involved. Now, you're servicing a community that is using that water supply. You have to make sure that there's certain chlorine, certain tests done on a consistent basis, to manage that water system.

The same thing if you're on a septic or waste water treatment plant. Wastewater treatment plant can cause $500,000 to replace. You have to make sure that they're maintained on a high level. If they're not, you could be front of the bill for a very expensive project.

Jason: A lot of what makes a mobile home park work is underground is what you're saying?

Andrew: Correct.

Jason: Okay. It's not just land, there's infrastructure that's really critical underneath.

Andrew: Very, very, critical. Those are all items you're able to depreciate and we love that part of the business because mobile home parks are also a known tax shelter because of those improvements.

Jason: Interesting. You said that Frank and Dave over MHU?

Andrew: M as in Mary, H as in Harry. Mobile Home University.

Jason: Got it, all right. I thought I would make sure. Cool. What else should they know about mobile home park investing that we haven't covered so far?

Andrew: I'll just give a vague overview of it. There's a model where the community owners will own all of the homes and basically operate it as a flat apartment community where every home is a park-owned rental. That is not the model that we follow. We are looking at a more scalable model to have the tenants own their homes. Then, we just have lot rent.

There's a couple of reasons. Obviously, repairs and maintenance would be a lot less. Your expenses will be a lot less. Also, your turnover on a tenant-owned home unit is approximately 4%-5% annually where the turnover on a park owned home unit is closer to 50% annually.

From a management side of things, if you have a tenant-owned home community, you're going to spend less time dealing with turnover compared to a park owned home community. There's communities out there that have done both ways but we prefer the tenant-owned home model.

In regards to mobile home park investing, it is affordable housing. If you're familiar with affordable housing in multifamily, HUD housing, or things like that, you can deal with a lot of the same residence but there's also different classes just like in any asset class where there's very high end mobile home communities that have swimming pools, community centers, three golf courses. Then, there's communities on the lower end that are just not taken care of very well. The homes are really close together, there's a lot of older homes. We try to aim right at the middle.

We're looking at the C class parks that maybe we can bump up into a B. That's typically where we play.

Jason: Got it. All right. For those that heard all of this and still thought there's no way I'm going to touch this. There's no way I'm going to go to MHU. I don't want to do any of this stuff, but those returns sound pretty sweet. Maybe I should talk to Andrew. Maybe there's a mom and pop that's listening, they're like you know what? I'm tired of this garbage. I'm tired of dealing with this place. I want out. It's time we retire from running this mobile home park. They're like maybe we can have a conversation with Andrew.

Who are the people that you're wanting to get in touch with you? Whether it's investors, whether it's potential people that can create a deal with you? What are you interested in?

Andrew: All of the above. If there's a wholesaler that comes across a mobile home park and they want to assign it, or it's a property manager, or maybe it's someone that wants to partner on their first deal because they want to learn the operations before just jumping in with two feet. All of them should reach out to me. My website is keelteam.com. I'd be happy to chat with you. I love talking about mobile home parks, you won't have to pull my leg too hard to go on the phone with me.

Jason: I could tell. Andrew, I appreciate you coming on and sharing a little bit about mobile home park investing, helping open my audience’s eyes to that just a little bit. Maybe you'll get a few phone calls, maybe some people will get into this. Who knows? Maybe there'll be some sort of a hybrid where deals even workout. Are you looking at expanding outside the midwest at all?

Andrew: Yeah, we've looked at some deals in many different areas. Not in California but outside of that state we've looked at several deals. You have to hit a certain number of units for it to make sense for it to go to a new market. You don't just want to go after a 40 lot mobile home park in Idaho when the rest of your communities are all in Ohio or Pennsylvania.

We definitely looked at other places. I've JV'ed with people that brought me a deal that they didn't have any money but they just found this great deal. I found things like that and I'm totally open to sharing what I know on the operation side to others that bring a deal to the table.

Jason: Awesome. Andrew, I appreciate you coming on the show. I wish you continued success.

Andrew: Jason. Thank you so much for having me. I really appreciate you having me on the DoorGrow Show.

Jason: All right, cool. Make sure you reach out to Andrew if any of this sounds interesting, you are curious about this in working with him, or getting into it yourself. That was keelteam.com.

If you're looking at figuring out how to grow your property management business, I had so many calls this week from new clients that have come onboard with us. There's this common challenge that property managers tend to deal with at various stages. I've noticed that you've got that first sandtrap at about 50, 60 doors in the single family residential space where you're dealing with how do I start to get ahead? How do I create some leverage in this business so I'm not just trapped as a solopreneur here forever? How do I start getting more doors than I'm losing so I'm not just breaking even every year in terms of growth? If you're dealing with any of those kinds of challenges, we're really going to help you break through that initial barrier.

Then, there's that second sandtrap which is usually if you can break in a healthy way past 100 doors, if you haven't done that yet, talk to us. If you break past 100 doors in a healthy fashion, which means you're not just a real estate broker. That's really healthy and you've got this unhealthy property management business on the side, we can help you with that too. You do it in a healthy fashion.

Then, you'll end up usually in the 200-400 door category and then you get stuck. This is where I see a lot of property managers stuck in NARPM. A lot of property managers are struggling. There are specific things that you need to break free from that sandtrap.

Usually, the challenge is they're not getting the right thing members. They're not able to retain team members for a long time. They're trying to build and systemize the business, build a team. They just don't have a business that's scalable. Even if it were fed a lot of potential business, or a lot of deals, or a lot of leads, once they approach that 400 or maybe up to 500 units space, the business owners feel really stressed out.

They built a team usually the way a solopreneur thinks. They built a business based on what the business needs, not on what the business owner needs to lower their pressure noises through the roof. Every person that they have on their team is coming to them for everything and asking questions. First, it feels really exciting when you're small. As you scale and as you build, it feels really suffocating. You become the biggest bottleneck in the business.

If you're experiencing that, then reach out. We would love to have a conversation so that we can help you break past that second sandtrap as well.

Anyway, I'm Jason Hull over at DoorGrow. Make sure you also check us out. We've been really pumping up Instagram and getting going. Follow us on Instagram, it's just @doorgrow. Make sure you get into our community at the DoorGrow Club Facebook group. You can go to the DoorGrow Club. Just go to doorgrowclub.com.

Until next time, everybody. To our mutual growth. Bye, everyone.

Download this Episode

Aug 18, 2020

The next time you play golf on company time make sure insights into how you spend your time on the job out in the field is not being tracked.

Today’s guest is Barima Kwarteng from Timeero, a GPS app that reduces overhead costs and streamlines time tracking. Basically, Timeero started to prevent golf (at least on company time) because it’s expensive!

You’ll Learn...

[01:52] Barima’s Background: Originally from Ghana in West Africa, but attended BYU.

[02:35] Timeero: Some employees work in the field. How do they spend their time?

[03:01] Drunk Coworker Confesses: On company time, they play golf on Fridays.

[03:35] Software not from Scratch: Acquired cold base from Texas cop and rebuilt it.

[05:00] Theft Prevention: Timeero tracks time, location, mileage, and much more.

[06:10] Screenshot Safety: Pressure to prove work is being done to get paid.

[06:58] Big Brother? Find out if employees are being accountable or taking advantage.

[07:22] Bottom Line: Companies save 5-15% payroll costs by tracking employees’ time.

[08:16] COVID Cash Crunch: Tighten belt to offload employees not pulling their weight.

[10:00] Technology and Time Management: Paper timecards/sheets take too much time.

[12:07] Timeero: How the Web application works after downloading app on smartphone.

[15:06] Geofence: Reminder to clock in and clock out as soon as you arrive/leave work.

[16:36] Better Culture within Business: Nobody likes to be micromanaged. Trust me.

[20:49] More Money? Most are more motivated by recognition than monetary benefits.

[22:05] Simplicity vs. Tech-Savvy: Get people to use new things or do things differently.

[24:10] Why is Timeero different from other apps? Gives outside team more insights.

[30:42] ROI: Timeero is $5 per user per month, plus $10 base fee for business account.

Tweetables

“If golf is helping the bottom line and helping you get revenue, great, but otherwise…” Jason Hull

“People right off the bat think, ‘Oh, it has a little big brother feel to it. What we're seeing is, it's actually helping the bottom line in terms of payroll.” Barima Kwarteng

“Technology saves you a lot of time. As a business owner, you can dedicate those hours or time to something more beneficial.” Barima Kwarteng

“The app only tracks time and movement while you're clocked in. The moment you clock out, it stops tracking you because we really value privacy.” Barima Kwarteng

“It helps people track time more efficiently and more accurately.” Barima Kwarteng

Resources

Timeero

Brigham Young University (BYU)

DGS 132: The Cashflow and Chaos of Managing Student Rental Properties with Peter Tverdov 0

Transcript

At DoorGrow, we are on a mission to transform property management businesses and the owners. We want to transform the industry, eliminate the BS, build awareness, change the perception, expand the market, and help the best property management entrepreneurs win. I’m your host, property management growth expert, Jason Hull, the founder and CEO of DoorGrow. Now, let’s get into the show.

My guest today, I'm hanging out with Barima Kwarteng. Did I say it right?

Barima: I think you got that right more than most people.

Jason: Okay, awesome. Barima has a company called Timeero. Before we get into that, I'm excited to hear a little bit about this. I was checking out your landing page for your software. It looks like it's kind of unique with the GPS stuff and some of those kinds of things.

Before we get into that, why don't you introduce yourself to those listening or watching this later? Just help them understand what brought you to Timeero, and share a little bit about your entrepreneurial background here.

Barima: Yeah, absolutely. I'm originally from Ghana, a country in West Africa. I'm not sure if many of you listeners know where that is. I originally came to school out here in the US at BYU. At BYU, I was able to learn a little bit more about entrepreneurship and starting businesses. It's something I've always wanted to be able to do. That opportunity presented itself with Timeero.

The whole idea behind Timeero was that many businesses out there have employees out in the field. They have teams out in the field. They want to have a little bit more insight into how their employees or team members spend their time. Timeero provides you that opportunity to be able to have more insights into how your outsight spends their time.

One of the events that really triggered this was I have a friend who owns a construction company. His employees, every Friday, they would bring their golf clubs and check it in their truck. On company time, they will play golf on Friday. The company didn't know about this. They only found out during a company party that they were playing golf on company time. One of the employees was drunk and finally spilled out the secret about what they were doing.

He needed a solution to be able to track again and have insights into where his employees were spending their time. Working with him, that was how the whole idea was born. I initially did not build it from scratch. There was a company out in Texas that the owner of the company wanted to sell his software.

I remember thinking to myself, you know what, this is what Brad wants. This is the kind of solution he needs. I actually ended up acquiring the initial cold base from this guy out in Texas. He was a cop. He just wanted to get rid of it and focus on something else.

What we ended up doing was rebuilding the whole system again and making them much better. That's a little bit about how we got started on Timeero.

Jason: Timeero started to prevent golf, basically.

Barima: I have a problem with people playing golf. When you're doing it on company time or when you're playing when you're not supposed to be playing, it gets pretty expensive. We’re on company time.

Jason: Yeah. If golf is helping the bottom line and helping you get revenue, great, but otherwise...

Barima: If it's helping the bottom line, yeah. Exactly.

Jason: Okay.

Barima: Sometimes, it feels like it has a big brother feel to it, but you'll be surprised in many ways that people use it. It tracks time, location, mileage, and a whole lot of things.

Jason: My company's virtual. One of the challenges I’ve noticed over the last decade or so that I've been running a virtual team is you sometimes get people that are not full of integrity. They come into the business, you think they're going to do a good job. If there isn't a level of accountability that needs to be in the business, people sometimes will take advantage of that.

The challenge is that I've had people stealing time from me in the past. Eventually, you find out. Eventually, you figure out they're not getting stuff done and you're paying for that time. That's a challenge people deal with. It's theft in the business. It sounds like we're talking about preventing theft.

One of the side effects I've noticed in having time tracking and time software for some of the team members, contractors, or people that I hire, some of these do screenshots, some of these do things like that. It's created safety for my team members or as contractors as well.

One of the challenges a lot of contractors deal with is they have to prove that they're doing something and they feel that pressure. It could very easily be somebody that hired them to say I don't think you did anything, or I don't think you did enough. I don't want to pay you.

There's also the issue of if there are interactions or dealings with customers, so having accurate records protects the customer, it protects the employer, the team member, and it protects entrepreneurs, the CEO, or the boss of the company. I think people forget that and they sometimes like to focus on it feels so big brother.

I generally found that I only get that feedback from people that want to not have accountability.

Barima: I think you hit the nail on the head. That's exactly what we're seeing as well. There are a whole lot of uses for it. Generally, people right off the bat think, oh, it has a little big brother feel to it. What we're seeing is it's actually helping the bottom line in terms of payroll as well.

One of the things I haven't really mentioned is just with time theft, it's natural for us to have our times. I may come up to you and say I work from 8:00 AM-5:00 PM. The reality is I probably worked 8:13 AM until 4:42 PM. Five minutes, 10 minutes here and there start to add up all the time. It starts to affect the bottom line. We're seeing companies saving anywhere from 5%-15% payroll cost by just having a system in place to help them accurately track more time and also have more insights as to where the employees are spending their time.

That's one of the few statements that we're giving businesses that you’d also have to [...].

Jason: I think one positive advantage that has come from the whole coronavirus, COVID-19 epidemic is in March, everybody sort of experienced the significant cash crunch—most businesses did—and they had to tighten their belt.

What we saw is a lot of businesses laying people off, a lot of property managers were tightening the belt because they worried rent wasn't going to come in. That created this massive mass cleanse of wait, bloat, and fluff inside of companies. There was just this offloading of that.

That makes people really conscious. I think people, more so now than ever, are really conscious of the fact that a 5%-15% reduction in payroll cost is significant because that's typically the largest expense in a business. That could be a significant reduction in expenses, which means you have a lot more cash flow health.

If cash flow goes into the business, the business is dead. The second cash flow is gone, the business is done, unless you get loans or something to squeeze out and get a little free cash available. Cash flow is king in a business, and payroll is going to directly impact that.

Barima: Right. I think you're spot-on on about that. What the coronavirus and everything going on, as a business owner, your natural instinct is to try to cut down costs. Like you mentioned, most people may be looking to lay off people.

A lot of times, as business owners, we’re so focused on bringing in more business. How do I increase my revenue? It also makes sense to look at your bottom line and figure out, how do I cut down costs using technology? I think it's easily forgotten by a lot of team leaders or business owners. In figuring out how to cut down on costs using technology, you can dramatically cut down on costs and help improve your bottom line.

In terms of time management, let's just focus on time management. There are a lot of companies out there who still use paper timesheets, they're having their employees to text in their time, or using some form of [...] system. What we're not even talking about is the amount of time that's involved in processing your payroll.

First of all, your employees may not be turning in their timecards on time. Depending on how often you’re running payroll, you may be finding out two weeks later how many hours they may have spent on a job. They may not have the greatest handwriting and you're spending a lot of time trying to figure that out. Or you may have to open a call and try to get everyone to turn in their time card in a timely fashion.

Today is Friday. The last thing you wanted to do is to spend your Friday afternoon or evening trying to chase people for their timecards. If you're using a system like Timeero, you don't have to sit around and wait for any of that. We're talking about cutting the amount of hours anywhere from 30 minutes to even 5 hours for some companies or more to minutes or even seconds. You can just pull up a report of how many hours have been worked, how much mileage, and have insights to where they've been.

Technology saves you a lot of time. As a business owner, you can dedicate those hours or time to something more beneficial. It might be spending more time with your family or other areas of your business. It definitely does help save you a lot of time and money as well.

Jason: Okay. We talked about some of the benefits of saving time. Let's talk a little bit about how it works. Say, a property management business owner has some boots on the ground, has an agent or a person at the field, a property manager, and they're doing showings. They're going to open up a property for somebody in getting a lease handle. They're moving around and doing stuff.

But they're not sure if this person is going and just picking up the gates in school, hanging out and watching Netflix for an hour here. They want to verify this, how does this software work?

Barima: The way it works is that you have your web application, which you can run on an iPad or a normal desktop machine. Your employees are going to have their smartphone. We have mobile apps that they can download on their smartphones. Once they have the app on their smartphone, they can log in using the credentials that they’ve been assigned.

Whenever you're ready to start with it, let's say we'll start at 8:00 AM for me. I come in, I punch in, and it starts tracking my time, my location, and my mileage. Whenever I travel around it logs my positions. Let's say I clock in and decide to drive off to go play golf. Now Jason is going to come in and see that I'm at a golf course.

That's probably where I'm not supposed to be—at a golf course. You're going to see a trail path of where every single employee has been while they're on the clock. Managers can review that and ask questions. Why were you at the golf course? Or were you supposed to be there in the first place?

Jason: For the manager that's looking in the app—managing their staff that is tracking their time—they will see a map for this?

Barima: They will see a map, exactly. There's a Google map. For every time entry, there's a Google map that shows your trail path of where you’ve been while you were on the clock. Again, the app only tracks time and movement while you're clocked in. The moment you clock out, it stops tracking you because we really value privacy.

We're not interested in knowing what you were doing off the clock. It's only while you're in the clock that it tracks your trail path, where you've been, and any information that’s needed

Jason: Great. If they have a maintenance person going around doing maintenance in some properties, they can say, hey, this tenant called me. They said you haven't shown up yet. Where are you at? Oh, yeah, I'm on my way. You check and they're at the golf course. I know that's not the case.

It creates some accountability, which I think lessens the temptation for people to lie, steal, and do things. It also creates more accuracy because they know that their location is being entered in. Now, say somebody forgets to clock out. They go do an errand at the grocery store. They're like, oh, I forgot to do that. Are they able to edit their time entry to remove that portion and eliminate that pin from the map?

Barima: Absolutely. You're able to go edit your time entries and change all of that. One of the things we're doing or some of the few things we've got is to make sure we can remind people to clock out as well. Not just clock in, but also to clock out.

You can set a reminder. For instance, we use a technology called geofence. We can set a geofence around your work area. The moment you leave your work area, it notifies you to clock out because you probably may have forgotten to clock out, you're leaving off for lunch, or leaving off.

The other thing we're coming out with is an automatic clock in and clock out. Whenever you arrive at the job site, it automatically clocks you in. When you leave, it also automatically clocks you out. These are optional settings you can turn on and off.

Again, it helps people track time more efficiently and more accurately. Now, you don't have to worry about forgetting to clock in and out. It just handles that for you if you turn on those options.

Jason: Yes. I'm a big fan of creating or implementing systems that can do the job of managing certain pieces rather than micromanaging your team. I love when information's pushed to me instead of me having to go and ask them, and get it, or find out, or that sort of thing is. You may want to know, as a boss, what were you [...]. What were you doing this time?

If you go and ask them all the time, if they are doing the right thing, they're going to feel invaded. They're going to feel like you're not trusting them. Having a system like this, I can see the advantage in being able to check and say okay. It can alleviate those fears you have in the back of your mind. Oh, they were on the job site. They were doing this job at this property. They were in the office this time while I was on vacation when I checked.

It just allows you to lower that pressure, those noises, those fears, and those doubts. And it allows you to facilitate greater trust in your team.

Barima: Absolutely. Speaking of micromanaging, I'm not a micromanager at all. I don't like environments where people feel micromanaged. Sometimes using the software may come off as micromanaging.

One of the things we do is we like to train our users to have a better culture within your businesses, within your companies. Foster an environment where people feel trusted. And also, using tools like this to foster more accountability. You can have a great accountability system without micromanaging people.

Sometimes, people don't think those two things go together. You can have good technology in place, make sure people are held accountable, but then also avoid micromanaging people.

Jason: Yeah. This is an ironic thing in business or some people think these things don't go together. But really, when you create really good accountability systems inside your business, first of all, it's going to prevent the hiders or the people that aren't real believers in you or in your business from being able to get away with theft, stealing time, or being lazy. These are the team members we sometimes have in business that just want to leave for the weekend, complain about their boss, and they hate their job. None of us want those people on our team.

Ultimately, we want people that are believers, people that buy into our vision, that want to enact the change that our business' mission is focused on. Those are the people that we want working for us—people that are inspired rather than controlled.

What I found is that those types of people love accountability systems because they get recognized. They want recognition. But when you're hiding, when you're trying to steal, when you're trying to do as little work as possible, and just get a paycheck, you don't want accountability or recognition. You just want to fly below the radar.

For my team members, we have a weekly commitment meeting. We show up and everybody says what they got done that week based on what they committed to doing in the previous week and what they didn't. My team members love being able to say, I got these things done. Everybody can see it. Great job you got these things done.

Nobody wants to be the person that has a bunch of things that are in the red that they didn't accomplish, that are nos on the to-do list and want to feel like the weakest link. It creates a performance culture in which there's positive peer pressure. I could see how some people would resent this system and some people would respond well to it.

Ultimately, as entrepreneurs, we want those that respond well to accountability and they love the recognition. The big mistake we make a lot as entrepreneurs is we think that they just want more money. We think they want bonuses. That's going to incentivize their behavior. Most people, besides entrepreneurs and salespeople, are more motivated by recognition than they are by increasing monetary benefits.

Barima: I totally agree with that. It's very easy to think money motivates. Not everyone is solely motivated by money. Money helps but there are so many other ways to motivate people. It comes down to figuring out what each person on your team values. Recognition is one of them. It really, really, helps to help people feel recognized. It helps them feel that a good job is very important.

There are many ways to motivate people outside of money. I've seen it go both ways where money motivates people. Actually, I've also seen it not motivate people. You just never know. It's up to you, as the leader, to figure out what motivates each and every single person.

Also, like you've mentioned, there are some people who just are not ready to work. They will be the ones complaining about accountability systems, and they will be trying to figure out ways to beat the system. With those people who fall in that bucket, you have to forego different ways to work with them.

Jason: Now, when it comes to technology, the biggest challenge with the team is adoption, which means getting them to use it. This is usually the biggest challenge with software is getting people to use a new thing or do things in a new way. What's your experience with people being onboarded into Timeero and getting their team members to use this?

Barima: It's been on a wide spectrum. Overall, one of the big reasons why people go with us is because of simplicity. We put a lot of effort into making sure that our software is very easy and very simple to use. We know that not everyone is very tech-savvy. We really invest a lot into the design. Simplicity is always at the very top of what really shapes the design.

When it comes to onboarding, it's very simple. We try to make the process extremely simple so that with a few clicks or a few taps you’re in the system and you're starting to log hours without very much help. We also invest in a lot of our customer support. You can get on the phone with us and talk with us. You can get on live chat. We’re happy to do a video call and help anyone get onboarded.

There are few players out in the space. In software in general, it's a well-known fact that it's not that easy to get support when you need it. Sometimes, people will put you through an email system and you may hear back from them several days after. With us, we really invested a lot in our customer support, so you can get on the phone with us in the live chat.

I can tell you, Jason, once you put out your request, you can expect to hear from us within 10 minutes. That's it if you're within our core hours of the business. We really take that. It's a high priority for us in giving people the support they need.

Jason: You mentioned that there's a lot of other apps in the time tracking space. Customer service and being intuitive are two areas in which you stand out. What are some other features or benefits we haven't touched on yet? Or is there anything else that leans people to using your software to do this rather than whatever they're comfortable already or that they're using currently?

Barima: When it comes to time tracking, time tracking has been around for a long time. You have companies that have been doing this for over 30 years or probably even longer. It's a very saturated space. There are so many time tracking apps out there. Some of them are free and some of them are paid as well.

Where we separate ourselves from the gazillion apps out there we are mostly focused on helping you give your outside team more insights, having more insights into how your outside team is spending their time.

We have a lot of property management companies that use us. Also, we help you track mileage. There are few apps out there. I can only probably count two apps I know that probably do that—track your mileage and track your time.

Many companies will want to track your mileage. Perhaps you reimburse employees for mileage driven as well. They may probably be paying also for a separate time tracking app with GPS tracking capabilities. What we've done is we’ve matched those two. You don't even have to pay for two separate apps. You get time tracking, your mileage tracking. You're also getting scheduling and your host of other things we want to come up with like expense tracking as well.

We've been able to mash all of these different technologies. It's very appealing to a lot of property management companies, businesses, and even property managers with one or two employees will use us. It just saves them a ton of time.

As a business owner, you're focused on trying to grow your business. The last thing you want to be doing is trying to chase paper timecards, figuring out mileage, and whatnot. With technology, you're able to do all of these very, very quickly, and much more easily. Your time can be focused on what's supposed to be important.

There are several things we do: time tracking, mileage, GPS tracking, scheduling, and a few other things. Again, with our software, you have a lot more insight into how your outside team is spending their time.

Jason: Awesome, that's great. There's a lot of property management business owners that have property managers that are spending some time in the office, some time out in the field. They'll be able to assess whether they're out, in, or not. They'll be able to see how much time they’re spending at the office. They'll be able to see that they are going to the properties at the times they're supposed to.

I'm sure every property management business owner has heard, I showed up for the showing and nobody was there. Usually, the assumption is this tenant is totally out there. But it may be the case that you have team members that are not really measuring up, being fully honest, or doing the things that you need them to do. That level of accountability is going to keep them at that high level.

Barima: Right, exactly. You probably end up getting a bad review from a customer that says, They never showed up. As a business owner, you can go to their system and say, Where was John at 3:00 PM on this day? It will pull up that system and tell you.

Jason: Yeah. If they were there, then that could be your comment on that review online. We use GPS technology to track. That's a selling point. That's a feature. We use GPS technology to track each of our team members that are out in the field, and this team member showed up at 2:58 PM—two minutes before and was there. We have this verified.

You have facts and data. This will protect you legally in certain legal disputes. You'll be able to verify the things where people were in certain places when they were supposed to be. If you were supposed to be there to deal with a constable, an eviction, or a policeman. Any of these things, there'll be a record that somebody was there at that time stated and you'll have history.

If you end up in a courtroom, some sort of a challenge, or a discrepancy with an owner or a tenant, you've got verification. You've got validation from a third party showing that there is a GPS time tracking being done.

Barima: Absolutely. Jason, it's very interesting with my experience just talking with different business owners. What I'm seeing is the businesses that are investing in technology are the ones starting to get ahead. Over time, they'll start to get ahead because it just gives you such a huge advantage. It's tremendous the amount of advantage that technology just gives you.

Sometimes, you have some business owners that just want to stick with the old way of doing things because that's what they're used to and it works. Yes, it might work, but your competition is just getting ahead, miles ahead of you just because you're investing in the right technology. The ROI that you're getting from using technology is so much bigger than what you're paying for.

Jason: Yeah. You're saying that this can save people on average between 5%-15% in payroll?

Barima: Exactly. 5%-15% of payroll. That's just the payroll side of it. Now, there's the human. We're not even talking about your time spent trying to do payroll and capture people's times. We haven't also talked about the errors that happen from getting the payroll log. The last thing you want to do is overcompensating people or under-compensating them.

Again, you use technology that takes care of that. You don't have to spend your time worrying about, did I end up overpaying this person or did I underpay them? We're talking about tremendous time-saving costs as well.

Jason: Okay. I'm looking at your website. The pricing looks really affordable. Let's just do some quick math for property managers here. Say, you've got one team member. They’re maybe between $15-$20 an hour. They're full time. You've got one team member full time. That could be anywhere from $3000-$4000 a month that they're spending on this person. 5% of $3000 is $150. Your software is not going to cost them $150 a month. Not even close.

Even if it just helps them a little bit, it sounds like it can easily pay for itself right out the gate just by reducing a little bit of extra fat that people are padding accidentally on to their timesheets.

Barima: Absolutely. It pays for itself right out of the gate. Again, looking at the ROI, you were paying this amount of money and you're saving this amount of money by using our system. It pays itself off right away. In a lot of ways, you can say it's a no-brainer to use that.

Jason: All right. Is there anything else we're missing?

Barima: Our pricing is very simple. It's $5 per user per month. It doesn't mean it's going to stay that way. In the future, we'll eventually introduce extra pricing tiers as we add more technology as well. We do have a $10 base fee for your accounts. The $10 base fee just covers your whole company account.

Let's say you have 10 employees in your company. You're going to pay 10 times your $5, so that puts you up at $50. Then, there's the $10 account base fee that you pay every month. In total, you're paying $60 a month to manage your 10 employees—whereabouts, the time entries, the mileage, the scheduling, and a whole bunch of things—only for $60 a month.

Like you mentioned, you can look at how much you're saving in payroll costs by using that. Purely just for payroll cost, you can—

Jason: If it only helps them save 1%, even just a single percentage in staffing cost, it would be a no-brainer.

Barima: Yes. It is a no-brainer, but you'll also be surprised not everyone finds it to be a no-brainer. You get it, but not everyone might get it that way. Yeah, it's very interesting.

Jason: Very cool. Barima, it's been great having you on the show. We haven't had anybody on the show yet talk about anything like reducing or tracking time with GPS out in the field. I think this is a common issue that property managers run into, or it's a blind spot they just have they've just not been paying attention to.

Something like this would probably create a little bit more safety and certainty for them. It sounds like it would also lower some of the effort, pressure, noise, work involved with timesheets, payroll, and dealing with people that are out in the field or in-house vendors. People that they have maintenance, people inhouse, property managers that they have out in the field, people doing showings. I think there are a lot of benefits here for property managers. I appreciate you coming on the show and sharing this with us.

How can people find out more about Timeero? Get in touch with you? Plug your stuff.

Barima: Yeah. You can visit our website at timeero.com. Visit our website. Use our live chat. You can also call into our office. If we’re in, we will answer it. If we're not, we'll respond back to you.

Please do visit our website and use our live chat. Get on with one of our support agents or a customer sales agent who will get in touch with you and help you solve problems. We're here to solve problems. Get on and talk to us. We'll figure out if we'll be a good fit for you or not. If we're not, we’re happy to recommend any other solutions that might be a better fit for you as well. We look forward to hearing from you.

Jason: Awesome, Barima. Thanks for coming on the DoorGrow Show.

Barima: Thank you. Thanks for having me on, Jason.

Jason: All right. We'll wrap this up. If you are a property management entrepreneur that wants to add doors, you want to make a difference, all the things we talked about in the beginning, in the intro, be sure to reach out to DoorGrow.

We've been having great success helping clients, coaching clients, helping them clean up their business, clean up their branding, clean up everything that's preventing them from getting the deals, and the leads that they really believe they should or could be getting.

The reality is that SEO won't save you. Can SEO help your business? Absolutely, but there is not a lot of search volume for property management for this industry. The best deals and leads are snatched up before they start searching on Google.

You need a game plan, you need a system in place that you can grow your business, and not be waiting and relying on having the top spot on Google in order to grow. We want to help you get there. We want to help the best property manager succeed.

Reach out to DoorGrow. Check us out at doorgrow.com. And be sure to check out Timeero. You can check it out at timeero.com. Until next time, everybody. To our mutual growth. Bye, everyone.

Download this Episode

Jul 21, 2020

It’s that time of year as college students start or return to school. They may think they know it all, but really know nothing. How many students does it take to change a lightbulb or turn the heat on? It’s time to grow up in the real world!

Today’s guest is Peter Tverdov of Tverdov Housing. Although student rentals are management intensive, Peter actually enjoys dealing with students. It’s prepared him to take on other types of tenants to diversify and grow his business.

You’ll Learn...

[02:18] Rutgers University: Becoming a landlord in New Brunswick and loving it.

[02:53] Student Housing Side Hustle: Accumulate more and manage them for others.

[03:24] Hindsight is 20/20 in 2020: Bad timing to start business and quit day job to grow.

[04:41] Decision to deal with students and student housing led to diverse tenant groups.

[06:15] Peter’s Portfolio: 65-70% student rentals, 15-20% low-income families, 5-10% middle-class/workforce housing.

[08:10] Onboarding Students: Educate and set expectations to limit excuses later on.

[11:00] Happy Tenant, Happy Owner: Second largest lead generator is tenant referrals.

[12:57] Broken Windows Theory: Dumpy/dilapidated areas attract crime and trouble.

[13:45] Tverdov Renovation Consultants: Improve properties to attract better tenants.

[14:47] Avoid or Acquired Taste? Riches are in the niches as a student rentals landlord.

[16:33] Other Options? Rules/laws for room rentals, individual leases, boarding houses.

[20:55] Responsibility: How to be landlords and hold each other accountable.

[23:35] What’s next for Tverdov Housing? Track KPIs, achieve goals, and grow doors.

Tweetables

Landlord Business: Slowly and discreetly acquire more properties, get your hands dirty, and deal with people.

“In business, it’s good to diversify.”

“Managing student rentals, it really gets you battle-tested for managing other tenants.”

“We’re not for everybody. We’re fair, but firm.”

Resources

Tverdov Housing

Tverdov Housing on Instagram

DGS 131: Property Management Growth Strategies After COVID-19 with Mark and Anne Lackey 0

Transcript

All right, today's guests, I'm hanging out with Pete. I’m going to see if I can say your last name right, Tverdov. And I'm going to unmute you so you can actually respond to that. Did I say it right?

Pete: That was awesome. Pete Tverdov of Tverdov Housing. Pete, before we get into the topic, I want to introduce you, have you introduce yourself a little bit, but we’re going to be talking about student rental properties and the title is The Cash flow and Chaos of managing student rental properties. That sounds kind of fun. Let's get into the cash flow and chaos after we hear a little bit about your background, how did you get into this, and tell everybody who's listening about Pete.

Pete: Sure. Happy to be on the show, thanks for having me. I got into it, my wife and I moved back to the Central Jersey area about six years ago and in the process of moving back we were looking to buy a multi-family, live in one unit, and it brought us to New Brunswick, where Rutgers University is. We both went to school there, we both played sports there, became a landlord, and really enjoyed the process of becoming a landlord.

As I wanted to try to accumulate more rentals, I had the idea to begin managing for the people as it's something I really enjoyed doing. I enjoyed just getting your hands dirty and dealing with people. I started to do that on the side a little bit in that neighborhood, very slowly, very discreetly, and then little by little, I was just nibbling and getting more people under management because I was doing a pretty good job.

About a year ago, it grew into a large enough business where I was at a crossroads with my regular job. I said you know what? I feel pretty good about this. I'm just going to dive in and really try to grow my business. That has been a bit rocky because I did that officially in January. I say rocky because of Coronavirus. The business has been good. It's been fun. I enjoy being an entrepreneur. I enjoy trying to grow the business each day and I'm happy to be here.

Jason: Yes. Looking back, hindsight being 20/20, pun intended, so here in 2020, would you have chosen, if knowing that this would all happen to start your business, would you still have done it?

Pete: It's such a hard question to answer because I had grown a business enough to that point where there was really no turning back. I just had a breaking point because I was working 24 hours a day. I was working in New York City. So it's just really challenging to try and juggle both really and I couldn't at that point. So was the timing the best? Definitely not.

Jason: Okay, so you started getting into doing this yourself. Then you started doing it for others. At what point did you start deciding it would be a good idea to deal with students? I mean, this is your college hometown, right? It's a college town, your wife's college town, there is a college there, and it seems probably pretty obvious that you should be dealing with student housing. Were you already dealing with students with your own rentals?

Pete: Yeah, that's exactly right. Every rental we owned was student housing and something I had a lot of familiarity with. For a while, I didn't want to do anything else but student rentals. About a year ago, I started to diversify that and try to pick up other tenant groups to manage, which we have, thank God, because in business it's good to diversify.

But for me, anything with investing or my advice to anybody with investing is to go with what you know or the areas you know and then you branch out from there, which is what we did with the business. Again, student rentals are something we're super familiar with, super comfortable with and now we're at the point where we're happy with how much we have in the business and we're actively looking.

We don't really even market too heavily to student rental landlords just because we have a sizable amount and because we know what chaos comes with managing them and how management-intensive they could be. As I said, we're trying to diversify the business. In addition to being well-known for student rentals, we want to [...] things as well.

Jason: Give listeners a little bit of idea of what your portfolio looks like right now.

Pete: Of our business, 65%–70% is student rentals. Another 15%–20% is lower-income families, and then the remainder is middle-class housing, workforce housing, yuppies. What's funny is managing student rentals really gets you battle-tested for managing other tenants because the other tenant groups really are a breeze. Student rentals are very management-intensive because they're 18- to 21-year-olds, so young adults. Most of them know nothing and what's worse is they think they know something which compounds the problem sometimes.

I was the same way and maybe you were as well. You don't really know much when you're that age. They don't understand that they're responsible for changing light bulbs or if the heat's not working in the house, maybe it's because no one checked to see if the thermostat was even on. Stuff like that is really low hanging fruit.

Jason: Yeah. Like you're saying, before anybody has kids or business or any of that, we're all experts on parenting, business, and how the world should work. I love it when my teenagers tell me how to be a better parent. I love that. That's always a really fun conversation. Everyone's an expert until they do it and then they realize they're like everybody else winging it and trying to figure out what's next.

You started with the most difficult type of housing. It sounds like it was more difficult renters and tenants than anything else. It felt like it was just downhill. From there it was easier.

Pete: That's right. As I said, it's just a very management-intensive group. What do I mean by that? They never signed a lease before. Some of them have never paid rent before. They've never written a check before or they don't know how to pay rent online. They don't really know what a security deposit is. They don't really know the process of getting it back.

I think our business grew because we really tried to help the tenants understand the process and how it works. With students, for example—I would recommend this to anyone managing students—we usually sit down with them for 20–30 minutes and go over the lease with them, go over all the points in the lease, and set expectations upfront. We try to really limit the excuses for a tenant, like I didn't know that. What do you mean? We sat with you in person and went over that. That's one of the things.

Some of the management items that I was talking about beat the properties up a little bit more so the repairs are higher and things always just mysteriously break. It was never their fault like something happens and nobody wants to admit it. I got a taste for managing other tenant groups. I realize how intense the students are and it's not a bad business to be in because, for people who own the rentals, the cash flows are higher, but with higher cash flows comes a set of their own problems.

Jason: Aren't these things just common in property management in general? Like the advantage of you having a business like this is that you're almost educating these people through the process. That would work well for any new client because even if they've rented multiple places before, you have your way of doing things, they still may not want to follow things, have misinterpreted things, or they may claim they read the lease and understand it. All of these things sound like a really good baseline for how to onboard all of your renters.

Pete: What I realized early on with the way I conduct business is we're not for everybody and that's because we believe in holding people accountable. One of the gentlemen who help me out hits me on the head. We're fair but firm. We're very fair. We don't try to nickel and dime people, but we're firm. The lease is the lease or the code is the code and this is what we have to do in order to ensure that the property is running smoothly, to ensure you're happy as a tenant, and to ensure the owner’s happy as a client.

As a property manager, you're getting hit from both sides a lot of the time, but that's what I try to do to tenants. Honestly, we try to give as good of an effort as we can to make sure that they have a good experience because what's pretty cool about our business is the second-largest lead generator for us is tenant referrals which is awesome. That's free. That costs nothing. For that to be number two, it tells me we're doing something right, even though it feels like we're not sometimes and I want to continue that.

Jason: So tenant referrals, meaning the tenants are referring the owners to your company?

Pete: They're referring other tenants to our company. It makes the amount of advertising we have to spend on finding tenants less.

Jason: Right. Do you feel like that's a challenge and student housing is finding people to rent the place?

Pete: I must say it depends on the demographic. What's unique about Rutgers is it's split between two towns in New Jersey, New Brunswick, which has a population of 55,000 and Piscataway, which (I couldn't tell you) maybe it's 30,000 or 50,000. It's not a small town either, but it’s very old homes, especially in New Brunswick.

What a lot of landlords in that area are realizing is people don't want to live in a dump anymore. They're willing to pay a little bit more. The house needs to be nicer. That's what we've done with stuff that we own. Most of the clients we have take a little bit of convincing, but after a while, they trust us to spend some money on their property because it makes it easier to rent.

I went out to Rutgers, I majored in Criminal Justice. There's this thing called Broken Windows Theory and for people who don't know that it is, it's what it sounds like. When you have a dilapidated area with a bunch of broken windows, it attracts crime and attracts people looking to get into trouble. When you have that same place and it's all cleaned up, all the windows are fixed, the outsides painted, and the sidewalks are redone, the crime statistically usually has gone away.

We took that same theory with housing. So if you have a dump, you're likely going to attract tenants who don't care about the place. They're just going to beat it up even more. If you have a nice place, you usually attract nice tenants, and even with the students being as management-intensive as they are, we've found that to be true.

What's interesting is within the property management business—I did this right in the middle of the pandemic—I said screw it. I’m going to start another business. So we created what's called Tverdov Renovation Consultants. We basically do project management for our clients. We tell them, listen, we could help you rehab, bathrooms, kitchens, additions, roof siding, blah-blah-blah. We have a whole portfolio of the work we've done on Instagram.

That's been good for the owners because it makes their property easier to rent. They get more rent and make our property worth more. We're happy because we've found a better tenant. The town's happy because we've improved the property and it's really a win and win across the board.

It's just a matter of convincing other owners who are stuck in having lipstick on a pig or they don't want to spend a lot of money on properties and now we're at the point where I don't really want clients like that. I want clients who want to have a well-run property.

Jason: Got it. Do you feel like tenants are an acquired taste in property management? My perception as other property managers avoid dealing with student housing, with those types of tenants. They feel like they're more difficult to manage unless they feel like in their market they need to. Do you feel like you would maybe in general convince these property managers in some way that there is a benefit or an upside to focusing on a tenant or better student housing?

Pete: I think if you know it and you know the area, you could do very well and we have done very well. If you don't know it, it's pretty obvious to people who don't know it. You get beat up because you don't know what you're doing. The challenging part is every school is different across the country. When tenants begin to look when the lease is run and there are a plethora of questions to answer. If I was going to invest in another state, it's a whole different set of rules if you're going to try to be a student rental landlord in that state.

For me, the riches are in the niches. Again, that's what I knew and I grew it. Now we're looking at expanding into more residential options. Still single family, two to four families, small apartment buildings. That's our bread and butter. That's all we want to do. We don't do commercial. We don't do HOAs or anything like that. That's what we focus on and that's what we're trying to grow.

Jason: Now, the financial upside that I've heard from some people that get into this is some have convinced owners to take a property and to rent it out the room instead of renting out the entire property to a family. They're renting it out by the room in these sorts of situations and they're able to get a lot more rent at the property by doing such. That seems to be that there would be a potential financial upside, especially if your fee structure is based on percentages or each renter rather than being just connected to a flat fee per unit, for example.

Pete: Maybe it's a little off-topic. We charge a percentage base and we'll always do that. I really don't know how property managers make money doing a flat fee. I think it's tough so we'll always be a percentage-based company. Renting by the room is, you're correct, that is the way to make more money. Again, I keep saying this phrase, but management-intensive, renting by the room is even tougher for students where we put groups together. We put a bunch together last year.

We had a kid from Singapore, a kid from India, a kid from New Jersey, a kid from Pennsylvania and they don't know each other. When you're renting by the room, it's even worse because now you almost have four tenants, not one tenant, or six tenants, or however many people you're putting in a house. That creates its own set of problems.

Again, this is based on jurisdiction. You cannot do individual leases because that would be considered a boarding house unless it's a licensed boarding house, you really shouldn't be doing that. We don't do that, so we had to rent by the room. We put them all on one lease. We say, listen, you're all legally responsible for damage in the common areas, and so on and so forth. It's challenging.

What's funny, though, is I actually want to try to add a boarding house to manage because we get a lot of people just looking for a room. Just looking for a place to live, not just an apartment or a studio. We get a lot of inquiries like, hey, do you have a room?

Jason: Is this boarding house law something that is common in just your state? I haven't heard from this, but it makes sense. Is this in other states as well?

Pete: I'm just speaking about New Jersey.

Jason: Interesting. It's something to those listening if they haven't dabbled in student housing or they're thinking of renting by the room or something like that, they probably should check with their local laws to make sure whether or not there's any sort of rules against doing such.

In New Jersey, what does it take to become a boarding house then or to set one of those up? Is it on an individual property basis or is it a licensing sort of deal as a property manager?

Pete: You need to have (they call it) a rooming house or a boarding house, but you need to have a license displayed in the property. I've been in enough of them. It's pretty obvious if it's a boarding house or rooming house because there'll be a kitchen with a bunch of labels on each cabinet. Like, this is John's cabinet, this is Max's cabinet, this is Pete's cabinet, and there's a common bathroom or two. Then all the other doors are just shut with locks on it.

If you can imagine, that's what they look like and then they'll have a big license in the hallway or stairwell that'll say this is a New Jersey-licensed rooming house or boarding house. That's how they work. But again, those are challenging.

Jason: Do you find in those situations you end up sort of having to play parent between roommates?

Pete: Yes and no. We had to do it last year with a group of girls we put together. It was a little aggravating and a lot of girl drama. I stepped in and I spoke with them and tried to give them some words of wisdom. Most of the time, what we do with student rentals, I don't care how many kids are living in the house. It's one tenant and I explain to them you're all jointly responsible for rent and all the lease obligations. So it doesn't matter how many people are in the house. At the end of the day, you guys are all responsible.

The other thing is we manage nearly 400 students. Some of these are very nice people, but we can't talk to 400 people. It's just not possible. What we do is we make a house manager or captain, or house mom, dad, whatever you want to call it and that's the person we speak with now regarding any tenant issues. We usually recommend somebody else in the house be responsible for submitting rent. So rent is submitted in one payment. Someone else is responsible for utilities. What it teaches these guys is responsibility, how to be accountable, and hold their roommates accountable.

In theory, what's cool is we are actually teaching them how to be landlords because they have to make sure rent is collected. Something's broken, they have to find out who did this. Now, I have to tell Pete or for repairs to be made, coordinate with them to schedule it.

That's why I said earlier, we're not for everybody because somebody who needs their hands held or mommy and daddy to wipe their mouth, we're not for you and that's okay. Our system usually winds up attracting tenants who are a bit more mature, a bit more independent and if they're not, they get there by the time that they're done with us.

Jason: Right, I like it. You’re part of their educational process of the real world. That might be a good selling point for getting tenants. We'll make your kid actually grow up. I hope you're excited about that. I'm serious. I'd be like, I'm going to send my kids into one of those properties, right?

Pete: I might try that.

Jason: It's worth a shot. Pete, I think this is really interesting. I'd be interested in those that are doing student housing when you see this posted or see this inside the DoorGrow Club Facebook group at doorgrowclub.com. I'd be interested to see other people's comments on what you're doing, what's working, and what's not working in student housing.

This started as a side hustle. It's evolved into a business doing it for other people. It's now growing. What do you feel like is next for you and your business moving forward?

Pete: What I start to do from watching podcasts like this is to track our KPIs, which is really cool. I love that side of the business. It's like a quarterly visit if people think of it. It helps me to understand where we should be spending money, what's working, what's not, and tweaking things. Because we're in the growth stage right now, 100 doors is cool, but there are people who are 500, 800. Those are huge, huge companies.

We won't get there overnight, I understand that. The goal of my business is we want to cover three counties in New Jersey. So we're based in Central New Jersey. If anybody from New Jersey is listening to this, Central New Jersey really doesn't exist. That's the inside joke. But the three counties we cover probably have about 2.6–3 million people in them. Those are within a 30-minute radius of our office, so we're very comfortable being within a 30-minute radius of home base.

The goal is just to continue to add doors under management. Single-family, 2–4 families, small apartment buildings in those areas. There are certain towns that are rental towns and certain towns that are not. What we've been doing on the marketing side, we've been working on SEO, we have our own website, we blog, we're very active on Instagram, then we do mailers, which maybe not a lot of people do. We do some cold calling, too, and just constantly trying to tweak and figure out what's working, what's not, and how we could generate more leads.

On top of the property management, because in New Jersey you have to have your real estate license. So right now, me and a few people, my team are realtors. Eventually, I would like to have my own brokerage. Really rural housing is three companies, so it's realty services—we can help you buy and sell investment properties; that's all we do—we could help you manage the property, or we could help you rehab the property.

We have some clients where we help them buy the property, we help them rehab the property, and then we manage the property. Then, one day when they want to sell it, we'll sell the property. That's about creating multiple income streams for our business within the same business, which I think is pretty cool.

Jason: Makes sense. Cool. Pete, it's been great having you on the show. I wish you success at Tverdov Housing and for those that are listening, if you have questions about student housing or getting this, or if people listening are interested in getting a place from you or whatever your goal is, how can they get a hold of you?

Pete: My website is tvdhousing.com and also my Instagram, Tverdov Housing. You could look at the last name on the DoorGrow Show. It's Tverdov Housing. We're constantly posting what we're doing on Instagram, so it's usually properties we're rehabbing, or some crazy management story, about just some crazy stuff that's happened and probably will happen in the future, stuff that we're selling, so we're very active on there.

Jason: Cool. All right. Pete, thanks for coming on the show.

Pete: Pleasure being on.

Jason: All right. Those of you that are interested in getting into student housing or that have been dealing with student housing, I'd be really curious, like I mentioned, to see your feedback inside the DoorGrow Club Facebook group so inside the DoorGrow Club. Let us know what you find is working or not working. It sounds like a challenging thing. I think any of us that have gone to college and remember some of the crazy stuff that either we did or that we saw other people doing, recognize that could be a really challenging thing, but it's necessary. Like their student housing is a need. It'll be interesting to see how things go moving forward with COVID-19 and Coronavirus, and things shifting to online. It will be interesting.

Check out the Facebook group, doorgrowclub.com. If you are interested in growing your business and your property management company, making some changes there, if you are feeling stuck, struggling, whatever, reach out to DoorGrow. Check us out at doorgrow.com We'd love to help you out. Until next time. To our mutual growth, Bye everyone.

You just listened to the DoorGrow Show. We are building a community of the savviest property management entrepreneurs on the planet, in the DoorGrow Club. Join your fellow DoorGrow Hackers at doorgrowclub.com.

Listen, everyone is doing the same stuff. SEO, PPC, pay-per-lead, content, social, direct mail, and they still struggle to grow. At DoorGrow, we solve your biggest challenge getting deals and growing your business. Find out more at doorgrow.com.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you’ve learned and start DoorGrow hacking your business and your life.

Download this Episode

Jul 7, 2020

As some freedom returns to society following COVID-19, don’t miss out on potential opportunities to implement property management growth strategies.

Today’s guests are Mark and Anne Lackey from HireSmart Virtual Assistants (VAs). Mark and Anne are broker-owners that manage almost 200 doors in Atlanta.

You’ll Learn...

[03:47] Trends: Property management pivots and changes during economic downturns.

[07:10] Hire Virtually: Save money, get better employees, and increase productivity.

[08:22] Wake Up: Don’t resist remote work; realize office space may be unnecessary.

[11:14] DIY vs. Professionally Managed: Ramp up sales/funnels to serve customers.

[15:26] Problems are always opportunities to grow business by offering solutions.

[21:11] Customer Service: Don’t disconnect. Focus/follow up for retention/satisfaction.

[27:02] Professionalism: Set expectations. Don’t badmouth landlords via vendors.

[28:29] BDM: Do you need a business development manager?

[31:33] Time, Energy, and Effort: Resources required to rent properties to tenants.

{32:28] Referrals grow businesses. No referrals represents customer care problem.

[35:29] Gamechanger: Save time and money to get things done or do more yourself?.

[38:30] Wrong Person, Role, Tool, Time, and Money: Hire based on owner’s needs.

[40:57] Off-the-Shelf vs. Customization: How to hire and build teams takes time.

[46:50] Remote Challenges: Communication, operations, and management problems.

[48:22] Key Performance Indicators (KPIs): Get work done based on expectations.

[50:15] Think, Invest, HireSmart: Know avatar to grow property management business.

Tweetables

Opportunities are available to make sales and buy, manage, and invest in more properties.

You don’t have to have your employees in an office. You don’t even have to have an office anymore.

Property managers are immune to guilt and the heroes of the rental industry.

Referrals grow businesses. No referrals represent customer care problems.

Resources

HireSmart Virtual Assistants (VAs)

DGS 69: HireSmart Virtual Assistants with Anne Lackey

Transcript

My guests today are Mark and Anne Lackey from HireSmart. Welcome you two.

Anne: Hey, good to see you. It's been a while.

Mark: Hey, it's good to see you.

Jason: It's good to have you back. I noticed you're displaying that beautiful logo in the background.

Mark: Isn't that wonderful?

Anne: Yes, that is of course a DoorGrow special. They helped us with that on our website.

Mark: The logo, the renaming, all of that was a DoorGrow impression that was right for us and is great for our clients.

Jason: Yeah, I like it. Cool. We're going to be talking about property management growth strategies after COVID-19. This Coronavirus is just starting to clean itself up. I just rode a road trip from Pennsylvania to Austin over the course of multiple days. People were not wearing masks anymore. We were eating at restaurants. It was awesome. It was like we are back to having freedom again.

Most places are open here in Austin. I went to the hardware store yesterday, though. Everyone was wearing masks and I felt like I was in trouble. I thought we were over this already, but apparently not at Home Depot.

Anne: Some places are, some places aren’t.

Jason: I think the national chains and the national stores have to accommodate the lowest common denominator nationally. They got rules in place for everything. What are we chatting about today?

Anne: First of all, I want to make sure everybody understands we are broker-owners ourselves. We manage doors in Atlanta.

Mike: Nearly 200 doors in Atlanta since 2005 for other people and for ourselves, since 2001.

Anne: We've been talking a lot to our friends who are in the property management business. We are, of course, NARPM members, affiliates, and affinity partners with them. We hear a lot around the nation of different things.

Just like your trip from Pennsylvania. You saw different parts of the country where things were more open than others, so we want to talk about a couple of different things as we see them. For property managers that are thinking what's the next thing.

I want to back up just a little bit and talk a little bit about historical trends and changes. Mark, why don't you get us started on that?

Mark: This will show my age. That's one thing if I've mentioned this. In the 70s, we had lines to get gas. Not everybody out there remembers that, but there was an oil shortage. There was a gas shortage and at that point, everybody said we're going to run out of oil in a couple of years.

It was a crisis, so out of that came what? We got into solar energy, more on to hydroelectric. Things pivoted, things changed. In the 80s, the savings and loans went down. Things pivoted on how we got mortgages. The dot-com buzz, the 90s, the tech blow up. All those things and what most everybody remembers is the meltdown that we had in the economy and mortgage market that occurred just 10–12 years ago.

At that point, it required pivoting and Anne and I are really good at our business about looking to see what the trends are going to be. What's going to change and how to pivot. That's what we want to talk about today. It's not the end of the world like everybody said, March 15th or whatever date it was when everybody went to hibernation. It's like, it's the end of the world.

Anne: Nobody's going to pay their rent.

Mark: We thought that 12 years ago when Lehman Brothers shut their doors. It all seems like it's the end of the world, but it's not. It's an opportunity. It's learning to pivot. Look at where the puck is going.

Anne: We wanted to talk about some of the trends that we see and the opportunities that property managers should be looking at in their business. You obviously don't hop on every trend and everything that comes along, but it is always good to put it in perspective. Mark, let's talk about some of the trends that we've seen in real estate in general. We're going to talk about how you can take advantage of that.

Mark: In the last few months, we had property managers and friends that were investors that had Airbnb. They were making 5–10 times the amount of rent I was off of a property. Suddenly, they made nothing because all the bookings shut down. They’re looking. A lot of them said hey, let's sell. Let's go long term. A lot of things changed there. Through them and through those changes of people not having as much disposable income at this point because there's a slow down in jobs, second homes aren’t popular right now.

Two, with all the laws that are coming about with the changes to protect the renters that are coming out of state legislators and the national, there's a lot of change and as property managers, we keep apprise to that. But these DIY (do-it-yourself) landlords don't. So, we're going to talk about some opportunities to make sales, to get some additional properties, to manage some opportunities for investing, too, if you're into that area.

Jason: When COVID hit and it was March, March was brutal for us at DoorGrow. Sales stopped. Every property manager just tightens their purse strings, freaking out, there's this cash crunch. We experienced a serious cash crunch so we had to get lean. I think a lot of businesses had to get lean and in the long run, that is a really healthy thing for business. Everyone was trimming the fat and [...] was effective.

Anne: We saw that in HireSmart because now everybody is a virtual employee. This is a perfect time to write stuff. People that have been hesitant to hire virtually have been in our doors now because they are like, wow, we can save some money. We can have better employees. We can have different strategies and approaches. Now, it was no longer important because it wasn't allowed to have people come into the office. Actually for us on HireSmart, it actually expanded our business.

Mark: There was resistance before from property managers that wanted to walk down the hall and lean over Joe or Joan's shoulder and see what they’re doing, see what they're working on—literally, not figuratively—to be there, to have that conversation face-to-face.

They were very hesitant about working and they didn't have the resources to figure out how to work remotely. With what’s come out of COVID-19 has become the realization that you don't have to have your employees at an office. You don't even have an office anymore.

Jason: I've known this for well over a decade. Interesting to see that mass transition of people realizing they can use tools like Zoom and move away from having somebody right there in their office. I did some polls online asking people during this. I asked how many people would renew their business lease at the end of the term and a lot of them said they're going to, at the very least, downsize, maybe to a smaller office base, or they may even not renew.

I also did some polling on what people have noticed as a result of people working from home. Some of my clients were saying that they've noticed that they were surprised that their team members became more productive. They're getting more done. I guess because there are fewer interruptions they were saying. There are fewer distractions. Maybe they're more comfortable. But some of my team members are doing better.

I have heard some people say I hate it. My kids are there all the time. I'm going crazy. But in general, I think the world has to wake up and realize when you have to get work done, you can try this. Then they tried this and they're like, hey, this works. Why are we spending so much money on this brick and mortar location that is outrageously expensive to have all these people in it when we can eliminate that crazy expense and it's unnecessary.

Mike: Yeah. It was shocking, like you, we immediately drew into our shell in March, and let's save. We don't know what's going to happen. People are going to let people go. But in April and May, we had the most requests for information about our services. The most orders we've had in five years.

Jason: I'll bet.

Anne: Without any [...]. That's the funny part for us [...]

Mike: We’re not traveling.

Anne: It's been interesting and we do a lot of community teaching and speaking even online. We always have to help people understand what opportunities are there. A lot of things that we're promoting or that we're seeing right now, specifically in property management, is now’s a great time to ramp up your sales and funnels. Again, because the DIY's are so lost. We already know that there are so many DIY landlords compared to professionally managed.

Mike: Eighty percent of the US are do-it-yourself landlords. That's a lot of opportunity.

Anne: That's a lot of opportunity. I know you talk a lot about that, but how do you reach them? How do you engage with them? How do you attract them? Of course, they outgrow a platform, obviously, as a key component to that, which is wonderful, but you have to have the human-to-human or human automation to back it up.

I think where we're coming to as a society is if you don't have a physical office where people can walk in anymore because you're closing your doors. We've had a closed-door policy for 19 years. I think people are very surprised that we've never let anybody in our office ever.

Mike: We have a small office of three.

Anne: We've never let anybody in our office even when we had seven people in our office, we didn't have people in our office because it's a distraction, that interruption. What happens is you need to serve your customers. You need to be talking to them. You need to be serving them.

Now, the residents and owners don't just want to be served 9–5. We're seeing that they want answers seven o'clock at night, eight o'clock at night when they're online. When they have questions they would like to have some interactions with someone from your office.

How do you do that cost-effectively? Of course, we have the solution. A full-time dedicated virtual employee that works as the second shift or the split shift is there to take care of chat. They're there to answer the questions and help people guide them on applications.

Mike: Then guide the people that are coming in to bring you properties to manage.

Anne: Right, and to talk to owners about how I work with you. Because here's what's going on in the marketplace. Again, in a lot of places, you do have people that aren't able to pay their rent right now because they have lost their jobs. Do you have owners that are concerned about what I do? How do I do this? We've had an increase in our inquiries for property management recently as well because they just don't know the rules. They don't know the laws.

Mike: It's not the time to withdraw. We're all sheltered in our business in place, too, and when we withdrew that opportunity to find new business went away. The companies, the far-sighted future thunking property managers, business owners, and the brokers that are now looking at making some investments. Not just sitting on their dollars, but actually making some investments in the right people, the right tools, business development people to help grow the business, doing outreaches.

One thing we were talking about just the other day was—we haven't done this yet—we should have a seminar that we invite all the DIY landlords to share with them all the fears of all the new laws that have come out.

[...]. We have that seminar and some of them are going to come out and say, okay, now I can do things differently because I have information on what I can and can't do. A lot of them are going to come out and say I just can't do this anymore. I'm tired of doing it. I'm going to hire—in case—us because we've been in that seminar.

Making those types of investments, and granted that those seminars aren't always live, they're maybe at this point virtual but reaching out to those. Those are the ways now to grow your business for tomorrow because over the next six months until we get to the end of this year, there's opportunity abound for forward-thinking.

Jason: That's what problems do. Problems are always opportunities. Let's talk about the problem. Here are some of the things I noticed. I won't say who it is, but I got a call from one of my business coaches and he has rental properties. He was like, what do you see in the market place right now because I got a small portfolio of properties and only 50% of them are paying rent. I said at least 98% of most of the rent is being collected by my clients. That's what I'm hearing.

Also, what I noticed happening is my clients are saying that their owners were calling them and saying if tenants don't want to pay rent this month, we'll let them not pay rent. They're like no, they're going to pay rent.

The thing is people felt guilty. They're almost ashamed but feel guilty, but property managers, you guys are over that [...]. You guys are completely over. You've heard all the excuses. You've heard all the stories. Some residents right now, due to the unemployment benefits and stuff that are going around, are making more money, especially the low rent markets. They're making more money than when they were working. But some of them are still trying to use the excuse that they need to not pay rent or whatever.

The news kind of made it look like that. It made it look like people trying to collect rent are evil, bad, sick, or wrong. A lot of homeowners are just feeling guilty. Property managers are immune to guilt.

Anne: That's because we've heard it all.

Jason: We've heard it all. We heard all the stories, the excuses. You know how to help people. You know what programs are available because you guys are on top of this stuff. You guys aren't having trouble collecting the rent.

In general, I haven't heard anyone in the single-family residential space or even multi-family having real trouble collecting rent. Rents have gone down just a little bit. You got people that most would have heard it's the same people that we're always troubled paying rent. We just couldn't evict them, but that's coming.

Mike: Your coach needs to reach out to a professional manager. You see that, but he doesn't. Seminars, webinars, something.

Jason: They don’t see the problem. That's the challenge I've always experienced in DoorGrow. I'm selling a solution to a problem that most people can't see. They can't see the leaks on their website. They can't see the challenges that their branding is hurting word of mouth. I have to educate people to see the problem.

The same thing is what you're talking about. If you can create the gap and show the contrast between what challenges and problems they're dealing with and what they could be experiencing, what successes your clients are having, they're going to see this gap and that gap is what creates pain.

People want to solve pain. People want a pain killer, not a vitamin. People will pay even more money to get out of pain. They want a solution, but they don't know a lot of them that there's a solution out there. I do think there is a massive opportunity. There's no scarcity in property management. There's no shortage of people that are in pain or have problems or challenges they are dealing with.

Not only that, but I think property managers can hold their heads up high because good property managers, I really do believe as I said before, can change the world. There are millions of renters. Even here on my own property, I'm renting (I just moved to Austin), my kids were without a water heater for two weeks. The landlord sent out two different plumbers because he didn't like the feedback that the 13-year-old water heater should be replaced even though the pilot kept going out.

I didn't even know my kids were taking cold showers because they got it before me and they can't get on Xbox until they take their showers, so they 're just doing it. All they're thinking about is can I get on the Xbox now? I'm like, yes, go ahead. But then my daughter's like, I haven't taken a shower in four days because the shower's freezing.

I didn't know this and the younger ones, I went to them. That doesn't make sense because they've been taking their baths and their showers. I went to my son, Hudson, and I'm like, how's the shower been lately? He's like, cold. I'm like, what? Why didn't you tell me?

Mike: It’s virtually a summer, right?

Jason: Then I said to my daughter, she likes taking baths, you've been taking baths? She's like, Yeah. How are your baths been? She's like, they're really cold. I'm like, what? But you guys protect families. You guys also protect owners. You guys are like the middle person that makes everything okay and you take care of people. It lowers the pressure and noise.

Property managers even do things like increasing the number of pets that families are able to have because you guys recognize that usually, it’s the kids that are causing more damage than the animals. [...] to get more rent because of pets. There are so many benefits to property management that positively impact families, homes, and lives. You guys are really the heroes of the rental industry. Property managers are the heroes of the rental industry.

Mike: And unlike your property manager there that evidently has trouble with customer service.

Jason: He's not the property manager, technically. He's just a landlord who doesn't want to do anything.

Anne: You got a DIYer.

Mike: Yeah, a DIYer.

Anne: Sounds like a great lead.

Mike: But that gets into the consideration of customer service. As property managers, we worried over the years about customer service to our owners but we haven't worried as much about customer service to our tenants. For retention and to continue to have tenants that want to refer people in, raising your level of customer service at this time specifically because I know I ordered something that didn't come and it was then delivered to Valentine, Nebraska instead of here where I am in Georgia, so I sent a response online and I got an auto-reply that says call this number. I call the number and it says we're too busy. We're not answering phones now. Just send an email. Customer service has failed specifically right now.

Anne: I'll actually tell you something that we did on our property manager which I think has really impacted our renewals and we are getting increases in rent even now.

Mike: On everyone.

Anne: Let's just talk about it. Again, people pay for when they feel taken care of. One of the biggest gaps that we saw, this is probably two years ago, in our business was exactly what you're talking about. Tenant isn't taken care of, it's taking too long, the contractor is giving all kinds of excuses as to why they can't get there, tenant's going here, contractors going here. There's this big disconnect.

Our virtual employee, Bonnie, is charged literally with every day every work order that comes in, she's calling the vendor and saying vendor, did you get it? Because we want to make sure it didn't get—

Mike: Lost. You know how emails are.

Anne: That's the first thing. Then the next day, she's calling the resident and saying resident, we assigned your work order to contractor B. Have you heard from him? Well, no. What happened?

Jason: That's better than being ghosted and then eventually not having your calls answered, then eventually maybe getting a text or response half a week later.

Anne: She says okay, you haven't heard from contractor B. Here's contractor B's information. We have already approved them to go out. Then she calls contractor B and she says contractor B, I heard that you haven't connected. Why haven't you connected? Oh, they haven't returned my call. Okay, I just got off the phone with them. They are available. Call them and they are expecting your call.

She closes that loop, that hand-off because we assume contractor B is doing his job and we assume tenants are never wrong, they never change their phone numbers or anything else.

Mike: Then the contractor goes out like he did to you and assesses the work. Many times there's not a follow-up, so what does Bonnie do then?

Anne: Bonnie, as soon as she gets the date it was supposed to be scheduled from either the tenant or the contractor B, she follows up the next day and says my understanding is that contractor B was supposed to be there yesterday. Did they show up?

Mike: Jason, did they take care of the water heater for you.

Anne: Are you satisfied with the repair.

Mike: And Jason says no.

Anne: No, I still have… Now, we have another feedback loop. This is a maintenance process that we never could have done without having a virtual employee do this. It's too time-intensive and we have other work to be done.

Mike: Then the flag goes up to tell the owner, owner, you got to provide hot water. You want an ACH or do you want us to loan you the money at an 18% rate?

Anne: Yeah, put it on a credit card, however you want to do it. The reality for us is our tenant satisfaction has gone through the roof because we showed that we care, we're not letting it go, and literally, I as the broker get the list of not only what the outstanding work orders but where they are in the process and what she's done to move it forward.

If we have a resident that we haven't been able to get in touch with, the contractor hasn't been able to, we have an escalation process. I don't manage, Bonnie manages. Again, total game-changer.

Mike: The benefit out of all of that, we don't get pushed back when we're raising the rent. We started with our process in the middle of March. We do it in the middle of every month with notification of our rent increases and property. Most property managers that we know said you're crazy.

We're either going to hold it. We'll tell them they don't have to pay an increase. We went out there and we got resistance from one tenant over the last, March, April, May, June. We got four months into our belt of increases and we have one pushback.

Anne: Of course when you have rent increases, that increases our profitability, too. The owner makes a little bit more money, we make a little bit more money. It's still very reasonable. One of the things I'll say about rental rates is we don't do it arbitrarily. We do a full competitive market analysis. We make sure it's on the market. We don't raise all the way up to market if it's a significant jump, we'll do it at the average appreciation rate.

Mike: We want to stay just below the top of the market.

Anne: Correct because we don't want to give them a reason to leave.

Mike: But we got happy tenants that don't want to leave. They go oh, I can't rent down the street for what I'm paying here because we always stay right below that.

Jason: There's another hidden killer, too, I noticed in the scenario because when these vendors came to my property here and talked to me, they were basically bad-mouthing the landlord. They were like this guy is cheap. I've told them he needs to do this.

In your scenario, the vendor is going to feel like they are getting taken care of. They are going to feel like they are on your team and on your side, and they are working with you, whereas these vendors feel more loyalty to me because they know the landlord isn't' doing the right thing.

Anne: That goes back to having a contract with our contractor of standards of professionalism. Our vendors actually sign a document that says these are our expectations to be a vendor for us, and one of them is to not bad mouth as part of that.

Mike: All these things combined, give us opportunities to shine. We get referrals every week. People come to us and say we hear great things about you as a property manager, and we're forward-thinking. We have opportunities there where we reach out to try to bring in business. Like what we're talking about earlier, a lot of the property managers are just sitting back. They are scared. They are afraid to do anything. That's the wrong thing to do.

Anne: A lot of them are looking to bring on a BDM. Remember last year was the year of the BDM. Do you need a business development manager? Okay, maybe you do, maybe you don't. We tend to be our own.

Mike: We are our BDMs.

Anne: But again, we are high salary people like if you are paying somebody. Our time is very valuable, but we are seeing the smart property managers are supporting that sales effort through follow-up with the virtual employee, a virtual assistant that is literally a full-time doing this grinder follow-ups because we all know in sales—I don't care what industry you're in—you have to reach out seven, eight, ten times.

Sometimes, property management specifically, it's pain point-related and some of the pain points only come up once a month. Some of the pain points come up once a year. Some of the pain points only come up periodically, so if you don't have a system to reach out to them, again it can't just be an email anymore.

I think people are tired of tech, tech, tech. You need to have tech. You need to have a chatbox on your thing that's manned by a live person, in my opinion, but you also need that human-to-human automation. You need somebody that actually shows that they care a little bit about not only your company but the people involved. Having that sales support, a virtual employee to do that, really allows your BDM to be their most successful self and to do the things that they like to do. People don't realize that.

BDMs don't want to do a whole lot of phone calling. They want to be in relationship management. If you can get them in front of the customer more times, if you can keep prospects warm and in the hopper so that when the prospect is ripe and ready, and your BDM can come and close, you are maximizing your ROI for that person.

Mark: Yeah. They actually go to our website and ask for some of our tools or some of our information. It auto delivers but then they get a phone call, I want to make sure you got 21 questions or our technical information, and when they get that phone call, they're shocked.

Anne: I'll tell you one other thing where people are going to have some issues. We all know about the Zillow. Zillow and they're charging for leads. That’s always been a hot topic. Zillow is rerouting leads. They're rerouting them to their call center in some areas, not to all areas, but into some. You don't have somebody actually calling those leads proactively when you get the email because even if you syndicate them, specifically if you syndicate them, you still get the email that says so and so is interested and they give you the phone number. But if the person proactively calls, Zillow is going to try to give them to people that are paying them, not necessarily to those of us who are syndications.

If we're not actually outbound calling those leads as they come in, we are missing opportunities for tenants. This has been a big change probably in the last three weeks. This is fresh information that again if you don't have somebody in your office that has the time, energy, and effort to be calling in addition to responding back via email, you are missing an opportunity to get your properties rented. Again, we have literally five properties come on the market on June 5th, all but one are occupied now. That's how quick we are to get these things done because we have a dedicated resource and our virtual assistant. Literally, that is her only job to focus on.

Jason: I want to touch on a couple of things you mentioned that you threw out that I think are important. One, you were talking about referrals. This is one of the number one ways to grow any business generally. I talked to a client I think yesterday, I was coaching a client and they were like our business is so great. We’re great. We got all this process dialed in and they said, but we're not getting any referrals. If a business is not getting any referrals, it's probably not as great as you think it is.

Property managers have blind spots. We all do. For those listening, if you're not getting referrals, you got some customer care problems that are likely going on. You should be getting referrals. You should be getting referrals from your vendors. You should be getting referrals from your real estate friends. You should be getting referrals from your property management clients. You should be getting, maybe referrals from some of the vendors, but people should be talking about you. If they're not, there's some sort of blind spot that needs to be shored up.

The other thing you mentioned (I think) is really smart. A lot of people, yes, they're like, I need a BDM. I need somebody to do sales, but they can't afford it. A lot of people can't just go out and afford to get some high-grade wonderful salesperson. But most business owners are not willing to also acknowledge that they are a part-time shitty salesperson. The time they're willing to dedicate or have sometimes is maybe an hour or two a day. That’s part-time. it's 10, maybe 15 hours a week, maybe they can dedicate up to 20 hours, but if you really want to grow and scale your business, there probably needs to be a little bit more time or you need just business being referred to you all the time, so it's super easy.

One of the easiest hacks I implemented when I was a solopreneur and was doing all the sales, the web design, branding stuff, and everything myself, I got an assistant. I had that person operate as a sales assistant and an appointment setter. It immediately multiplied, not just doubled probably, but it multiplied my capacity to close deals. All I did was show up for appointments. I just met with people and sold. I wasn't doing any of the follow-ups. I was a solopreneur and my assistant was calling—she had a British accent—and saying hello, this is Helen, the assistant to the CEO Jason Hull of DoorGrow. He was wanting to get back together with you.

It also set me in the mind of the prospect as something higher than maybe I actually looked like at the time being a solopreneur, sitting at home, trying to work in my living room. There's power in having a team. A lot of people say I can't afford to hire anybody. Maybe you just need somebody to start, just somebody that you can start with and they could be full-time or part-time, but they can start doing a piece of that thing that you need help with. They don't have to be able to do everything. Maybe it's the piece that you least enjoy. Maybe doing the follow-up, the cold calls, and whatnot.

Anne: That's the great thing about virtual assistants and personal employees. You're looking at less than $20,000 a year for full-time dedicated help. That's a game-changer. You can't afford not to do that. I think that that's where people get sideways. Where we really help our clients in helping them define their staffing needs, and what's the best ROI for them to bring on board first. We’re talking about trends and the things that we see, but that's one of the services that we provide, helping them figure that out because sometimes it's like you said, sometimes this is a generalist. Somebody that can do a little bit of everything. Sometimes it's a sales support person. I know I need leads. Sometimes it’s accounting, sometimes it's leasing line, sometimes it's in marketing.

A virtual assistant through HireSmart, because we're full-time, dedicated, and we specifically recruit for our clients. We don't have a room full of VAs that we go, here you go. I actually go and curate the contacts for you, and then I personally work with them for 40 hours afterward like that one-week job interview to make sure that they're amazing. Anybody that has hired and day two you're like, ugh, they just aren’t amazing. I take care of that for the clients.

Mark: It frees up so much time. If it frees up 10 hours a week, how many deals can you close, how many new properties can you bring on in 10 hours? You invest maybe two hours where somebody else is making all the calls, set the appointments, you got that two hours invested. Your return on that is tremendous because you're going to make an offer that’s equivalent to $100, $200, $300 an hour for your investment of time.

It goes back to, you've got to make those investments. You can't not hire now, you can't put your head in the sand or pull back in your shell and say, I'm going to do it myself. Especially if you're not happy doing it because if you're not happy, you're not going to get it done.

Jason: Therefore, a lot of people that have been shifting to doing more themselves. I have to lay off team members now, I'm doing everything myself. Now I'm doing stuff that I don't even want to do.

Let's touch on one thing that you just mentioned. I think this is really important for everybody listening to understand. I've seen this in hundreds of property management businesses and businesses in general, but one of the most painful or dangerous things I think a business owner can do is hiring the wrong person, the wrong role, spending the wrong money at the wrong time.

A lot of people hire based on what they think the business needs instead of what they need in order to create more space and eliminate the number one bottleneck in the company, which is you the business owner, it's the entrepreneur. You taking the time to figure out what they actually need to get the best ROI is huge for them because they've seen lots of people, they hire the wrong person they didn't need. Now they're spending this money, or they just hired a bad person in general which not just cost them the money they spent on that person and the time they spent to get that person, but they're now losing money in secret places.

I've had team members that stole from me. I've had team members that stole time. I've had team members delete and stuff after I fired them. These are problems that entrepreneurs learn painfully over time trying to build a team. A lot of property managers are in that first trap. They're the 50–60 door mark, they don't know how they can afford to hire that first person, and this is a solution for that.

This is a very obvious solution for that. You can help them figure out who they really need right now and to take the next step forward, because if they spend the money on the right person, they make more money. It makes it easier. They then can reinvest. If they spend it on the wrong person, or the wrong tool, at the wrong time, it could be the right tool but it's at the right time, or they're getting software prematurely that they didn't really have to have at that point, or whatever it might be. If you spend money at the wrong time even though it might be the right tool for the future, you're hurting your ability to get to that future.

Anne: I totally agree with that.

Jason: Cash flow. If you run out of cash flow, the business dies. It’s like the Indiana Jones boulder rolling after you is the cash monster trying to get to you. If the boulder catches you, the business is game over. You’ve run out of money, run out of cash, you're dead. People started to feel that in March. You have to always be outpacing that boulder. If you spend, the boulder gets bigger and faster, but you can get faster if you spend it on the right people.

Anne: One of the things I tell a lot of prospects that I'm talking to is most property managers (specifically) were never trained on how to hire or how to build teams. That’s not something we learn at school, it's only by trial and fire. A lot of property managers have fallen into it.

Mark: There's not a hiring 301 class in college.

Anne: One of the things that I tell them is, just like you're the expert in finding the right tenant for an owner because you've seen enough applications, you've gone through the process, you've done all that, you are the expert there, we’re the experts in hiring. I know I have a profile for hiring, I know what's successful, I know what's not successful. I save my clients from hundreds of hiring mistakes because it's not that they can't do it, a DIY landlord can do it, but they can't do it as well as a property manager.

I say the same thing. You can hire. It’s going to take you more time, you don't have a process, you don't do it enough, I have done thousands. Just in the last six months alone, I have evaluated over 9000 applications. You say that gave me some data points.

Jason: You know the BS, you know how to spot the scammers, you know which people are gaming the system, you know which people are feeding you a story, you know what questions need to be asked. In the Philippines, you got to ask about their internet connection. You got to, you can't just trust that they have one. You got to ask about where they're working. Where are you working at? Where are you working from?

That was part of the thing that I really enjoyed working with you guys. I always look at everything through a certain filter, and I'm skeptical, and I want to see how I can help people. As I went through your process, I'm like, they do this. They already do this. This is stuff I've learned over a decade in my own painful experiences hiring in India, Bangladesh, Russia, the Philippines, Bolivia, and of course the US, which ultimately most of my team are in the US now. But I have Filipino team members.

I can personally vouch for your hiring process making a lot of sense. It’s solid and it works really because it's very similar to my own. There are so many similarities. Okay, they've got this down, but you have some advantages. We talked about this in the previous episode. You guys should go listen to that where we talked about their processes and some stuff they do, but you have vetting, background checks, and stuff that people don't just have access to if they're just trying to DIY this.

Mark: It’s like the difference, if you're getting married, you got the bride and the groom, and the bride wants a custom-made dress, not one off the rack. The groom really wants a tux that fits them. We are the custom dress, we are the custom tux for that couple versus walking into Neiman and pulling one off the shelves, this looks good, or getting a dress off the hanger and putting it on like, this almost fits, let's go get married.

Jason: It looks like your dad handed you down a suit or something.

Mark: Right. That’s the difference in what we do. We are custom for our client. We are not off the rack.

Anne: Right, and outside of that is it takes time. It takes us 3–4 weeks to literally curate the right people. I always say if you need to hire somebody just the first person off the street, good luck.

Jason: You guys are bespoke. It’s bespoke hiring.

Anne: We have a guarantee and all of those things, and we can back up what we're saying. But again, if you're trying to grow your property management business right now, you need to look at your staff. Here’s the other thing. Not all staff members are coming back. You may think they're coming back. They're not coming back. You’ve got to look at who are your top liners? Who are the ones that you’ve got to keep? You need to be investing in a relationship with those people first of all.

If you're not talking to them on a regular basis, if you're not feeding them, if you're not taking care of them, you need to take care of them now. Who’s part of your med tier? The kind of people that are like, if they come back, great. If they don’t, what's the impact that’s going to happen? What are the people that you really know you just need to not have come back, and you need to deal with that pretty quickly.

Mark: For our best person, we got a VA to assist that person so that they can do even better at the best that they were. That’s the important thing that people need to take away from changes that are coming out of COVID. It’s supporting your staff and letting them work at the highest and best use. Maybe that's taking away some of those phone calls and emails by hiring an assistant for them and to give you the opportunity to grow. It’s an assistant to you for the business development to make those calls and to set up those appointments, so that you can just close.

Doing those things is the job that Anne enjoys so much is finding the individual to match. What does Jason need exactly? Even though Jason doesn't know exactly, she'll draw that out of you, and I'm just picking on you on that.

Anne: That’s a puzzle for me. There's nothing better than when I see my clients six months in, years in, we have our clients for five years now and seeing them and they’d say, Mitch has been the best thing ever in my company. She's really allowed me to be amazing and do what I want to do. Literally, these are comments that we get when we survey our clients. It has been a game-changer. If you're open and able to change.

I don't know how much time we have, but there are a couple of things that you need to look at, regardless of whether you use virtual assistants, employees, or whether you are looking at that which are some of the challenges that come from working with a remote team, because remember, even if you're planning to go back to an office, your staff is going to want to have more flexibility. Let’s just call it what it is. Not everybody wants to commute anymore. There are some that miss being in that environment, there's a lot of guys that are like…

Mark: We’re happier.

Jason: Yeah, why should I spend time commuting? Why should I spend time driving to this? I think there are a lot fewer people doing face-to-face appointments, and they'll just do it through Zoom or they'll do it through Google Hangouts, Meet, or whatever.

Anne: Whatever works. What we're finding is it is truly illuminating management problems. It’s illuminating communication problems. If you had a communication problem in the office, now you have a tremendous communication breakdown outside of the office.

Mark: If you have an operations failure in the office, boy, the failures are even bigger.

Anne: As managers, we need to look at what tools do we have on our tool belt. We help our clients with some of that because we understand years ago that we needed to equip our people to be good at this so that they would keep our people.

Mark: It is in software, it’s tools, it’s technology. There's a lot of different pieces that go into that.

Anne: Looking at your management style and we like to manage personally using key performance indicators (KPIs) because that takes [...] work out of it. I don’t have to worry if they're working eight hours as long as the KPIs are done and they can get their job done in six, I'm happy to pay them for eight and let them do what they want to do, as long as my stuff’s getting done to a level that I expected.

That's the easy button for management, if you don't know about key performance indicators, I certainly encourage you to learn what that is, and how to do that, but it’s one of the things that we teach our clients to do very easily. There are some easy methodologies to do that, but we are seeing some communication breakdowns from people that don't use us. We’re seeing some issues with management. The manager that was the nice guy, that was able to get people rah-rah-rah in the office because she was able to see them, that’s now changed. Now, work is starting to do great.

Mark: They can't hide behind the curtain.

Anne: They can't hide behind that personality anymore because work’s not getting done. That’s one cautionary tale that I will throw out to your listeners.

Jason: Results don’t lie.

Anne: They don’t, but it’s difficult to have conversations if you don't have data, and a lot of times, people don't want to track data because they think it's too difficult. We teach our clients how to do it very simply, very easily, and very quickly. That's the other thing. You’ve got to be able to get feedback daily to keep on top of it. If you wait for weeks or months, you are now in this huge hole of garbage that is very difficult to get out of. Make sense?

Jason: Makes sense. It's been awesome having you here on the show. Maybe we can take just a few minutes, let's talk about some opportunities right now and ways you think property managers have an opportunity to grow after COVID. We’ve touched on maybe doing webinars, I think you threw out there, the Airbnb. I think I have one client that added 24 doors in a month just from former Airbnbs by cold calling them and reaching out.

Obviously, you got to convince them probably to get the furniture out of the place, and make sure that these are good opportunities to manage, and that it’s going to rent effectively compared to what they're paying because some of them were making a lot of money.

Mark: They were. You can offer a turnkey for that. I know you've got furniture and all, I'll take care of making the donation, or I'll get the local company that buys furniture and resells it. I don't know if there's a market for that right now, but I'll get it picked up by Salvation Army or the kidney people, and you'll get the receipt. I'll take care of all of that and make it easy for you to let me manage your property long-term. The property managers that think that way are the ones that will be successful. We’ve been seeing that happen in Airbnb and a lot of them are coming back out of service.

Anne: One of the things we always recommend when we're consulting with clients just in general is know your avatar. If you're a short-term rental person and that’s your avatar, then you need to create a different marketing strategy around that, like how are you going to deal with that. If your avatar is long-term rentals and you want to gain business by going after short-term to convert them to long-term like Mark said, have a package, have a system, get your relationships put together. Right now interestingly enough, we have investors that are scared to death and are selling, and we have investors that are super excited and are buying.

Mark: [...] sales transaction. Though the property manager doesn't have a sales component in their business, they need to have an alignment with the referral program to somebody that does sales. I mean I'm selling two houses a month this year.

Anne: Without trying, without marketing.

Mark: Yeah, these are my investors. They just say I want to sell, and I’ll say I want to make the commission. No problem.

Anne: It's about having a strategy, being able to implement that strategy. and figuring out what are the resources that you need to create that strategy. We think using virtual employees and virtual assistants is a great way to maximize all of that because right now, it is kind of intense. If you're going to do research for short-term rentals, there's not a database you can necessarily easily pull from. You’ve got to go search for them, talk to them.

Having that marketing strategy based on what it is that you want to do, having a value proposition that speaks to the pain that the person is dealing with, all are very important. Having a website that actually can capture those leads and make you look professional which is what you guys do is also part of that. You have this well-rounded marketing plan.

Mark: We have our VA do all the research. Maybe it’s calling everybody that's on Craigslist or ads out there and saying, you may be tired of being a manager, you should go to this webinar we have coming up. It’s how to be a better manager and how to deal with the current [...]. We can do all those invitations to get people into our webinars that are going to show them they don't need to be doing this anymore. There's a lot of different ways that property managers can grow their business right now, but they need to think smart and make those investments.

Anne: And HireSmart.

Jason: And they need to HireSmart. Awesome. It's great to see you guys again. I'm glad you guys are doing well there over near Atlanta. Keep me apprised as to your next idea.

Anne: We always have them.

Jason: You always have them. That’s as crazy entrepreneurs. We always are coming up with new stuff. I'll let you guys go and I appreciate you guys coming on. Your website is?

Anne: www.hiresmartvas.com

Jason: All right. Thanks, Mark, thanks, Anne.

Mark: Thank you very much.

Anne: Welcome. Thank you, Jason. We appreciate you.

Jason: Awesome to have them on. If you are a property management entrepreneur, and you're wanting to add doors, and you're wanting to build a business that you actually enjoy, that you love, that is built around you, this is what we do at DoorGrow. Reach out, I guarantee that we’re going to make your business better in some way, shape, or form, and you're going to love it.

Even if you feel like you hate it now, maybe you're thinking you want out of it, you're feeling like it’s uncomfortable, you're probably just doing the wrong things in that business, and you may need some VAs that might be a solution for sure. We can help clean up the frontend of your business and help you get the business in alignment with you.

Reach out, check us out at doorgrow.com, and make sure you join our Facebook group. We've got an awesome community there, and people that are helpers, that are givers, and you can get to that by going to doorgrowclub.com. Mark and Anne are in that group. We've got lots of other really cool property management entrepreneurs that are willing to contribute and help you out. Until next time everyone. To our mutual growth. Bye, everybody.

April Fools Day is coming. Prank your friends opening a never ending fake update screen on their computer. Sit back and watch their reaction.

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DGS 130: Productivity While Working From Home with Thanh Pham 0

Jun 9, 2020

What can you do to be more productive, efficient, effective, and get stuff done while working from home during the COVID-19 crisis? No matter how much work you do or get done, there’s always more to do.

Today’s guest is Thanh Pham from Asian Efficiency, which has helped more than 15,000 clients worldwide. Also, Thanh hosts a growing and flourishing podcast called, The Productivity Show.

You’ll Learn...

[01:53] Asian Efficiency: Positive stereotype and memorable name for company.

[02:55] Thanh turns hobby of documenting productivity processes into a business.

[03:47] Groundhog Day: Businesses operating from home lose time and progress.

[05:06] Work/Life Balance: Nothing going on, no way to work, long days, and no variety.

[06:33] Planning: Take it to the next level via different dimensions, contingency options.

[07:23] Productive vs. Interruptive: Seek clarity to set one goal a day to accomplish.

[09:10] Sense of Momentum: What you want and why it matters should drive your life.

[12:15] Structure/Strategy: Create own schedule, design ideal day, and set cutoff time.

[14:57] Five Whys: Identify root cause and motivation. Money, freedom, flexibility?

[17:55] Energy vs. Time: Don’t do everything, do what you like and others do the rest.

[25:44] Ideal Day: Map it out the night before to start the next day right away.

[27:08] Do’s and Don’ts: Don't eat at your desk; do step away from your office or home.

[32:05] What keeps you up at night? Entrepreneurs are known for worrying too much.

[34:40] Chinese Proverb: The palest ink is better than the best memory.

[35:41] Analog vs. Digital: What’s the difference? Depends on personal preference.

Tweetables

Restore order in your life to gain a sense of relief and energy to help you recover.

“Whenever we're working from home, one of the most important things is to plan our day. That's such a simple thing that we can do, but most of us kind of skip that process.”

“Set one goal a day. If you accomplish just one goal a day, no matter how big or small, you had a productive day.”

“If we don't have energy, if we don't have any of that when we're starting our day, it's just so much more challenging to be productive.”

Resources

Asian Efficiency

The Productivity Show

The ONE Thing by Gary Keller

DGS 129: Get More Realtor Referrals With Your Own Mobile App 0

Transcript

At DoorGrow, we are on a mission to transform property management businesses and their owners. We want to transform the industry, eliminate the BS, build awareness, change perception, expand the market, and help the best property management entrepreneurs win. I’m your host, property management growth expert, Jason Hull, the founder and CEO of DoorGrow. Now, let’s get into the show.

I have a special guest with me today. Just down the street in Austin hanging out. This is Thanh Pham. What's up, Thanh?

Thanh: Hey, Jason. Good to be here. Thanks for having me and I'm super excited to chat with you here today about productivity and anything that we can do to be more productive.

Jason: All right. Did I say your name right?

Thanh: Yeah, you did. First time, first attempt, 100% correct.

Jason: I thought I did, but I thought I would make sure. I'm really excited to have you. You have a great sense of humor. We're chatting it up before the show and your company is called Asian Efficiency, right? Is this correct? Asian Efficiency?

Thanh: That is correct. That is a positive stereotype that we have going on here in most of America and the Western world so I thought, “You know what? That's such a funny name. Such a name that sticks out and is memorable.”

So we started off as a joke in a way because I just want to document my journey of being more productive. I remember one time I was staying at a house in Miami with some friends, all fellow entrepreneurs. We went out for one night, then we had a few drinks. We had a great time, then the next morning I was being productive in getting stuff done; waking up really early. By the time it was noon, I was done with my day and everyone else was waking up really late. I said, “Oh my gosh, Thanh. You're so productive. That's some Asian efficiency right there,” and that's when the name was born.

Jason: So this almost became a theme around you or a nickname attached to you before it was a business.

Thanh: Yeah. Honestly, it just started as a hobby. I just wanted to document how I did things as I was learning about productivity and how to be efficient, be effective, managing my time better, and I just started to blog about this back in the day in 2011. After a while, it just started to grow and took a life of its own after about six months. Then people kept asking me, “Thanh, this is so helpful. I'm learning so much. I would love to hire you. Do you have any courses or products?”

And I said, “Actually I don't. But that's a great idea.” I accidentally turned this into a business, and now, almost nine years later, we helped over 15,000 clients all over the world. We have a podcast that's growing and flourishing, and just continuously impacting people, people that are listening here today as well.

Jason: Awesome. Our topic today is productivity while working from home, which a lot of people are doing right now. Due to the Coronavirus, COVID-19, a lot of people are on lockdown. A lot of people have been stuck at home. Businesses are operating, some are still operating, but they're doing it from home, and a lot of people are joking right now. The big joke is it's all one big day that's been running forever.

Everybody feels like there's no difference between one week to the next. The month has gone on for three months now. We're kind of losing a sense of time, it seems to be the theme, and things just keep repeating so we lose a sense of because everything seems so similar each day and we're lacking variety in our day to day, it feels like we're not making any progress I think, maybe subconsciously as well.

What are you doing to stay out of that Groundhog’s Day sort of movie type of scenario in your own mind, cognitively?

Thanh: I think one of the interesting things that are happening now is some of those are working more than others and some of those are going the complete opposite route. We don't have a job. There's nothing going on and there's no way for us to work. In either spectrum, it feels like days are so long as a result because as you said there's no variety. It's nice to be able to go to work and then come home relax and do nothing.

When we miss one or the other, it feels like we're completely out of balance or some of us are just working all the time. If you've been working from home for a while, then you're just working more now because there's nothing else to do. You can't leave your home. You can't go anywhere so you just work more. For those who don't have a job right now, or not working as much, or can't work, you are stuck as well. You can't do anything else but stay at home and relax and do relaxing activities.

Jason: And binge Netflix.

Thanh: And binge Netflix, yeah. I've watched so many shows. Money Heist was one of my favorite ones that I just finished. A great show, watch that one.

Jason: I just went through that too. My girlfriend and I were watching that one and it was good.

Thanh: Oh my gosh. Season Four, that really got me. But that's a whole completely different podcast.

Jason: I wasn’t mad at the cliff hanger left at the ending though. My girlfriend was upset and I was like, “No, that makes me excited about the next season.”

Thanh: [...], you just have to watch it whenever you have time.

Jason: I'm sure the character, the professor, you'll get excited about. He's got everything planned out. He's incredibly efficient and he always finds a way to make things work. It seems like when nothing else seems like it'll be possible, he finds some [...]

Thanh: I thought I was a planner until I saw this character. Then this guy takes planning to a whole nother level because I thought planning a vacation was great, fun, and easy, then this guy takes planning of the robbery to five different dimensions, so you go whoa, this is crazy.

Jason: Right. He's got all the contingency plans. He's got names for all of them and something happens, he's like, “No problem. We're just going to bust out plan C,” and they just pop it out and everybody knows what to do.

Thanh: That's a beautiful thing and when we're working from home we can take the same approach. Whenever we're working from home, one of the most important things is to plan our day. That's such a simple thing that we can do, but most of us kind of skip that process. If you're listening to this and you feel like most of your days are unstructured or you go about your day and you feel like, “Man, I wish I was more productive,” or, “I wish I had that one particular thing done.”

I know many of you who are listening probably find it very challenging to schedule stuff. You want to say, “You know what? I want to work on this particular task, or call this particular tenant or client at 11,” and then something comes up. A fire, someone calls you, you got an important email, you're on call the whole time, you have an email client open, interruptions coming all the time, you feel like you're on edge, and it makes it very difficult to focus. It makes it very difficult to concentrate and have focus blocks where you're actually working and doing stuff.

When you're in that kind of situation, one thing I've found is when you're trying to work with people who have that interrupt-driven day, one of the best ways you can approach that is to set one goal a day. If you accomplish just one goal a day, no matter how big or small, you had a productive day because the rest of your day is typically driven by interruptions and things you have to deal with anyway. But if you can make progress on one goal, or one big outcome, or one big task, that's a really productive day, so let's aim for that.

Jason: That reminds me of Gary Keller's The ONE Thing. He's got his one thing question which is, “What's the one thing that, by doing it, everything else will become irrelevant or easier?” That one thing question, so maybe that's something the listeners can ask themselves. What's that one thing that if I do this, it's going to get me a sense of momentum today? It's going to make me feel like I've done something. I've accomplished something. I moved the needle just slightly on my goals.

Thanh: I think a great reframe to add on top of that to help people because one of the things I see people struggle with is, “Jason, I have five million things I have to do and they all have to be done. How do I pick one thing to work on?” Oftentimes, we ask ourselves that question. It's a sign that you don't have any clarity about your goal or the destination you want to go towards.

So, when you don't have that, everything feels equally important and whenever you get that sense when everything is equally important, that's a sure sign that you don't have clarity about what your goal is or what your destination is.

I want to challenge you as a listener to say, “Hey, what is the goal that I'm trying to accomplish?” Because once you know what that is, prioritizing or finding the one thing or the few things you have to do becomes so much easier.

As an example, if you're publishing a book, that is your big goal for the year, then if you have a to-do list that says I need to redo my finances, organize my closet and write chapter two. One of those three sounds more appealing because it's aligned to a goal which is just writing chapter two. That doesn't mean redoing your finances and organizing the closet is not important, they are important, but they're not, in relationship to the goal, important enough for you to prioritize over something else.

Once you have absolute clarity about the goal, this is what I'm trying to accomplish, you start to notice that certain tasks on your to-do list stand out because they will help you get you closer to your goal. That makes prioritizing them really easy and that makes it easy for you to say, “Okay, this is the one thing or maybe the two things I have to do today, and if I do that then I had a really productive day.”

Jason: I love that. I think some of the coaches I've worked with in the past, one of their big questions would always be to ask what do you want? What do you want? That first gut reaction deep down that we're going to respond to that. What do you want in your business? What do you want I think is really important because it's very easy I think for us to just end up becoming a slave to our business or doing things for other people.

I think a simple question of what do you want, then the follow-up question was always why does that matter? Because if it doesn't matter, we're not really going to do it. There has to be a why behind it especially if that’s work, if it's painful, if it's difficult. So what do you want and why does it matter. Really, that ultimately should be driving our business. It should be driving our life. All these things are vehicles to serve as. They're all vehicles to make us happier, or more fulfilled, or give us a sense of momentum.

Let's get into some specifics. People are listening and are like, “Thanh, I've got my one goal but how do I create this structure for my day that you've talked about? How do I do this?”

Thanh: If you're working from home, one of the best things you can do is to create a schedule for yourself because after working from home since 2009, I've consulted so many clients over the years. There's a lot of different strategies out there when it comes to being productive and trying to be efficient working from home, but the one strategy that I see that is most effective for most people is creating your own schedule.

You want to design your ideal day and one of the biggest things that you want to pay attention to is that again, one, you want to have one big goal for today especially for people who are listening to this who are interrupt-driven schedule, you want to create that. Then the second thing is you want to make sure that you have the cutoff time for when you stop working as well.

I know that's going to sound crazy for a lot of property managers and you go, “Thanh, I can't do that. I'm on call 24/7 and I need to be reachable whenever people contact me.” I totally get that, but if you want to have some sense of balance in your life or if you feel like you're always on call, you're tired of being that way, you want to then start creating some systematic solution around that so that if people do call you after a certain time, it's still being handled.

When I'm working with a lot of owners and operators, their main fear is, “Man, if I stop working after six. I'm going to lose a lot of business. I'm going to get a lot of complaints.” Those are rightfully so in the beginning, I would say, but what if you could hire someone to be able to work even part-time to deal with stuff outside of your normal office hours? To be able to handle that request and things that people need so that you don't have to do that.

You can pay someone else to be able to do the things that need to be done while you have time for yourself. As you're growing your business and have specific boundaries for yourself, it makes it easier for you to have that work-life balance because most of us who are entrepreneurs and are working all the time, after a while we get so tired. One of the main reasons businesses stop existing or quit is because the owner is tired. They're just like, I'm so done with—

Jason: They’re burned out.

Thanh: Yeah, they have this burnout. So we want to create boundaries. We want to create systems in place so that we don't have to work all the time. When we do work, we can work on the things we have passion about or we're really good about, that are in alignment with what you were talking about earlier which I love is the whole why thing. If you've never done that exercise, it's called the five whys.

Basically you ask yourself why five times, you start to come down to the root cause, the root motivation for you why you started this business. Oftentimes it's not because you wanted to make more money even though that was I'm sure a strong motivator for a lot of people. Oftentimes, it comes down to having your own freedom in your life. Having a flexible schedule. Having quality time with your family and friends.

Once you really connect with that, you start to realize I don't have to work 18 hours a day. I can accomplish everything I need in six, or seven, or eight, and the rest of the time I can spend it with my family because that's why I started my business. To be able to spend time with them, not necessarily work more until midnight fixing stuff or trying to attend to tenants, even though that is important. Someone else can do that as well and get paid for it. You employ someone and that's a beautiful thing too.

Jason: I think ultimately when we boil anything down, it comes down to usually a feeling that we want to have. Somebody just says I really want a Tesla, or I want to drive. I want this car. When you really boil it down, people always want what we think we will feel when we have that.

How would it feel to have a business that runs itself or I had the freedom, the time? Ultimately, it boils down to some sort of feeling that we want to have. Then if you work it backward, once you figure it out, once you get to that bedrock why, then the question is can I have this why without that? Or is there a faster vehicle or a way to get to that in that?

If I just want to feel powerful, are there other things I can do to feel powerful besides what I was thinking about how to look this one certain way? One coaching or program that I went through, this phrase they always drove into us was, “It doesn't have to look a certain way.” They recognize it. Everybody always gets so attached to things looking a certain way. We want a specific outcome and we want to get there in a specific way. It has to look this way. No, no, no. It has to be like this.

Sometimes we end up becoming control freaks and I'm sure sometimes productivity can become a control freakish mode for people to get into. They're micromanaging every second. They're doing too much. Planning everything out in so much detail that they kill all the life and spirit of their life, fun. Ultimately, that could lead the burnout, unless people really just thrive on that situation.

I'm a big fan of energy management over time management. Spending your time doing the things you really enjoy like you're talking about and that's going to help you avoid getting burnout because if I'm doing the things that I love, I can work crazy amounts of hours in a week because I love it. I'm not getting burned out on it. I'm far less likely to get tired. People aren't going to annoy me or frustrate me in those situations because I feel alive. I feel like I'm doing something that brings me joy, life, and momentum.

I think ultimately everybody needs to find that in their business because I think the great secret that nobody talks about is that as a business owner, you don't have to do all the stuff people say a business owner has to do. You can do whatever you want. If you want to be the receptionist in your company, you can be the receptionist. It's your choice. It's your company. If you want to do accounting and you love that, you can do the accounting. If you want to do customer service, you can do that being the business owner.

Let's go to the cutoff time. I really like this idea. I like this idea because there are so many beliefs that prevent us from stopping and cutting it off. I had a job working for an internet service provider and I started managing their support department after being there for a short period of time, then I was moving up and then I was just underneath the two owners. I was working really crazy long hours. I had to commute sometimes during that job, like two hours because I was driving into LA (Los Angeles), and traffic was crazy. And then driving out.

S.o I would just stay even later and I was working, working, working. The thing I realized is that no matter how much work I did there was always more. There's never an end to finishing all work that could or possibly will be done. There's no exact stopping point that you'll eventually find that all the work you need to do as a business owner or even just as an employee is done. But creating a healthy stopping point when it hits this time, I'm going to stop my day and pick it up again tomorrow.

It's always going to be there waiting for you. It's still there and what I find is, is it the Pareto principle? It is the idea that if you constraint your time to a certain limit, “I'm going to be done by five o'clock. Five o'clock I'm cutting it off.” What happens is you start to become more productive because you start to innovate. You start to be creative. You're forced to constraint and because of that constraint, you have now to innovate. Without a constraint, it could be endless.

You give somebody in your team an endless amount of time to do something, they can take weeks. You're like, “No, I need this done by Friday.” Then they start to innovate. “It's not possible the way I currently do it to get done by Friday. Okay, what can we do to change that?” Every week you can have this done. Then, you start to get innovative.

I think there are secret benefits to doing that cutoff time that psychologically feel backward but we're going to become more productive as a result of creating that cutoff time. Do you agree?

Thanh: I one hundred percent agree because there are actually multiple benefits to setting that cutoff time. You mentioned one [...] of them right there which is like setting a deadline first. We know that there's nothing better than having a really good deadline that forces you to get a lot of things done in a shorter period of time. Having that cutoff time every single day is like having a deadline every day for yourself to say, “Okay, I need to get all of these work done before a specific time,” and if we don't have that, then we take up the whole day and even more than that to get the things done that we need to get done.

That goes back to what you're saying early like Parkinson's Law. Something takes up as much time as we give it to. If we say, “I want to have this done in two weeks,” it can be done and if you tell yourself it can be done in one year, it will be done in one year. It's just a matter of how much time we give ourselves to get something done.

By having a daily cutoff time, by forcing ourselves to do the things that need to be done, especially if you focus on one or two major things like the one thing or the two smaller things and say, “Okay, I need to have this done before five,” then you will find ways like you said to get it done.

The other big benefit of that is that when you have that balance to say, “Okay, after five I'm going to stop working,” you can then go to bed earlier. You can enjoy time with your family. You can spend time with your kids or you can do some personal hobbies. You can run some errands. You can do all these different things that restore order in your life. They give you a sense of relief. They give you a sense of energy to help you recover.

Guess what? You're going to show up as a better owner, as a better property manager the next day because if you're sleeping well, you're eating right, you have the time to do all the things you need to do, you're going to show up the next day feeling refreshed and having more energy. Like we talked about and like you mentioned earlier, energy is such an important factor. It's such an important currency for productivity and when we have the energy to focus and do the things we need to do, we are so much more productive than without it.

It's like if you have really nice sports cars sitting in your garage, you're the perfect driver. You know exactly how to drive it. You know every single feature, but the car has no gas. Guess what? You're not going to go anywhere even if you have the right tools, you know exactly what you need to do, you have no gas? Guess what? You're not going to drive that thing anywhere.

It's the same thing for us. If we don't have energy. If we don't have any of that when we're starting our day, it's just so much more challenging to be productive. Then we have to caffeinate. We have to drink more coffee or tea getting ourselves ready. That's not a success [...] for us to be able to focus and be productive for the rest of our lives. We want to be able to start our day, get things done that need to be done, and have the energy to focus and do the best work that we're paid to do, essentially.

By introducing that cutoff time, it has so many benefits that come with that. Just think about all the benefits that come with having more energy. Sleeping better, running the errands you need to get done. Having that sense of order in place because you can do all these different things. It makes it so much easier and makes you so much happier as well. That's going to be reflected in your work you do the next day, and the day after that, and the day after that.

Jason: I think ultimately what all of these creates is presence. It allows us to be more present or more there when we need to be there. If a property manager is communicating with a tenant, they need to be on when things get difficult or sticky. They need to be on with an owner and they need to cognitively have the ability to make decisions, and move quickly, and think.

All of this gives us power. It gives us power when we're able to be more present because if you're tired, you're not present, not nearly. If you're cognitively burned out, then you're almost in a situation that is painful that you're forcing yourself to do something. Forcing your body to do something that is uncomfortable. You're done and you keep going.

Let's go back to the idea of this ideal day. How do we create a map for our ideal day? When do you do this?

Thanh: Ideally, you want to plan your ideal day the night before. That's something that is such a simple habit that I teach and very few people actually do. But once they do it and follow through with it, they start to know this huge productivity jumps because it allows you to start your day right away, as soon as you're done with your morning routine or you're sitting down on your desk instead of just starting your day where you're scrambling, trying to figure out what to do.

Also, the other benefit that comes with planning your day the night before is that you can go to bed knowing that everything is being addressed and is going to be addressed the next day as well. You can feel relaxed and not stressed out as much because you know anything that needs to be addressed needs to be done the next day, so you can sleep a lot better. It has so many energy benefits as we talked about earlier.

Planning your day the night before is one of the first things I would recommend people do. The second thing is to have one big goal. One big win for the day, then the third thing is the cutoff time. You have those three pieces in place, plan it the night before, one big goal, and having a cutoff time. You will have an ideal day figured out for yourself.

If you're working from home, one of the things I would also recommend that you don't eat at your desk. Actually leave your office or your home. This applies also if you're working on an office because most of us are just sitting at our office or desk the whole day and we get so burned out by just looking at a screen, being on Zoom meetings, or being on the phone the whole time that it's actually nice to be able to step away.

Go for lunch for an hour and go for a walk. By the time you come back, get outside. Get some sunlight, some vitamin D and you feel so much better. Your mood is elevated. You have a new sense of urgency, a new sense of energy. Stepping away from your desk to have lunch, as simple as that sounds, will make a big difference.

I was working with this coaching client. He had all these big goals and we were committed for a three-month engagement. The only thing we did is I told him to go for an hour-and-a-half every single day because he was working at a big bank. He was super busy. He felt like he just had to work 80 hours a week. The only difference that we truly implemented was just going out for lunch because it's like a mid-day reset for him.

I gave him a new sense of energy, a resurgence of focus. He was able to work from going to 80 hours to 55 hours, which was a huge improvement for him. The only change was because he had a longer lunch and is going outside. Going out for lunch away from his office. As a result, he was just more focused, had more energy, and knew exactly what he needed to do. He had more time to think about stuff. So, instead of just sitting there all day at his desk feeling lethargic and just sitting there for the sake of sitting there, he wasn't actually truly productive.

Again, plan your day the night before, have one big win, set a cutoff time, then definitely go out for lunch outside of your home and office.

Jason: I love it. It's like breaking up your day into two chunks to tackle. It's a lot easier than doing an eight-hour chunk. The night before, why not do planning in the morning? Maybe you can touch on that. Some people do this. They get up in the morning. They sit down. They're like, “I'm going to plan out my day,” and they do it in the morning. Advantages? Disadvantages? What are your thoughts? I'm sure you've had clients doing that.

Thanh: Yeah, I've done both for many years. Planned the night before and I also planned the morning of. One thing I found is if you're somebody who is a morning person, you have the energy you have in the morning, then planning the night before gives you the most benefit because you can just start your day right away and just use your energy and focus on the important task that needs to be done. You just get started right away. You're not wasting time or energy planning something. You already did that the night before.

If you're a morning person, then I would say that's the way to go. I would say for a majority of people that applies too, even if you're not a morning person. Even if you're somebody who starts a little bit later, let's say 10, 11, or 12. It's still beneficial to plan the night before because you can go to bed knowing that, "Okay, I have an idea what to do."

Also, there's the sense that once we know what we need to do the next day when we go to bed we can just feel assured that we're going to do this, but also, our brain will start thinking about how do we solve this particular task or problem or knowing exactly what we need to do the next day.

That's very powerful as well whereas if you plan the day off or the morning of, often it's easy to get distracted, or to have an excuse for something, or just continue to lay on the bed a little bit longer because we wanted to. Because there's no sense of urgency or clarity about, "Okay. I need to do this today," because that planning process still hasn't come up.

I think for many reasons and for many people planning the night before is more of a preference, ideal, something that you will make a habit of because I do think it has much more impact. But if you're somebody who doesn't' really get started until two or three o'clock in the afternoon, then I'd say it's okay to do it in the morning because you're not going to be as focused anyway. Those are some of the pros and cons, but if I were to work with a client, I would always recommend doing it the night before.

Jason: I like the idea you touched on there that if you do your planning the night before, you're then allowing your subconscious to work out a lot of the details. A lot of entrepreneurs operate based on their gut, their intuition. It's things that they're subconscious, or deep down are coming up for them, or they’re figuring out. I think that gives them more of an opportunity to use that supercomputer that our subconscious mind is. That makes a lot of sense.

I'm going to play around on that. That sounds cool. You always hear the phrase, “What keeps you up at night?” Entrepreneurs are notoriously known for being kept up at night because they're worried about something or working on something.

Maybe just the act of offloading everything at the end of the day and saying this is going to be a plan for tomorrow, instead of leaving it there feeling like you need to work on it, that's going to allow your subconscious to work on it, but also create the space so that you can get good rest and you aren't kept up worrying about things. It'll allow you to lower that anxiety or that pressure, noise, or that stress that every entrepreneur tends to carry.

Thanh: Yeah, that's why I always recommend that people journal at night as well because when we have so many thoughts before we go to bed, it's just so hard to fall asleep. I've been really geeking out on this even further because I have an Oura ring, one of those fitness trackers, and one thing I've [...] is that when I journal and I put all my thoughts away, my REM sleep goes up significantly. REM sleep is when [...] frustration for our brain, for our mental health, and when I don’t journal, the number of minutes of REM sleep goes down quite a bit.

I think it's really because when our brain is occupied with all these different things, it cannot actually relax as much because there's just so much going on. But when we journal and put it on paper, put it away from our head and actually put it on paper, our brain can relax knowing that we don't' have to use this as memory or store anything. It's on paper. It's there.

If we need it, we can access it. We don't have to worry or stress about it. You can actually focus on recovery while we're sleeping. It also helps you to sleep better. You feel less stressed when you do that. It's a nice winding down routine for you as well to decompress and just destress. I like to journal in the morning as well just to reflect and think. Also at night before I go to bed just to honestly put my stray thoughts away.

If I wanted to do something, or I had a particular task, or I had an idea that I don't want to lose, just write it down real quick. It's out of your head and as you know, our memories are terrible. I've had so many ideas and then go, “Oh, what was the thing I was thinking about? That was such a brilliant idea.” Or I had a catchphrase and I was like, “Oh, I should use that on my podcast or marketing copy. Oh my gosh. I forgot what that was. I wish I had written that down.”

Our memory is as not strong so it's always a good idea to write stuff down as quickly as possible especially before you—

Jason: [...] about the palest ink?

Thanh: That I don't know.

Jason: It's the palest ink. I'm being Asian Efficiency now. It's my turn. There's this Chinese proverb that the palest ink is better than the best memory, or something like that.

Thanh: Oh, I've never heard of that. I might have to borrow that from you.

Jason: You could look it up. I don't know who said it, maybe it was Confucious, he says everything. But anyway the faintest ink is better than even the best memory because it's there, it’s tangible, it can't be forgotten, We know our brains are not really great at accuracy or remember things, so I love that idea.

Related to that, Mr. Asian Efficiency, how do you feel about typing versus writing? Because what you're saying is writing in my journal, writing in my journal. Are you actually writing or it sounds like it can be more digital, nerdy, tech, whatever way of typing everything. A lot of people are, “Type it all. Type this note. I'll type it on my phone. Type, type, type.” Do you find there is any difference? Are the things you feel like writing is better suited for? Do you write anything? How does this work for you?

Thanh: I think this whole analog versus digital is an interesting conversation for many people. What I have seen in my own personal life and amongst thousands of our clients is that there's no one best way to do something. It's really a personal preference. You can have a paper to-do list, or a physical planner where you write your to-do list, or you can have a digital one. I tend to prefer to use a digital planner myself, but when I'm writing notes down or journal, I usually like to do it on paper.

There are scientific studies that show if you write something down, you tend to remember better. Your retention is a little bit better. There's some value in that as well. You also need to look at the functionality, utility value that comes with that because you leave a piece of paper at home, you can't really access it anywhere whereas if it's something in the Cloud or Evernote. If I write it down on my computer or write it down on my phone, I always have it with me whenever I need to.

I like to have a combination of both so for example my to-do list is digital, I use OmniFocus as an app for that. Then in my company we use something like Jira, a project management tool. For notes and just storing ideas and just random stuff I use Evernote. That's on my phone and also on my computer and available on the web. That's an easy way to access stuff very quickly too.

But when it comes to journaling, I like to have a physical planner. I use something like a five-minute planner or just a self journal which is a physical planner. I use it every single night and every morning to either plan my day, to think about stuff, or to just write down and just put some thoughts down or ideas that I have. Whenever I am traveling, I'm also carrying one with me. If I don't have it with me, then I'll store it in Evernote real quick.

Most of the time, I like to use something physical because it allows me to disconnect from my computer. I'm sitting behind my computer most of the days and when I'm sitting there, I'm just not as creative because I'm associating computers and screens with work. Sometimes, if I want to be creative, I have to actually step away from that to be able to go to my whiteboard. That's another tool that I use which is physical or pen and paper-ish. Just go to my whiteboard and start mind mapping, brainstorming ideas, or creating a quick list of things I need to do or want to remember because I can be so much more creative when I'm away from my computer.

The same thing with pen and paper. Sometimes, if I'm doing thinking questions for myself then I say, “Thanh, what will it take to double my business over the next six months?” That’s a simple question that I ask myself. If I do that behind my computer, I get easily distracted. There's notification popping up. “Oh, let me just quickly check this email. Someone's messaging me on Slack or Microsoft Teams. Oh my gosh, I'm getting so distracted,” whereas if I'm away and I have my favorite beverage. I'm sitting at a nice coffee shop or something, I see beautiful people walking around, there's a nice atmosphere, and I'm just sitting there and thinking, there's a different level of engagement, commitment, and clarity that I get from doing that.

I like to use a combination of both. Again, there's no perfect solution for everyone. There's no one-size-fits-all, and a lot of times people have to figure out on their own what they prefer and also depending on their lifestyle, but I think everyone can benefit from digital and paper.

Jason: Yeah. Like every podcast episode, I'm writing down notes. This is just this episode, that's page one. I'm already on page two. Thoughts as they come to me, things I need to do, like I just wrote down I need a cool box for my mic like you have because I don't have that. That's kind of cool. I'm always thinking and the brain is always going, so writing things down (for me) is a big deal.

I use all kinds of digital stuff to keep track of things. Keep track of tasks, keep track of what my team is doing, tons of software and my business so I get it. Then even on my iPad, I have an iPad with an Apple pencil so I can write on that and it's digital. There are a whole plethora of different ways. I guess ultimately it's what works for you. What's going to actually help you feel creative, feel the momentum, and get your thoughts out. I do think there's magic in writing.

As nerdy, as digital, and tech-savvy as I am, I think there's magic in writing. They found that even when you write stuff out, if you lose your main writing limb and you start writing with your other hand, your handwriting will eventually be exactly the same once you get used to it again. Handwriting analysis, if you geek out on some of those stuff, is actually like brainwriting. It's like a brain to paper. I think there's some magic in writing that I think there's also something therapeutic about writing for me that I just don't get by typing something.

Thanh: Absolutely. I have a beautiful pen that was gifted to me. Someone gifted me a Mont Blanc pen and the really funny story about that is like four or five years ago when I got this gift. Someone gave me this pen and when I got this pen, back in the day I didn't know anything about pens so I'm like, “Wow. Okay, this is a nice gesture.” So I put that pen away.

I didn't really think much of it and a few months later, one of my employees comes here and says, “Thanh, is that a Mont Blanc pen?” and I go, “I have no idea. What does that even mean?” He says, “Oh my gosh, this pen is like $700, Thanh. Did you not realize that?” I was like, “No, but let me use it because it's so expensive.”

That's when I started using my pen and that's when I realized wow this is really actually a beautiful pen. The weight of the pen, the way you hold it, then I actually started writing down stuff a lot more as a result of that. As you said, it's kind of a therapeutic thing. It's a beautiful tool that I have that I like to use. It's really smooth and sits nicely in my hand. Because I'm away from my computer, there's no crazy stuff going on. There's a lot to that.

If you make it really enjoyable for yourself where it's a therapeutic fun thing for you, you have tools that you use that you enjoy, then it makes it really easy and fun. Something that I always talk about in my podcast is called minimalist luxury. How can you have very few things, but the thing you do own or the best quality that you can afford is absolutely the best thing that you want to own and have?

For example, having one really nice pen allows you to do so many cool things with that. Writing a contract, or agreement, or journaling every single day. It's a fun process for you because you love to use that pen or maybe it's a really nice jacket that you love to wear and anytime you wear it, you feel so much more confident. Going back to that feeling that you want, that you're looking for, it's like if you want to feel powerful you wear that particular jacket. There's one jacket that I have, anytime I wear it I feel so powerful. It's my favorite jacket and every time I go to speak, that's the one I always like to wear because I associate it with being powerful.

Jason: I think I saw the post on your Instagram or your Facebook. Your power jacket, does it have a little shield on it?

Thanh: Exactly, yeah. All these different things that we can buy and there's not many things that we need, but the few things that we need or want to make sure it's the best one that you can afford because oftentimes it will last longer. It's better quality. You'll enjoy using it more. That's something I learned from using that pen because I don't want to use any other pen, that's the one pen I want to use and every time I want to use it I feel so happy using it.

Jason: Yeah. Thanh, we can probably talk about this stuff for hours. We can go on and on and I'm sure there's lots of stuff that you can share and teach people. Maybe we should wrap this up. How can people learn more and what things do you teach or share at your company?

Thanh: Absolutely. Thank you first and foremost for serving your listeners and audience. If people want to find out more about me and what we do at Asian Efficiency, we have a podcast called The Productivity Show; it’s the number one podcast on iTunes. Also, you can go to asianefficiency.com. You can find anything there about productivity, being efficient, automation, what kind of tools to use. There's so much free content there that I would love to share with people, so just go to asianefficiency.com and we'll take care of you there.

Jason: Awesome, alright. Thanh, it's been great having you here on the DoorGrow Show. I appreciate you being here.

Thanh: Thank you.

Jason: All right. We will let Thanh go. Check his stuff out. Really cool guy. Anybody that is focused on something as much as he has, has some really cool ideas to share and it's fun to have people like that on.

If you are a property management entrepreneur, and you're wanting to add doors, you are wanting a better website, a better presence, you are wanting branding that makes you feel confident to look good when you go showcase your business to other people, helps you improve your sales, whatever you're looking to do for your property management business so that you can improve your growth, we can help over DoorGrow.

Check us out. Go to doorgrow.com and we look forward to having you as a client and supporting you in your growth. We love our clients. We have some amazing, awesome clients. Check us out at doorgrow.com and be sure to join our community at doorgrowclub.com and that's it for today. Until next time, everyone, to our mutual growth. Bye, everyone.

Listen, everyone is doing the same stuff. SEO, PPC, pay-per-lead, content, social, direct mail, and they still struggle to grow. At DoorGrow, we solve your biggest challenge in getting deals and growing your business. Find out more at doorgrow.com.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

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May 26, 2020

What’s an easier way for realtors to get referrals to property managers? A free mobile tool, rather than just another app on your smartphone.

Today’s guest is Vitaliy Merkulov from Renter Inc., a company that builds software for realtors and property management businesses to be relevant, knowledgeable, and engaging.

You’ll Learn...

[03:05] What’s next? Building mobile app to generate leads.

[03:50] #1 Source: Property management businesses grow via referrals.

[04:57] Purpose and Point of Development: Mobile app gives you more realtor referrals.

[05:47] Features and Benefits: Realtors request free rent analysis, receive push notifications, provide referrals, and view referral status.

[08:10] Rent Analysis: Property manager is first to know who’s leased property, what property should lease for, and what the market suggests for time it takes to lease it.

[11:40] Relationships: Get customers when they’re hot. Provide a tool that gets them there, gets them faster for more chances to turn them into leads.

[14:09] Resource: App also offers latest trends, news, and events in specific areas.

[15:18] Fear and Future Opportunities: Evictions and moratoriums will be lifted, and the real estate/property management industry tends to do well in these situations.

[17:37] Open Rates: App is opened more than email; provides easy access to people.

[19:44] Installation and Onboarding: Enable permission to receive push notifications.

[21:30] Transactional and Global: Two types of notifications.

[22:45] Status of App: In development phase, planning to be released mid-June 2020, and four beta testers in place.

Tweetables

#1 Source: Property management businesses grow via referrals.

People shift from buying to renting. People transition to being accidental investors.

The property management industry may have a season of significant growth.

To get people to give you referrals, you have to show them value.

All the features have been defined, they're ready, and they’re in the development phase.

Resources

Renter Inc.

Info@renterinc.com

DGS 71: Automate Giving Landlord References with Vitaliy Merkulov of Renter, Inc.

Mynd Property Management

RentPros

Real Property Management Preferred

DGS 128: Navigating the Cash Crunch with Tim Francis 0

Transcript

My guest today is Vitaliy. Vitaliy, welcome to the show.

Vitaliy: Thank you.

Jason: You’ve been on the show before. Your company is Renter, Inc. For those that aren’t familiar with you, why don’t you give us a quick background of you are, and then maybe give us an update on Renter, Inc., and then let’s get into this new thing that you’re here to talk about today, which is how realtors can start getting referrals to property managers in a more easy way.

Vitaliy: All right. Thank you for having me here again. Last time I was here I believe it was about a year ago. Renter, Inc. is a software company that builds multiple software. One of the ones that I was here for last time is called Rental Verification software. What that does is it automates the process of giving rental verifications to your tenants that are leaving your property.

You have tenants that are there, they’re getting ready to leave. That new prospective landlord contacts you, asks you for references. Usually, it takes 10-15 minutes to do that, and then you have to chase—make sure that they give you consent forms and all that stuff. With our software, Rental Verifications, you’re able to integrate with Propertyware and AppFolio, and it automatically generates their rental verifications for them so you don’t have to spend your time on that.

The last time I was here, I was saying hey, we need some beta testers for AppFolio, and we were able to get them because of this show. Right now, it’s up and running. Everything is good. What I want to talk about today is this mobile app that we’re building. This came from talking to property managers, asking them what their real problems are. Some of them came back and said our biggest problem is not really automation right now. Our biggest problem is getting more leads. That’s where this app idea was born. I’d love to talk to you guys about that.

Jason: Let’s get into it. The number one source for most property management businesses in growing businesses, if they have a healthy property management business, is always word of mouth—it’s referrals. If you build up a business that has lots of doors, it’s a machine that builds itself. It just naturally starts to grow as you have more tenants and more owners, and you’re doing a good job, and providing good service, more and more people are referring. It kind of takes on a life of its own.

For a lot of property managers, this is a real problem. It’s a struggle to get this machine going, to get that engine going. Then even for the larger ones, they’re always like how can I pour more gasoline in this fire that is our biggest fire? How do we make this work? You and I have been talking about this software quite a bit, right? We’ve gone back and forth, and I guess you could say I have consulted and given you a bunch of ideas on this as well. Where are you at with this, and what have you come up with? Let’s tell people about it.

Vitaliy: Let’s try to get into what is the point of this app first, and then I’ll tell you where we are in the development of this app. The main point of this app is it will give you more referral apps—realtor referrals. The way it works is instead of you going to realtor events, meeting realtors, and giving them your business card and beg for referrals, you would simply give them your own app with your own logo, which will have very good tools in it that you would provide to these realtors. That they would simply go to either App Store or Android store and download your own app.

This app will have capabilities such as realtors will be able to request free rent analysis directly from you, and you would be able to respond back inside your own app with your own rent analysis. They will receive push notifications, you will receive push notifications, and everything is done through the app. The other feature is going to be referrals. Realtors will be able to give you a referral from the app. You will see and get a push notification saying that there is a referral coming in.

The big part here, the realtor will be able to see the status of the referral. For example, is the referral converted, has it been dropped? All of that will be able to be seen in the app. The other benefit that this app has is it’s not only an app that is useful for you, the property manager, it’s also a tool for a realtor to be basically an expert in investors’ type of world. You will be able to push important information to them. For example, local laws and regulations that these realtors need to know when they’re working with an investor in the area.

It makes you relevant, it makes you more advanced in knowledge, and it gives them this free tool rather than just another app on their phone. It also gives you push notifications, which is a much, much more chance of them interacting with you. The other biggest thing out of them all is the fact that it’s a mobile app, it’s on their phone and you can send them push notifications. They will be on top of your mind compared to all of those property managers who gave them their business cards and begged them to follow up with them.

Jason: Let’s touch on some of this real quick because I’m sure we’re going to lose people if we’re just throwing out all the features and benefits. When you first came to me with this app, I was really negative about it. I mean, let’s be honest. I was like nobody wants another app on their phone. Realtors aren’t going to want to just download some app and give referrals. The missing piece, which you just threw out there like it was not that big of a deal, but I want to point out it’s a big deal—that rent analysis.

Realtors really do want to be able to say to their investor clients here is an expert analysis, but they have no idea. They have no idea they could go to Zillow, they could go to these places, but they’re inaccurate, and they have problems. Nobody knows better than a property manager who’s leased out two or three properties in that neighborhood what that property should realistically lease for, or what they could get, or what the market is suggesting based on the time it takes to lease a property. All this kind of stuff.

They have all these anecdotal data in their head that you’re just not going to be able to pull in sometimes because they’re the boots on the ground. They see this. This gives agents a resource that they can come to you, provide, basically, a lead to you like here’s this property. Here’s the owner’s detail. Here’s the stuff. You’ll be able to provide that service. They’re going to feel safe that you’re going to give this person back to them when it comes time to sell because you’re going to be, as a property manager, the first to know when this person wants to sell. Why?

Because they’re going to reach out, and they’re going to want to know what the property may be could sell for. They’re going to have this need, so you can then refer them back to the agent. The idea, once we figured that out, there’s an incentive, there’s some benefit for the agent to look like an expert, to keep the client, to receive that, and then I was like all right. Now, this is starting to make sense, Vitaliy. This is something I could sell people on. I could say hey, you should do this. This will be a good idea.

The idea that agents can see the transparency, they can see where a lead is at, almost like a CRM. They can see where it’s at in the step in the process. Because this is one of the concerns, if I send somebody a referral, I want to know if they’re being taken care of, I want to know how it’s going. I want a little bit of feedback. Did you get them on as a client? Are you going to pay me a kickback for this? Is there like this? That’s what the property manager and the real estate agent, they want to see all of this stuff. This app facilitates all of that.

The agent’s going to want to keep this app on their phone because they’re going to have this easy resource they can go to. It’s a tangible anchor. Psychologically, anytime they’re stuck on anything, they’re like oh, well, this person is a real estate investor and they want to turn this into an investment property. The next step is we need to figure out what could this property rent for if they buy this property? You can start building that, connect that relationship. It allows the agent to look even better, to look like they have a team of resources, to look like they’ve got things at their disposal, and you get to be that resource as a property manager.

Did I sum that up, somewhat? Is that okay?

Vitaliy: Yeah, of course. Let’s imagine this. The realtor is out there showing the property to investors. They look at this property, 123 Main Street, and the investor says how much can I get rent for? Instead of you waiting, going to your office, and then reaching out to your favorite property manager, the realtor can take out their phone, and go to your own property management app, and request a rent analysis right there and then, and forget about it. It depends on how fast you are, you’ll get a notification or a push notification into your own app, and you’ll be able to provide a rent analysis within seconds or minutes.

Jason: This rent analysis is going to have the property owner’s info on it, right? You request that from the agent. If the agent wants to request this info, they’re submitting their client’s info like here’s the client’s name, here are their details, so that you get a lead as a property manager. Then you can communicate with the agent and with the owner.

Vitaliy: Yeah. Much faster and you always got to get your customers right when they’re hot, and this is when they’re hot. They’re looking at this property, they want to know what is it going to rent for, and if you can provide them with the tool that is able to get them there, get them faster, there are more chances it’s going to turn into your own lead.

Jason: You start building that relationship, and at that point, you’re just being helpful. Ultimately, you don’t have to be salesy, you’re just providing value, you’re being helpful. Here’s the rent analysis. Here’s what you might want to do. Then if you’d like us to come out and check out this property and give you an idea of what changes need to be made, we’d be happy to do that in order to get it ready. You can start to build this and start this relationship without having to start selling.

The agent is saying this is a trusted resource, I’m going to connect you with this company. They’ll give you a rent analysis, they’re going to do all of this, and they come with that authority already established.

Vitaliy: Most property managers do offer this free tool on their website, but once the realtor is on the field, they're not going to pull up their phone, and try to go on your website, and request rent analysis there. It might be harder to do. If it's on their phone, there are more chances they're going to do it through your app rather than finding and looking for a website of another property management company. Hoping that that website is accessible through their phone.

Knowing that it is a resource because this app will not just have rent analysis and referrals, it will have latest trends, latest news, and events that are happening in specifically your area, there are more chances that they're going to already know about your app because you've been pushing push notifications to them about the latest events. They will have you on top of mind, and they will know to go to you rather than to another property management company.

Jason: Right now, with coronavirus COVID-19, all the drama that's going on, there's a lot of fear, there's a lot of uncertainty, there's going to be a lot of shifts—evictions, moratoriums are happening. Once these things start to lift, there's still going to be a lot of questions. People are looking for answers, and there's a massive opportunity here coming in the future. If the real estate market doesn't recover quickly from all this complete pause that's happened, then maybe a real estate industry may suffer and struggle, and then the property management industry, usually by default, tends to do well in those situations.

People shift from buying to renting, that people transition to being accidental investors. They can't get places sold as the market tanks. The property management industry may have a season of significant growth coming here in the next several months or next several years. This would be a tool that would allow you to get that info out like here's the update. Here's what's going on. We even see the president of the United States. He has an opportunity right now to do daily briefings, and his ratings are higher than anything else going on right now, from what I understand.

Everybody wants to know what's coming from the top. You're the expert in your market, you're the expert when it comes to rentals, and so the agents—maybe even landlords might start tuning into this if they’re another audience added into this app. Am I jumping the gun there?

Vitaliy: No. That’s perfect. The main point here is in order to get people to give you referrals, you have to show them value. If you're just going out there and giving everyone business cards and begging for referrals, you're not going to get them. You have to give them something back first. With this app, you are giving them a resource that is specific to that specific market. Once you show them that you've given them resources, and you've given them information that has been valuable, for example, the latest news, and trends, and eviction laws specifically for your area, they will most likely go to you because they've heard from you, they've seen you.

This app will be opened up much more than an email would. That seems to be the trend, and that is one of the biggest reasons why mobile apps are being developed by larger corporations—is to have that easy access to people. Once a push notification goes out, the open rate is 95%. People will open up that little ding on their iPhone or their Android phone, and they'll see that red one next to the app, and they will want to open it and make sure that they see what's going on. The technology has been proven that the fact that the mobile apps do get opened up much better, and they do bring a top of mind much better than anything else out there.

Jason: Let's compare it to other things. Email open rates are pretty low. We use a software called Drip currently for our newsletter, for example. We have, actually, what's considered a really high open rate on our emails, but even still, a really good open rate on email maybe is 30% on a bulk email. Maybe, right? If you get 20%, some people still consider that pretty decent. That means the vast majority, if you're looking at the 80-20 rule, are not looking at the emails. The way inboxes are now set up, they go into weird folders, or categorizations, or spam. Email deliverability is just not a great way to maintain communication or a relationship.

Text messages have really high open rates, push notifications really high open rates. That's what you're talking about. There's a big difference if you can do push notifications versus that. Is there a challenge with getting people to opt into the push notifications, or is this just something they'll need to educate each realtor they're bringing into this like make sure you say yes to the push notifications as you enable this app.

Vitaliy: That's a good point. When the realtor does install this app, it goes through what we call an onboarding. A few pages where we explain to them the point of push notifications first before we give them a pop-up and say hey, allow push notifications, so they will know to enable it rather than just pushing it to them, and most people just say no, I don't want push notifications. We do think that there is going to be more people enabling those notifications.

I haven't thought about this, but in the future, what we could do is if there is a notification that comes in, we will display some message saying hey, be sure to enable your push notifications. But if they do open the app, they'll still see that notification, it just won't be a push notification. It's still a much better open rate in that. Does that make any sense?

Jason: Yeah, it does. You're going to constantly solicit or get them to open permission to do the push notifications if they haven't done it yet. That makes sense. It will be one of those annoying little red icons probably on the phone app set with a number like oh, man. I got to look at this. What's going on here?

Vitaliy: I wanted to say that there are two types of notifications there. One is when it's transactional, so for example, there's a new rent analysis available. You have given them a new rent analysis, and then they get a push notification saying hey, 123 Main Street has responded with their rent analysis. That's one type of push notification.

The second type is what we call a global notification, and that is what a property manager of this app is able to send out to everyone. It could be something like hey, if you give us a referral this month, we'll give you double the price, or something like that. It's more like a promotional push notification just to get into on top of mind of people.

That is where you have the potential to send it to everyone who has their push notifications enabled, and it will also show up in their notifications screen on the app even if they don't have the push notifications enabled. They'll still see it next time they open the app. People are able to use that as a promotional also. There are those two types.

Jason: Perfect. Okay. Where are you at with this app? How far along is development? Do you have people using it? Beta testing? Where is it at? Those that are listening, what would be the next step? If they're interested, which I'm expecting people to be pretty interested in this, why don't you give people a state of the union on this app.

Vitaliy: Currently, the app is in the development phase. It's planned to be released mid-June 2020. Right now, all the features have been defined, they're ready, and they’re in the development phase. We have currently a few beta testers. RentWerx, which Brad Larsen as one of the beta testers. We have Mynd Property Management as one of the testers. We have another property manager called RentPros. They manage about 1000 doors, they’re a beta tester. Then we have one of the Real Property Management Preferred, beta testers. Currently, we have four beta testers, and the majority of them are in over 1000 doors. Currently, they're working on expanding in their referral program, and that's why we were excited about this.

Those who are interested in becoming beta testers, we are only going to offer the beta to 10 beta testers. After that, the beta program will close until it's available for everyone else. The beta users will get 20% off and then will not get that if you sign up after the beta is over. The benefit of being a beta user is that you obviously get the discount, and also, you're the one who will determine which features will be developed in the next phase. That's a really good benefit there.

It will be out mid-June, and then we'll probably test it for about a month or so, and then July or so, it's going to be available for everyone.

Jason: I don't think you'll have any trouble getting some beta testers with all the people that listen to the show. You'll get 10, so that's not going to be an issue.

Vitaliy: Whoever gets in there first is going to get it. We're not going to allow more than 10 beta testers because we want [...].

Jason: Then make sure they're good ones. Find some really tech-savvy guys because they'll give you some good feature requests, or gals. Guys or gals, right? All right. Awesome. Vitaliy, this sounds really great. I know I've got several clients that would be interested in this. Hopefully, they're listening to this. On some of my calls that I do with my clients, some of the gals and guys there were keenly interested in something like this.

We're going to throw this out. By the time this makes it to the podcast, they'll already be filled, I'm sure. How do they get in touch with you to get on the beta program? For those that aren't going to make it into that, how can people find out more about this, and where you're at with this, and maybe even sign up? How do people communicate with you?

Vitaliy: The best thing to do is go to our website renterinc.com, and then there's a tab on top that says Other Products. Once you go to that, there's a Realtor Referral App. It'll take you to a specific page where it doesn't talk a lot about the app but allows you to schedule a call with us. That will tell us that you're interested in specifically the Realtor Referral App. We'll get on the call to see if you're a good candidate for a beta tester.

If you are, you'll join, we’ll get your logo and your company information, and you'll have your own app mid-June. If you don't make it to the beta test, we will still be able to get you on the call, get you set up, and then once the beta program is over, we'll get you set up with your own app, hopefully somewhere middle of July.

You can either go to renterin.com, or you could just email info@renterinc.com, and then just tell us you're interested in the Realtor Referral Program. I'd encourage everyone else to also take a look at our other software that we have. We also have an integration with AppFolio that allows you to request rental verifications and get them back in 24 hours or so. We do that through our Chrome extension that we’ve just built. Take a look at that. We’re excited about the referral app, but our other tools are pretty good too.

Jason: You’re a humble promoter of your products and services. I appreciate that. Vitaliy, thanks for coming on the show. Keep us updated on how this goes.

Vitaliy: All right. Thank you so much. Talk to you later.

Jason: Awesome. We’ve had lots of conversations about this. He’s been picking my brain. Anyway, check that out. If you are a property management business owner, and you are struggling, you’re having difficulty, you want to feel like you have somebody in your corner, we’ve got some great coaching programs available. We also are launching websites. Every week, we’re launching a new website for clients, so check us out. At DoorGrow, I believe we build the best websites in the property management industry, hands down.

If you are feeling even a little bit confident or insecure about your website, go to doorgrow.com/quiz and test it. Grade your website, and see where it’s at. If you get an A, then I guess you need to have a conversation with me or my team. But if you don’t, if you get a B, or what’s common—a C, or even more common—a D, or you fail outright on this quiz, then you owe it to yourself and your business to make sure you’re not missing out on website leads and deals every single month.

One deal is probably worth $6000 lifetime value. That’s maybe $2000 a year on the door. Maybe you’re making $2000 a year, and you can keep going for maybe three years, maybe $6000 lifetime value. If you’re missing out on just two or three of those every month, that could be $18,000 in future ROI that you’re missing out on every single month. That can be a very expensive thing if you multiply that by 12 months over the course of a year. Websites are not that expensive. They’re just not. One door would cover it, so reach out to us.

Anyway, I’m Jason Hull with the DoorGrow Show. Thanks for hanging out with me. Until next time. To our mutual growth. Bye, everyone.

This document has been edited with the instant web content composer which can be found at htmleditor.tools - give it a try.

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May 12, 2020

Are you a business owner who wants to get good at financial decision making and CEO-level accounting? How can you build a runway to opportunities? By navigating mindset, expenses, and cash.

Today’s guest is Tim Francis from Great Assistant and Profit Factory. Tim’s training, Know Your Numbers, shows how businesses can deal with cash crunch and cash flow.

You’ll Learn...

[02:48] Free Upcoming Event: Navigate the Cash Crunch.

[03:20] Entrepreneurs: Like Indiana Jones, running as fast as possible from expenses.

[06:00] Pre-built Spreadsheet: Adding and subtracting, red boxes and green boxes.

[06:40] Beyond Profit First: In motion and cutting expenses when DoorGrow sales stop.

[10:23] 3-Step Method: Navigating mindset, navigating expenses, and navigating cash.

[11:29] Mistakes of sloth, and mistakes of ambition.

[12:19] Step 1 - Navigating Mindset: Be good to your body, protect personal and professional relationships, and early action is crucial.

[22:51] Step 2 - Navigating Expenses: Business's profit margin and bloat factor involves how many dollars to be sold at top line for $1 at bottom line to spend/buy something.

[30:08] Survive and Thrive: When sales go down, create a situation where you don't have to sell as much. You can meet it at a lower sales level and still get by.

[31:52] Step 3 - Navigating Cash: The Cash Flow Forecast figures out how much cash can you touch now? There's a big difference between cash and free cash.

[45:38] Opportunities for Growth: If your business doesn't cash flow, it will fail. Cash flow first, then focus on growth. Cash comes from different places.

Tweetables

Entrepreneurs confuse revenue, sales, top line, or top of the P&L statement with cash.

There's actually a way to navigate the cash crunch, even if revenue is going down.

Property management industry has a massive opportunity due to big shift in the market.

Panic isn't productive. It's important to be urgent, not anxious.

There's a big difference between cash and free cash.

Resources

Navigate the Cash Crunch with Jason Hull and Timothy Francis

Tim Francis on LinkedIn

DGS 127: Using a Virtual Assistant to Scale Your Property Management Business with MyOutDesk 0

Transcript

I am hanging out here with Tim Francis. Tim, welcome to the show again.

Tim: Good to see you Jason, again.

Jason: Tim and I just started trying to do this on Crowdcast the normal platform. It didn't work out. The internet gods were not kind to us for some reason so we're starting it over. I wanted to introduce Tim to this audience again. Tim has been on the show before because he was talking about his company, Great Assistant, a fantastic company. I've hired assistants through it for US based assistants.

His parent corporation, or company, or whatever you want to call it is Profit Factory. I recently went through training with him called Know Your Numbers. One of my goals for this year was to get really good at this learning financial decision making, maybe more business owner, CEO level accounting. Tim is the go to guy for this. He has a program on this that I went through. He had a really cool thing that he showed us how to deal with cash crunch and cash flow.

He reached out to me and is putting this out to audiences trying to help businesses out right now. I'm excited to expose my audience to this idea of how they can navigate the cash crunch. Tim, welcome.

Tim: Thank you so much for having me.

Jason: We're going to do an event here in about a week. I'll just plug that now up front, just get that out of the way. It's for free and we're going to go into greater detail about these things. You're going to be sharing your screen, showing spreadsheets, helping them figure this out. But let's start with talking about the problem. What's going on with the market right now, the cash crunch, and why is this relevant?

Tim: Yeah, you bet. If you think of Indiana Jones in Raiders of the Lost Ark, there's this amazing boulder scene. Jason, I have to give you credit for giving me this visual of this boulder rolling behind us as entrepreneurs. We're running as fast as we possibly can, and that boulder, that's expenses.

Jason, full credit to you, every time I use this analogy now I'm giving you credit. A bit of the secret here is that there's actually a simple three step method that we can actually turn this into a different Indiana Jones scene. In the Last Crusade, Indiana Jones, there's this like leap of faith scene where he's standing on the very edge and he's looking at this massive chasm between him and where he needs to go.

It looks impossible, it looks impossible that he’ll possibly be able to cross this chasm, but then he gets this idea. He takes some sand, and he throws it out and it covers, and there's this hidden balance beam, it's invisible, this invisible balance beam to walk across. That's exactly the three step method that I teach as a passion to entrepreneurs. I think a lot of entrepreneurs confuse revenue, sales, top line, or just that top of the P&L statement with cash.

The thing is that they’re two extremely different ideas. Yes, one can lead to the other, however they're not necessary. There's actually a way to navigate the cash crunch, even if revenue is going down. I've helped many, many companies, I think I’ve had 139 board meetings now. I've helped over 70 companies, and at least 7 of them I've helped to escape bankruptcy, including that with them following the exact process that I'm going to teach today.

Whether someone despises accounting and numbers, feels pretty good about them but maybe not a pro, or even if someone's an absolute pro at numbers, I think the perspectives that we share today are going to be really, really powerful. Also just in case anyone's afraid of like oh, my god, here we go, numbers and accounting. I hate that topic. I avoid my accountant like the plague. I'll tell you what, I was rejected from Business School three times. I couldn't finish calculus. I don't know my brain wasn't wired that way, and the good news is you don't need any of that to be able to navigate the cash crunch.

If you know how to add and subtract, in fact Jason, you don't even need to be able to add, subtract. If you know how to use a calculator to add, subtract, we can make this happen. The tool that I'll go more in depth with you on our webinar coming in about a week from now, everyone will actually get access to a prebuilt spreadsheet.

All you got to do, it takes maybe 20 to 30 minutes to put your own info in. Literally where you see a red box is a crisis line, and where you see a green box, you're good to go. That's it. It's adding and subtracting, and red boxes and green boxes, that help you to navigate. To build your very own—personalized to your business—path to navigate the cash crunch.

Jason: Before we get into this, I want to touch on and create a little transparency in this. A lot of entrepreneurs are fearful. There's a lot of shame around admitting that something doesn't look perfectly successful. There's a lot of shame around finances and money. Like oh, no, I've got debt or I've got this.

I'm going to share what we're experiencing at DoorGrow. Leading up to this, one of my goals for this year was to get control of finances, really understand and get into financials, which is why I did a training with you, Tim, and I'm working with you on different things, because that's a step beyond the Profit First.

I've got my Profit First coach and accountant that I work with as well. I've been doing lots of calls with her getting all these different loans that are coming out, getting everything going. I'm glad that I was already working on this stuff prior. We started cutting expenses dramatically, we started doing shifts. As I was getting control of things, I was like why are we paying for that? If we weren't in momentum already—you used the analogy of the airplane flying over the trees—we probably would have hit some trees. We probably would have crashed.

We were already in motion. Sales, March just stopped. Property managers stopped buying products and services from DoorGrow because they were holding their wallets tight, they were scared, and that's about half of our revenue. We had to tighten our belt really quickly. We weren't really ready for that, we haven’t budgeted the beginning of our month to do that, so we had to get really creative. Using some of these strategies helped us to keep that plane above the tree level, navigating the cash crunch, or in my Indiana Jones analogy, outpaced the boulder so that we were able to make it through the end of the month.

I'm really excited to share this property management. I'll point out that I believe the property management industry has a massive opportunity right now. There are property management companies, especially in California, Florida, and Hawaii, that they are growing. March was one of their biggest growth months in adding new doors, in acquisitions, period, simply because there is a whole big shift in the market.

A lot of people are going to be needing property managers. We won't get really into that now but there's a lot of opportunity right now. Property management is a really safe place to be hedging against the market right now. Most property managers will probably have pretty good cash flow.

It's only the third and we're already seeing most people are paying rent on single family residential. They're not noticing much of a difference. They've had a few people reach out for payment arrangements, but all things, I'm saying is that it's basically normal. They're a little concerned about May, so this May become even more hyper relevant in the next month or beyond. I want everyone to pay attention to this.

Property managers, you guys are blessed right now, while a lot of businesses are just done. They're failing, their revenue is cut to zero, especially luxury markets, vacation markets, restaurants in a lot of situations. Businesses are closing, failing. This also is the perfect excuse for entrepreneurs that are not really committed to their business to get out, perfect excuse. A lot of people are going to take it. If you are not one of those people, and you're committed to making this work and you want to grow, reach out to DoorGrow, I want to make sure we help you capitalize on all this. Tim, let's get into these three things that we need to pay attention to.

Tim: There are three things to navigate, navigating mindset, navigating expenses, and navigating cash. I don't normally share this piece, but because of what you just so wisely shared just around the shame that sometimes entrepreneurs feel around money or like oh, I'm a failure or whatnot.

I'll tell you what. I think that being a leader is a lot of responsibility. Even if you're a leader of 1 or 100, it doesn't matter. It's that classic man in the arena story. It's not the critic who counts. I think that there's actually something incredibly skilled when an entrepreneur sees that things have changed, and they're ready to change with it. I think that that's actually a sign of prescience is the word, when we can see things that are coming and to act accordingly.

I also think that Verne Harnish has a great expression, he says, "Growth sucks cash." If you've been spending a lot of money to grow your company, and that's why you don't have a lot of cash to show for it, there's no shame in being ambitious either. There are mistakes of sloths, and there are mistakes of ambition. Mistakes of sloths are when we make mistakes because we're sitting on the couch not going for it and life passes us by. Mistake of ambition is when we were really going for it and things didn't work out.

Mistakes of ambition, it's even arguable to say that it's even a mistake at all. I just think if you're in a position where you’re a little tight on cash, or maybe a lot tight on cash, I get that the shame narrative is available and I don't know that I'd go there. First of all, it's not accurate, and secondly, it's not productive.

This leads us into our whole first of our three steps mindset, navigating mindset. Before anyone decides to tune out and say mindset is going to be the secret or some law of attraction, maybe more airy type topic. I assure you, it is not. I assure you that it is not.

In 2008 I had a real estate portfolio of my own, not a big portfolio, just four houses, but I ended up losing around $100,000 mostly of other people's money. Around that time, I also had a mentor who ended up being one of the two leaders of a $12 million Ponzi scheme. Didn't start as a Ponzi scheme but it became a Ponzi scheme, that's typically the way they go. His business partner is convicted in court, barred folding securities for 25 years, and ended up actually leaving the country. This is in Canada, where I'm from. It was extremely exhausting and stressful to go through all that and to see everything that was happening around me. It led to me developing an illness called Erythema nodosum.

Erythema nodosum is something there's no real cure for. You just have to wait it out. It's just bed rest. Your body really swells up and becomes so painful to walk that you can't, then it becomes so painful that you stand that you can't, and you end up just lying in bed every single day.

50% of cases are stress related. There's no way to know for sure, but I'm pretty sure mine was stress related. If you think an economic collapse like 2008 is bad, or an economic collapse like 2020 is bad... I'll tell you what's even worse is having economic collapse and also having a health collapse, where you actually can't do anything about your situation because you're in bed.

Thankfully, at the time, I had very, very, very few dependents, I had no teammates and so the impact, the blast radius was small, it was just on me. Had my mom not paid my mortgage for me for three months, I would have gone double bankrupt, my personal finance, my business finance.

Talk about an eye opener, and I was only 28. I was only 28 at the time. When I talk about the importance of managing mindset, this is absolutely crucial that we manage stress. I'll tell you, I've been not just through economic collapse, economic plus physical collapse, and it is not a pretty situation. You do not want to go through that.

Along the lines of how do we go about managing mindset, I think that there are a few important perspectives in addition to some of the obvious practices. I'll just start the obvious because it's pretty straightforward. Make sure you're getting some exercise even if it's just a walk on a treadmill, or a peloton bike, or something like that in your living room, whatever the case may be. Get some sunshine if you can, even though we're all locked indoors, that sunshine is super important. Diet, take care of that. Make sure you’re getting lots of water, maybe ease off on the booze a little bit too if you're someone who enjoys to imbibe a little bit.

Be good to your body. Probably the biggest of all, for most people, is actually sleep. Sleep is something that we can lose very quickly in times of turmoil and stress. You might need to turn to things like small meditation, reading, journaling, or something before bed to help take your mind off of some of the challenges of the day.

I'm telling you that it's absolutely crucial. When I look back at my sleep habits and actually have been keeping track of my sleep for years and years and years. Jason, I'd sleep for four hours and lay on the floor next to my computer, sleep. I'd work till 5:00 in the morning, I'd sleep four hours on the floor next to the computer and I would stand up, go pee, and go back to the computer and start working again. Desperate times sometimes call for desperate measures, but there is such a thing as too high a price to pay.

Remember that this too shall pass. September 11th came, the world changed, and we got back to business in a new normal way. The housing crisis came, the world changed, and we got back to business in a new normal way.

Jason: Tim, I'm going to touch on what you just said real quick, interject. These are really basic things but they're showing some significant correlations between COVID-19 and melatonin, and nitric oxide in your blood, vitamin D. These are the basic principles of health. I have training for our clients called health secrets and it's these basics.

We talk about getting sleep, that's when melatonin starts to get produced in your brain. It's much higher in children, it gets less. You may want to supplement with that but getting good sleep, getting some sunlight, finding a way to get sunshine and sunlight on your body is going to be a big deal that releases nitric oxide from your skin into your blood, if vitamin D gets produced, these are basic. Sleep, nutrition, some physical activity, exercise, some sunshine, water and hydrate. This and all of that lowers your stress levels and it lowers our pressure and noise significantly.

I love that you're sharing that. Keep your stress levels as low as possible and start physiologically.

Tim: I think along with stress is this idea of engagement. I don't know if I need to share this part, but I'll say it just to be responsible. If someone is not engaged enough right now, you're not paying attention to what's going on in the world. If you're only at about a 6 or 7 out of 10 engagements, goodness gracious, it might be time to pick it up a bit.

If you're also to 9 or 10 engagements it's probably too high, you're over stimulated, you're over engaged. We need that 8 out of 10 where we're focused, pupils dilated just a little bit. Eye on the prize. I always say that panic isn't productive. It's important to be urgent, not anxious, to be urgent, not anxious.

Jason: I'm too Agilent right now. I'm excited and that's where I'm at. I love chaos, let's be honest. Maybe there are other entrepreneurs like that but when chaos happens, that's opportunity. That's where we get to be a light and we get to stand out, so I'm enjoying this even though it's uncomfortable.

Tim: Very nice, very nice. I think that two other mindset pieces, one is that it's important to actually protect relationships. Yes, I mean the personal relationships that we have in our life because they can be such a source of security, joy, and comfort. I also mean business relationships. We're going to get to the other side of this, and unlike other past catastrophes that were measured in years, I think, yes, our economic catastrophe is going to be measured in years on this one for sure. I think that in terms of months, I think this pandemic is going to be measured in months, not years and years and years.

One of my questions at each point is what is the state of the relationships of suppliers, vendors in the case of property managers, tenants, if you're managing on behalf of other people like your clients, your investors, and owners. What's the state of those relationships going to look like in three months from now, or six months from now when we're on the other side of this.

You might make it through, but do you still have people that respect you? I heard a story the other day of an entrepreneur that just cancelled all their credit cards and said well, everything's just going to fail in terms of expenses and I'm going to add back one by one the few things that make sense. It's a shortcut to just cutting expenses.

That's a way to go about it, but are you going to just supremely piss off everyone in the process? I think that protecting relationships is important to keep in mind. That doesn't mean that you're always bringing good news to everyone along the way, especially in the cutting expenses part of our presentation today. I think to be respected for being accountable, navigating agreements that you have with people rather than just abandoning them.

My other mindset piece is that early action is crucial. If you discover that you need to get alone, act now before more businesses are closing, and possibly soaking up some lending capacity, or even just work capacity that bankers have to fill out applications and whatnot.

If you discover you need to reduce a teammate's hours, tell them as early as possible so they can start making plans of their own personal and family finances. So that if a dip comes for them income-wise, they're prepared for it. If you can help them find a new opportunity elsewhere, do what you can to manage those relationships.

I got an interesting perspective from someone who used to have a business helping individuals, not businesses, but individuals navigate bankruptcy. He said one of the most common patterns he saw with people going through bankruptcy is they didn't cut expenses deep enough or soon enough, deep enough or soon enough.

I think that that's a very interesting perspective and maybe a usable guideline would be to say anything that's not going to help increase the profitability, and specifically cash coming into your business in the coming six months, I'd probably delay it. If you're thinking of a new website, if that's not going to immediately give you a bump in cash in the next six months, then let's put that on pause. We'll see if we can renegotiate it, put it on hold, delay it, or even cancel it.

I think that's a really powerful way and maybe for you, the number isn't six months, maybe it's three months or eight months, whatever. But if we can keep an eye on what's going to bring cash in, in that timeframe, that really makes decision making a lot easier around what expenses you can continue with and which do not.

This leads us to our second of the three steps of what we need to navigate and that is expenses. I think that something I'd say in my path of learning accounting and I even went and took night classes at the University of Alberta. I finally did go and take University accounting classes. It was not for credit though, they wouldn't let me into the for credit version, but they'd let me still sit in the classes and study. You know what, Jason, I got 100% of my midterm. I wanted to throw up my middle fingers as I walked into the room.

I can't complete calculus, I can't get into business school, but here I'm getting 100% of my midterm. How about that? How do you like them apples? One of the big ahas that I had is that in my brain, because we all grow up thinking about personal finance. I think in personal finance, we think if I make $1, I can spend $1, and $1 in is $1 out. If I want to go buy a car, a pair of jeans, or a pair of shoes, I just need to get that amount of income to be able to pay for the shoes, the jeans, or the car.

When it comes to business finance though it's a little bit different. To be able to buy $1 of expenses, we can't just make $1. It's because there's other expenses in the business. That's why we always talk about profit margin.

If I have $100,000 in revenue, and I've got $50,000 in expenses, then I have $50,000 in profit. My profit margin is 50%. What that means is at the end of that year, or quarter, that month, for me to have an extra dollar to go buy something the next month, quarter or year, I don't need to make $1, I actually need to make $2 because my profit margin is only 50%.

I have to make the $2 at the top, 50% gets stripped away by expenses. I'm left with $1 to now go and spend in the next month, quarter, or year. There's this idea, I invented it, it's called bloat factor. How many dollars do I have to sell at the top line to have $1 at the bottom line to be able to use and go and spend and buy something else in the coming month, quarter, or year?

It's very simple math. If you're at 50% profit margin, which very few businesses are—very, very, very, very, very few businesses are—then you'd have to earn $2 to have $1 at the bottom to be able to go and spend in the coming period. If I've got a 25% profit margin, I have to make $4 at the top to have $1 to go and spend. If I'm at a 10% profit margin, which a lot of businesses around that 10% margin mark, I have to go make $10 to be able to have one at the bottom.

Jason: This is super important for people to realize. A lot of us entrepreneurs, we look at our bank accounts and we think well, I've got $1 that we made. Now I can go buy this thing for $1. They think it's a one to one relationship. That's a huge mistake.

Tim: Whatever your business's profit margin is, you got to figure out the bloat factor. Let's just say for example, you're at a 10% profit margin, that means you have to make $10 to keep $1, your bloat factor is 10X. If you cut $1 of expense, you now don't have to sell 10X that in revenue to be in the exact same place.

For example, this is actually an extraordinary story Jason, this going to blow your mind. I talked to one of my private consulting clients here. He and I had like uh-oh, the crisis is coming call like three weeks ago. He cut $9,000 a month in recurring revenue. Does that mean that he doesn't need to sell $9,000 in the coming year? Well, of course not, because it's recurring expenses.

Jason: I was going to say he lost them?

Tim: No, no, no. He cut $9,000 per month of expenses. At his profit margin, his bloat factor is 8.7. $9,000 times 12 months in a year times 8.7, he does not have to sell $944,882 in the coming year. He cut the need to sell a million dollars just by cutting $9,000 a month in expenses. That is mind expanding.

Jason: We have pretty healthy profit margins at DoorGrow, we’re pretty tight. We're a virtual team but we cut a ton of expenses. Maybe if we have time, I could list some of the crazy actions that we took to help make sure that we cash flowed. It makes a ton of sense to me.

Tim: Big time. I'll just take a super simple example. I actually set up a calculator which we'll play with in the free webinar you and I will do. We'll play with the bloat calculator a little bit. If I have a profit margin of 10%—not uncommon for businesses—my bloat factor would be 10. If all I removed was $250 a month, that's it, $250 a month of recurring expenses, canceling subscriptions, canceling unused services, access to different websites and whatnot, I would not have to sell $30,000 in the coming year. $250 a month does not sound like that much to cut, and yet a 10X bloat factor, that's $30,000 you do not have to sell anymore.

You tell me what's easier, finding $250 a month and cutting it, or going out and generating $30,000 in new revenue in the coming year?

Jason: Especially right now for us. My accountant was really impressed with me. We cut $10,000 in monthly expenses, depending on what our profit margin is. That can be pretty significant for us as well in terms of how much sales we don't have to do to make it each month. That's made it breathable for us significantly.

Tim: When you talk about being able to survive and thrive even when sales go down, you just created a situation for yourself where you don't have to sell as much. Even if sales go down, you can still meet it at a lower sales level and still get by which is really incredible.

Jason: I met with my accountant last night and we mapped out the month with all the recurring revenue that we have coming in. If we do no sales this month, we will make it.

Tim: I love that.

Jason: We’ve pivoted quickly and reduced the expenses, but right now it’s a great opportunity for property managers to grow and we're offering some crazy deals. Hopefully, we'll also be doing some sales this month and making a big difference.

Tim: I love that. I think you were sharing offline about how all these Airbnbs are now switching to long term rental. They got smoked out of the market and now they just want to go back to traditional long term rentals. So there's all this flood towards property managers. For a property manager that knows how to convert an Airbnb into a standard long term rental, ready to rock, and knows how to find those deals, goodness gracious, this could be a really revolutionary time.

Jason: There are several channels right now for growth and each one is going to get bigger. Property managers right now, they can capitalize on it. We're pushing our clients aggressively to start taking action on these things right now.

Tim: That's so exciting. There's another way that we can navigate the cash crunch even if sales go down. It's not just by managing expenses but it's also by navigating cash. Let's get into the third and final step in navigating the cash crunch. The free webinar that we're gonna do in approximately a week from now, we're actually going to do live exercises. We're actually going to share screens and you're actually going to see this spreadsheet in action. It's super simple. Anyone can do it. It can be a game changer.

Of the multi-million dollar companies that I've helped save, some of them I didn't even do private consulting with. They just came, they know your numbers, or they heard me talk about just this one tool, The Cash Flow Forecast. They use it religiously when they're in a tough spot and it helps them get through. It's very exciting.

There's actually two parts to this. The very first is actually understanding how much cash can I actually touch right now? There's a big difference between cash and free cash. Cash is the amount of money that's in the bank if you add up your checking and savings accounts. That's cash. Free cash on the other hand, we have to deduct some money out of that total cash to get the free cash to know what we can actually work with. From our total cash amount, we need to set aside committed costs.

Committed cost is any amount of money you've promised that you're going to pay. Let's say for example a website, I've signed a legal agreement to get a new website done. If I don't manage that agreement to delay the project, I'm on the hook for it. If that's a $10,000 cash outflow that's coming up in two weeks from now, that is a committed cost. I haven't received the service yet but I've committed to receiving the service or the product for that matter.

Jason: It's money that's earmarked. It's money that is going to disappear. If you can't pay it, it could cause some serious problems.

Tim: Big time, getting all the way back to that whole topic about managing relationships even through the tough times.

The second category that we need to earmark some cash is payables. Let's say that you already had the website built. It was finished last week. You've enjoyed the service. You've received the service or the product for that matter. You're on net 30 terms or net 60 terms and now you got to pay that person. That's a payable.

Now, one of the biggest payables that is unavoidable is death is taxes. Thankfully, the payment deadline in the United States has been extended, which allows for some cash flow breathing room for entrepreneurs, which is very important right now. I would do my best to get clear and make sure that I've got a separate account for tax. I actually have a separate bank account. It's a little profit first esque or Richest Man in Babylon esque that there's a separate account for income tax and that's where I would hold my income tax.

Jason: I have that too. The idea is to have it at a bank that is difficult to get into. That's completely a normal thing.

Tim: You don't know the pin. You give it to someone else. Two keys to authenticate and turn to open the vault.

Jason: The worst online bank ever or something like that.

Tim: Or the brick and mortar bank that has no online, something like that. After committed costs and payables including income tax, we also need to remove or set aside any deposits that we've got. This is huge in property management because we have deposits from tenants. You can't really spend that money, it's not money that you've earned. It's just money that you're holding as a deposit so we got to park that on the sidelines.

Then from there, whatever amount that you've got to pay in credit card debt or any other very short term, high interest debt. Most credit cards are 10% more. If you've got all kinds of rewards on your card, you probably are facing 19.99% or 21.95% interest. We really want to make sure that we're getting that paid off at the end of each month or else we're facing colossal interest rates. I would earmark that money to hold to the side as well.

Then from there, there's two more. The next one is ultra-short term debt that you need to pay. Short term debt in accounting refers to any debt that's due this year. A Tim Francisism ultra-short term is in the next 30 days. If there's any portion of debt that you need to pay down in the next 30 days, I would earmark that cash as well because if you don't pay it, a lot of small business loans have liens or guarantees against your house. You might lose your house if you don't pay it, or you don't renegotiate that payment because there are some circumstances now where banks and different lenders are allowing you to skip the payment right now because of what's going on.

Our last category where we need to earmark and subtract cash, I actually have a whole separate account in my bank for this particular category, is what's called Unearned Revenue. I don't think that's as big in property management candidly. For example, for someone who's offering other services, unearned revenue can be the difference between life and death to know what is earned and what's not. For example, if someone hires me for a year of consulting and they pay in a block amount of money at the start of the year, they pay the whole year in advance, I can only touch 1/12th of that with each month that goes by because it's unearned revenue until I've delivered that guidance for the year.

Understanding our starting point of actual free cash is the first part of managing cash, and then the second part is to build out what we call a cash flow forecast. It's very simple. It's 13 weeks which is 90 days, just three months. We simply plot into the cash flow forecast where we've got cash coming in and cash going out. Jason, would it be appropriate for me to just show a screenshot of a cash flow forecast or should we wait until the webinar?

Jason: The podcast listeners won't see it so let's get that, we’ll show it on the webinar. They'll just be listeners but it's pretty cool. I'll give you a testimonial related to this. I met with my accountant. We're mapping out all the recurring revenue that we have at DoorGrow and figuring out what expenses. We basically went through this. She started doing this manually in a spreadsheet real time, basically doing exactly what your spreadsheet does. She was figuring out which things are going to hit, what are the due dates for these. We're figuring it all out. I was like that's so funny because Tim has a thing that does this.

She took me through it manually to make sure that our cash flow situation is going to be good because it's not just hey, this month we're going to make X number of dollars. We're going to have X number of expenses and we're okay. It's maybe at the beginning of the month, you have a whole bunch of things that are running and you're making that revenue later in the month or however it might work. You need to make sure it's all going to be timed perfectly. That's the brilliance of your cash flow thing because if it ever dips below zero, you're dead. It goes into the red, that's death. You have to make sure that you always know when things are going to hit and this is what your spreadsheet does, which is pretty brilliant.

Tim: I agree. I totally agree. I'll tell you, when people are calling you every single day to collect money, 29 days is an extremely long time. It is an eternity. Being clear about when money is arriving, not just by the month to your point, but to the week. To be very clear about when cash is leaving to the week, and making sure that not you or anyone in your team is sending cash out the door too soon especially without other people like a bookkeeper helping or an executive assistant helping to pay different bills, if you don't direct your team on when to pay bills, people in your office or on your team, they might just pay the bills when they come in. They just might pay it exactly the same day that they open the envelope or they get the statement online. They're like oh, well, I was just doing my job. I was just paying this because it came in.

You got to give your teammates leadership, guidance, vision, and direction on items like this especially in a cash crunch. People oftentimes ask me Tim, this tool is brilliant. How often should I be looking at it? I say that you look at the tool as often as you need to, relative to two factors.

Number one, how low is your plane flying relative to the treetops? This is just the analogy we talked about earlier. If your wheels are clipping the tree tops and those trees might take your plane down, then you're looking at that cash flow forecast possibly every single week to make absolutely damn sure that you're getting the money in that you're expecting on that week, and you're not sending money out any earlier than you're supposed to on that week.

Jason: Even daily.

Tim: A hundred percent. The clients that I have that weren't had multimillion dollar businesses which can have a lot of complexity, moving parts, people, teammates, products, clients, and all the rest, they would literally have it open every single day just to make sure things were coming and going, that all the trains are running on time because there was no margin for error.

The other reason why you'd want to have your cash flow forecast updated in front of mine regularly is if there's a lot of turbulence in the air. Whether you're flying close to the trees or not close to trees. If you got a lot of altitude, that's great. But if there's a lot of turbulence, that can do a lot of damage to your plane as well. Maybe you're not looking at it every single day, maybe not even every single week, but at least once a month. I hate making absolute statements because there's always an exception to the rule, but more or less 100% of entrepreneurs are in turbulence right now because of the climate that we're operating in. This is not a situation, it's limited to a city, a state, or even a country. This is worldwide.

The cash flow forecast is how you make sure that you've got oxygen in your tank and that you can keep moving. Without that oxygen in the tank, doesn't matter how big and fast your flippers are to generate revenue. You got to have the cash in the oxygen tank.

If you do hit any spots where you've got red on your cash flow forecast and you need to manage that crisis line, there are a lot of different strategies. Some of the more obvious strategies would be applying for some of the SBA loans. The only downside to that is we don't know when they're going to arrive.

Secondly, bank lines of credit or if you've got access to them already and they're just sitting unused, that becomes an option. There's raising money from family and friends or an investor. If you wanted to, this is maybe less attractive for most entrepreneurs, we can actually sell shares in your company to raise money. There's also just the simple renegotiating if you need to pay something. Let's say it's $5,000, it's in three weeks from now, and that's when your first red square hits on the cash flow forecast, that's your crisis line. If you're going to be short just $1,000 or something, maybe you could call that person that you owe the money and say can I make it in two payments? I'll pay you in three weeks half, and then one week after that the other half. Lo and behold, just by splitting to 2 payments over 14 days instead of once, all of a sudden you've made up the difference and now all your squares are green. Now you've got not three weeks of safety, but five weeks of safety.

Jason: The plane can fly through all of those and knock at the trees.

Tim: Hundred percent. The thing is there's a lot of conversation out there about how we have to pivot our businesses and how we have to change our sales and our marketing. I think that is all extremely important conversation to have, absolutely crucial conversation to have. Inevitably, if we're going to pivot our offerings in any way, shape, or form, it's going to take time to roll them out. If it's going to take, say, four weeks to come up with a new offering of some special for an Airbnb owners that want to convert into long term rental, if you need to create a marketing campaign to identify those people, if you need to train up your staff to call certain Airbnb to see if they're distressed. Whether it's people, projects, processes, offers that you're rolling out, it's going to take some time. Even if you do it really quickly, it will probably still take at least a month, if not a few months, to be able to make that pivot and to make that implementation.

It doesn't matter if you've got the best idea. It takes four weeks to roll out, but you only have two weeks of cash. That's like building a brand new airplane that's the world's fastest, sexiest, coolest, most comfortable, smoothest plane in the world, but if you only give it 100 yards of runway, it's not going to take off. It's just not.

Jason: To boil this down real simple for those listening, all these opportunities for growth, it does not matter if your business doesn't cash flow. It's going to fail. Cash flow first and then let's get you focused on growth.

Tim: Cash can come from different places. It can come from loans and other places, not just from revenue. To your point, Jason, I just think there are so many opportunities on the other side of this. We just have to make sure we have enough runway. Surprisingly, amidst this entire thing, I'd say the thesis of all of this is that the most important factors in navigating a cash crunch is actually not cash itself. It's actually time. Time is what we're playing for and cash gets us time.

By getting time, we can now get out of panic. We can get back to being calm, clear because we've got a cash flow forecast. You can see what's coming down the pipe. We're confident because you know the exact steps you need to take and because we're clear, confident, and calm, now we can be creative to take advantage of the opportunities that are coming down the pipe. That is the name of the game. Those three steps, navigating mindset, navigating expenses, and navigating cash are how we build the runway that we then can launch off whatever the new opportunities are to take us into the new economy.

Jason: I had Michael McCalla on the show. I've worked with Al Sharpton as a coach. One of the things Al would say is if you lower the pressure noise for an entrepreneur, that's where their brilliance and genius comes out. One of the things Michael Mccalla talked about is that when we have constraints or limitations which this market is creating, it's going to create innovation. If you give somebody the Pareto principle, if you give somebody an endless amount of time to do whatever, they don't have to innovate.

We're innovating crazy inside DoorGrow. My team members are getting new ideas. We release some contractors. Our salaried staff are figuring out new ways of doing things, ways to save money, ways that are more efficient, ways that are faster. These are big opportunities right now for you and your team to give them some constraints, have them work with you on lowering expenses, solving the cash crunch crisis that you may be experiencing, and allowing innovation creativity to happen. If you can keep your presence calm, your team will be there as well. This is a step towards that.

Tim: Did you want to share with folks maybe a little bit about our presentation we're doing next week? We're actually walking people through building a cash flow forecast.

Jason: Yeah. Let's just touch on the details. It's going to be on Thursday, what day is that?

Tim: April the 9th.

Jason: It's going to be on April 9th. It's going to be 11:00. Our time, we're both in Austin, Central, which is 9:00 AM Pacific noon Eastern. What are we going to be sharing during this? What are you going to be sharing with everyone?

Tim: You bet. First of all, folks, go to navigatethecashcrunch.com/doorgrow. I know podcast listeners won't be able to see this, but Jason, I'll just share my screen so you can see it. We've got Navigate the Cash Crunch with Tim Francis and Jason Hull. It's happening Thursday, April 9th, 2020 at 11:00 AM Central, which is Chicago time just like Jason just shared. In it, we'll be sharing the three step process we've talked about today. We're not going to go into as much detail into mindset because we talked about it here today already. We'll cover a few tools around expense management. The real star of the show is building your very own cash flow forecast.

You can register for that webinar at navigatethecashcrunch.com/doorgrow. What you'll get is access to the training. You also get the cash flow forecast template as well, which you can just drop into your very own computer and get to work with seeing where your crisis line is. Hopefully, it's not too close and from there, seeing the exact path to navigating safely.

If you happen to be listening to this podcast episode of the DoorGrow Show after the webinars already happened, so after April the 9th, 2020, no problem. You can still go back to the exact same URL. You can see the resources and the replays there so that you are not left in the dark.

Jason: navigatethecashcrunch.com/doorgrow.

Tim: Yes, indeed. Absolutely. Maybe you guys can throw that in the show notes or something like that for anyone listening to the podcast.

Jason: Absolutely.

Tim: That's that. I think that somewhat as a final thought on my end over here. It's just that deep down inside, we as entrepreneurs, we take on a lot to be great leaders. I do view property managers as entrepreneurs. I hope they do too, because they are there. They're doing the courageous things of entrepreneurs every single day. Sometimes leadership isn't easy. Sometimes it has uncomfortable conversations. Sometimes it has uncomfortable moments. I think that there's something really beautiful about getting clear on where we are.

Oftentimes we talk about our goals and what's the most important to us, but we also have to be very clear about where we are. Getting to Austin, Texas is very different if you're starting in Chicago versus Waikiki. Knowing where we are right now with free cash, and then from there being able to map the path with our cash flow forecast, it really creates calm, it really creates clarity. Therefore, it really creates confidence which then creates creativity that we can now take on this new economy.

Something I am very sure about is not anyone including myself could have specific data around this. I just know my gut, Jason, that the economy that we had two months ago, it's over. It's gone. I don't just mean bull versus bear. What I mean is the way we did business once upon a time is forever changed. I'm very nervous for what kind of discomfort is coming for anyone who thinks that how we used to do things is coming back to what it used to be.

As we chart into these new territories, I think being able to be calm, clear, confident, and creative is the path. It takes courage and just a couple simple tools to be able to have that. I think that if we're operating from clear facts and confidence, we become lighthouses that can attract what we need to attract into our worlds, and also fend away what we need to fend away. We're not left making super emotional decisions.

One of my mentors, his name is Keith Cunningham, he talks about emotion and intelligence often working inverse of one another. The more emotional we are, which is really saying the more that we're in our amygdala, the less that we're in the frontal lobe of our brain, the less our executive functioning is there and the less that we're able to make intelligent, clear, confident decisions.

On the flip side, the more that we can make calm, clear, confident decisions, the less that we become really emotional about what's going on. That's not to say we're not passionate. We are so passionate about our businesses. Yes, emotion has its right place. We just don't want to get stuck making decisions or taking action that we may regret down the road.

Jason: Absolutely. Tim, thanks for coming on the show. Everybody else, make sure you tune in when we do our presentation. For those listening, watch the replay. Until next time to our mutual growth. Bye, everyone.

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May 5, 2020

The COVID-19 craziness has caused people to stress out and scramble to work remotely. This crisis is pushing everything forward technologically. Why not hire a virtual assistant (VA) to scale your property management business?

Today’s guest is Daniel Ramsey of MyOutDesk. Daniel is a real estate investor/broker who loves doing deals, and property management is a way to connect with others and create communities. But he also wants time to take a vacation with his family!

You’ll Learn...

[02:52] MyOutDesk: Property managers find talent to inexpensively scale their business.

[04:05] MLS Porn: Scrolling through new investment properties on the market.

[05:05] Remote Reality: In 2018, 5% of America worked remotely, now it’s 50%.

[07:58] Work Culture: Maintain good team, quality interaction, and customer service; and reduce operational/overhead costs.

[15:00] Steps to Scale: Assess business, compound leverage, develop plan, craft outcome, start interviewing, launch, and training.

[25:48] Match Values, Not Personalities: Define who you are as a person and company.

[33:15] Go Remote Guide: Tips for working remotely with new technology.

[35:08] Push vs. Pull Leadership: Communicate, don’t micromanage.

[44:15] MyOutDesk Mission: VAs need to be indispensable and irreplaceable.

[46:15] Pricing vs. Cash Crunch: Do you need help? Can you afford MyOutDesk? [53:52] Care ROI Concept: Emotion is what creates memories.

Tweetables

I had a need in my own real estate practice. I hired a virtual assistant. I was like, ‘Wow, this works.’

Leverage is compound interest and entrepreneurs’ biggest swing.

When I hire somebody, I'm hiring them to grow my revenue. I'm hiring them to save money. I'm hiring them to own an entire process for my business.

The biggest cure for the economy is businesses and entrepreneurs staying productive.

Resources

MyOutDesk

Go Remote Guide (text MOD to 31996)

MLS

Mark Spain

Bluefishing by Steve Sims

DGS 126: Streamline Inquiries in Your Property Management Business with LetHub 0

Transcript

Jason: Welcome DoorGrow Hackers to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, impact lives, and you are interested in growing your business and life and you're open to doing things a bit differently, then you are a DoorGrow Hacker.

DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you're crazy for doing it. You think they're crazy for not because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income.

At DoorGrow, we are on a mission to transform property management businesses and their owners. We want to transform the industry, eliminate the BS, build awareness, change perception, expand the market, and help the best property management entrepreneurs win. I'm your host, property management growth expert, Jason Hull, the founder and CEO of DoorGrow. Now, let's get into the show.

Today, we have a really cool guest. He is Daniel Ramsey, over at MyOutDesk. Daniel, welcome to the show.

Daniel: Thanks for having me, Jason. I'm so glad to be here.

Jason: Daniel and I were talking a little bit in the green room chatting up a little bit about what's going on. It's a little bit crazy right now, with COVID-19 and Coronavirus, and all this stuff, the real estate market looks scary. We may get into that a little bit in the show, but our topic today is using a virtual assistant to scale your property management business with MyOutDesk. Before we get into that, Daniel, what I want to hear about your background, your entrepreneurial journey and that should lead us right into the inception of MyOutDesk.

Daniel: Yes, sure, man. I love the show. I'm really grateful to be here. I agree, I'm a real estate guy. I love doing deals and property management is just such a great way to connect and create community, and also, it's a great place for deal flow if you're a buyer and want long-term wealth. I love being here. I'm a real estate investor, myself, real estate broker, contractor, mortgage guy, developer, broker, this is my world. I love it.

In fact, you'll love this story. My wife and I, we've got two little girls who will drive in the neighborhood and I'm like, "baby, baby, open house, I gotta go look at it," and she's like, "fine, just go." I'm a real estate guy, I love what I do. We help property managers basically find talent and inexpensively scale their business. The topic is timely.

Our business was started because I had a need in my own real estate practice. I hired a virtual assistant. I was like, wow, this works. My wife and I went on our honeymoon, and as many entrepreneurs, I brought my laptop on my honeymoon. I'm in Guatemala in a rainforest, and I'm at the bar at like 1:00 or 2:00 in the morning and the bartender in Spanish is making fun of me. He's basically saying things like dumb Gringo, his wife's here, beautiful woman just married, why is he still working? At that moment, I knew something had to shift in my world, and that's when we started to scale and really use leverage at a high level.

Jason: I would imagine that most of our partners as entrepreneurs go through quite a bit, and they don't always appreciate us doing things like that.

Daniel: My wife calls it MLS porn for me, because at night, I'm scrolling through all the new investment properties that came on the market. I'm really lucky to marry her, and she's understanding. But at the same time I wanted to stay married, and I wanted to have a kid, and a family, and I knew I needed leverage in my business. I wanted to be able to take a vacation.

Jason: I'm sure you have kids at home right now.

Daniel: That's right.

Jason: Me too, it's crazy. One of them just came in to hand me an Xbox controller so I could give them access because I control that, crazy. I'm on air, they don't care. They're like, dad, this is important.

Daniel: This is the deal. This is what we're in, and it's crazy timing because we have this call like a month ago, and we're in a crazy place. In 2018, 5% of America worked remotely, 5%. Last week, that number went to 50%, in one week.

Jason: The rest are probably not even working.

Daniel: Yeah. Here's the thing, as a company, one of the things that we've been doing is we've been remote for 13 years, 100%. We're about 1300 people. If you're listening right now, we figured out how to scale a business remotely with 1300 people, and serve clients like property managers, real estate brokers, investors, flippers, that's what we do.

In the last couple of weeks, we've helped more companies just understand the tools required, what systems you have to put in place, how to communicate with your people when they're not physically in your office. We put together a whole like go remote guide that we're going to give away in the show, basically, just to help things like what you just said.

We were just on a conference call with our largest client and his two and a half year old son just, hey, daddy, I need more Cheerios. This is just how it is now.

Jason: Yeah, that is what it is. There's all these funny videos you'll see online where you've got like some guy on the news and his kid walks in, in a diaper, and then the wife's crawling on the floor because she thinks she's not on camera trying to pull it out, these things. The world we live in, we're fathers, we run companies, there are moms that run companies, and I don't think there's anything that needs to be hidden.

It's not like there's something shameful that you have kids or that you have a personal life. For those that are watching this or listening, just own that. It's totally okay, everybody likes to see that you're a real person anyway, instead of just a suit and a tie stuck behind a desk all the time. It's a lot more relatable I would imagine. I've got four kids. I'm slightly insane, I think, and it's crazy, and they need to be quieter, hey guys be quieter.

Daniel: That's awesome.

Jason: I started my company Open Potion the corporation back in 2008 right around the time everything was falling apart then. I've just worked from home. I've been virtual, my team members are in Toronto, New York, wherever. We've got some in the Philippines. A while ago, there's always a stigma connected to those that were remote, especially if they were not in America.

I think that we're going to see some crazy shifts that are going to be happening. One, every company that’s like, “We can’t have people working from home, how will we know that they're actually going to do work?” These things, these concerns, now you have to. If you want them to work, they're working from home. Your office is shut down, you're not doing business.

Everybody's figuring out in this new environment, and they're scrambling. I'm sure companies like Zoom are just going to go gangbusters, but this is the new world that we live in. I think it's going to push everything forward technologically which is exciting, and it's going to cut out a lot of bullshit. All the fluff that was just bloated in companies is just eating up resources, like people are just going to realize after this why do we need this $20,000 a month office space for this big corporate building?

All these things are going to be shifting, and we're going to have this new culture as a result of everybody being forced to stay indoors and work from home. I think that's going to open people up to the idea that, hey, I can have team members and they don't have to be right geographically near me. I can find the best that are anywhere, and find people that are lower costs, and figure this out. People are going to be a lot more open that have been closed to it before.

I imagine this will be really good for companies like yours, to be able to help people out and help people see that you can still maintain a really good team, and quality interaction, and customer service, and you can lower your operational costs, or at least make a more healthy cash flowing business by reducing some of these overhead expenses that you have in the company.

I was hanging out on a really great course with training over the last few days with a financial coach. One of the phrases, I don't know who said it but he made this joking comment that overhead walks on two legs. Basically saying people are the biggest piece of overhead a lot of times that we might have in a company.

I want to point out, that was a really humble intro you gave, but in the written intro I have here you've got 10 years of experience serving more than 5000 clients, including over half of the real trends, top 10 Real Estate teams.

Daniel: Right.

Jason: Your company has already got a who's who list of clientele as far as real estate businesses go.

Daniel: Yup.

Jason: You've built real estates' number one staffing company, and it says you've worked with some of the top clients in the industry from sales organizations like the Mark Spain team to tech providers, like the Zillow Group, Keller Williams, and RE/MAX, and so you sound like you're a pretty cool connected guy as well.

Daniel: Maybe connected. I don't know about cool, though. What we do, and I love this. We have a property manager who's in Austin, and I really love this guy.

Jason: That's where I'm at.

Daniel: Okay, cool. You guys are neighbors. He manages half a billion dollars of commercial real estate, and he's like one of these guys that's just freaking brilliant. I'm like, hey, what are you doing? He's like, I'm sitting with my son and looking at deals. He's middle age, and he's really had a lot of success, but he called us because he had four property managers, a bookkeeper, and an office manager. Five people running half a billion of real estate, and he's like, hey, my people are overworked. I'm worried that nobody's taking vacations. Everybody works on Saturdays and Sundays, and our systems aren't tight.

Jason: Burnout is coming.

Daniel: Exactly. They had a system that didn't have all the information in it. They had basic terms, but every lease is different. Some tenants are paying for maintaining their HVAC, some are not. He had all of these leases that nobody had actually put into the system. Every time somebody called and said my roof is leaking, he'd be like, okay, we'll call you back, and then they have to dig up the lease, and we have the lease and say, who do we call? Is it our responsibility, or is it their responsibility? Five hours later, they're responding to what could be a really big deal like damage everywhere for the tenants.

We started working with him about two years ago, and we started helping him with SOPs, Standard Operating Procedures. We started helping them take their leases and get him into the system, which is any basic scale a business grows, a business scenario.

We gave him a book like an AP, AR person, so now his really talented bookkeeper who's managed his whole financial world for his entire career has time in her day to think strategically, and save money for the company. What we did is all the property managers got in the system. We basically gave them somebody to run their system so that there was a person who could enter data and just make sure the system was clean.

The bookkeeper got an assistant, and now all of a sudden he's poised for what are some phenomenal growth years that he's had in the last couple of years. It didn't change his world. It really didn't, because we're $21,000 a year for a full-time employee. If you think about that, half a billion dollars making all the rents, literally for almost $100,000 now he's not going to lose his team.

That's our story. That's what we do for really big companies like Zillow, and all the way down to small investors who own 5 or 10 properties and just need somebody to help the day to day, keep things running.

Jason: Let's get into how this process works. Let's take a typical listener of the show, they're probably maybe a property manager, entrepreneur. Maybe they've got about 200 to 400 doors that they're managing, largely single family residential. They might have a property manager by now or two. They've got maybe somebody having maintenance coordination, and everybody on their team is telling them that they're maxed out on time, because that's what always happens. Every team member is maxed out on time, and they feel like I can't afford to hire anybody right now. Every appointment back on time, and then they call you up.

Let's go through the process here of what it would look like maybe for one of these clients to start a conversation and work with you.

Daniel: Sure, Jason. I don't want this to be a commercial for us. What I want to do is if you're listening right now, like what the steps that I'm going to go through are the steps to determine how to scale your business. Even though these are our steps, you can actually write these things down and go through the step by step process. Whether you hire us or not, this is the process that we know works, because we've done it 5000 times.

The first step is just really assess your business. We do a strategy call with all of our clients where we do a one on one video conference, just like you and I are right now on video, and we go through things like who's on your team, what are your systems. When I say systems, like where are you putting all the information?

Do you have a voice phone system so that when people call, you can transfer that number around. A lot of property managers do but some actually don't, and you can imagine during this Coronavirus what happens if you're a property manager and you had regular phones tied to an office that you can't go to anymore.

What do you do? We're looking at who's on your team. We're looking at what your systems are, what tech do you have right now to operate, and then we're looking at what your processes are. Talk to me about what happens when you have to turn a tenant over, talk to me about what happens when you put a property out to lease, what's the step by step process. Who owns that process, and so we'll go through those three things in our first strategy call and really identify what's your highest value leverage, and we have this process and I liked it. I love thinking like this.

Leverage can be just like compound interest. You can have compound leverage, meaning you as the business owner, or your managers, or the people on your staff can offload some of the not very valuable process based day to day repetitive stuff that you just don't need to do, and then you get two or four hours back of your day, and then you can take those hours and help build your business, and then you get a compounding effect with leverage.

That's the next step is what do we need to do to start taking advantage of compound leverage? If you or your team gave up some stuff, how would you then drive revenue for your business or increase your value for your customers? What would you do to really scale and grow if you got half your day back?

Jason: You do the strategy call. You figure out team systems attack, you're going over their processes. You're identifying the highest value leverage, I think it's a cool idea of compound leverage. And then what would you do next? What would you recommend next?

Daniel: It's developing your plan. From that guy that owns half a billion dollars in property to the person who's got 100 homes, every single person has opportunity. It's standard blocking and tackling in business. We're doing a needs analysis for you. We're saying, okay, what do you need to do now, or who do you need to hire on your team now? It's always been developed with the plan moving forward.

Any company like ours who says, oh, we'll just hire somebody for you tomorrow, be scared. Just be scared, because as an entrepreneur, leverage is your biggest swing, it's where you can get the most value for your dollars, you really have to be strategic about it. Step two is what's my plan? What systems do I need in order to do this virtual thing like what we're talking about going remote? Who do I need? What do I need? What conversations need to happen for my internal team?

What planning do I need to make? Let's create an outcome statement. You could call step three crafting an outcome. Another thing that's unique about our businesses is we don't do job descriptions, areas of responsibility. I don't say anything wrong, there's nothing wrong with that, but what we do is we create outcomes. For instance, when I hire somebody, I'm hiring them to grow my revenue, I'm hiring them to save money, I'm hiring them to own an entire process for my business. We will help you craft and create a plan that really adds value to your business, so that you're getting a 3 or 4 times return on the $21,000 that you're going to pay us.

Jason: You're crafting an outcome, you've developed the plan. You've done the strategy call, you develop the plan. You've crafted this outcome, and then what's the next step?

Daniel: At that point, we know exactly what you want to accomplish. As a company, what we'll do is we'll take that outcome, we'll craft a series of interviews with somebody who has experience doing that thing. One challenge that we have in the outsourcing virtual assistant world is you can go on Upwork and hire somebody from India for $3 an hour, and that's what most people think about when they think of outcomes, or outsourcing, or virtual assistants.

The thing is we're a virtual professional company. We are very strategic, we hire people who've done it before, who've been there before, who have served that outcome in the past. If you need somebody to answer the phones and be a prospector for you, or handle like client calls or tenant calls. We're going to find somebody who they've been 10 years doing that. They may not be property management, but they've been 10 years on the phone handling concerns and being a support mechanism for businesses similar or very like yours.

The next step is to get three to five people right in front of you, so you can interview them, and you can choose somebody who is a great cultural fit plus an expertise and experience.

Jason: I love the idea because I think cultural fit is the most important piece to look at first. A lot of people, well, they're great for this job. They look great on paper, they know how to do this job, but if it's not a good cultural fit, and I find as an entrepreneur if you don't feel comfortable around them… There's a great book by a really cool guy called Steve Sims called Bluefishing, and he talks about it in it. He calls it The Chug Test. He's like, what I want to go chug a beer with this person, if the answer's no, like then there's a disconnect, there's a problem. He uses the chug test with clients and different things.

I think on our team, it's really important that everybody on our team exists to lower our pressure and noise. They exist to help move the business forward towards our outcomes. If there's resistance there, or discomfort there, and you're adding more and more team members like that, you're building a business you don't even feel like being involved in. It's very important, I think, for us as entrepreneurs to be really conscious of how we feel around our team members.

Daniel: I can tell you I've hired people before and you have it too. If you're listening right now, it's interesting because I think this is a mistake that we make as entrepreneurs, we either hire people that we really like, or we hire people who know the job, and have expertise or experience doing the job. The reality is you need both. You've got to enjoy them, or at least feel like there's a fit in who you are and what you think, but they also have to be an expert at what they do, or a professional in our world.

I can always tell when I'm talking to somebody who understands growing and scaling a business because they say what you just said, Jason. I appreciate it.

Jason: I'll add, I think one of the biggest mistakes I've seen entrepreneurs make in trying to grow, or scale their business, or hire in their team is that the biggest mistake we make is that we try to hire somebody like our self a lot of times. We have a natural rapport for people that are like us. In NLP, Neuro-Linguistic Programming, they teach if you mirror or communicate at the same pace of these sorts of things, then you can build artificial rapport, or build real rapport perhaps really quickly. But, the challenge is we also tend to have a blind spot and hire people that are like us.

A lot of times, the people that we need to do a certain job, or not the entrepreneurial, visionary, cowboy personality type, or whatever personality type you are as an entrepreneur. You might need a different personality type for that role, and sometimes we're trying to get people like us, which we don't even want to do those things, and we're trying to put them into that role. We need to find people that love and enjoy doing that particular thing that we don't want to do. Somewhat, they need to be different from us, but we need to be able to have a relationship with them that feels comfortable and feels good and that we value. We enjoy being around them or having them on our team.

Daniel: Some things I'm going to add because I'm a nerd. I love people, I love growing and scaling. I think there's another possibility which is when values match. If you're very clear about what your values are as a human and a business, then you can be with somebody who maybe doesn't match up with your personality, because you feel like you at least have that commonality and value.

Jason: You guys trust them.

Daniel: Yeah, exactly. One of our values as a family is we take care of our people. I teach my kids, we don't give up. I naturally gravitate to people who care about people, and who have a bit of grit. Defining who you are as a person and defining who you are as a company, and having those values can help you in selecting somebody who you may not love hanging out with, but there's a value match, and they have an expertise match. Things just jive as a company.

Jason: I find that's one of the biggest flaws that I see in property management businesses, probably any business. As entrepreneurs go from the stage of solopreneur to building a team, they build a team around them but they're operating like a solopreneur. They're trying to micromanage them. They're viewing these people as people that are supposed to be extensions of them in some way, and instead of building a team around them, of people that are taking things off of their plate and their jobs to lower their pressure and noise, they're hiring people for jobs, people for roles they think the business needs instead of what they need.

In order to hire a team and build a team around you that is what you need as an entrepreneur, there needs to be clear values. Those need to be defined. That's one of the foundational things we coach clients through is getting clear on their business, why we get entrepreneurs personal why, how those connect, creating, figuring out their core values. If they don't have that, they don't have culture. Culture comes from the entrepreneur, and it's the business that is supposed to exist to serve the entrepreneurs needs in some way, and it's also supposed to exist to solve a problem in the marketplace.

If they have those things in alignment, it significantly affects their ability to close deals and create trust. That speeds up rapidly. If they don't have that, then not only are they having challenges with that, but they also have a team around them that they have to micromanage, that they always feel like they have to tell what to do, and that are not believers in them or in the business because they've never given them anything you believe in.

Having a team of believers feels great. You feel like you're Iron Man. You feel like you've got the super suit, you've got all these people supporting you. We had an issue this morning, there was a client that had a product or something and they were frustrated or upset because they didn't do any of the work and they didn't get the results, obviously. They didn't do some things that needed to be done, didn't show up any calls, that didn't do anything.

We want this client to get a result. One of my team members is brilliant at coaching and helping clients just feel the negative energy and transform it. He's just a brilliant coach in that, and he talked to this client for like 60 minutes. The client was like, okay, I'm excited to work with you guys, I'm not going to sue you now. My approach probably would have been a little bit more hardline and hard nosed.

I've got another team member, and he deals with the clients directly. He's super diplomatic, and I'd be like just do it this way. But he's like, why don't we say it like this? I'm like, that's better. Our team members protect us. They protect the business, especially if they believe in you. You always feel like you're being supported. God, it is so stressful. It's worse having a team than being a solopreneur if you have a team that isn't there to believe in you, to support you, and lower your pressure and noise, it's worse.

Daniel: Agreed. Agreed.

Jason: You want to talk about the next step? You've got this outcome crafted. I love that idea because ultimately what matters is results, the outcome is what matters. A lot of people will hire just to fill a wall. They're like, "We need this." They think that's the outcome, we solved it, we got this person.

The real outcome is them helping the business achieve a goal, achieve the outcome, that's involved. I like the idea of crafting outcomes. What's next?

Daniel: You know what? I have to follow it up with the outcome. I want clarity for your audience around why we do that, it's really important. When you have a person coming into it and you give him a job, they could do a job and not get a result.

Jason: Absolutely.

Daniel: That's the challenge. When you craft an outcome and there's massive clarity between you and the employee about what the outcome is, how to do the job is well informed. It's like, "Look, we are going to need you to book X, Y, and Z so that the clients have this result." They're like, "Well, I booked it." Yeah, you booked it but the client didn't get this result. This is a challenge.

Outcomes just align the interests of the entrepreneur business owner and the employee so that the coaching conversations and the interactions are super, super, clean. There is some responsibility on the entrepreneur because I can't say, "Look, I want to fly to Pluto one day. I'm going to hire you to help me do that." That's just not a possibility right now.

We have a lot of clients here who are like, "I don't know how to do that. I need to hire somebody. Daniel, can your virtual professionals help me?" I'm like, "Absolutely not, we can't help you. You don't even know how to do it. How would we know if you don't know?"

The military has this great concept, "You can't give one unless you have one." They don't promote from outside. You're not going to get a two star General who used to work at Coca-Cola, they're not just going to make him the general. They have a process of rising through the ranks because that experience is so important.

When our clients say, "Hey, I want to try this thing out." We're like, "Hey, we can't help you because we're not a try-it-out company. We're a professional organization that helps entrepreneurs get time freedom in their life and high caliber leverage." We're not going to experiment something with you, we're not going to try to create the shift that's going to go to pluto. We just don't know how to do that.

That's some clarity on the outcome.

Our next step after an outcome, we start interviewing. Then, it just moves into the launch which is why we have the Go Remote gift for your audience which is really timely because 50% of the world is now working at home. How do you do that? What are some of the technologies? How do I communicate?

Jason, you're going to love this one. You and I, we've been working remote for a while. Most people would be on a chat platform, "Hey, I got to go to the bathroom." Nobody wants to see that, but we're all humans. What do you say? In our Go Remote guide we're going to give out, you type ‘bio.be right back.’ It's just a little bit better to see that on a chat platform in your corporate office, maybe 100 people.

We've got a lot of tips, tricks, what's the right etiquette, and all that. After you interview, which is about a launch, that's probably where all the magic happens—the first 90 days.

Jason: Yeah. I just saw on Facebook, it went viral, that all these people are working from home now. People are doing Zoom meetings and stuff. Some lady in her team of 20 or 30 people on a Zoom call forgot that her camera and her mic was still active while she was going to the bathroom. She said, "I'll just go to the bathroom," and took things with her. How awkward would that be? They need to understand some basic etiquette dealing with this new technology.

Daniel: Sure. The fun thing about it, we're all humans. We all have kids, we all go to the bathroom, we all need a lunch break, and the rules are different now working at home. If you find yourself as a manager or an employee, you have to hyper communicate now because nobody can see if you're actually working. If you find yourself as a leader, you have to give people the benefit of the doubt, and really communicate, communicate, communicate. This is a time unprecedented in history. Nobody can plan for needing to take your entire team remote in a matter of seven days. It just can't be planned for.

Having a little bit of grace as a leader, and also increasing your communication for your employees as a leader is really super important right now.

Jason: Yeah. One of my coaches, Al Sharpton, gave me the idea that the best way was push communication rather than pull in which as a leader, you don't have to go to hold them, stand over their shoulder, and ask them, "Hey, did you do this? Are you doing this? Where's this at?" That's pull communication. You're always trying to get things from them but you set up systems in which the system, they're reporting, submitting things, and providing the information to you so you'll feel comfortable, and you don't feel the need to micromanage them that way.

Daniel: That's a great point. Part of our onboarding is helping people understand what a start of the day report looks like and the end of the day report looks like. Each of our folks, 1300-ish, 1200 or 1300 people, are doing a start of day report where they're like, "Hey, these are the seven things I'm going to accomplish today." And an end of the day report, "Hey, those seven things I knocked out five of the seven. I did three others and these two are pushed to the next day."

Again, if you've got those communication systems well-oiled, one of the things because we've been virtual for so long, we have a tech platform where all of our virtual professionals enter their time. They start their day and they do their start of the day report in our system. At the end of the day, they report in our system. It keeps tabs and track of our virtual professionals so that we have a system of knowing, "Hey, they took a break." They enter into a system, "I'm taking my lunch break," or, "I'm taking my 15 minute break."

We have a system that reports to our clients everything they do throughout the day. Our clients can login to that portal and just see it. We've been doing that because that's normal. Now, everybody's like, "Hey, how do I do that?" That's another example. You just have a start and end of day report so your managers and your people have a clear way of communicating what their day looks like.

Jason: Yeah. That same coach I mentioned, I once asked, "How do you know if somebody in your team is a believer?" He just said, "They're getting their work done. You've got the outcomes and the things they're supposed to be doing. They're reporting that they're getting these things done. The performance is there and you're getting the results that you want. You don't have to micromanage them, you don't have to live in fear. They're getting things done.” That's ultimately what you want. You want to pay money, you want them to help you make more of it. You want them to get it done.

Strategic call, development plan, crafting an outcome, interviewing, and you said launch. The launch is then setting, you've got these systems in place. For your clients, they can login, they can see what the team members are doing.

Clarifying question. There's two types, I've noticed, of assistant companies or outsourcing companies where they're like, "Hey, we'll answer your phones and we've got 50-100 people here in a call center. Some random ones are going to answer the call." Or, you've got Raymond who's assigned to your phone and he's going to do this, he's going to do this job for you. Maybe you could help the listeners understand what MyOutDesk and this relationship looks like.

Daniel: Yeah, make sense. The first example is for major corporations. Our business is designed for SMBs—Small and Medium Sized Businesses. We think of us like an extension of your business. You get to interview them, you get to onboard them. They report everyday to you. It's like, "Hey, Jason. I'm here. Daniel's here. I'm ready to login. I'm going to rock it. Do you need anything today? Here's my start of the day report."

Every single day, they login. We typically do Monday to Friday. Some of our clients will have multiple schedules depending on coverage needs. LIke over the weekend, late night calls, or emergency phone numbers. Just think of us like an extension of your business. We're giving you leverage. We're a real estate staffing company that is specific to property managers, brokers, busters, mortgage companies. Our whole world is around helping you grow and scale.

After the launch, it goes through training. Most entrepreneurs who ever hired somebody realizes that in the beginning, I liked this X. If you've been watching us on video right now, I'm doing an X. In the beginning, it's low value because they're brandnew to your business. They don't know your culture, they don't know your customers, they don't know your value proposition. There's just not a lot of value in the first two weeks.

At some point, the value goes up. The amount of time you have to spend with somebody is high in the beginning because you need to tell them everything that's in your brain. That all of this tribal knowledge that you need to impart and give to them. You might already have it documented, you might not.

The first 90 days is really teaching them how you want them to serve the business. Communicating, giving around like, "Hey, here's how to use our system. Here's the training platform. Here's all the team members. Here's all the systems you need to learn." The first 90 days, it's just getting them up to speed. After that, typically our clients are recording a 60% or 70% savings with the exact same result they were getting prior. It's pretty awesome.

Jason: Now, these team members, is it hourly or are you dedicating a monthly? Fulltime? How does this tend to work?

Daniel: There's a couple of things. We're different. Obviously, they're virtual professionals so they're working full time. We're a subscription based business. You pay us, we pay them. We also carry their healthcare, their vacation time, and all their benefits. Most companies, they're making a very razor thin margin. Honestly, 90% of what you guys pay us, what our clients pay us, actually goes to benefits for their virtual professionals—benefits, vacation, health plan, we do conferences. We have an entire support system, team, tech, and all that kind of craziness.

The point is they're our people. We're helping you get up to speed so they can help you grow and scale your business. At some point, we all become a team. Meaning, the company is here to support the virtual assistant, support the client, and everybody wins. That's what I love about working here. I'm going to help people find jobs in the Philippines, that's where we operate. I get to help businesses scale and grow. It's like the coolest place to be especially because we’ve helped over 5000 clients. I’ve gotten to see growth plans, org charts, systems.

It's just so exciting every day to see so many Small and Medium Sized Businesses really see under the hood—profitability, who's on your team, what are some of your struggles. It's just really awesome for me and my team because every day, we're just serving our community.

Jason: Love it. What are some of the frequently asked questions that people have that maybe we haven't covered? That somebody might be asking during the process?

Daniel: A lot of people are like, "What does my commitment look like? How long do I have to stay in contract?" I'm a real estate guy and very firmly believed in value. We don't lock our people into any long term contracts. Every two weeks, every single one of my clients is voting with their credit card, honestly.

Imagine if your business, 100%, runs on adding value for others. That’s how our business works. One of the missions that we've embraced at a really high level is our virtual assistants or virtual professionals need to be indispensable to your business. That's the guiding light, it has been from the beginning. If they come in and they take things off of your plate, you have all this time freedom, all of these opportunities to crack, and grow your business, then we just created an indispensability, it is irreplaceable. That's our whole mission as a company. We're really excited.

Jason: Very cool. Do we talk about pricing? What is it going to cost? Typically, I know that the people listening, that's the big question. They're like, "Can I afford this? Would this make sense for me?" Most of them are thinking, "I can barely afford the team I have now. Is this something I can do to get to that next level? Maybe this will help me bridge that gap."

For example, in property management, what I call the first sandtrap is the property manager that's maybe broken about 50 doors, they broke that barrier there. They're between 50-100 doors, they can't break the 100-door barrier. They're operating as a solopreneur, they can't afford to hire their first team member. Their pricing is too low, they've taken on too many crappy properties to manage. They've got a lot of leaks. They're trying to figure out, "How do I get ahead?"

They can change some of these other things but one of the things is, "I need another person." Maybe you can touch on that and give people an idea of what they should budget for and make this work.

Daniel: Step one, three, or five, is 100% free. If you're listening right now and you're like, "I need support," or, "I need help," I just want you to jump on our website, myoutdesk.com. Just go and schedule a consultation, go through the process. Worst case scenario, we walk away as buds. We high five each other, say, "Congratulations," and we walk away. Best case scenario, we find a way to make it a win-win where you're getting time freedom back into your world and you're able to focus on growing and scaling your business.

If you decide to move forward with us, I always like to say, "Look, it's $400 a week. It's $400 and some change." It's not a super expensive value proposition in our world. It's $1747 a month, all in—benefits, vacation time. Like an entire team supporting you. All the systems and processes that we’ve developed over the years will help you.

This Go Remote guide we're going to give out is 12 pages and 5000 clients later worth of really good this-is-how-you-run-a-remote-team guide. We're going to give everything away for free because that's what we do. Including our time, energy, and effort.

We were just on the news last week. We basically gave out consultations to help business leaders, C-suite people, and entrepreneurs figure out how to go remote. There's this bottleneck in California. Everybody got shelter in place. California went down, people were scrambling. We helped our insurance broker, we helped our attorneys. We were just helping people figure this out and give them some confidence in this.

If you're listening right now and you think this might be an avenue, I would just encourage you to reach out because it costs you nothing but your time. You'll walk away with a lot of value.

Jason: Another major issue right now is the cash crunch. Every business is feeling a cash crunch. Cash is just shortened, people are laying people off. Companies are furloughing people, their team members can collect their employment insurance. This is a painful time period. They're having to figure out how to cut expenses. Some businesses will not be the same after this.

This might be another option if they're having to layoff staff and they're not able to fund or keep cash flow positive. The big challenge then is how do we keep some sort of level of service? How do we still deliver to our clients if we cannot afford that overhead anymore, and we need to lower the overhead.

For those listening, that's what you need to do right now, to cash crunch, and solve that problem. If you can be healthy there, then you can get on some higher level problems to deal with like how do we keep the [...] economy or what not. You've got to solve the immediate cash crunch issue. That might be an SBA loan, that might be some of these things coming out. Maybe having a conversation with your team might help facilitate that.

Daniel: We have a good friend of mine who owns a recruiting firm. One of her right hand women has a 1 year old and a 3 year old. They're all at home. She needs support now, not tomorrow, because she's contractually obligated to add value to her clients. If she doesn't, they have the opportunity to walk away and cancel. We're seeing a big uptake in people who are like, "Hey, we're having staffing issues right now. I'm not sure. We need support in X, Y, and Z.” We're happy to go through that process with somebody and say, "We can help you here," or, "No, this isn't what we specialize in but these people are your best option."

There's a lot of companies like ours. There's lots of resources out there where the SBA thing, that's one of our free gifts in the Go Remote right now. When we give that away, we have a guide to getting the SBA disaster loan there. We have a guide for what's happening with the taxes right now. We have a guide for what you are saying to your clients right now in this weird, uncertain time.

You can't say you want to buy or sell, this is an odd time to be a sales person but it's a great time to have conversations, ask questions, and connect people on a human to human basis. We put together a little guide for people in that space. We should give it away. What do you think, Jason?

Jason: Let's do it. How do we get it?

Daniel: All you have to do is text MOD—MyOutDesk—MOD to 31996. Anybody that wants it can go there. You'll get a link to our Go Remote stuff, all those free guides are down there.

Here's the other thing, normally, you understand marketing, we date our content. Normally, we help people register and do a bunch of stuff so that we know who they are. Because of this disaster and because of everything that's happening in the world, when you text MOD to 31996, we're giving that stuff in a Word format. Meaning, you can take the Go Remote guide, put your logo on it, and give it away to your customers and clients. You can put your logo on our disaster recovery plan.

We have a CEO mindset conversation. It's time to adapt your value proposition for your customers because we're in a new world right now. All that stuff is given away free because we're all in this together. The biggest cure for the economy right now is businesses and entrepreneurs staying productive.

Jason: Right. I'm texting it right now so I can check it out. It's 31996 and I just do MOD.

Daniel: That's right. I can't wait to see Jason from across my phone. It's going to be awesome. There we go. Boom! "MyOutDesk is your partner in going remote!" That's exactly it, brother. Right there.

Here's the thing, we were on TV. I think it's an important message. I think we can wrap it up with your audience with this one thing. As entrepreneurs, as business leaders, it is our job to stay productive. It's our civic duty right now. Our economy is going to be challenged. The people at the bottom who have the normal middle class jobs, they're going to go through pain. As a leader in my community, my job is to help everybody I can stay as productive as possible. That's what's going to shift, that's what's going to change this world.

That's why we put together a guide. That's why we're giving it up free. I hope it's valuable to you guys, your audience, and Jason—even you guys.

Jason: Awesome. I just did a training just last week. Property management and property managers are going to be even more critical during this time than ever before. This is an opportunity for property managers to plant seeds for the future. I taught a concept called Care ROI. Right now may not be the time to focus on financial ROI but Care ROI will lead to that in the future as things shift. In turn, people will remember. Because emotions are heightened right now, anything that we do, and it actually takes a communication that we do as an entrepreneur, as a business owner, will be magnified times 10 in the mind of our customers or consumers because emotion is what creates memory.

It's the difference between what you were doing the day before 9/11 or the day on 9/11. People's memories are very different because of the emotions attached. Right now, you have the opportunity to get a 10x ROI on positive things that you do out to your customers, to your audience, and your potential clients. That is massive.

Everyone listening, make sure you checkout the training that I did and leverage that Care ROI. I want to thank you for coming on and doing this even though it's crazy right now. I honor you for putting out this awesome guide to help people out. That's awesome. I look forward to having some more conversations with you in the future, Daniel.

Daniel: Jason, thanks for your time, man. We really appreciate you today.

Jason: I'll say one more thing, Everybody, businesses exist to solve a problem. That's why businesses exist. If the business is not solving a problem, it's taking people's money and not delivering results. There's no higher purpose or cause that entrepreneurs can do right now than to solve people's problems and to also make money. Making money helps you help the economy, it helps everybody. It helps you help your team. Find ways to help people solve their problems and to make money.

I don't think there's anything wrong. Some people try to guilt and shame right now. They're the people that are just taking from the system, don't worry about them.

The other thing I'll point out is if you're an entrepreneur, you don't like your business, you've been looking for your out. You're an entrepreneur, this is your perfect out. This is the perfect opportunity to choose out of your business and just not do it anymore. You have the perfect excuse.

For the rest of us that are driven, that we’re passionate about what we do, if you are a property management entrepreneur, you're still wanting to grow, still wanting to be part of the community, check us out at doorgrowclub.com. Get inside our Facebook group community there. There's lots of helpful things going around, property management trying to solve problems for each other, and figure out what to do with things. Make sure to have a conversation with us at DoorGrow. Our goal right now is to plant those Care seeds, ROI as well, and help you out in any way that we can. Check us out at doorgrow.com.

Daniel, thanks again for coming and hanging out.

Daniel: It's been my pleasure.

Jason: All right. We'll let you go.

Everyone check out his website. It is myoutdesk.com. Make sure to do the text message thing. Until next time, everybody. To our mutual growth. Bye, everyone.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

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Apr 14, 2020

Are you a property manager who spends too much time struggling with leasing requirements? It may be time to automate rental property management and focus more on how to grow your business.

Today’s guest is Faizan Khan from LetHub, an AI leasing assistant service for property management businesses. LetHub utilizes AI to interact with renters, resolve their problems, and get them to the doors.

You’ll Learn...

[03:40] Why LetHub? Opportunity to use AI to automate rental property management.

[04:21] Myth: AI is a simple chatbot with multiple threads of what needs to be done.

[05:00] Reality: AI goes beyond basics by understanding how the human brain works.

[05:26] Good vs. Genius AI: What’s the difference? Ability to learn and fix mistakes.

[06:39] How to build an AI: Data scientist, algorithms, machine learning (ML), and supervised learning approach are needed to get started.

[07:29] LetHub’s Goal: Make experience for renters and landlords very easy.

[07:55] Property Management Problem: Difficult to get a rental apartment. Demand is high. Everyone is looking. AI can help.

[09:05] Why LetHub uses AI? AI is not going to replace humans, but it’s a substitute.

[09:19] Retention Rate: Property managers want to get the best tenants and keep them.

[10:25] LetHub’s AI: Replies to questions, books tours, provides CRM, handles emails.

[12:15] LetHub’s Automated System: Requires less staff and time to generate results.

[15:35] Pre-call Process: Top four questions focus on pets, moving date, student or employed, and tell me about yourself.

[17:25] API and Integrations: Connect to Buildium, Yardi, or other account.

[20:00] LetHub Listings: All channels have Web link; connect email with Web platform.

Tweetables

LetHub’s goal is to make the experience for renters and landlords very easy. Get people to the door.

A good AI understands; a genius AI learns from its mistakes.

AI won’t replace humans, but be a substitute for property managers to focus on growth.

People like to chat. They don't want to call. They want instant replies.

Resources

DGS 125: Premature Expansion in Property Management - Part 2 0

Transcript

Today's guest, I'm hanging out with Faizan Khan. Faizan, how are you today?

Faizan: I'm good. How are you?

Jason: Welcome to the DoorGrow Show. I'm doing great. Faizan Khan has one of the coolest names that we’ve ever had on the DoorGrow Show. We were joking in green room that it sounds like he’s a gangster rapper, just cool. Actually, you made that joke, because I’m a nerd I said it sounds like some badass [...].

Faizan: That’s right, yeah. It’s a different name. I haven’t heard this name myself before.

Faizan, I'm really excited to have you. You have a service that we're going to be talking about today called LetHub. I know nothing about it. I'm excited to ask you a lot of questions. I get curious. Before we get into that, let's talk about you. Where this guy with this cool name came from, what your background is, and why people should listen.

Faizan: As a child, I had been involved in entrepreneurship stuff and starting businesses small or big. I'm originally born and brought up in Dubai and Pakistan, considered like a mixture. Then I moved to the UK for a bit and after that I have been living in Canada. I've lived in five different countries throughout my life. I love traveling. Whenever I get a chance, I try to go to any other spot that I can go to, provided there's no Coronavirus over there. I'm really interested in real estate. I've had a bunch of start-ups before. I saw this opportunity of using AI to automate rental property management, so I started this company called LetHub.

We are in our start-up phase but we're doing pretty well working with a few clients in Canada and States. We're trying to help people to automate all of their leasing requirements so they could sit down and focus more on how to grow. Right now, we're using a very sophisticated AI to interact with renters, resolve their problems, get them to the doors, and all that stuff. We can get deeper into that. That's my background of why I started and who I am.

Jason: This sounds really interesting. A lot of people talk about AI and you hear that thrown around. I think the term can sometimes be used very loosely. Their version of an AI is they're creating a chatbot with multiple threads of what they need to be done.

Faizan: That’s a very good question. I think a lot of people are sort of sold on the idea that AI is basically just like a pre-made thread of questions or a pre-scripted bot. But the truth here is that it understands something in a similar way as a human would, like the sentences or words I'm saying to you, your brain is breaking them down, understanding the context of that, processing it, and then replying. That's how our brain works.

A good AI would understand that, even a better or a genius AI would really learn. If it creates a mistake, you can teach it what to do or it could teach itself what to do next. An example would be if someone says hey, do you allow pets, or hey, do you love furry friends? The AI would respond saying that, hey, we do. This is our pet policy. The renter would say, hey, is a small dog or cat okay? The third thing that the renter says is context. The context is do you allow any pets. Truly, I would not understand that, but an actual AI would understand the context.

Jason: How does one go about starting to build an AI thing? Is there an AI system that you are leveraging to build? Is that how this works?

Faizan: Yeah, that's a good question. You need a data scientist, number one, and you need to build some algorithms. You need to understand how machine learning works. It's a lot of techy-techy stuff to get data, to train the AI from an infant to a child to an adult. It's a simple process like any other human would be trained, how we grow up, we learn a few words, and then we're taught a few things. Pretty much like that. We use a supervised learning approach. It's a very sophisticated machine learning approach. Our goal is to make the experience for renters and landlords very easy. From our tests, we see that a lot of people ask the same questions. We cut that down, get people to the door rather than them giving you a call or sending you hundreds of emails.

Jason: Let's talk about the problem first. What problem have you seen to the property managers you're dealing with that you thought maybe AI can help with this?

Faizan: First and foremost in a very dense city where I was living in Vancouver, it's very hard to get a rental apartment. The demand is high. Everyone is looking. For us as renters, it was getting impossible. It would take two months to get something, that's how I started. I was like, why is this process not solved? If I send an email to a landlord, why am I not getting a reply? If I show up there are 20, 30 other people, I need to fill out a new rental application every time. If you go into 10 units or 10 different spots or places, it will be 10 different applications and that's all while you're working 9:00 to 5:00 as a professional. That's how I started.

Why do we use AI? AI is not going to replace humans, but it's going to substitute a lot of their work that they do so they can focus on other stuff. A lot of the problems that property managers face are mostly around getting the best tenants and then keeping them. What's the retention rate? That's one of the bigger problems in multifamily and also single family.

I believe that you can cut that whole process down to finding someone from a listing, to getting them to the door, and to sign the lease. You can cut the time down by around 60 to 70%. If you're spending four to five hours a day, if you have a lot of vacancies or spending a lot of time just on replying to people with the same questions and it gets monotonous, you might lose focus. You're not that happy talking to people. That's where an automated system comes in.

People like to chat, especially millennials. They don't want to call. They want instant replies. Our product comes in there and solves this problem. It replies to everyone's questions and books you a tour right away into the leasing team's calendar. It provides a nice CRM for property managers just to have a look at who's coming when, weather details, do they qualify, all that good stuff. It also handles emails coming through. We see that 50 to 60% of property managers get emails than calls. Emails and texts are the king right now in terms of communicating. We deal with that as well.

Jason: LetHub is handling emails?

Faizan: Yes.

Jason: It's dealing with text messaging too?

Faizan: Yeah. Apart from calling, everything. Our AI assistant is dealing with all the online web chat. You can put it on your website or you can just post it on ours. It would reply to your emails. It would reply to the text. It will send reminders, all that good stuff. Honestly, there's a lot of companies that have already built this, but the automation piece is missing. There's always some manual work. We built it in a way where you can just click a button and start using it. There's no need for a three week training. I hate that.

Jason: What are you seeing in terms of how this is impacting the clients that you brought on some of your initial prospects? What are you seeing? What are they noticing? What's different for now?

Faizan: I don't want to jump the gun on this one, but I think it's helping people not to hire more which is scary. An example is one of our clients, they used to hire interns who would take calls, reply to emails, and then give the lead to a leasing agent who would go out there and show the unit, do a tour and then sign the lease and all that stuff. They stopped hiring an intern because now the system’s so automated, they’re getting good results. From a leasing agent’s perspective, they’re leasing faster. Those hundreds of emails they get, because it’s automated, they can filter through renters faster and get signed leases faster. The rate of listing to lease, the timeline has decreased. We've been measuring that very specifically. Minutely looking at is that the USP, is that actually the time spent by a leasing agent, but it's both. If someone spends on these activities, that goes down and the time to lease goes down as well.

Jason: Let's go through the lifecycle then. I want to understand which pieces of the lifecycle of dealing with prospective tenants, showing the property, getting the lease, then on boarding, how much of this is LetHub connecting with and helping with?

Faizan: Our goal is to get people to the door.

Jason: It's getting people to the showings and getting showings scheduled and that sort of thing?

Faizan: Yeah. It's answering our questions, dealing with increased, pre-qualifying people, and getting them to the door according to your schedule. Just get them to the door and then after that you could do the rental application or whatever you'd want to do, but also we get feedback as well. We're getting them to the door. If they don't like the property, we're getting some feedback as to why they didn't like the property or something like that.

The goal is to get them to the door fastest with good pre-qualification, answering all their questions that they might have, and booking tours in a smart way. If you manage more than 400 units, 1000 units, or even 2000 in our case, then your time is money in that sense. There'll be no shows. There'll be people who are not that qualified. You'll always be dealing with not a higher quality of tenant like prospective renters.

Jason: Give listeners an idea of the pre-call process, like some of the questions you might ask or what property management might have connected or built out in that piece.

Faizan: I've built the algorithm myself with the help of my CTO. It's highly customizable. Obviously staying within human rights, there's some questions you cannot ask but it's customizable. You put your criteria and river our AI. We'll make sure she gets those answers from people.

Jason: What are some of the questions that it's asking? You had mentioned earlier like maybe pets, maybe if they've had an eviction before.

Faizan: You could ask anything from if you had an eviction, do you smoke, do you have any pets, how many people are moving in, why are you moving, are you a student. A lot of people ask this. We suggest people not to ask more than four questions, otherwise, that drives renters away. The top four I'm telling you is number one is pets, what's your moving date, when do you want to move in, are you a student or do you have a job, that sort of thing, and then the fourth is please tell me a bit about yourself. Generally, tell us whatever you would want. Though you can keep the criteria strict. If they don't fall under your criteria, they don't actually book a tour. We'd show them other properties.

Jason: I understand the idea of decreasing the amount of time wasting type of calls where they're just asking details about the property. Will this be able to pull in some of the data on some of the properties through API or connect, because most property managers have all this in their property management software? If somebody's getting into your chat tool or the system and asking what's the square footage on this property or where is this located, how many of these things can it feel?

Faizan: All we ask people to do is connect their Buildium or Yardi account and then go from there. We are constantly working on improving the integration and it will have enhanced integration with time. Right now if you as a property manager want to have a taste of LetHub, just let us know and we'll add a few of your properties. You can have an experience and then we can attach your integration and all that stuff. But we're not really partners with any of these companies, we just want to be clear. These are one off requests from property managers where they say this software, can you integrate so that we help them integrate. There's some softwares that do not have APIs.

Jason: What manager has a full API, I guess property now has an API?

Faizan: Yeah, probably Rent Manager. I was talking to the folks at Rent Manager as well. We're in moving talks with them soon. We'll meet with them at the conference as well. With Buildium, they don't really have an open API, same way as bigger companies like Yardi or RealPage. They have a paid API so they have this whole program. But we're happy to work with anyone. The key is to cut down the time it would take to on board anyone if they are using a very sophisticated software. We're happy to work with them and help them set that up while not changing anything. That's the important part. They keep doing what they're doing, we're just going to be working on the side getting them into leads.

Jason: LetHub can operate as a chat tool on their website for people that are coming there. How does it help them via their listings that are out on the internet on various channels?

Faizan: All the channels, email, text, and just having a web link, when you list your property, all you do is you just connect your email with our web platform. When you list your property just in the description and say, hey, click here to book a tour, or you can just redirect users to your own website. If you spent a lot of money on branding and making your website amazing, which a lot of people have, just redirect them to your own website and the river would just pop up and guide the user to book a tour or answer any questions.

Jason: What questions are property managers asking you that are a little bit curious or wary or whatever? What are some of the most common questions they're asking about LetHub before they're willing to take it for a full spin and utilize it?

Faizan: That's a good question. I think it depends on the size of the company. We were in talks with Aimco which has 10,000 units, bigger company, and multifamily. Their number one problem is integration so they would want integration with their current software which is totally fine. Make sense, bigger companies, got more complex. With the smaller property managers, I think their major concern is that will people be okay chatting with an AI versus a human.

I want to be clear on this that nobody's replacing nobody over here. We're just helping people and we've got the tests to show you that that's the future. There's a lot of banks using this technology and you can order a pizza. I don't know how smart it is, but you can order a piece of pizza through an AI assistant.

Jason: Anything else you want to let people know about LetHub before we wrap this up and how can people get in touch and maybe check this out?

Faizan: Yeah, for sure. I think if you're a property manager who is looking to automate things so you don't have to run after renters and if you're looking to really use the latest and greatest tech, then please get in touch with us. Our website is lethub.co. You can email me at faizan@lethub.co, I'll be happy to do a demo myself or one of my team members would do it for you. Happy to chat about your problems and see if we can build a more customized solution for you. Yeah, that's about it. Keep growing I guess.

Jason: Faizan Khan, really great having you on the show. I appreciate you hanging out with me today and we'll let you go.

Faizan: Awesome. Thank you so much.

Jason: Awesome to have him on. Check out LetHub and let us know inside the DoorGrowClub Facebook group what your experiences are if you decide to try them out, what you think. We'd be really curious to hear about your feedback. Go post an update inside the DoorGrowClub. Get to that on doorgrowclub.com. That's our community for this property management podcast. If you are wanting to figure out how to grow your business, you're struggling to grow, you're running into issues, reach out to our team. Check us out at doorgrow.com. Until next time everybody, to our mutual growth. Bye, everyone.

Download this Episode

Apr 7, 2020

Do you have a coach to help guide you to grow your property management business? If you want to excel at what you're doing, you must have somebody who's playing a bigger game than you.

Today, Jason Hull and Jon Ray of DoorGrow continue their discussion on premature expansion in property management. Besides putting planning and process documentation systems into place to be more efficient, they focus on the third system: Communication (internal and external).

You’ll Learn...

[01:33] Interruptions and Inefficiency: Every interruption costs 18 minutes of productivity.

[02:13] Pay to Play: Learn from coaches how to protect and guard against interruptions.

[02:40] Cut the Slack: Chat tool that creates interruptions and crushes team productivity.

[03:15] Under-Communication: Creates interruptions that prevent momentum and flow.

[04:07] Communication System: Only involve those internally that need to know, and find ways to improve external client communication.

[06:01] Organizational Structure: Clear line of communication for delegation.

[08:15] Who does what? Pair effective visionary with brilliant operator to get things done.

[18:18] Sales solves all problems—not always true. Growth feeds business.

[19:25] Get things in place, and then it's not premature.

[21:00] Jack of All Trades, Master of None: Entrepreneurs find opportunity everywhere.

[25:34] DoorGrow OS: Consolidate systems, processes, professionals to be successful.

[31:10] Three Currencies: Growth involves time, money, and effort.

Tweetables

Every interruption costs about 18 minutes of productivity for one team member.

Under-Communication: Creates as many interruptions that prevent momentum and flow.

Every team member you add lowers your pressure and noise. Every team member you add makes your job and life easier.

Get things in place, and then it's not premature.

Resources

Jason Fried of Basecamp

Warren Buffett

Slack

Entrepreneurial Operating System (EOS)/Traction

Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Growing Firm

HireSmartVAs

Anequim with Mexican VAs

DGS 124: Premature Expansion in Property Management - Part 1 0

Transcript

Jon: I have worked with coaches for the past 20 years. I believe in them wholeheartedly. If you're going to excel at what you're doing, you have to have somebody who's playing a bigger game than you.

Jason: Welcome, DoorGrow Hackers, to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, and you are interested in growing your business and life, and you are open to doing things a bit differently, then you are a DoorGrow Hacker.

I’m hanging out here with someone else from DoorGrow, Jon Ray.

Jon: Yeah. Thanks for having me.

Jason: The third system that's necessary so that you can avoid premature expansion is you need an internal communication system. If you're still operating on sneakernet, or constant interruptions like sneakernet as they walk into your office all the time and interrupt you, then you're operating really inefficiently. Every interruption costs you about 18 minutes of productivity for one team member. If one team member interrupts another team member that's 18 minutes times 2. I don't know what that is, but it's more than a half-hour.

Jon: Thirty-six minutes.

Jason: Too many minutes, like 40 minutes down the drain because two people decided to talk to each other, or one person interrupted somebody else. You have to protect and guard against interruptions. All of this stuff is stuff that has to be learned. It's stuff that I've had to pay lots of money to learn from different coaches.

I had met with Jason Freed, the creator of Basecamp, and hung out with me on a call like this for 90 minutes. He cut my staffing costs in half overnight. We're high tech. We were using all kinds of technology. He pointed out how we are using this chat tool that had group rings. It was causing everybody to interrupt everybody all the time. Everybody feels like they had to read everything. It made our entire business completely inefficient. The software was Slack for those of you that are big Slack fans. Slack was absolutely killing and crushing our productivity as a team. It is basically an endless diarrhea without context or stream of information for every single project. Everyone on the team felt like they had to read every single thing.

Jon: One of the things that entrepreneurs are aware of is that when a team is under communicated, that's not a good thing. But there's this idea that maybe over-communication is the way to go. That's actually just as bad, if not as bad, because it creates so many interruptions that then prevent people from finding the momentum and flow that allows them to be most efficient.

Jason: The reason it costs you 18 minutes of productivity is because that's about how long after somebody that causes interruption, regardless of how much time they're spending with you. They might spend 15 minutes with you, and then it's 18 minutes. It takes time to get back into the flow. What was I doing? How do I rebuild this house of cards that I was building before Steve came in from finance and interrupted everything?

There needs to be an internal communication system that works effectively for the team that only involves the people that need to know or deal with a certain thing at a certain given time, rather than everybody needing to see everything. If you're a control freak as an entrepreneur, and you need to know everything, and see everything, you're probably the biggest bottleneck in the company. You need a planning system, you need a process and documentation system, you need an internal communication system.

The other system that you need is you need an external communication system. You need a client communication system that makes it easy. We use Intercom. Some people will use HubScout. You also might use your property management software in some ways for this. You might have phones, but you have to clearly have an effective client communication system. That's something we're always working on improving is client communication. We use Voxer internally as a team, and some of my coaching clients will use that as well. We've got a lot of tools that we use to increase communication, but most of it is one-on-one. It's not causing big group interruptions or situations like that.

Jon: An important thing to reference here—when it comes to creating the right communication systems—is that there has to be clear lines for delegation. Part of your process documentation needs to be letting each employee at each level and in each role understand what type of tasks are appropriate to delegate up to you and what needs to be delegated down.

Jason: All that comes with the process documentation, but planning helps with that a lot at that system, and then you need an internal communication system. As part of that, that's kind of the organizational structure. There needs to be a clear line of communication where somebody reports to somebody.

I was talking with a property manager the other day. They had their part of another business. What she said is that this other business that she's a part of—outside of a property management business—that there are three bosses. Over one department there's two managers. I said, “Well, how did the team members know which one to go to?” I said, “Are they very different personality-wise? Do they get different answers?” She's like, “Absolutely.” So then, how do they know which one to go to?

There's so much confusion in this entity. She could see it. Me hearing about it just made my skin crawl because I was like, “I would feel so crazy and uncomfortable because it sounds like a nightmare.” There's all this infighting and politics and all the stuff going on because nobody has any clarity. People don't even know. She said somebody got promoted in this business and everybody said, “Hey, congratulations.” There was a celebration.

Jon: I’m going to take this time and just pause you. I know that there are people out there that are saying, “This sounds like a lot of work. I'm already too stressed out.” There's so much resistance to putting in this work. What we're talking about is do you want to win at a new level of the maze? Do you want to be a high achiever? Because if you're satisfied with being in this mediocre average zone of success, then maybe you don't need all of this. If you ever want to get to a level where you're dominating your local marketplace, and you're running a business that isn't just growing but is growing comfortably, these things are mandatory, right?

Jason: Yeah. I can empathize with that strongly. The little story—just to wrap it—was everybody was congratulating this person. They were asking him, “Cool. What are you going to do now?” He said, “I don't know. I’ll figure it out as I go, I guess.”

Anyway, let's go back to the question. What was the question again? Sorry, I have to finish the thread.

Jon: There's so much resistance around showing up and having to actually do all of this stuff. Maybe you can talk about why it's important to push through that resistance, or how to do that? Then why ultimately, the short term resistance and discomfort leads to a more comfortable, more profitable, and more fun business down the line?

Jason: I just would rather kill the resistance. Here's what I realized. I had a ton of resistance. When I started working with some of the best operational companies, I was working with probably the best operational coach that might exist in the business world. I had already studied traction, and EoS (end of sale), and I'd heard of the Rockefeller Habits, and scaling up, and I went to this thing called warrior. There are other systems out there similar to the 90-day year. All these planning systems have some commonalities between them, which I sort of outlined when we discussed the planning system. I felt a ton of anxiety when I was going and learning this stuff. You want to know why? Because I'm not the person that should be doing that stuff.

That kind of stuff is stuff that operationally minded people love. I can geek out on a system like I could see the genius in it, but me doing it, and me implementing it, me running meetings, I'm not the person to do that. Most CEOs and entrepreneurs are the worst to run team meetings, to manage their team, to manage operations, to manage operational processes. That's why you'll see almost any visionary—that's really effective—paired up with some sort of person that's operationally brilliant. It gives them the freedom to create ideas, create a vision. The operator helps them make that stuff come true and happen.

Jon: If I'm a property manager and I'm still in that first sandtrap, and maybe I'm not even doing more than a quarter-million a year in revenue, and I don't really have the budget to bring these people on. Can you talk about what it would look like to start thinking about a hiring trajectory and mapping out some of the milestones of how I can get to this place?

Jason: This is a learned process to know clearly where your time is going, how you're the biggest bottleneck in the business, what needs to happen next? This is stuff that we teach, but it's a process. There's a system for knowing exactly what you need next to take the business to the next level. It's part of the stuff that we teach clients.

Ultimately, for those that maybe they’re the lower level like, “I can't hire a COO. I can't hire an operational manager. I can't even hire an operations assistant yet.” Maybe they just get a personal assistant, executive assistant, somebody that loves planning. They love process. They love documenting things. They love systems. They geek out on these things. They like calendars and spreadsheets. They'd love to color coordinate sock drawers. Their closet is organized. Their desk is spotless. These are not typical visionary entrepreneur personality types that are high-driven types of people.

If you are not that personality type—now on property management, you do get some operationally-minded people, but they might not also be the driver. They may need to get a BDM (business development manager) in the business. Somebody that's out there crushing it, and closing deals, and aggressive because maybe they're that operationally-minded person. That's why I think every business needs to be built around you, the entrepreneur, but if you're hearing this and you're getting anxious. You're like, “All these systems, all this stuff,” and you're overwhelmed. That probably means you're not the operations-minded person.

The operations person, they probably have some of these, and they get excited about that. Those property managers are the ones that are like, “I can't grow yet. We're working on all of our systems and processes first,” and they have 10 doors. They're documenting everything and getting everything dialed in and then you have the opposite. You have to figure out which type are you? The other thing to point out is this stuff doesn't make your life crazier, and it doesn't make your life more chaotic, and it doesn't feel it's not more work. Because when you start to get these things implemented, and you're offloading, and you're systemizing, and you have planning, and you have vision, your team can actually help you do all of this.

Every team member you add actually lowers your pressure and noise. Every team member I've added to the team has made my job and life easier. I'm doing less. Every day I'm doing less. Every new person—I brought you on—I’m doing less. What that allows me to do is to do more of the things that I really should be doing, the things that I'd really love, the things that really make me feel alive. I'm to the point now that I enjoy doing sales, but you've taken that off my plate, and you're taking some of the marketing stuff off my plate. I enjoy doing marketing, but there are things that I now want to do more than those things.

As you build out your team—the very first person you need usually is an assistant, very first person. Hopefully, that's a person that you can grow into the role of being an operations assistant, an operations manager, maybe a COO of your company at some point if they’re brilliant and effective enough. Because that's going to lower your pressure significantly, and they're going to help you get all of this stuff dialed in and implemented.

Jon: I know a lot of people have hired somebody at $10 an hour to be a personal assistant. They've had a bad experience, or that person just didn't really do what they were supposed to do. Is there some way to think about bringing on a personal assistant where that's actually going to be a successful relationship?

Jason: Oh man. We've had people in the show like HireSmartVAs and Anequim with the Mexican VAs. If you're not an expert, and you don't know how to answer that question, and you want to just get a virtual assistant like those, or a great assistant we've had on the show—if you want a US-based assistant, you need help. Because you don't know how to identify these people. The mistake we make as entrepreneurs is we tend to hire people we like or that are like us. That's not the person you usually need. You usually need a person that's somewhat your opposite that can balance you out, and handle the things, and take things off your plate that gives you more pressure noise.

We have a process we take people through to identify that so that you can build up the ultimate job description for your dream team member. The silliest thing I ever hear—and I mentioned this in some of the system shows—is when an entrepreneur starts asking around, “What do you have your assistant do?” That's like walking around the grocery store asking people, “Hey, what do you eat? What are you having for dinner?” Because they have no clarity. You're not ready to hire. It's not what they can do, it's what do you need? You have to get really clear on what do you not enjoy? What drains you? What's sapping your energy? What is that has alignment with you personally?

That's one of the things we get people really strong clarity on is who they are, what they should and shouldn't be doing, so the business can be built around the entrepreneur instead of built around somebody else's system, or somebody else's process. This is my major problem with traction and some of these other systems. It’s building according to somebody's ideal system, which ironically is a system that requires some special coach that's super expensive that you have to do it that one exact way. You need this thing called an integrator that is only one that can do it.

Jon: I was going to say I think the people that I see who are the worst at delegation are really nice people. Because really nice people hate asking other people to do stuff that they don't want to do themselves. The misconception there is that other people like the same type of work that you like. You can always find somebody who loves to do the things that you hate to do. That's how you should be thinking about hiring. Let me find somebody that I can bring on as an assistant who can start to help me offload all the things I don't want to do, but they love doing those things.

Jason: The biggest mistake we can make as an entrepreneur in our business—when it comes to team members—is to assume that our team members think the way we do. Almost none of them do. They're very different. Otherwise, they'd be entrepreneurs. Entrepreneurs are just different. My team members love being told what to do each day and having clear ideas of what to do. Me, I want freedom and I want autonomy. There are huge differences.

You need to recognize that the stuff that you hate doing, somebody loves doing that. I don't like calendars. I don't like staring at spreadsheets all day. I don't like doing graphic design in front of a computer all day. Can I do these? Can I enjoy them sometimes? Yes, but that doesn't mean that that's my best use in the business or in life and that I want to do that. My team members that love those things, they love those things. They could do that every day. That's just fun for them. I don't ever have to motivate them. That's how I know I've gotten somebody in the right position because they love doing what they're doing. Without getting too far off-track—because we could do a whole episode just on hiring, planning, whatever.

Jon: How does all this tie back into premature expansion and whether or not I as a property manager am ready to expand?

Jason: The one other system we didn't mention is you need a sales process and system. You need some growth system that's feeding the business. This might be the most important. Some say sales solves all problems. Not totally true, but without sales, you don't have a business. There's no revenue. You can't pay your team members. Things get scary. You can't pay your mortgage, or rent, or whatever you’re doing, you can't pay the lease on your building. Sales have to be happening. Bit growth has to be happening in the business.

All of these things go together. You need all these different systems in order to work. If you have all these systems, then you almost have a franchise model in which you can open up another office, or a new location, expand into a new market. Ultimately, you're going to want to keep as much as possible—probably centralized—to lower operational costs, to reduce redundancies, and get what you need to support that new location.

Then you know, all right, this is not premature. We've thought this out. The baby is ready to be born. This is all set up. The reason I call premature expansion because there's nothing premature that is usually considered positive. Anything that's premature—whatever you can think of—is usually a bad thing. I wanted people to understand it's too early, it's too early. You don't have things in place. Get the things in place, and then it's not premature. Does that mean you're going to learn? Yeah, you're still going to learn. Are there going to be mistakes? Absolutely. Is it going to be messy sometimes? Sure, but that's running a business. Perfect businesses don't exist. That's part of just what's going to happen. If you're dealing with that, the idea of starting this new location expanding everything else and everything else is already a mess, you're just pouring gasoline on a fire that's already there and it's just getting worse.

Jon: These processes and systems really give you a leverage that allows you to be really successful in a lot of different styles of expansion. Whether that's opening another office, or acquiring something. The best investors in the world—like Warren Buffett—are essentially people who are really good at systems and processes. When they go and acquire a business that's in chaos, they know that they can immediately implement the right systems, processes, and management team, and that business will become profitable very quickly. It puts you in a position where you have a huge competitive advantage over anybody who's just bootstrapping it or shooting from the hip.

Jason: Another form of premature expansion is death by opportunity. Entrepreneurs, we see opportunities everywhere. You know you're the opportunist type of property manager or entrepreneur business owner if you are like, “We can start a roofing company. Let's start a maintenance company and we could serve these other companies. Let's do roofing. Let's get a house cleaning business. Let's do carpet cleaning.” I know business owners that they have new property management, and they have seven or eight other businesses.

Jon: It's like the jack of all trades, master of none.

Jason: Some of them can be good. They can build out teams, they can have things really well dialed in. If you learn to do it for one—like you we're saying—you can do this for all of these businesses and make sure that it's going well. But if one's a mess, you're just adding more problems and making it more challenging. What it does is it dilutes focus. Focus is one of the key ingredients for making money. If you want to make a certain amount of money, and you're like, “Well, let's add more services.” You would think that would add more money. What it usually does for most entrepreneurs is it just dilutes what they can already do. It just divides that up and it becomes more and more challenging. It's a lot easier to make a million dollars in one company than a million dollars to 10 annually. That's another form of premature expansion. That all comes back to the planning system.

The planning system, and our vision, and goals as a company give me constraints as an entrepreneur and as a visionary. I'm like, “We could do this and we could do that.” My team is like, “We can't. We've got all these goals that we’re working towards. We've got this, we got this. Maybe we can make room for that next quarter or next year.” This protects them from the grenade when I come back from the conference and I have all these ideas and want to change everything. They'll say, “I can see that I don't want to lose sight of what we have going already and destroy that momentum. I want to achieve these objectives. It's going to get us money. It's going to get us making a difference. All these things that I want. We need to keep that going. Then we can figure out where that can fit in.” It just allows us to not just go through the buffet line, throw a ton of stuff on a plate, and then end up not being able to utilize even half of it.

Jon: Once everything that you're talking about—the communication systems, the processes, the systems—once all that's in place, it also gives your staff and your employees a mechanism for delivering feedback to you, even if that's uncomfortable feedback. Almost always—maybe not almost always, but at least in the businesses that I've run as a high-level manager—the employees who are actually doing the operations a lot of the time have really solid ideas on how to make things more efficient, but they feel afraid of communicating those up. By opening up those channels of communication and making it so that it's not uncomfortable for a lower-level employee to give a great idea and have that idea be received, you can actually empower your team to fix a lot of the inefficiencies.

Jason: Here's a real simple thing that I thought of that you can recognize if you're ready for premature expansion. If you are the one running all your team meetings, and you're the first to speak in all those meetings, you're already losing. Have you noticed that I'm not running the meetings, and everyone asks me what I think less? “Hey, are you stuck on anything?” I'm the last one to go. Because it's so easy for us as entrepreneurs to say, “Hey, here's my idea. Everyone should do this.” Then when you ask your team members they're going to go, “Yeah, what the boss says. He pays me. That sounds like a good idea. I'll go with what he says. That's the safest answer.”

Jon: Growth in all levels—personally and it when it's directly related to revenue—means that there has to be an integration of discomfort sometimes. The proper communication levels mitigate and buffer the discomfort that employees have for communicating good ideas. Oftentimes, the people on the ground level are the ones most capable of finding the thing that's going to work for your current team dynamic.

Jason: This is something we've been thinking about a while. We run our business using a system that we called DoorGrow OS that I feel like is one of the most brilliant planning systems out there. It's a consolidation of several different planning systems, operational coaches I've worked with, having brilliant operators on my team. It's something I built out even software-wise that we use internally as a team. You've just started to get a taste of this. There's clarity. There's communication. Everyone knows what they're doing. We're hitting targets, and goals, and objectives each week. The momentum is strong. This is how we grew 300% in a year.

Jon: It's a really interesting way of running a team. I've run a lot of teams that have a lot of branches underneath the management. This just provides a level of efficiency and oversight that still makes upward and downward communication very feasible and very easy. Maybe at some point, I'll convince you to share that system with the rest of the world, but right now, it's been really interesting for me to understand some of those principles and see how the years and years of working with all these coaches have been baked into some of these ideas and the things that you're identifying as the ways to know whether what you're doing is premature expansion or actually profitable growth.

I don't know if you have anything else on your list, but I know that we're starting to get a little bit long. Maybe we could just recap what we’ve talked about. I'll turn it over to you for any final words of how somebody can take what we spoke about in this podcast and make it actionable. For somebody who has nodded their head to at least one or two of the things that you said during this podcast, what should be their next step for starting to figure out how they can start to tweak the knobs and levers of their business in order to be more in line with what will actually make them successful?

Jason: Every business owner is doing the best they can with what they know. Every person on the planet really is doing the best they can with the limited access to knowledge and resources they currently possess. If you knew better, you would do better. There's a lot of things I don't know. There's a lot of things that I can't see. My best feedback is—you've probably heard a lot of ideas on this recording. Maybe you were nodding your head, but ultimately, if you feel stuck, or you don't feel like you're going as fast as you want, or you don't feel like your company's in momentum, then you need help. You need to reach out.

That's one of the scariest things for us to do as entrepreneurs, but I do it. I have coaches that I pay. I go and I get help. If I don't know something, I hire a coach. I've got an event I’m planning on going to in March to learn something that I feel like I'm weak at in the business. Normally I would hand up to other team members but something I've avoided that I need to know more about. You need to have enough vulnerability to recognize that you can't do it all on your own. You're not Atlas holding the entire globe on your back. You need to get support.

If you don't feel like you have support, if you don't feel like you have somebody in your corner, if you feel like you're the smartest person in the room in your company, and everybody's just going to say yes to whatever you throw at them, there's a big problem. You've got big blind spots. You need to reach out. You need to get help. That could be us at DoorGrow. Set up a call with us, reach out. We can help you identify some of the blind spots, some of the leaks, some of the inefficiencies, and get you into a high state of momentum. We start in those five core functions at the very beginning.

Jon: I want to just mention—because I can feel that somebody just had some resistance to, “You can't do it on your own. You need a coach.” That almost sounds too salesy. Maybe we could alter that statement and soften it for that person who feels resistance to that because you could do it on your own. You could go to the bookstore. You could buy all the books. You could read through them all. You could slowly implement things, and see what works, and what doesn't work, and it would take you forever, or you can work with a coach and collapse time. For people who are looking to collapse time, that's when it becomes incredibly valuable to work with somebody who's already done all of that research and extracted the best practices, split testing all the ideas and figured out what works. Now, you can have a roadmap for how to get to success in the quickest way possible instead of having to trial and error your way down the road.

Jason: I am a big fan of trial and error, but I do also like collapsing time. My coaches have helped me collapse time dramatically. I was that guy. I was for many years. I was the guy that thought I could watch another Youtube video, or read another book, and I could figure out on my own. It took a ton of time. You have to recognize there are at least three currencies.

If you want growth, it involves time, it's going to involve money, and it's going to involve focus, or energy, or work, or effort, whatever you want to call it. Those could probably be broken up even further, but you've got these three currencies. If you use all three and invest all three you can grow faster. If you decide, “I'm not going to invest money. I don’t want to go hire a coach. I don't want to pay DoorGrow. I don’t want to go spend money on this.” Then you can go buy cheap things like books, and watch free YouTube videos, and get a lot of some good stuff. Some stuff that's leading you the wrong way but you don't know. They're experts so maybe they'll be telling the truth. You try it out. Then what ends up happening is it's just going to take infinitely more time.

That was my challenge. I spent a massive amount of time. It was painful. When I finally started to invest serious money towards the best that I could afford at the time, I collapsed time dramatically, and I always made that money back. Not even just made it back. I made it back monthly. I was making more than I paid the coach. That's almost been my experience with every coach. I've got so many coaches that I paid $5000 a month. It gets ridiculous, but do I make more of that in a month? Absolutely.

Jon: One of the things that I hear on the calls is if someone isn't seriously setting goals for their business, it feels to me like it's because they're afraid that they're not going to hit them. If they don't say them out loud then they don't have to suffer the defeat of not hitting it. One of the reasons to work with a coach is to have the accountability and the hand-holding required to get you over that resistance and that hump so that you can actually start hitting those numbers. The first time that you hit one of the goals that you set, you get addicted to it. You want to keep hitting goals, but because people have set so many goals in the past and then failed at hitting them, they don't set goals anymore.

Jason: They don’t trust themselves.

Jon: One of the things that a good coach can do is get you back in alignment with your goals so that you recognize that that vision is possible to hit. That's part of that collapsing time. There's a ton of great business books out there, there's a ton of great niche courses out there. You can throw money into a million different ways to “grow your business,” but if you're not looking at your business holistically, and you're just looking to fix the symptom with some kind of a band-aid, you're never going to be an A-player in anything that you're doing. There's an opportunity to level up by working with a coach—whether that's DoorGrow or somebody else.

I have worked with coaches for the past 20 years. I believe in them wholeheartedly. If you're going to excel at what you're doing, you have to have somebody who's playing a bigger game than you.

Jason: That's very true. I agree. Let's end on that note. Jon, I appreciate you and hanging out with you again. Those that are watching, make sure to—if you're watching this on Youtube—subscribe, like us. If you're hearing this in iTunes, please, be sure to leave us some feedback. We want to hear your real feedback there. Leave us a review. That helps us out.

Jon: I’m also going to say before this goes out. Join us in the Facebook group because this can be an ongoing conversation that we have in the Facebook group. We have so many stellar examples of property managers who are doing all the right things there. You can interface with them, you can interface with the people on our team, and you can tell us what's working, not working in your business. Then if you disagree with everything that we just said, we invite you to come and have that conversation as well. Because any type of conversation whether you're praising what we're doing or trying to chip it down with an ax is going to allow us to grow, and iterate, and become better. We want to have you in that group.

Jason: Well said. Until next time, everybody. To our mutual growth. Bye, everyone.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

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Mar 31, 2020

If you walked out the door for a month, would the business you started survive? Would it still operate? Do you have the right people in the right roles?

Today, Jason Hull and John Ray of DoorGrow discuss the problem of premature expansion in property management. What is the best way to see consistent, comfortable growth?

You’ll Learn...

[03:25] Plateau vs. Premature Expansion: Buy new business, location, or expand to make more money:

[04:33] Debunking New Market Myths: Easier, less work, and shortcut to growth.

[07:20] Duplication: Split energy leads to struggling to successfully do double the work.

[08:43] Clone Your Competitor: Takes 10 people to duplicate tasks and do them better.

[13:00] New Locations: Avoid burnout by building a team and support to be scalable.

[15:21] Processes: If employee leaves, document tasks to prevent disconnect.

[22:55] Expansion: Continue to grow in the same, new, or additional location? .

[24:20] Systems: Plan and set monthly and annual growth targets, goals, and more.

[31:15] Process Documentation: Who does what and how to do what they do.

Tweetables

What is the best strategy to see consistent, comfortable growth?

Entrepreneurs: Build the business you want, not what you can.

Success: Strive for pie in the sky dreams or a pile of manure?

Resources

DGS 80: Automating Your Business with Process Street with Vinay Patankar

DGS 123: Automating Accounting Functions & Creating Capacity in the Workday with Kyle Redding 0

Transcript

Jason: How dialed in is your business now that if you walked out the door and left for a month, would it fall apart? Would there be a problem? Would it still operate? Maybe then, if the answer is, “Yeah, it would be totally fine,” maybe then it’s time to open up a new location because that means you have things really dialed in, you’ve got the right people.

Welcome, DoorGrow Hackers, to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, and you are interested in growing your business and life, and you are open to doing things a bit differently, then you are a DoorGrow Hacker.

I’m hanging out here with someone else from DoorGrow, Jon Ray.

Jon: Thanks for having me, we’re a part of the DoorGrow growth hacker team.

Jason: We were sitting and I’m thinking, “What can we talk about?” The topic that I wanted to talk about is a common problem that I see come up. I coined a phrase for it and I don’t know that anybody else has ever talked about this phrase, but this is just what I felt like calling it. Our topic today is premature expansion in property management.

Jon: Premature expansion, tell us about it, Jason. I’ll preface it by saying I’ve been talking to a lot of our seed hackers, a lot of property managers that are a part of the Facebook group. Ultimately, everybody is trying to figure out what is the best way to seek consistent, comfortable growth. One of the things that has come up on a recurring basis on these calls is that as people are thinking about the various strategies that are available to them for growth—especially at some kind of an accelerated pace over what they’re doing—oftentimes there is a consideration if not an outward movement towards moving into another market.

As you and I were talking about that that can sometimes be a great strategy, but sometimes it can be an absolute failing strategy. Premature expansion is basically your term and how you’re packaging that concept of when that kind of expansion into another market may not be the best strategy. Can you talk about in more detail on how somebody should be thinking about whether or not they should move into another marketplace?

Jason: There’s a lot that goes into deciding whether to move into a new marketplace, or premature expansion could be even buying a new business, or a new location. It's any sort of expansion. Usually, the motivation behind it is they want to grow, they want to make more money. Their challenge is that sometimes it’s not all that it’s cracked up to be. The most common scenario—one of the most—is somebody will come in and they’ll say, “Hey, we want to buy another property management company in another market,” or “We’re going to open up a new office in another new market.”

Usually, when I ask them why, they feel like they’ve hit a plateau in their growth in their current market. This is usually what’s fueling this. They feel stuck. They were doing something that was working, they usually get to maybe the 200-400 door range and what I call the second sandtrap. Once they get into that space, they think, “Well, we got this far in this location. We’re hitting a limit or a plateau. Let’s just go duplicate that effort and do it somewhere else.”

It makes sense on the surface. It sounds so easy like, “We did it here. Maybe we tap this out. Maybe now it’s time to go to a new market.” I think there’s a lot of myths that drive that. One myth is that it’s going to be easier in another market, in the second market it will be easier. That’s almost never, ever, ever the case. The second location is always more difficult. It’s more difficult to manage, it’s more difficult to maintain. If you have a second office, you’re going to need a second set of staff. It’s just harder. It might mean that you’re doing double the amount of work as an entrepreneur trying to run two locations. Also, they think, “What worked here,” I think that’s a myth, “What worked in our first location to get us to this point might work there.”

If they’ve been in business for maybe 10 years, and they played this pay-per-click game in the beginning, or they were doing all property management leads in the beginning, and that stuff has shifted, and it's not as easy. Things have shifted and changed, but they're thinking, “Well, we got this far. Let's just go do what we're doing now over here. Maybe it will grow just as fast.” They run into some problems because fundamentally, what used to work may not be working.

Another myth is that it's some sort of shortcut to growth, and it's not really a shortcut. There's a lot of challenges and difficulties. What's easier than opening up a new location, and then trying to add more doors, and to build out basically a whole another company, essentially, is to grow where you're at. That's far easier.

A lot of times, when I ask them, here's the golden question to ask yourself if you're a person listening to this thinking, “I want to expand. Let's open up and go into a new city.” First of all, you need to ask yourself, do you really want to be there? Do you want to drive out there? Do you want your team to be taking trips out there? Does that feel comfortable to you? Because ultimately, you can build a business that you want to have. It doesn't have to be the business that you can do. That's a big temptation we make as entrepreneurs is we build the business we can’t. “Oh, well we can do this. I can add this service. We can do that.” Then we get scattered. We end up diluting our effectiveness.

In the case of premature expansion, they open up a second market. What inevitably I see happen—almost every time—is their first primary location starts to suffer and struggle, and they start to lose those doors, and customer service levels drop, and there are challenges, and they're having a more difficult time running both. Things have to be incredibly well dialed in in order to do that, to make that work.

Jon: Ultimately, what you're talking about here is this concept of duplication. We all wish that we could duplicate ourselves so that we could do twice as much work. In entrepreneurship—in order to successfully duplicate yourself—there are some certain things that have to happen. Otherwise, that duplication just looks like split energy, and then neither of the parts are getting as much as the first whole. Maybe you can talk a little bit about what it looks like to successfully duplicate yourself.

When I was running teams at Google, and when we were thinking about whether we were going to expand into a new marketplace, we wanted to make sure that we had maximized our efforts in the current city that we were in as much as humanly possible, and we wanted to make sure that we had templatized all of our processes so that the management wasn't directly involved in the success of the business. They were guiding strategy and vision, but they weren't operationally necessary other than that high-level guidance. Maybe you can talk a little bit about what that would look like in a property management business, and how somebody should think about that concept of duplication.

Jason: I love what you're saying about what they would do at Google. It makes a lot of sense. What I've seen is in my experience in helping hundreds—maybe even thousands of entrepreneurs—is there's always this myth that if I could just clone myself, all my hopes and dreams would come true. I know all this stuff, I can do all this stuff, and then all my hopes and dreams would come true.

Let me tell you from experience what it took to duplicate myself, because I pretty much got somebody to do every single role that I used to do in the business, and it takes probably about ten people. That's my experience. It takes about ten people to duplicate yourself. You're never going to find that one person that can do it all. If you do, they're going to become your new competitor, or they're going to go start their own business, or they're going to leave you after they realize that they can probably do stuff better than you, just like you probably figured out back when you were working for somebody. You’re like, “I could do this better.”

That's the e-myth—that's the entrepreneur myth. That's what everybody wants to do. They're like, “I could do this.” A lot of business owners that are running businesses now they used to work for somebody, and they're like. “I could do this.” Then they'd start learning that they need to become an accountant, and they need to become a graphic designer, and they need to become whatever. Whatever all the different roles are and the different hats that you wear.

Just like that in a property management business, if you're going to expand into any market, you have to realize which hats are you still wearing, which seats are you still sitting in on this bus that's the business? If you're managing, and you're acting as BDM, and you're acting as the property manager, or maintenance coordinator, or any of these operationally tactical, critical roles, then the challenge is you go into the market, your life's going to become twice as hard with another location. There's that momentum and that inertia in getting something new going.

Training one new person makes your life twice as hard. If you're going to build out a new team there, if you're going to build out maybe a satellite staff, it's still a lot more work to get that all built up. That's why if you don't have high leverage when it comes to systems, high leverage when it comes to the process—I think maybe that's a good question to ask yourself is: how dialed in is your business now that if you walked out the door and left for a month, would it fall apart? Would there be a problem? Would it still operate? Maybe then, if the answer is, “Yeah. It’d be totally fine,” maybe then it's time to open up a new location because that means you have things really well dialed in, you've got the right people.

The question is also connected to that: if you lost any single team member—think of who you think is the most critical person on your team—if they killed over and died—god forbid—or they left your business, or they went to work for a competitor, or they went to start their own property management business, how quickly would you be able to get back up to speed? Do you have all their processes defined? Do you know what they're doing? Do you know what they do on a day-to-day basis? Do you feel like somebody else could step into that role very easily because everything's documented? If not, opening up into a second location is dangerous because you're not going to have all those things dialed in.

Ultimately, overwhelm is going to set in. This is the big thing for us entrepreneurs. We operate, basically, at two speeds. It's like we're in momentum, we’re on fire, and we feel alive, or we're in a state of overwhelm feeling stuck, and frustrated, and stressed. If you're already feeling stressed, and stuck, and frustrated, that's probably not the time to go heap more on to your plate.

Jon: Just playing devil's advocate because I think a lot of the people that I talk to in the property management space that are considering this move are like, “Well, that may be accurate advice for most people, but I'm better than most people. I was able to bootstrap where I'm at now, and I was able to scrap it altogether, and I didn’t document all of these processes. Why can't I do the same thing for a second location?”

Maybe you can talk a little bit to me, and explain to me why it's different from the second location? Because it is true that you can figure things out when you're physically there in person, but as you start to satellite out, it's a different kind of mentality that you have to take, and the bootstrapping method doesn't work so well. Can you talk about why that is?

Jason: When you open up a business—just through sheer will of force and just personality—if somebody can sell, and somebody is driven, they can create a business. They can probably even get it up to about $1 million in revenue annually just through that. But beyond that, you have to have a team. In property management, you're going to probably need a team long before you hit that amount in revenue, and you need support. Otherwise, it's just not scalable. You're going to start to burn out really quickly. This is why we see so many people get stuck in the first sandtrap, which is about 50 or 60 units. It's the solopreneur. They'll get stuck there.

If you're at the place where you're at about 200-400 units you probably got some team members, you probably at least have a maintenance coordinator, maybe a property manager, somebody helping with showings. You got some pieces in place. You've gotten that off your plate. That doesn't mean now you could go up and open up a whole new location because still, tons of things are still relying on you. Just pay attention. If your team members are coming into your office, or texting you throughout the day, then you are a bottleneck in your business already. You will be even a bigger bottleneck.

My entire team, we're virtual. If you bring on people that are at a remote office, they're not going to be able to get their questions answered quickly, they're not going to have the support that they need, you need to live there for at least 90 days so everybody's on board with it, systems are in place, and be able to do that. That's possible to build that up, but that means you need everything really well dialed in so that stuff doesn't just gravitate towards chaos. There needs to be protections in place so that you can ensure that people are doing what needs to be done.

Jon: I want to unpack that word systems and really the phrase systems and processes because I think a lot of people—at least in the calls that I'm having with property managers—when I say systems and processes they're like, “Oh, yeah. Well, we're already on that folio. We already have a rent manager.” That's actually not what you're talking about. Can you unpack that a little bit?

Jason: When it comes to processes you need to have—here's the way I look at it, if somebody on your team quit, fired, or died, or whatever, that means somebody else could step in, they could read a process, they would know exactly how to do it, and they'd be able to figure it out. If all the processes exist in that person's head and your head, then I'll tell you what, there's a massive gap usually, or significant gaps between what you think they're doing, and what they think they should be doing. There always is because it's all just in their head.

We know internally at DoorGrow that this happens, and we have processes documented. There’s still a disconnect sometimes. One team member thinks, “Well, this is how I've been doing it. I think this is how it's supposed to be done.” We have it documented, which is it might even be a little bit different because sometimes people don't refer to the documentation all the time. Then there's what the visionary or the entrepreneur thinks should be done all the time, and the team's documented, or decided it's being done differently. These things are in constant negotiations that need to be brought together.

You can collapse time on that by having processes that people have to actually follow, like you have to actually mark it off and complete it. There's a checklist that they're signing off on that they're actually doing so that there's some accountability that they followed those steps. There needs to be accountability in place because most people—just like learning to drive a car, you maybe read a manual once, took a test, passed the test, maybe the first few times you drove you we're checking your mirrors all the time, and making sure nothing was going on around the car. Now you just get in and you just do it. You're probably skipping a bunch of steps you thought you needed to do in the beginning. Over time, maybe you start to skip other steps. Some drivers don't turn on their blinkers when they're changing lanes. They’re like, “People will figure it out around me.” They just don't do these things, so they're not following the process. They're breaking the law.

You have these things that you want to be followed because it keeps the business safe, it protects you from liability in the business, whatever. Your team members, they're going to gravitate towards skipping steps. They're going to gravitate towards what's easiest. If there aren't checks and balances, and accountability in place, what happens over time is everything's kind of gravitating towards some sort of ease, and some sort of chaos, and you're not really aware of it. Then somebody quits because usually when you look at what they were doing, you're like, “Oh my gosh.” It's usually the person that the entrepreneur thinks is the most critical and essential in the business.

Every time I've had that person on my team that I thought, “If they left, my whole world would fall apart. My business would crumble. It'd be the worst thing ever.” That was always the best person for me to lose. Why? Because what was happening was the reason you feel like they’re so critical is because you have so much uncertainty around what they do. You feel like they're the only one that knows how to do it, and it's their job security they love to maintain. But really, if it can be done by them, it can probably be done by just about anybody that has maybe the right demeanor, and the right personality type for that position, but you need to have those processes documented so they can step in. That’s how I gauge it.

Jon: I’ll chime in with as far as efficiency goes, you can keep all the same people, but there's so much mental anguish that happens when something isn't well-defined. Even at DoorGrow, and in many of the businesses that I've worked in, when you go and ask someone what they do in their day-to-day, they feel like that's a subjective question because they feel like they're doing something different, or at least slightly different in every single moment, in every single day. There's so much time and energy that gets wasted when you're constantly having to reanalyze the entire problem, and then make a decision on what the action should be.

When you actually start to document what each person is doing on a regular basis throughout the day, and you look at that from a macro perspective, even within that subjective lens of maybe some things are approached in a different way depending on the scenario, there are very clear processes, tasks, and activities that are being done on a regular basis. If those can be defined, and then clear expectations, and processes can be attached to each of those bullet points, it allows each of your employees to have a better reference point for how to handle certain engagements in the business.

One of the things that creates turnover in a business—in my experience—is that when that level of certainty on what somebody should be doing to be successful in their role is not there, resentment starts to build towards whoever the entrepreneur, or visionary, or guiding light in the business is. That resentment ultimately gets to a boiling point where it's no longer sustainable, and then that results in somebody quitting, or throwing a fit, or making a mistake, or having an accident.

Documenting these processes is one of the best things that you can do to create a level of certainty in each of your employees’ minds so that they can be more successful and more satisfied in their position, which means that retention-wise, you're going to keep your staff longer.

Jason: Let's talk about some systems that are required so that your expansion into another market or in general is not premature. Because if it is premature, your operational costs are going to go up significantly. I'll give you an example. I talked to a property management company, and they had 2000 doors. They’re on the East Coast, they had over 20 offices, but only about 2000 doors. It was split among 20 different offices. What their strategy for growth was going and buying up all these little mom-and-pop shops. They would keep those shops intact, they would keep the staff and everything. Their operational costs were ridiculous.

Then there's another client. He had 2000 doors, and he had three locations: two in Utah, one in Idaho. Eventually, became part of the HomeRiver Group. His operational costs were far lower. Same amount of doors, his market was probably even a lower rent market, but he was probably making more money because operationally among those doors, he didn't have 20 offices, 20 buildings to pay the lease, or whatever taxes on, or whatever. All the support staff that goes with each of these offices, all this duplicated stuff.

Here's what I think is essential to take a look at if you're thinking, “Hey, I want to expand into another location.” First thing you ask yourself, would I do it even if I were able to continue to grow here? If I were able to continue to have the doors in this area—where I want it—would I do it? The thing to keep in mind is, according to the Iceberg Report (the last I saw), it was 30% of rental properties are professionally managed, there's 70% in single-family residential at least, there's 70% available potential market share to be created. A lot of people think, “Well, it's impossible to do that,” but if you look at Australia, you've got 80% of single-family residential almost professionally managed. They, at some point, we're probably around where we are, and they've gotten it to 80%. We have so much opportunity there, there's so much blue ocean. Everybody's fighting in the bloody red water. We've talked about them on the show before.

The idea that we've run out of options is not always true. It is true if you're playing the game everyone else is playing: SEO, pay-per-click, content marketing, social media marketing, pay-per-lead service. If you're doing those things, it's super competitive because that's what everybody's doing. That is focused on that small existing amount of market share. The people that are already looking for you rather than reaching out and creating new market share, which is what we help our clients focus on. That's one thing to take a look at.

The systems that need to be in place. Here are some of the systems that we have in our own business at DoorGrow. One, you need a planning system. Most businesses don't have a plan, they have no planning system. That means you have annual targets, and you have quarterly goals as a company, things to implement, monthly goals. You're not just coming back from every property management conference with a list and chucking a grenade into the middle of the room after pulling the pin and saying, “Hey guys, I'm excited about this. We're going to do all these things.” Everybody goes, “How? We're already maxed out.”

You don't have a system for growth because you don't have a system of planning in the business. If you don't have a planning system, if you can't tell me a realistic annual goal that you're going to hit, if you've been operating in so you think you have a system, and if you've not hit your annual goal for the last year, or two, or three you have a b******* system. It's not real, you’re not hitting your targets.

Jon: I want to pause you there and unpack that statement that you made about coming back from the conference with all of these great ideas, and then chunking the grenade in the room, because I do think that happens in every industry but especially property management. Because one, there are so many conferences, and two, it's really easy to get excited about an idea, and then just chunk it on to your staff and say, “Implement this.” When you're talking about a planning system, the way that we do it here in DoorGrow—that I think is really effective—is you're talking about how do we reverse engineer everything on that list and put it in yearly, 6-month, 90-day, monthly, and weekly commitments so that we know all of the steps that are required to achieve each bullet point on that vision list that came from the conference.

Jason: If we take it even a step back further—and you're new to the team so you've gotten to see this happen—you'll remember, we go through and we take a look at the business as a whole. Every business has five core functions in the business—something I learned from one of my business coaches, Al Sharpen. This is basically the whole pipeline of the business. The goal of the business is to make money, that's how it is successful. Then it also needs some sort of purpose besides just making money.

Those things drive everything that we do. We take a look at these five core functions, and we look at each of them, and we figure out where are we deficient, where can we be stronger? It's impossible to be solid on all of them. That's impossible because for example, if you ramp up sales, then your fulfillment side’s going to hit constraints. You’re going to have difficulties as a team. If you're closing a bunch of doors your team's going to have difficulty onboarding all these new clients, for example, so that's going to go down.

Everything's always in flux. The thing to work on is the thing that's weakest. Generally, that's earliest in the sales pipeline. We take a look at that, and we figure out, “All right, what are the things, and what could we do? Then we decide what we will do as a team? Then we figure out what is possible for us to do over the next quarter.” These will all go back to our annual goal, which we have a couple of annual goals, and it's all broken down. We reverse-engineer it from what the business actually needs. If our goal is to focus on lead gen—if we're a property management company—we're not going to go and implement a maintenance coordination software that quarter if that's already going really well. That maybe we’d do that next quarter.

The problem is, businesses don't have a planning system, they don't know how to break this down, and business owners come back. If they do come up with goals they go to some Tony Robbins event, and they're adding extra zeros to the end of everything, and they’re getting super pumped up, and that demoralizes your team because your team, all they hear is, “This is impossible,” and they're losing. There's no way you're going to hit these goals because they're pie in the sky dreams.

We get excited about them as entrepreneurs, but that's not the same for our team. Our team wants to see that we're hitting our numbers every month, not that we, “Oh, well, we missed it this month.” That idea in setting goals that a lot of people will throw out there, which I don't believe is true, is that it's better as a team to aim for the stars than a pile of manure and hit. It's better as a team to aim for the pile of manure and have success. Your team can feel what it's like to win and have momentum.

Jon: I just want to make sure that we're making this actionable for people, and give people a clear way to assess whether they're prematurely expanding, or whether expansion maybe is the right step.

Jason: It’s a real simple question, do you have a planning system? Can you say with certainty that you have an annual goal that you are confident that your team is going to hit financially? Do you have a quarterly goal that you know what you're doing this quarter, and that you feel pretty confident that you're going to get these quarterly targets implemented? Do you feel confident that your team can hit the 30-day goals that are going to help create those quarterly targets? Does your team know what they're doing every single week relevant to those 30-day goals? If the answer isn't yes to all of that, then you're just operating with the shotgun approach, and your team feels confused, they're concerned, they don't know where the company is going, so they can't really help you get there.

Everybody at DoorGrow is aligned towards what's going in my goal of revenue, making a difference in the industry, all these things are very clear. We talk about them during every meeting: our whole planning system, what we're doing, even what we're doing on a weekly basis that we meet as a team like we did yesterday. To go over our weekly commitments we checked in, what did you do towards these commitments that you had for last week? Did you get these done? There's this high-level of accountability. That's a planning system. That's one system the business needs.

Jon: So far, to analyze whether it's too premature to expand, we’ve got: if you as the entrepreneur walked away from the business, would the business still continue to operate with success? Then we have if you could add the number of doors that you want to add in your existing marketplace without having to go to another locale would you prefer to just add them in your existing marketplace, or is there some other reason for you to want to be in another city. Then do you have a clear planning system where you've got annual, 6-month, 90-day, monthly, and weekly commitments that are all being reverse-engineered so your staff can be successful? Really, that's part of operating without you being directly involved in the operations. What else?

Jason: The other thing that's essential in the business before you can expand is—we've mentioned this already—you need process documentation. You need a system in the business for finding, and storing, and updating documentation. You need a process system or documentation system in the business that includes job descriptions, org charts. There needs to be clarity as to who's supposed to be doing what and how to do things. That's absolutely critical in a business especially if it's going to scale because once you have a team, there's turnover, there's hiring. These things can derail a business if they're critical roles if you don't have these things in place. Process documentation system is really important.

The software we use is Process Street. Everyone can check out the episode that I did with the founder and CEO of Process Street. We use that as an internal documentation system, and then we also have job descriptions, org charts, these kinds of things. We're going through a process because we've got a jumble routine. When you add a new team member it screws everything up, Jon. Now, my role changes. My job description is different. You're stealing things from me, which I love. Everybody else's job changes a bit too. We're making all these adjustments.

Ashley—my ex-wife—she works for me now, and works in the business, and she's great. She's over some of our operational pieces, you're taking on sales and marketing. These are all things that I used to do, they were my role. Like I said, I used to do every single thing in the business, every single thing. Now we have at least 10 people on the team, and they're all doing something that I used to do. Pretty much all of them are better at it than me. Everyone's better at these things than I am.

Jon: I just want to speak from the perspective of an employee because anytime I've gone into a new business, if it's chaotic, and nobody knows what they're doing, and nobody has clearly defined roles, it is so uncomfortable for a new person to step into that environment. That's why there's a lot of 90-day churn and turnover for new hires because when somebody says, “Yeah, I don't feel like it's a good fit.” What they mean is, “You didn't provide me with the level of certainty that I was looking for in this role.” When everything is clearly defined and documented the way that you've done at DoorGrow, it allows me as a new hire to come in with so much certainty, and I feel like everything is teed up for me to be successful in my position which makes me want to do more in the position.

Jason: You just listened to the DoorGrow Show. We are building a community of the savviest property management entrepreneurs on the planet, in the DoorGrow Club. Join your fellow DoorGrow Hackers at doorgrowclub.com.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

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Mar 24, 2020

Do you like dealing with people or properties? Most real estate investors and property managers leave dealing with numbers to their accountants.

Today, I am talking to Kyle Redding, Head of Growth and Sales for Proper. The property management tool uses artificial intelligence (AI) and machine learning (ML) to provide accounting and bookkeeping services. As a former CPA, Kyle has extensive knowledge of accounting, bookkeeping, and customer experience.

You’ll Learn...

[05:12] Purpose of Proper: Partner with property management companies to set up accounting automation for back office.

[06:10] Proper Position: Works with, doesn’t replace other property management tools.

[10:00] Sophistication Fog: Property managers who need additional software and staff to optimize accounting automation.

[12:15] Proper Process: Property managers handle invoices via dedicated email inbox, training, and automated processing.

[17:45] Reminders: Rent is due! Rent is late! Proper’s frequency of property management invoices and statements.

[21:10] Proper Competition: Hire bookkeepers/accountants with qualifications, education, and experience to alleviate single point-of-failure.

[29:55] Proper Pricing: Affordable and sliding-fee scale based on price per unit.

Tweetables

Proper manages the books, you manage the properties.

Proper’s Primary Focus: Accounting automation for more scalability and less stress.

Proper’s accounting team is not your run-of-the-mill bookkeepers.

Leverage Growth: Partner with Proper to take property management to the next level.

Resources

DGS 101: Take Confusion Out of Property Management with the Proper App

DGS 122: Creating Systems in Your Property Management Business with Paul Kankowski 0

Transcript

Today’s guest is Kyle Redding of Proper. We’re going to be learning about what Proper is now. I think we’ve had you guys on the show before and it’s different. Kyle, welcome to the Door Grow Show, glad to have you. Let’s get into your background and maybe you could share with people your entrepreneurial journey, I think you have a cool story and I think it’d be fun to get into first.

Kyle: Yeah, thanks, Jason. This is exciting, thanks for having us. Up at baseball in college really all I wanted to do fell into accounting. That sounds a little crazy, but Accounting 101 was in all those classes that I took and got 100% in. Don’t ask me how, but it just happened. While playing baseball I was like, “Okay, I think I can do this.” You travel a bit, you miss a bunch of classes but still, somehow worked it out.

That revolved into an internship with Ernst & Young and then ultimately, a full-time job. I started up at EY in Orange County, California for about five years or so in the real estate group. A lot of my clients were public REITs or real estate developers. I ultimately then transferred out to Australia where I work at EY. Again with some real estate clients and some other industries.

Ultimately, I got out of the public accounting game and was attracted to start-up life. I found this little start-up in Australia that was looking for an accountant that could sell, and I thought I’d give this a crack. We are a little finance online payment company in the professional services, all of our clients were accounting firms and law firms. We got really deep into the accounting industry and the CPA world and how they run their business.

We grew that business and brought it to the US about four years ago. I took that company public in July last year. While that happened, I’ve always stayed in touch with one of my best friends, Matt, who is our COO and head of finance at Proper and Mark, an old college roommate from USC. We used to make surfboards and Matt and I worked at Ernst & Young together.

At that time, Proper was really trying to solve a lot of different challenges for a property managing company, mainly on the maintenance side, which I think he comes and talks about before. Mark, our COO, was just religious about user research and first principles, light up thinking, breaking down problems, and finding the best solution for those problems; which is how we ended up coming back to Matt and I’s core background from the CPA world and real estate and addressing that [...] maintenance side of things, which is a nice to have and people want that to be better.

The real true problem that we found was on the accounting side. A lot of property managers don’t necessarily get into this business because they like doing the accounting, or they do not do the accounting because (like you said) different from the real estate sales. It allows them to grab a hold of these owners and these properties, and develop other business opportunities but at the end of the month, the key deliverable that they all have is a financial package on that owner’s investment. That’s where we are today, helping a lot of property management companies solve that challenge and get better and focus on growth as opposed to running a call center and operations.

Jason: Cool, so let’s get into how would you describe Proper now to those that are listening? What does Proper do?

Kyle: Yep, sure. We partner with company management companies to help automate their back-office essentially, from everything, from AR to AP, to bank [...], to owner reporting. We use very high caliber accountants who have all got an accounting degree from big universities, that work in a big board accounting firm, that works at a Fortune 500 accounting firm. We power our team with machine learning, automation, and artificial intelligence to help make their job easier and allow our clients, the property managers, to scale a lot faster without having to worry about hiring more staff for training those people or maybe delaying, bringing on more portfolio because they need to do those things before they can get to that next step. We focus on accounting automation.

Jason: Help me understand then how that works. Most property management entrepreneurs and business owners that are listening to the show right now are probably thinking, “Well, I’ve already got AppFolio, I’ve already got Rent Manager, I’ve already got Buildium. I’ve got a property management back office or accounting solution.” Is Proper something that you guys are positioning yourself to replace these tools or is this something where work in conjunction? How does this work?

Kyle: Good question. We work alongside all of those tools. We’ve got a big mix, we don’t just work in AppFolio, we don’t just work in Propertyware. We’ve got clients that use Buildium, use Yardi, AppFolio, Propertyware, Rent Manager, you name it. We’ve even got clients who start out with QuickBooks and then as we help them grow, we transition into something more appropriate like a property management software.

Right now, we’re not looking to replace any of those tools. We help optimize them for our clients. We help them set up a foundation to better utilize those and then manage those as well. A big part of what we do is helping them set up the appropriate level of internal controls. Are they set up for growth? Is that foundation there to really pile on top of?

When we take on a new client, a lot of times it’s retooling the way they’ve set up AppFolio, Buildium, or Propertyware. It’s helping them get their [...] matrices set up. It’s all of those things to create efficiency, get them out of the weeds of the mundane repetitive low-level tasks that are [...] time set from their day, put that on to our plate, and get them back out to the field, so they can grow their business.

Jason: It’s not just accounting because you’re helping with some of the operational aspects as well.

Kyle: Correct. What we found is depending on a property manager and the company and the way they’re staffed, there’s a lot of leaving in and out of that accounting process. There’s a property manager who might spend 10%–15% of their day doing some accounting function that they probably shouldn’t be doing. The other side of that is you might be the owner or the broker-owner going, “I wish my PMs are out there losing these vacant apartments I’ve got, but they’re stuck doing this paperwork because there’s no one else to do it,” or it’s part of a process that they set up that hasn’t been revisited or fine-tuned. So, we help alleviate all those little bits of pieces there, then create more capacity for them to focus on what they want to focus on.

Jason: Is this difficult to get going, get set up, and is there a certain level that a property management business owner has to be at before it would make sense to work with you guys?

Kyle: Let me tackle that second question first which is do we have a minimum or a certain size. The short answer is no. We’ve got clients who have as little as six units. We’ve got clients who start with us at say 30 units and grow to 50–60 within three months. I’d probably say where it starts to make the most sense where they can move away from that one part-time admin or office staff handling some of these admin related tasks or accounting related tasks. Generally, to make it to that 30–40 unit mark and they’re starting to gain some momentum and get a little serious is where we can usually help them get to that next level.

Where we see a clear difference is with somebody’s property managers who we call in the sophistication fog. They’ve half thought on their AppFolio or Yardi to do some things for them, but they still have some low-level staff that may or may not have an accounting background. They’re essentially taking off things on the checklist on a daily basis to help get that job done but there really isn’t an optimization to that process yet, it hasn’t really been optimized. We can come in and create efficiencies for them and help them, ultimately, have them repurpose those people to maybe a more interesting role or a more revenue-generating role, and then start to use some automation and fine-tune their property management software to do more for them.

Jason: When it comes to automation and the technology side, do you guys have a homegrown software that’s running and doing the stuff? Are you using a certain software platform that you work within?

Kyle: We continue to optimize and build other tools mainly around AP. Our goal is to attack one of these functions at a time. We found by measuring our accountants’ time that on average it takes about 5 minutes and 59 seconds to process an invoice. We built a proprietary tool that allows us to take that 5 minutes and 59 seconds down to (say) 30 seconds. From a scaling perspective, that property manager then takes on another 200 units. There isn’t the fear of being able to handle that, and we don’t need to staff another five people on their account to get that work done. We can continue getting through that work at a very high accuracy rate by training our model over and over with the different touches and windows that we see.

Jason: How are the property managers feeding stuff into the system as if they’re feeding it into Proper?

Kyle: Just like maybe a more specific property manager we may have set up where, let’s say 70%–80% of their invoices from their [...] vendors are coming in by email. They might have a dedicated inbox, ap@xyzpm.com or billing@xyzpm.com. If they don’t already have something like that set-up, then we’ll help create something like that. We’ll work with their vendors and their team to start training those invoices to come through to that inbox, at which point we can then adjust them and start processing them through our automation tools.

Jason: What are some of the big questions that you’ve been getting? Everybody’s using their property management software, they probably have their systems and processes going to where they’re afraid to even mess with it a little bit, they feel comfortable. Then hearing you say, “Hey, we can help you make things faster. We can make it better, we can help you utilize things better, we work alongside,” and they’re probably thinking, “This is going to be really expensive, I don’t know if this makes sense. I’m going to have to do something different or something new.” What are some of the concerns and how are you addressing those? Maybe you can address them here so people listening, they’re popping up in their head.

Kyle: Sure. I’ll probably revisit one of the questions you asked earlier which I didn’t address, which was what does it look like to get started or to start working with us? What does that process [...]? Our onboarding process, usually depending on the size of the PM, say, between two and four weeks to where we’ve fully taken over the accounting work off of their plate.

When we start working with a new client we’ll basically do a deep dive walkthrough through every single one of their processes that they have. We’ll then document that process, so if they do continue to grow or they want these policies, procedures, and manuals for their own internal use, they’ll have those and we can use those to hire additional staff as they continue to grow.

That’s probably a big first step, is understanding what they do, how they do it, what is being done, who’s doing what, et cetera. During that onboarding process, if we see a glaring opportunity for an improvement or an optimization, we’ll help them execute it right there on the spot. In the first instance, we’re going to match what they do so there’s the least amount of distraction to their day. Then over time, the next 30-60 days, we’ll tweak that some more and optimize it a little bit further to where they’ve got a smooth running engine behind [...] essentially.

That’s a big question for a lot of prospects of clients that we take on is how do we get started, how does this work? That’s a very high level.

Jason: Let me recap that. Some of these direct out with accounting, they’re frustrated with some of their internal processes connected to these, their day-to-day, and in 2–4 weeks you feel like Proper can significantly lighten their load and allow them to breathe.

Kyle: Yeah. For example, just in the last month, 80% of our clients had increased their unit count on a month-to-month basis. Obviously, there are ebbs and flows, they might lose an owner (which drops the units), but generally speaking, once Proper gets in there, we alleviate and free up. We have one client, we freed up 35 hours a month of their time. This is a seasoned property manager who’s just, at the end of the day having to review work, or they were using another accounting partner.

Jason: Then roughly how many doors did they have that they were freeing up that much time?

Kyle: About 200, let’s say. Not a massive one but a decent-sized property managing company. Working with Proper, we generally saved in terms of card cost of headcount, up to 30% of their accounting staff wages over time. Maybe not on day one because if we’re not going to replace a team, that comes in phases, but over time, we generally see about a 30% cost reduction. We can fix this cost for them as opposed to them running a call center. They want to be making more money so let us fix this cost for you. Keep the quality at a very high level so that financial output and what you’re delivering to your owners.

We also see a significant reduction in the number of questions or queries that our clients get from owners every single month because now our accountants are coming in and doing things may be the way they should’ve been done before or at a slightly better cadence or faster cadence which helps them keep their relationships.

Jason: What are you seeing in all the property management businesses that you’re working with? How often are they sending out statements? Rent is sometimes trickling in. Rent [...] coming [...] a month. Sometimes it’s late, rent is really late. In these situations, what are you seeing as a frequency for invoices going out?

Kyle: Definitely ranges depending on who it is that we’re taking on board but ultimately during that onboarding and stabilization period, generally it’s within 60 days or so. We have them all recording on the 10th of the following month and that’s a pretty standard cadence across the industry, but we make sure it’s consistent. There isn’t that, “We’d like to get it done by the 10th. Sometimes it’s the 15th or sometimes it’s the 20th.” We try and help standardize that across all of their owners. That might even come down to giving them some advice around, “Hey, you don’t have this clause in your owner agreement negotiated property, let’s help you fix that real quick.” That way you have some consistency. There are fewer exemptions and less, “Oh, this one requires that and this one requires that.” Again, building for scale, they can make those tweaks and continue to pile on top of what they’ve already built.

Jason: One of the questions that pop up in my head hearing about this and owners giving some of their subs, they’re concerned about checks and balances. How am I going to make sure everything between my management software reconciles with my trust accounts, banking accounts, and everything is going in and out? How do I make sure everything is legit and stable? If I’m going to hand it off to somebody, I want to feel safe that these checks and balances are in place otherwise I’m going to have to check everything. Isn’t that true?

Kyle: Yeah. A big way that we approach that is through those onboarding walkthroughs. When we do a deep dive into each process, whether it’s collecting rent or AP, or with the owner recording if there are only [...] there, we go into extreme detail, we document and create a manual for that process. Then there is a consistent agreed way of doing it, whether we try to make recommendations to improve it, or we say, “Hey, you guys have got some great process here.” We just formalize it in that way there’s a clear line of, “This is how it’s going to work.”

Then we use tools to keep people accountable. Set reminders for (say) someone on the PM side, they haven’t approved an invoice for us yet, we need to garnish their approval. We use tools that allow us to keep those people accountable, so we can keep them [...].

Jason: Short callers and text messages?

Kyle: We communicate daily pretty much with all of our clients from Google Hangouts, workflow collaboration tools, things like that, so there’s clear visibility.

Jason: What are some of the other frequently asked questions that people give you when they’re going through the sales prospects sort of process with you?

Kyle: What are our qualifications, what makes us qualified to do this sort of thing. As I said, Matt and I—Matt is our head of operations—we’re both CPAs with extensive real estate experience at Ernst & Young. All of our accounting team—I think I mentioned this before—got an accounting degree from college, they’ve worked at a Fortune 500 company, or [...] accounting firms. Our staff is not your run-of-the-mill bookkeepers. They’re highly trained, they’ve got extensive experience, we require our team to do at least 10 hours of CP in real estate accounting every year, that generally gives them some confidence.

Then we’ve got some clients out of their really sticky situation with back books and unreconciled accounts for a long period of time and if we can come in and clean that up in a very short amount of time. We have one client who had nine months of unreconciled accounts, and we helped clean that up in about 3½ weeks. When we can show our clients that we can do this for them and help them get to a part where they can sell all their managing company and their portfolio, that speaks volumes for the rest of the people that we talk to.

Jason: Let’s throw stones at some of the competition.

Kyle: Sure.

Jason: One of the main competitors is going to be the property management that’s like, “I’m just going to go higher because the alternative will be I’m going to go higher than somebody. She’ll help me with my bookkeeping or my accounting, or data entry with checks and invoices and all this kind of stuff.” They bring in somebody, they’re probably one of the lowest-paying members of their team, and they’re trying to teach them how they do it and it gets really messy. I don’t know if you want to say anything else, maybe I already threw stones at it.

Kyle: No, that’s good. It’s definitely a challenge that we come across, where they’re weighing up, “Do we do this in-house or do we bring on a partner like you guys?” What we often see or hear from people who maybe have gone down that road and then maybe come back to someone like Proper is that it's a single point of failure. It’s one person who’s a real accountant. They go on vacation, things get missed or they get tired if they’re growing quickly, and they’re not organized. All of those things are risks that a team like Proper doesn’t let happen because we have more than one person while working on your portfolio. We could do that and your pricing is still fixed. That’s one of the ways that we help alleviate those sorts of risks from that setup but that might be the right set up for some people.

Jason: Yeah, I’m sure every property manager that’s brought anybody else in to touch anything financial in their business has noticed some really ugly mistakes that they’re having to clean up. They’re having to reissue their statements, they’re having to undo or apologize for a notice to quit or something that went out to the tenant that shouldn’t have.

Let’s compare this now to just going and getting an accountant, like somebody maybe, “I’m going to go hire a local accountant. They know my area, they’ll get to know my business. Steve down the street, this guy, CPA.” Let’s throw stones at that now.

Kyle: The biggest downside to that scenario is that they’re often doing things in arrears. The accountant isn’t there, the CPA isn’t there every day to do and process invoices or reconcile the bank account. They usually come in the first week of the next month to catch up on everything. The client isn’t super organized, they’re going to have to be digging through things, distracting their clients, asking them questions about stuff that happened three or four weeks ago. Which can be a big challenge. You might be able to navigate through that and create some processes, but that can be burdensome. Even more at a time sucks especially if people on the go are not doing things the way they should be along the way.

With our team, we’re reconciling bank accounts on a daily basis as transactions go through. We’re processing invoices instantaneously as they come through. There are benefits of us essentially being an extension of your team, just maybe not sitting in your office, but having the same people every day in and out doing that work for you as you go.

The other thing about the traditional CPA firm is they’d rather do the higher margin advisory work, tax consulting. It’s expensive for them to do the low-level bookkeeping. They’ll do it for a relationship, but they don’t necessarily like doing it. We actually get a lot of referrals from CPA firms who have clients who need property accounting done at an affordable price.

Jason: You go get an accountant, they’re looking at things after the fact, they’re pointing out things you need to clean up, they’re disrupting your day. You’re having to communicate with them, you’re trying to find the problem they’re pointing out rather than these things being taken care of on a day-to-day basis. If you guys fix something that’s messed up within a day or even two, it’s dealt with. Thirty days later, some stuff to undo your mess.

Kyle: Correct.

Jason: What are some other alternatives to going without Proper? I guess doing it themselves.

Kyle: Yeah, doing it themselves but again you’re constantly fighting that growth battle. How do I get to the next stage, whether it’s right? We all look for leverage to put us into that next zone. We get a lot of clients coming to us who want to grow. They get to the point of, “I can’t do anymore. I need a partner to get to the next stage.”

We get people who’ve been burned by other accounting partners who maybe just don’t have the same quality control so now they’re looking for a new partner that isn’t going to mess things up that they don’t have to keep an eye on.

I think because we focus exclusively on property managing companies, we’re not doing restaurants, we’re not doing eCommerce businesses. We’re 100% real estate accounting. That gives a bit of confidence in partnering with someone like us.

Jason: Got it. If you’re working with some sort of accounting bookkeeping firm, you’re having to force the system, and you’re having to explain to them what you do and that rent’s going to come in, and certain amounts are going to be taken out, and all of those kinds of mess, and they just don’t get it. You’re having to use every time, like change the account rep that’s working with you this company has turned over. That can be a mess, you can guess it.

Any other frequently asked questions that people come in to look at your firm would maybe want to hear on this podcast?

Kyle: How quickly we can get started with people or whether we can help them retool their software stack. Another one we get quite a bit and gotten quite a bit recently is “Can you handle our overflow accounting?” As in they might already have a full accounting team with that capacity that they’re hungry to grow, and they want to buy four portfolios in the next quarter 400–500 units each. “Can we engage you guys to help do the mapping and the chart of accounts to our chart of accounts and the monthly accounting into a ready to transition them from whatever software they are on now to ours?”

We handle a bit of our work as well or even maybe some ad hoc research of which one would outgrow this solution, what else should we look to do. We can scope in that sort of work and continue to partner with them on their growth.

Jason: Okay, pricing. If we can really give any numbers here but if you can help people understand how do you price this out, how affordable this is, how does this work?

Kyle: Great question. Our pricing scale is part of our client’s scale. As in the price per unit drops, the number of units continues to rise. We might start out someone with $12.99 per unit, we might have 100 units. Then if they get up to 2000 plus, we could get as low as $6.99 per unit. We calculate on a monthly basis and as the unit count fluctuates we adjust the pricing, so it’s a fixed note cost for them each month based on their unit count. If we don’t have to work on 100 units that they lost last month then cool, their fees are going to reflect that. So, between $12.99 a unit and $6.99 per unit per month for a full suite service.

Jason: Got it. Well no matter how you work the numbers, doing that here at my screen, it’s going to be a lot cheaper than even a part-time employee generally would be. That’s handling the stuff, that’s a single weak link in the chain, that can be a bottleneck, that might get sick, go on vacation, or whatever, or yourself holding the entire company back because maybe this is not your area of genius or your life’s purpose to handle all this stuff.

Kyle: Yup, exactly. We don’t necessarily provide à la carte services or our different functions of the accounting process other than accounts payable. We know that AP typically takes up about 60% of the time across the entire accounting function. We can get scale on AP pretty quickly especially with automation.

If we’ve got someone who’s looking to maybe test us out, try before they buy sort of thing, we might take on just AP for them or maybe 60% of their workload at an appropriate price point for them to handle just AP, then move that into taking on the rest of their accounting services. Otherwise, we get people who just say, “We need this, let’s get started right now.” We’ll work with their team, get up to speed in a very short period of time, and then take everything off their plate.

Jason: It’s just crazy to imagine that some of the property managers are going to listen to this. You’re dealing with some of the stuff, you’re running into headaches, you’re frustrated, this could be dealt with based on what Kyle’s saying here in like a month. It could be literally off your plate and your life could be infinitely easier.

Kyle: That’s very true. We do start taking stuff off their plate in the first week or two but that first 2–4 weeks we like to really just make sure we’ve got a good understanding of what’s going on so that mistakes don’t happen, so that by week 4, we’re fully optimizing, we’re ready to roll.

Jason: Cool. Well, I’ve gotten too deep with you and some of the members of your team and I know you guys are sharp. This sounds even better than what I thought we were going to be talking about today, so it sounds pretty exciting. I’m sure you’ll get some people reaching out that are running into some difficulties [...] off the top of my head that has been complaining about some of the stuff so it should be interesting to see the attraction you get on this episode.

Kyle: The main thing, Jason, that we wanted to do is really give our clients their time back and give them the confidence and reliance on this financial that every month they got to deliver to their owners without having to worry, want it to be consistent, and want it to be high quality. We want them to not have to fear about getting right or spending time checking things. We want to be their partner in growth. We look for clients who want to grow and are like-minded with us to really help transform their business.

Jason: I think those types of clients are my type of clients. These are the people that are focused on growth, so awesome. This is the Door Grow Show so hopefully, the people listening are that type of people. How do people get in touch with Proper? How do they get started? What’s the next step for those who might be listening that might be interested?

Kyle: My email is kyle@proper.ai. You can check out our site proper.ai. Shoot us a note. We’d love to do a free consultation for you, show you a little bit about how we work. We’re happy to be in touch with any of our customers as well if you want to reference check us. Please reach out, and we’d love to work with anyone who’s interested.

Jason: Awesome. Kyle, thanks for being on the DoorGrow Show.

Kyle: Thanks for having us, Jason. I appreciate it.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

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Mar 17, 2020

Are you a property manager who loves or hates creating systems by leveraging technology? Do you enjoy or dislike doing inspections, dealing with tenant issues, and handling renewals? Have you considered putting processes and people in place to automate your business?

Today, I am talking to Paul Kankowski, a real estate investor with more than 200 doors. Paul increased systems to build a better property management business. He describes how he created computer-based processes for his employees to do everything his way, the same way, the right way.

You’ll Learn...

[03:10] One-man Show: Learn how to get the job done right and then do what you want.

[04:41] Paul prefers to create processes and systems to solve problems.

[05:29] No Secret Sauce: NARPM speaker/expert on automated processes/systems.

[07:29] Paradise is Possible: People make more money, if they have good systems.

[08:39] Fines: Do I charge? Do I not charge? Decision made by process, not employee.

[09:25] Everything that doesn't have a process, Paul deals with until he creates one.

[10:52] Manuals and How To Videos: From simple checklists to 195+ steps to follow.

[13:37] First Process: Tackle the one that's losing you the most money.

[16:40] Make or Break and Placing Blame: Mistakes are made by processes or people.

[25:40] People as Process: Property management will never be completely automated.

[29:30] Retention vs. Growth: Give good customer service and don't let doors leave.

[36:20] Stay in Your Space: Identify what energizes or drains you, then offload them.

Tweetables

Mistakes are made when processes are broken or employees skip steps.

Be involved in your systems. Know how they're running for your business to run right.

Processes are not a secret sauce that everyone has to have a different one.

Why people like systems: They make more money, if they have a good system.

Resources

PM Systems Conference (Aug. 10-13, 2020, in Las Vegas)

DGS 80: Automating Your Business with Process Street with Vinay Patankar

DGS 76: Outsourcing Rules for Small, Medium and Large Companies with Todd Breen of VirtuallyinCredible

DGS 69: HireSmart Virtual Assistants with Anne Lackey

DGS 121: Property Management SEO Tips - Part 2 0

Transcript

Today I am hanging out with Paul Kankowski. Welcome to the show, Paul. I'm excited to have you on. I told you in the green room that I was really excited to have you because this is a topic I think everybody would be interested in. Everybody loves this idea of creating systems in the property management business, figuring out how to leverage technology. Before we get into this topic, qualify yourself. Tell everybody about you. You’ve done some really cool things in the property management space connected to this. Introduce yourself.

Pau: Hi, my name is Paul Kankowski. I'm out here in Temecula, California, this is Southern California. I have over 200 doors right now. We're not huge, but we have increased our systems in order to make ourselves better. I actually started in education. I was a school principal and a math teacher for 18 years, and I was a real estate investor. I've been a real estate investor for over 20 years. I bought a lot of properties and when the crash happened, I became a flipper. I bought a lot of rental properties and people were doing a really crappy job in my area. Now I actually know a lot of property managers in my area, but back then I didn't.

At the time, I just didn't have anyone that could do the job right, so I started taking some NARPM classes and I started using that to manage my own properties. I only cared about managing my own properties and family for the first two or three years, and then I went into that to turn it into a business.

Since I've turned into a business, now, I don't want to manage everyday things. I don't want to be doing inspections. I don't want to be doing all the stuff that you have to do as a one-person show. We have eight employees and I've created processes and systems so that they do everything that is done by computer and everything in the same way, I can work on higher-level things, more networking, and doing stuff that is more enjoyable in the industry.

Jason: More enjoyable for you, right? Because some entrepreneurs hate that stuff.

Paul: Yes. More enjoyable, in the sense, that I don't like doing inspections. I don't do them anymore. I don't like dealing with some tenant issues. I don't like dealing with renewals, but I like everything being done my way. I like it being done well. I like it to be done the same type every way.

Before (as you know) I have to get my hands on everything to make sure things are being done, so we are giving the best customer service. Now, we have systems in place, so I know that things are being done the way we state it and ought to just hope that my employees are doing it the right way.

Jason: Right. What's cool about Paul, for those watching, is Paul's built this business around himself and what he wants to spend his time doing, versus what most business owners think they should or have to do. You get to do things you enjoy doing on a daily basis, which really is different for every single entrepreneur.

Paul: Yeah, it's great. I like doing the processes and systems are working on them, but I can't. I was a math teacher for 12 years, so systems and stuff are like math problems. If you have a problem, how are you going to solve it and how do you solve them the same way each time? It also (I think) a great way for people to hire people that can do it for them, to get it done right, but you have to be involved in your systems. I don't care if you don't like the math portion of it. It's just very important that you know how they're running so that your business will run right.

Jason: Right. You can't just stick your head in the sand and throw it at somebody and expect that it's going to be done well.

Paul: I agree.

Jason: Let's take a step back. Everybody listening to this, I want to point this out, too. You’ve run some conferences related to automation and technology. You've got some things going related to that, you didn't mention that. You're an expert at this. You’ve spoken at NARPM, the Broker-Owner, I think, related to this, or the national conference or something like that.

Paul: I spoke at the national conference in San Diego. It was something similar to this. I have had four conferences on systems and I have a systems conference. My next one's in August, that will be our 5th one. This has been really good.

It's a small conference, they only allow 50 property managers to go do it. It's a workshop, not a conference, I always like to say, because it's not a bunch of speakers speaking. It's a lot of time you getting down and dirty, actually doing the processes, having fun with property managers, and really getting in conversations. “How is your move out? What's your move out different?” Sitting there and discussing with other people what they're doing and then creating the process on people that have already paved the path to do good process.

I find that when you sit there and you work with five or six other people, you learn where your inefficiencies are, what's great about someone else's processes that you can copy. Processes are not this secret sauce that everyone has to have a different one. You can take a good process and you can adapt it to your business. That's what our workshops are about. It's a really great time. They usually sell out in about three to four weeks. I usually have a long waiting list afterward, just because we do keep it small. I don't want to get so big where people can't actually sit and have a conversation with each other.

Jason: I like the idea. Let's talk about your business. Let's paint a picture of what's possible or what you see other business owners do that had been in these conferences, some of the people that are plugged in, they've got technology, they're leveraging it. I want to paint a picture of paradise or a possibility for those that are listening because I think a lot of people listening are going, “It sounds so complicated. It's probably not possible. I'm sure what I'm doing is nearly just as good.” What are you noticing in your own business? Maybe in terms of margins, systemization, and staff?

Paul: This is the biggest thing and this is why people like systems. You'll make more money if you have a good system. I'll look at HOA. HOA was an issue a year ago. We tackled; we were not doing as good of a job. We were handling every HOA issue as its own individual thing. We weren't getting emails to owners. We were dealing with the HOAs, but we weren't letting the owners know, “Hey, we're dealing with it every week.” I lost a big owner because they thought we weren't dealing with the HOA issue, even though we were, but I lost it because of perception.

The perception was they were getting email weekly, so we create a process where the owners get updated every week on the condition of the HOA when the things are going to be resolved. The other things that would make more money, first off, we have owners that are happy.

Second, the fines that we’re giving to tenants, they were happening 100% of the time. When it’s not in a set process, a lot of times I'm like, “I'm not going to charge that because it wasn't that big a deal. He left the trash can out.” Well no, it is a big deal and it's a $25 charge. You're going to get a charge no matter what now because it's in the steps. The employee who's doing it doesn't have to make that decision, “Do I charge? Do I not charge? Is this one of those things?” That's a step that might have been missed.

We've noticed our revenue—when we have processes—doing really well, it goes up dramatically. I would say HOA fines, we might have a couple of $100 in HOA fines the year before and now, it's thousands of dollars. That's a huge difference because we were not being consistent on the fine. That's a huge thing about the process.

The other thing is everything that doesn't have a process, I have to deal with. Here's one that we have not created yet, owners leaving us, and we have to exit them. That’s the next process we’re making in the next two months. Right now, when an owner leaves, I have to do all the work because I don't have a process. I'm afraid that my employees might do it their way. They might make a mistake. They might not take them out of the property mill.

I'm going to be paying $2 a month for that door that’s not even active because it's not been deactivated or up fully own and that it's $1.50 a month. All these little things that you think, “It's only $2, only $1.50.” You have 20 doors that you're being charged $2 a month, that’s $40. Over a year, you're looking at $480.

You have to have good processes so you don't skip minor steps. You say, “Well, I don’t skip.” If it's not written down, you make mistakes. You might not make mistakes but your employees are going to. They're not bleeding the business day-to-day that they're not going to sleep thinking about the business like you are as the property owner. If you write it down and you have every detail there, not only you're going to make more money, you're also not going to lose money from having money just shot through.

Jason: Okay. You were just talking about a process that you haven't yet created, that you're working on right now. When you get into this process of creating a new process, how involved are these? Are these like insane, and they have lots of different steps? You're thinking of every nuance and every detail or are a lot of your processes simple?

Paul: When I started, they were really simple. When I started, I was Asana, it was a checklist. It was a checklist and everything was the same and it was fine. It was better than nothing, but it wasn't good. Now, my utilities processes are 195 steps.

Jason: Your utilities process.

Paul: Are 195 steps. When someone does utility, it's about eight steps for them to finish it because one of the things is every utility is listed and so you put SDG&E, or you put Edison, a different step is going to come up for every single utility. It asks you questions and then Neil, my person has to go through 195 steps, they go through nine steps. They go through SDG&E, then it tells them the phone number to call, who they have to talk to. Sometimes, one of our processes for a little water company we deal with it says, “Talk to Susan,” because Susan's the one in the office that they have to talk to in order to pay this bill because this is [...] water district, and they're just kind of backward, I believe that's the one.

It says every detail. There are videos there. If I get a new person on, they can watch a video and the video shows them step-by-step how we do, how we put the invoice in AppFolio, how we do everything. It's a training tool for my new employees. I just had a new employee last week. The first thing we tell them is, “You need to go through Process Street. You need to watch these processes and you need to go through this 20 times,” and then I want you to try it, without me even instructing you and see if you know how to do the process. I'm going to watch you do it. If you know how to do it, then I created a good process.

If you watch these videos and go through it 20 times and you still don't have a clue how to do your job, then my process isn't good enough at this stage I'm at right now. You can be as small as just wanting a checklist and having people skip steps, which is fine, but there's more chance for mistakes to being so detailed that it's a training manual for every person that comes on.

Jason: I love it. For those listening, you're currently using Process Street. We had Process Street founder, CEO on the show before. It was a great episode. Make sure you go back and listen to that episode where we're talking about Process Street. We use it internally here at DoorGrow. I think it's a great software.

Now, if somebody is looking to get started with this, or they're showing up at your conference for the first time, they're one of these 50 people, they've got the deer in the headlights, eyeballs going on, and they're like looking around, they're feeling really inseminated, what is the first process that usually people should tackle?

Paul: The one that's losing you the most money. The one that's a hemorrhage point. It’s usually either moving, leasing, those are usually two of the big ones, move out. It's funny, right now, we've changed our compass around a little bit. I'm doing a pre-session on the first day, so we're doing it for four hours, where I'm going to work with a small group (10 people), and we're going to break down your process and build it together for the first four hours. You're right, I have people at all stages of my conference now, I have people that have been to every single one of mine. This August, it will be their 5th time going and I have people that's their first time going.

We want to give the difference between those that are first-timers and those that have been to four of them. When I started this systems conference two years ago, it was two years ago last September, I started it because I thought my processes sucked. I hired a speaker to come and speak to us, and he was pretty expensive. This is how this conference has started. I put on Facebook, “Anybody wants to share on the speaker cost, we’ll just meet in Vegas.” We had 10-12 companies there and it just started because 12 of us got together, we split the cost of the speaker, and we went together and hung out.

We had such a great time, we found that it was so great just talking with other property managers, that we kind of tweaked it a little bit, and then we’re like, “Okay, we are kind of the speakers because we are in the industry. We know what each other needs.” Now it's all about helping each other. If you go to this, you're going to the four hours (in the beginning where you're going to get that), and then just go and sit with other property managers, see what they're doing, write little notes, and get your checklist. Start as basic as you can.

I have one guy that will only use Google. Everything is Google sheets, but he has his steps written down and it works for him. Other people are Asana, other people Process Street. Other people like Wolfgang Croskey, have Podio everything automated. All his emails are sent automatically. Everybody that goes, they're using different software, they're using different things, but their whole goal is to help each other and to make it so that your process will be good.

Jason: Yeah. I would imagine one of the best things about being there, talking with other people, seeing and hearing how they do things, you're just going to get ideas, and there's a lot of ways to implement that idea. A process is software-agnostic in general. It's a process. You need certain steps to be done, it can be done by humans, it could be done by technology like Podio, it could be done by whatever, but it needs to be done. You need to know what the vision is so that you can create it.

Sometimes, this just comes from getting ideas from other people. “Oh my gosh, that’s a great idea,” and you're doing that in your business. “We should do that too,” and then, “How can we do that with the tools and resources that we're currently using?”

Paul: Jason, I would say, to start a good process, the first thing you do is you get every employee that's working on a process on the table. You get a big white sheet of paper and you write down, “What are you doing?” This is our creation of the process. Our process is to get them right. It’ll take about two months. It sounds like a long time, but it's really not because of the process we do to get our processes. We start out by getting all the people involved in the process, and we write down, “What steps are you doing? What do you do?” We don't skip anything.

After we get all of the steps down, I send it to someone in my office named David who will sit there and put it into a Process Street with all the bells and whistles, all the changes, and when this is going to happen. We sit there, and we go through it, and I try to break it. I go through every single step and I see where it ran into a problem. That's the very first month. I only work for an hour here and an hour there. I work on for an hour and say, “Hey, this is tweaked,” and “Are we clear?” He fixes that. I look at it and say, “Okay, this is good.”

After that, we give it to the person who’s actually going to be doing the job. Their job for the first month is to try to find where the process doesn't work and to either, doing the process to be like, “Oh my gosh, we forgot to put the charge into the tenant,” or whatever it is. If they find something wrong with the process, then I'm going to praise them beyond belief because they broke my process. Breaking my process is a good thing.

Throughout the entire year or whenever we have a process, whenever a problem occurs in my company—an HOA gets missed, and we have some major issues with some HOA—we look through the process, and we say, Was it a mistake by the employee, or the mistake by the process?”

If it’s a mistake by the process, we fix the process right then, right there and get it right again. If the mistake is by the employee, we show them, “Look here are the steps, what happened? Why did you skip it?” “Oh, I'm sorry. I just skipped this step,” now they know that it was them. It's really easy. In the past when you just have, “ Hey, here's what you do with an employee, you're always blaming the employee,” a lot of times, it is not the employee’s fault, it's your process.

Jason: Yeah, that makes sense. A broken process ensures you're going to have a bad employee a lot of times.

Paul: I agree.

Jason: I'm going to recap, this is what I wrote down. It takes about two months. You're going to first document it, sit down as a team, then you're going to build it, then you're going to break it, then you're going to fix it, then you're going to test it. It sounds like over time, you're going to optimize it based on what feedback you're getting from your team, and what feedback you're getting from clients, tenants, owners, and problems that are coming out.

Paul: Exactly and that process is never done because the second something goes wrong in our company, you look at what the process is. If you have a move-in and the move-in is a disaster, it's either the employee or process, and you have to check and find out. It's so easy when you have a good process, to find out where the breakdown occurred.

Jason: I think this is an interesting thing to point out because I get a lot of people that come to me, and they're like, “I need the perfect magic owner's manual. Where can I buy that?” or “I need this,” and I tell them, “Every single property management business is so unique, so different. How you want things done is going to be different and no business is ever perfect,” it's never just done. I think a lot of property managers think, “Well, I just need this one thing that I could just strap onto my business and it'll finally be perfect, it’ll finally be done, and I won't have to ever mess with it again.” I think that's just not reality. You’ve got things really well dialed in and you're still working on stuff.

Paul: I bought multiple different companies through NARPM that I'm glad I bought them because I did look at them. I can tell you right now, there are some things I bought that I never looked at, we never really did, and it says, “Blank your property manager company name,” it is very, very detailed and stuff like that, but until you sit down, if you buy something, it gives you a basis to start working on your thing, don't think, “Oh, I spent $1000 on this. Now, I can just implement it in my company,” you have a framework. By the time you're done rewriting that, it's going to be 50%-60% different (I think) than what you bought.

It's still going to help you. It's still going to help you pay Mark Cunningham, or any of these people, or Landlord Source for something that they have, is going to help you in getting your brain thinking about what you need to do for that role or position, but how Mark Cunningham or Landlord Source do their business is not the same way. I don't do my business the same way as anyone and I get a lot of their information. I look at them and I'm like, “Oh my gosh, it’s really cool how they did that,” but then we might have a different law in California, a different ruling, a different way of doing what we have to. You can't assume that what someone else do you can just implement in your company on day one.

Jason: Yeah. For a lot of us, it's easier to create something. Especially, for starting from scratch. If you're a startup, or you're a new property manager, you never documented your processes, sometimes it's helpful to have some resources to look at. It might not even be that great. Sometimes the bad processes with the bad ideas are even better because you can look at that and the contrast from what you know you're doing and what you're reading about, you're like, “Okay, we don't want to do anything like this, and I want to make sure that we avoid these things.” I like the idea that you intensely try to break your processes.

Paul: Yeah. The other thing I want to add is, I think automation is amazing, but this is my fear of automation. I will automate a lot of my processes, and they’ll be better automated than it is something that we're going to work on. But any bad process that’s automated, you're not going to see that's a bad process. If you have an email that’s automated going out and says, “Dear tenant’s last name.” Putting the tenant’s last name because you're not actually having any human do it at the beginning, then you're going to be automating that for 70-80 emails that are going to be sending “Dear tenant’s last name.”

I think you need to do a process for a while by hand. You need to have an actual human being doing the process, checking the boxes, and making sure it's right, so they could find things that are wrong. When you get a process really good, then your next step is to automate, because yes, it's great to save time and have an email every week go out that tells them about their HOA violation or tells them about the moving processes.

I still look at emails every once in a while and I'm like, “Oh my gosh, we forgot to change the wording from this move-in email to this move-in email saying the second week.” If it's automated, it’s going to be automated. Something automated bad is going to be badly automated forever.

All I'm saying is that a lot of people want to go from no process to everything being automated, and them not being involved. I don't think that's possible. Wolfgang Croskey, he’s automated, and he does an amazing job, but I don't think he went from not having a process to everything running on its own, and him not involved in it.

Jason: No. There was a coaching plan for a good while and I know he didn't start at Podio. I think he was using Process Street and even before that, he was working on stuff. I love the idea. You got to do it manually. A lot of property managers are already doing a lot of things manually. They're doing it that way first. They now need to document it, then they need to figure out, how can we start to systemize this? How can we create consistency? How can we automate this? How can we make sure it's being done the same way every single time and there are checks and balances?

That's one of the reasons I like Process Street because you can build a process and that’s one step, and you just paste it in a Word document if you have to. Really, really low level and maybe that's the best you've got. Eventually, you can break it into some multiple steps. Then you can get it into something crazy like you're 100 plus step thing that's got context-sensitive options based on what you pick, and it's going to give you different tasks to do depending on what options you're selecting, and you can get really crazy (if that makes sense).

The cool thing about having a process though is you can continually improve it. It can get better over time. That means that you're lowering operational costs, you're lowering drag, you're improving your team member’s ability to accomplish things and win, and get things done. Now, what do you think about the challenge of people as a process?

What I mean is, everybody has team members that they need in order to think. If somebody is making decisions, they're planning, they're coming up with ideas. Then you have team members that really are operating like a computer. Their job is just to follow the process. How do you balance this in your own company and determine, is this just anybody on the planet that could just follow this checklist, or they need some customer service skills, and they need to be able to communicate? How do you balance the discrepancy that people have that are fearful of processes because they're like, “I want my clients to be taken care of really well.”

Paul: You still have to think. You still have to go through it. You still look and see what's going on. How many of us property owners, managers, et cetera, spend nights thinking about everything we have to do the next day? You write steps down on a sheet of paper before you go to bed and then you try to get it out of your mind so the next day you don't forget it. You're not doing that because you don't want to care about your business or you don’t what I think about it, you're doing it because you don't want to be staying up at 1:00 in the morning, sitting there and trying to think what you need to do.

Everything we do in life, if something tells us how to do it, then we can start thinking about things that are higher level. You can take your employees. If you could take a lease renewal process and you can make it so that every single time it's done correctly, it's done right, no one wants to think about it, then there's no stress on these renewals. Now, when something does come up that’s stressful, people that are higher level can think about the things that are higher level. You have a maintenance issue where someone falls off the roof and you're getting sued. You're not going to process for that.

Now, instead of you thinking about lease renewals and wasting your time on something that can be automated, something that can be just automatic, you can spend your time on high-level items, and you're going to have employees that need to spend their time with high-level items, so you could spend your time on other high-level items. Probably the management will never be completely automated.

There are companies that say, “Oh, we could just automate everything,” no, you can automate a lot of stuff so you can spend your time on the 10% of the stuff that really, really matters, that’s really stressful, and that can't be automated.

Jason: We talked about this on the show I think probably several times with different companies, but ultimately, the goal (in my opinion) when it comes to technology, when it comes automation, when it comes to systems, is to take off the plate of yourself and your team members, the stuff that's really redundant, the stuff that could be systemized so that you can focus more on depth. I think that's where property managers are going to be able to compete with the big conglomerates, the big companies that are super tech-based, is that it's going to be about relationships.

Property management is a high touch relationship type of business. If process and systems allow you to create a more personal touch, to go deeper, to spend more time communicating more intimately with more depth with tenants, residents, owners, then I think you're creating a business that is going to have significant value, and it's going to have longevity because it’s built on relationships. Ultimately, it's people that are giving you the money. As people, we tend to like humanity, and we tend to like people.

Paul: If you're spending, as a business owner, 20 hours a month on something that can be automated or something that can be done by someone at a less level, you have to think of your time as value. When I had 30 doors, I did everything. When I had 50 doors, I was still doing everything. You have to figure out where you value your time.

I have five remote employees and I have two employees in my office. People are like, “Oh my gosh, that's a ridiculous amount of employees you have for the number of doors you have.” We’re profitable, and we’re profitable because we're in California, we price ourselves well. It's the customer service level we give our competition. Some of them are missing the mark. They are not giving that customer service, so we are giving it. Someone is not going to leave because of some deep discount or just giving really bad customer service where retention is so huge.

I'm seeing so many property managers talk about retention being better than growth because if you are losing 20% or 30% of your doors, all your time and ability is going to just stay even. People are spending $500–$1000 a door to get a new lead, but there are others that walk out the door. My thing is to give really good customer service and don't let those doors leave you. They are going to leave you because they are selling, but don't let them leave you because you are not doing the job right.

Jason: I find that with clients. A lot of times, the issue with retention. I agree, retention is a significant thing. The issue with retention is often created during the sales and onboarding so if you can really systemize, automate, and build a really solid process during the sales and onboarding, you've got a really solid sales and onboarding process that really develops a strong relationship, that would carry you for years with some clients.

Paul: I agree.

Jason: And the trust level is higher even if the communication (later on) is really low. If you created them in the beginning, they are going to trust you and it's going to be a lot stronger. If that's not done effectively during onboarding and sales and isn't created well, there's going to be a lot of uncertainty, a lot of fear. They are going to be questioning everything that you do. You might end up a lot more operational costs related to that, and they are probably not going to stay with you as well.

Paul: I agree. We have one person whose new onboarding is their main priority. It's making sure that new owners have a good experience and are treated well, and the onboarding experience is great. Never lose a customer. I think one of the podcasts I heard about that, I read the book. It was a great book. It's about customer service and taking it to the next level.

The thing is people will spend so much money on different things and then don’t answer the phone. If you can have your people working on the process, working on other things, then you answer your phone, you are not going to let that lead that. You just play when it clicks, $30, $20 get away. Processes are huge for your business to me, they are the number one building block.

I don't think everyone on all the boards is always, "How can I grow? How can I grow? How can I grow?" I think growth is important, but if you grow and all of a sudden, you add 100 doors in one year and it was just you, you don't have a process and everything is in your head, then you are going to lose all those doors because you are not going to be able to give. When you had 30 doors, and you go from 30 to 130 and you’re at the customer service, you gave those 30 people. You are not going to be able to give 130 because all of a sudden, then you are hiring someone. They are going to be like, "Well, how do I do it?"

"Well, you just got to listen to my head." No one can read your head. So, even if you are a single person that's by themself, if you want to give a task away, then start working on the process for it as soon you have to give that away. If you are at 50, 60, 70 doors, I would tell those people it's more important for you to start working your processes right now unless you plan just staying at 50 or 60 and never want to grow.

Jason: This is one of the greatest secrets that I coach entrepreneurs when they come into our program. One of the very first things to start them with is helping them get clarity on where they can get leverage the quickest first. It's usually different for everybody. There are some similarities but the way to identify that is usually done through getting clear on where you are actually going.

I have them do a time study, then I have them identify which things are energizing them and which things are draining them, then which things are strategic versus tactical. The strategic stuff grows your business, tactical stuff just keeps it going. Most of the process would work by its tactical work. The strategic work is what you are talking about doing in creating a new process. You are like, "We are going to work for this new process for the next two months when we get this dialed-in." That's what grows companies.

If you get to stay in your area of genius, the things you really enjoy doing as a business owner, and you've identified what does are because you are clear on which things are causing you grief and energizing you versus draining you, then you know exactly what to offload. You know what to give to your assistant and different people. We've had different great companies here talking about [...], hire smart VAs, great assistants. We've had companies talking about virtual team members and whatnot. Those are great episodes if you want to listen to those on the DoorGrow Show. We touched a lot on those different ideas.

Ultimately, one takeaway you want everybody to get is that everybody can have the property management business that they enjoy, that they love having, and if we built around you and what your unique strengths are, maybe you love the accounting side, maybe you love doing the phone calls, the customer service, connection with people. Maybe you’re a people person, maybe you geek out on systems and process, but you can do whatever you want to do in your business if that's your intention. I think we get stuck sometimes having the business that we think that we need to do like the job that we need to do in the business instead of the business that we want.

Paul: I would agree with that 100%. Last year, we grew 80 doors so that's probably the average of what our average. We are averaging between 5 and 10 doors a month. We haven't really started spending money on marketing because I really wanted to first get everything correct and right.

One of my property management friends (who is my mastermind guru) calls me once a month and asks me, "Hey, Paul. Did you talk to a tenant this month?" and I'm not allowed to talk to tenants because it was taking time away that I could be doing other high-level things and I need to trust my team to deal with my tenants.

Now, if it gets to a certain level and I have to talk to a tenant, then that's a different call, but I have to make sure that I am actually thinking about when I talk to a tenant. When a tenant calls because they are pissed-off about the fact that we paid the utility bill and make every charge, I have to trust my team’s going to handle it, my team's going to do it, and that I am not going to get involved in it because I find when I get involved in it, then I might do something that wasn't like the process we agreed upon as a team. I even had to, as an owner, that's $25. You are talking for 10 minutes, not worth my time for $25.

I have to be out of it because I will be like, “Yeah, just waive the $25. I don't want to talk to them anymore.” It's really important that no matter who you are, that you follow what you tell your team to follow. A lot of times, you can do it yourself, you made your own decision, but once you make a decision on how you are going to run your process or what your rules are, you have to stick to it company-wide.

I laugh because it's usually us, as the owner, are the worst culprits of not following what we are going to do. The employees do it because a lot of times my employees’ bonuses are based on serving certain goals so if I don't accept anything, they are like, "Man, you are hitting on my bonus. Don't be messing with my goals."

That's something I've learned is just find what you like. Find what you are good at and get a group of property managers around you that can be like a mastermind group that can keep you focused because you need other owners to tell you, "Stop doing that," because your employees won't always tell you exactly what you need to do, what you need to hear.

The other thing is when systems aren't working right. Now, there's a system in there where my employees can say, "Well, you didn't follow the system here." Every person is accountable for checking off what they have to do in the system. When I don't check it off at the end of the week, an email goes out to every person who missed any steps of the system. I have an employee that's checking that. My name is on there. I miss a part of my system and it will list. I never want to be there with three or four items that I missed because that would look really bad.

That's another thing, the accountability, I'm not doing the accountability part. I have an employee on Saturday that answers the phones and her job on Saturday if it’s not very busy, is to go through every single process in [...] and write down who hasn't met their deadlines for that process.

Jason: Yeah, accountability.

Paul: It works really well. None of us wants to see our name on that list, so everybody is getting their stuff done and it's not because I'm going to yell at them, it's because we don't want to be mass emailed to the whole team that you didn't do your job.

Jason: It creates a lot of pressure which is a positive thing. That means you don't have to come down on them all the time. There's this lateral pressure, this internal peer pressure in which most employees and team members are recognition-based. That's how they are most motivated rather than financially, so they want to be seen as doing a good job, and they want to be recognized. That's the opposite. There's that pressure, so they want to make sure they avoid that.

Paul: Exactly.

Jason: It makes sense.

Paul: And we also do our bonuses based on not being recognized. Even my bonuses. Everything is based on getting your job done. What I saw in the past, we didn't have someone that was going through it weekly. We had some process where they’d be open three or four weeks and not being completed yet. Now, it's very rare for the process.

It will definitely not be there if you are listed on that one week. If you are listed in the second week for the same one, then you are going to have a conversation with me, then you’re going to me. Our processes are never missed for more than 5–7days, which is huge.

The only thing that I'm still trying to figure out is maintenance because I use Property Meld and I'm still trying to figure out how I can make sure my maintenance team doesn’t get missed. Property Meld does good ways of doing that. That's something I'm currently working on is how on a weekly basis, we can check to make sure none of that's missed.

Everything that you do, you got to find using the software systems that will work to check on the system.

Jason: All right. Paul, I think it has been really fascinating. I think everybody listening got a lot of value out of this. I loved your tips about where to start. Anything else that you throw out there and want to say to anybody before we wrap this up about creating systems in the business?

Paul: I just tell them the dates. Our website is pmsystemsconference.com and the dates of our conference will be August 10th through 13th. It's in Las Vegas and it will be in Rio. It is not up yet, we should have it up next week or two. We are still working on it. We just got the rooms and booked everything yesterday. We just booked for August, but it's a really good time. Last time in January, we went ziplining on one of the nights. We also try new fun stuff because if you are working all day, you also want to have fun. There was a time we went bowling one night which is a great time to get together with a small number of property managers and get to know them. I enjoyed it.

People always ask me how long I am going to do it, I'm going to do it until I stop getting fun. When it becomes a job, then I'll stop doing that workshop, but now I go there and it's like seeing a bunch of old friends.

Jason: Cool, love it. All right, Paul, thanks for coming to the DoorGrow show. I appreciate you.

Paul: Thank you so much, Jason. You have a wonderful day.

Jason: All right, so check out his website. Check that out. Thanks everybody for tuning in. If you have a moment, make sure to like and subscribe. If you are watching this on YouTube, be sure to like and subscribe. If you are listening to this on a podcast on iTunes, then please leave us a review. We would love it. That would be great.

If you are a property management entrepreneur, you are struggling, you are frustrated, you are not sure what you need to do in order to grow, there's a lot of different ways you can approach growth depending on what challenges you are dealing with now. We have solutions for various things here at DoorGrow that we can help you with, please reach out. You can check us out at doorgrow.com, and we will talk to you soon, everybody. Until next time, to our mutual growth. Bye, everyone.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

Download this Episode

Mar 10, 2020

Why is your business remarkable? What are you doing differently that gives you a competitive advantage? Why should customers trust you over someone else? These are foundational elements that every entrepreneur should consider.

Today, I am talking to John Ray, formerly of Inspect & Cloud and now part of the DoorGrow team. John is a Search Engine Optimization (SEO) expert who helps property management entrepreneurs grow revenue and attract new customers.

You’ll Learn...

[01:27] Internet Marketing: Seeking clarity, relevance, and truth through so much noise.

[01:57] Seed Program: Training purpose of DoorGrowSecrets, not SEO.

[03:38] Keywords and Rankings: Transparency and truth, not tricks, deliver value.

[05:29] Can authority and expertise be effectively and successfully outsourced?

[07:35] Deliverables and Outcomes: Steps in purpose-driven SEO content process.

[10:00] Who are we in-service to? Don’t write directly to a search engine.

[11:25] Micromanagement Culture: Solopreneur businesses get stuck at 200-400 doors.

[14:20] SEO’s Place in Property Management: Communicate authority in community to make conversions.

[18:00] Does SEO make sense, right now? Do the right things at the right time.

Tweetables

The higher the level of trust, the lower the level of price sensitivity.

The worst thing that you can do for SEO is write directly to Google.

SEO has a place in property management, as a way to communicate authority and make conversions.

Do you need SEO to grow and be great?

Resources

DGS 27: Inspect & Cloud: Inspection Software For Property Managers

Inspect & Cloud

DoorGrow Seed Program

DGS 120: Property Management SEO Tips - Part 1 0

Transcript

DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it, you think they’re crazy for not, because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income.

At DoorGrow, we are on a mission to transform property management businesses and their owners. We want to transform the industry, eliminate the BS, build awareness, change the perception, expand the market, and help the best property management entrepreneurs win. I’m your host, property management growth expert Jason Hull, the founder and CEO of DoorGrow. Now, let’s get into the show.

I've got a very special guest today. He's been on the show before, Jon Ray. John, welcome.

Jon: Hey, thanks for having me.

Jason: Yeah. I think we're getting to a point now in terms of internet marketing and the internet where there's so much noise. People are looking for clarity, they're looking for things to be succinct. They're not looking for paragraphs and paragraphs of keyword targeted content. They're looking for relevancy. They're looking for the truth. That's a great way to stand out.

Going back before, you talked about a business having a higher purpose. This is one of the things we focus on expressly in the seed program. We have a training called Purpose Secrets. I think it is the most important training in the program but it's not what people come to us for. They don't say, "Hey, I really like this." Once they get into it or want this, that's one of the most impactful things they can do—have a clear set of values, have a clear set of purpose behind what they do, and be able to relate that. It creates trust. That's ultimately what the website's job is to do, to create trust. Trust is what closes deals. Not tricking people.

We also have city keyword landing pages and neighborhood keyword landing pages that will help the client I'm with input into the site to capture those longer tail keywords instead of just trying to focus on the main one market big, giant keyword. These are all things that we've thought about in our program to build out into, to prime the pond and get them started with all of these. It all helps with SEO but the program was never designed just for SEO. It's designed to create trust. It's designed to please people.

The side effect is that some of our clients get rankings on some of these pages. Ultimately, for me, the most important thing was always if somebody lands on the page–whether it's through them doing prospecting, or going to real estate meetup group, or they handout a card, word of mouth, or whatever that is. If somebody goes to that page, it sells people on trusting them, and them being trustworthy rather than trying to manipulate Google and trick them into showing people the page.

Jon: Right. There's a level of transparency, honesty, and alignment with truth that comes to actually delivering value versus just writing articles to hack the system. That means that in the customer's mind, maybe you're cutting corners on other things. To a certain extent, especially if someone knows the techniques that you're using and knows that you're just trying to manipulate the system, it leaves a bad taste in their mouth.

One of the things that you can do to deliver real value and to understand both what your customer wants and what Google is looking for, what the search engine's are looking for, is type in the keyword phrase that you want to rank for. Then search the web the way that your prospects are searching the web. Open all 10 of those websites and actually read the content on all 10 of those websites. Then take all that content in your mind, or have whoever's writing your content look at those 10 posts.

For instance, for the neighborhood-specific pages that I was talking about, let's say you want to rank for property management Far West to Austin. You would write an article. First, you would type in "property management Far West, Austin '' into Google. You would see what Google thinks the experts and authority in that particular keyword phrase look like. You read all of the pages on page one of Google, you take notes at the type of things that are in those posts.

Then, you approach your article and you say, "How can I summarize everything that I felt was valuable in these articles?" Then, you go above and beyond to deliver value. If you can effectively do that for every single keyword, then Google will start to see you as the authority but it takes more time. It means that you just can't outsource this to somebody in another country. You have to have somebody who actually understands that neighborhood, who actually understands what’s valuable to property owners in that neighborhood, and who knows how to properly amalgamate all of that content that your competition is putting out, then rewrite it in a way that provides even more value while still answering all the same questions.

Jason: I love it.

Jon: The foundational elements are always asking yourself why is my business remarkable? What are we doing that's different? What are our competitive advantages? Why should people trust me over the other 10 people on page one of Google? Most of the time, when you click through the top 10 results for any search term, the website is not aligned with any kind of value structure. They don't really have a competitive advantage statement that they're clearly communicating. That leaves a huge advantage for anyone who is purpose-driven, is showing up in the community in an interesting way to differentiate, and to be able to charge more money.

The interesting thing about aligning yourself with integrity is that when you're aligned with integrity, people will pay more money for your services.

Jason: The higher the level of trust, the lower the level of price sensitivity. It's been proven. As a property manager, if you're listening to this, if you're constantly butting up against people that are price sensitive, you have a trust problem or you're targeting the wrong audience. You're targeting the worst list price—the most price sensitive people which are probably the people that you're getting through cold leads that don't trust you. You get a word of mouth, high trust, referral, they're way less price sensitive.

Jon: It's such a vague statement to say, “Yeah, you need to be purpose-driven." Maybe we could talk a little bit about what that looks like in practicality, and some steps maybe someone could take without giving away all the Purpose Secrets in the DoorGrow seed program. I do think that it's important for somebody to be able to unpack that word "purpose" and understand what does that actually mean.

Jason: Some of the deliverables and outcomes that our clients end up with—they may not make sense to people just listening to this call—they end up with a personal why statement which is where they're getting really clear on why they're doing what they're doing. That's a really difficult thing for people to figure out.

I have some really cool processes that I take people through. I came to that conclusion for myself. Then we figure out what the purpose is for their business so that they have a very succinct mission statement that people can actually remember which means it's not some b*llsh*t piece of document that is like huge paragraphs of stuff that nobody ever looks at and never uses. Nobody on the team, if you ask them, "What's our mission statement?" Nobody will be able to say it. We want something real that is memorable.

Then, we get into creating a client-centric mission where you're getting really clear on your target audience—who you want. You don't want every client. If you're in the space right now where you’re trying to take on anybody, and anybody you talk to you think you need to try and get them on, you're in a very uncomfortable, probably negative, space running your business right now. You probably have operational costs that are far higher than they should be because you're taking on people that you probably shouldn't be taking on.

That's another thing. We get them really clear on who they want to serve and how they want to serve them. This keeps the business focused, aligned. As they're doing planning, they can challenge it against this measuring stick, so to speak. Whether they're still in alignment with their values.

Jon: I want to pause you real quick there. You're moving quickly through this. I really want to focus on something that you said. Whether you're running a PPC campaign or pay per click campaign, whether you're doing SEO or whether you're just trying to determine how to make your business remarkable, which is then going to add fuel to whatever fire you're trying to soak.

The one question that I think is important to answer is who are we in service to? That is going to help align all of your content. You don't own a right to a search engine. The worst thing that you can do for a SEO is write directly to Google. Google doesn't care about your business, Google isn't your customer. What you want to do, and this could be a tangible exercise that somebody could take away from this podcast, is at the top of a sheet of paper, write, "Who are we in service to?" Then answer that question as many times as you can.

Now, hang that over your computer or give it to the person who is creating your content. You should write all of your SEO articles, or any article or marketing or advertising campaign that you should write should be written as a love letter to the people that you wrote—that you put on that list. If you will do that and just make that small shift in perspective where all your content is targeted towards the people you're in service to, your campaigns will convert better.

Jason: Yeah, I like it.

Some of the other things we get into than finding the values of the company, everything to create the right culture. One of the challenges I see—and I guess we're gravitating out of SEO here—is that property managers, businesses, tend to fall apart when they get to about 200-400 doors. This is a really painful category for property management business owners because they are operating still as a solopreneur, mindset-wise. They now have a team usually that they built around them without culture, without clarity and purpose, and without clarity and vision.

That means they haven't attracted the leaders that support them and make their lives easier. They basically got a pile of people that they need to micromanage and tell what to do. They're trying to force trust through the veins of their company. It's a painful place to be in. It gets more and more challenging. As they approach 400-500 units, most property management business owners are massively stressed out. That's silly because if you build a team the right way, your life and your day to day should get easier and easier with every person that you add. You're just doing it wrong.

When we talk about the seed program being the ultimate foundation, it not only is a foundation to be able to eventually do SEO type work properly. It's a foundation for culture for their business so that they don't get stuck in that second sandtrap of 200-400 doors. They're unable to grow because they built the wrong team and they don't have culture. They're held back and they can't expand.

Jon: Yeah. I'll bring that back to SEO. What you're talking about is being able to build a little space between the business and the visionary. The visionary entrepreneur should be able to focus on developing thought leadership and authority in the community with a powerful team full of integrity that can take any assignments that are put in there. At some point, some of that thought leadership and authority has to be extracted so that the team has it for use.

One exercise that you can do as a delegation management tool so that you're not having to optimize your website yourself is find somebody in your office who can help you compile the most important questions that your prospects—those people that you’re in service to—have. Just informally have someone in your office interview you as the authority and thought leader, ask you those questions, and record it. This video does not have to go online because I know a lot of people are afraid of video, they're afraid of putting themselves out there. This audio is just going to be internal unless you want it to be a public piece.

The value of this is that now, this person in your office has a recorded response of how you would guide a prospect or someone you're in service to through a particular question. They can transcribe that and use that as the foundational basis for creating a really compelling piece of content.

I think that SEO definitely has a place in the property management industry. It's definitely a way to communicate your thought leadership and your expertise and to show up in your local community with authority which will then allow you to convert at a much higher level whether you're doing PPC, SEO, or just bringing in organic leads because you're remarkable.

The exercises, I guess, that I would send somebody home with is one, any keyword that you want to rank for, any keyword phrase that you want to rank for, go and type it into Google right now. Open the 10 pages that are on page one of Google. See what kind of content Google thinks is valuable around that searchphrase. Then think about how you can essentially summarize all of the key points that Google thinks that are important in your own words, adding your own level of expertise, and authority. Then go above and beyond delivering even more value. That's a really good way to think about creating content.

Two, at the top of the sheet of a paper, write, "Who am I inservice to?" Make a list of all the people that you want to be in service to. All of your content should be written as a love letter to those people because if you're speaking to them and just pick one on the list and write it as a personal letter to that one person, it's really difficult to write content to a group of people. But if you can identify customer avatars, someone on that list of people that you want to be in service to, act like you're writing a letter to them. Your content will be digested so much better. It will resonate at a more emotional level.

Then three, think about some of the longer tail keywords. Instead of thinking that the only thing you need to be writing content for is this top level city name, then property management. Instead, think about some of the longertail things, the neighborhoods that you can rank for, the value that you can deliver on a page by talking about some of the landmarks, businesses, problems that you know are happening in that neighborhood, and how you're going to show up as the authority in that neighborhood.

If you can do those three things, that alone will put you lightyears ahead of where most people are creating their SEO from. If you are working with an SEO professional, make sure that before they start doing the competitive analysis on what the other people who are ranking on page one are doing. If one of your competitors has 65,000 inbound links and really, really, solid content, it's going to be very difficult to knock them out of the number one spot no matter how much money you spend on content creation. Before you even start paying someone to write articles, they need to do a competitive analysis to see if it even makes sense for you to invest in SEO.

There are some local markets that somebody over the last three years may have spent $40,000 on content creation. That likely means that you're going to have to make a similar investment in order to rank number one. That $40,000 might be better spent somewhere else and provide more value if you invest it into making your business remarkable.

Jason: Love it. To go back to the original question, am I anti-SEO? I'm not. We built our business on SEO. We have good rankings for different things. We get customers all the time that find us on Google. I'm a fan of people doing what works. I feel like everybody should do the right things at the right time in their business, not doing the wrong things prematurely with hopes of an outcome that is not achievable.

If you are at a place where you think SEO might make sense, I encourage you to reach out to our team, have a conversation with Jon, that is something we can help you with. If you feel like you want to grow and your main goal is to add doors, we’ll have a conversation with you on DoorGrow, and figure out what's going to make the most sense for you where your business is at right now.

Jon: Yeah. I've had a lot of calls with property managers over the last two months about whether SEO is right for them. Almost all of them, I talked them out of SEO because it wasn't the highest priority thing that they needed to focus on. It wasn't going to deliver enough return on investment. What I can promise is that if you book time with me and have a conversation with me, I'll be very transparent. I will be very honest. I will give you a clear indication of what kind of investment you're going to have to make and how quickly you're going to have to make that investment to make any dent in your search ranking. You will have all the information you need to decide if that's an investment that's worthwhile or if that money's better spent somewhere else.

Jason: I think that's something we have a lot of clarity at DoorGrow. We know what types of clients we want to work with. We know who we want to serve, who we want to help. We know our avatar. We know what types of clients would not be a good fit for various programs. We make clients qualify. Our main seed program, we make people apply to be part of it. We're even talking about stepping up the requirements for that application to filter out even more people.

I think that's the secret in having clients you love working with that get great results, that build a good reputation in the market regardless of what business you have. You are really clear on who you want to serve and you’re picky about who you take on.

Reach out and have a conversation. If you're somebody that's listening to this and you're like, "I really want to grow." Or, "I think I need SEO." Or, "Somebody's saying I need it." Or, "I didn't ever think I needed it." Maybe you do. Reach out and have a conversation with us. Is there anything else you think, Jon, before we go?

Jon: Yeah. I'll just say one final thing. Tagging on to what you just said, what I see in 15+ years of entrepreneurial consulting is that the entrepreneurs who are successful are the ones who are showing up in a big way in their business and actively seeking out how they can be remarkable. Almost always, when people historically call me for PPC or SEO, it's because they're not in integrity with themselves. They want to be able to set it and forget it. They want to be able to pay for something that's going to grow their business without actually having to show up. It is a way for them to opt out of doing the real work that is required to be great.

What I'm interested in is working with people who want to be great and are willing to show up in that way.

Jason: Amen. On that note, Jon, I'm so glad to have you as part of the team. I'm really grateful that you're part of DoorGrow. It's super cool that we're both now in Austin and able to get together. I really appreciate you being on the team and the energy that you bring to it. You just fit our culture so nicely. I just want to throw that out there publicly.

For anybody that's listening, if you have comments about SEO, if you think we said something that was off, you're confused, you have questions, feel free to challenge us. Feel free to ask us questions. Throw these out inside of our Facebook community, it's a free group. We're very careful about who we let in. You'll have to apply to get in. You can go to the doorgrowclub.com to check out the DoorGrow Club and get into this group.

We only let property management business owners or entrepreneurs or those that are seriously considering starting a property management business into this group which keeps it clean, which keeps it very un-noisy. It's got really high quality people. We got over 2000 property management entrepreneurs in there. It's a fantastic group and resource. If you ever get stuck, you don't have to be stuck. There's lots of people who are willing to support you and help you in that group.

On that note, until next time. To our mutual growth. Bye, everyone.

Jon: Bye.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

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Mar 3, 2020

How can you utilize the Internet with your blog and website content to attract prospects and grow your property management business?

Today, I am talking to John Ray, formerly of Inspect & Cloud. John decided to join the DoorGrow team to help entrepreneurs align with a higher purpose through transparency to grow revenue and attract new customers.

You’ll Learn...

[02:45] Bromance: Similar passion, vision, and success for property management.

[08:50] Anti-SEO? Merging of minds and skill sets to increase customer base.

[11:16] What is property management? Lack of name recognition and understanding.

[12:15] Lead Gen: What clients want vs. what they actually need from marketers.

[15:13] Digital Marketing: Ancillary to foundational basics of a business.

[15:35] Purpose of Seed Program: Clients not quite ready for digital marketing solutions.

[18:17] SEO and Pay-Per-Click (PPC): Getting the cart before the horse.

[18:24] What makes marketing work? Storytelling. Do or say something interesting.

[19:07] Hook, Line, and Resonance: Shifting away from SEO the right way.

[21:48] Blue Ocean Concept: Opportunities for professional property management.

[27:35] FAQs: How do you respond? Are you a property management expert/authority?

[30:02] Quality vs. Quantity: Add value, not noise. Google’s goal is to please people.

Tweetables

Every marketer sells what’s easy.

Digital Marketing: Ancillary to foundational basics of a business.

Forget cold calls; trust is what closes deals.

SEO and PPC: Putting the cart before the horse.

Resources

DGS 27: Inspect & Cloud: Inspection Software For Property Managers

Inspect & Cloud

DoorGrow Seed Program

DGS 119: The Ins and Outs of Cost Segregation 0

Transcript

DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it, you think they’re crazy for not, because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income.

I've got a very special guest today. He's been on the show before. Jon Ray. Jon, welcome.

Jon: Hey, thanks for having me. We're finally doing a DoorGrow Jon Ray-Jason podcast again. I'm really excited to share some of the things that we're going to talk about on how to best utilize the internet, content on your blog, in your website, and some of the things that you can really do to dial in the way that you're attracting prospects on your website using SEO. Also, just to talk about how fun it has been working for DoorGrow and joining the team.

Jason: All right. Let's take a step back. I had you on the podcast, and we hit it off right away. We were joking before, we're having fun afterwards. We have little conversations here and there. We talk about random crazy stuff. Then, for a little while, we started meeting just as entrepreneurial friends hanging out like on Fridays or something. We were just setting a time to chat.

You've joined the team here at DoorGrow, but you came to me and reached out at one point. I was thinking about something at the back of my head. I was thinking, "Man, it'd be so cool if Jon and I work together. It'll be so awesome to have him on the team." Then you reached out. Why don't you tell your side?

Jon: Yeah. Part of my purpose is helping entrepreneurs figure out how to align themselves with higher purpose and use transparency in their business as a way to grow their revenue and attract more customers. My why and my purpose was really aligned with your why and your purpose. To connect some of the dots of my history, I've been an entrepreneurial consultant in the digital marketing space for over 15 years now. I went and worked for Google for a few years. I was helping run their global field marketing team.

A business partner friend of mine started a SaaS product in the property management space called Inspect & Cloud, which is a digital inspection tool that helps you determine how much security deposit to give back and make sure that your maintenance team and your property owners have clear communication with you. That was birth out of this marriage.

In my early 20s, I was a realtor and property manager. I was one of the people who had to go out and file eviction on people. This was over 15 years ago. When I had to go and file eviction on somebody, that meant that I have to drive up to the storage unit. I had to go through hundreds of file cabinets and files and hope that we had an inventory movement condition form, that we still had a copy of their lease, that wasn't just stained in coffee and doughnut crumbs. Sometimes I meant moving like six or seven file cabinets out-of-the-way, so I can get to the one that actually had the information I needed, so that I can go and file eviction on somebody who had been in the property for three or four years. We just didn't have good access to those records.

When I left the real estate space to go work for Google, I still was in contact with a lot of these people. One of these people is Gilbert Quinones who was my business partner in Inspect & Cloud. He's still successfully running Inspect & Cloud (inspectandcloud.com, if you want to check that out). The idea with Inspect & Cloud was we've got to solve the frustration of milling this status of a property and being able to effectively get that information when we need it. I married everything that I have learned at Google, doing digital marketing with the experience that I've had in the property management world. Those things joined together to become Inspect & Cloud.

We were very successful in growing that. I met a lot of property managers and really got inside the head of trajectory that property management was going. There were so many opportunities for property managers to dominate their local market because nobody was doing anything that I felt was remarkable. When I decided to walk away as an active owner-operator in Inspect & Cloud, to explore some personal things that I was interested—mostly coaching at a more philosophical and spiritual level. Really aligning businesses with purpose is what I wanted.

I was looking for methods that would pair traditional marketing and digital marketing with some kind of unique purpose that made a business remarkable. Ever since we've done our interview, it was so obvious to me that you were super passionate about what you're doing. You're seeing a lot of success with your seed program, growing people's businesses, and helping them align with purpose, given so much overlapping our wheelhouses, and in the way we wanted to consult with businesses.

I'm a builder. I'm somebody who can build businesses, run a team, handle operations, implement marketing, and jump on sales calls. I do my best work when I'm aligned with a visionary and with somebody who's helping create the intellectual property that then I could go and distribute. I kept seeing what you were doing, tuning into your podcast in the background. We started meeting on Zoom. It just seems like our two historical paths were meeting at this point that was better suited with us working together because I think we compliment each other really well.

Without going into more about this bromance, I thought that the most effective way that you and I could continue to deliver value to property managers and conscious entrepreneurs was for us to partner and capitalize on each other's strengths. We could really grow DoorGrow to a whole new level. I think we're doing that. It's been really fun to talk to a lot of seed hackers, to be on the sales calls, to go through the seed program myself, and really have a whole understanding for the first time.

I was always somebody out here looking in and being, "Well, how much more value could this program really have?" Then I got to actually go through it. I was like, "Oh, this is so much more aligned than I ever even thought." I think that has helped me in my genius zone since I've been working with you because I'm able to draw all of these other experiences that I've had working with entrepreneurs over the last 15 years and channel it through the lens of what you've created in the seed program. A big part of that was me bringing some of my skill set in, which as I was working for Google and in this past 15 years of digital marketing consulting, I've become an expert on Search Engine Optimization, and building really solid content campaigns that drive revenue, increase attention, and increase your customer base.

I think that for property managers, SEO's is an interesting strategy that they can implement. I think that a lot of people think that you're anti-SEO. I thought that would be interesting for us to have a conversation and talk about each of our perspectives—why I'm really bullish on SEO and why you're (at least publicly) seemed to be more bearish on SEO. Maybe we can come to a merging of the minds on that.

Jason: Yeah, we'll chat about that. I'm not really a builder. I help other people build their companies, but it's through my innovation that I [...]. I'm an innovator. I love sitting down, being the mad professor. I didn't want to be the guy who's been doing videos or in the foreground. I have business coaches who were like, "Jason, if you're not going to do it, nobody's going to do it. You got to do it." They pushed me into that space and I've gotten a lot more comfortable on that.

Even still, it's really nice to have somebody coming on the team that I trust to understand the vision behind what I want to do, and allow me the space to innovate and create new stuff. Now that I have you on the team, I'm really excited about the new stuff that DoorGrow's going to be doing to solve property management problems here in the future. I've got some cool ideas and now I can start to focus on those, work on those, and we get along really well. We just have so much fun together.

A lot of people do think I'm anti-SEO. In the past, I love throwing stones at different things that I think are causing challenges in the industry. Because we were focused on SEO—we did pay-per-click management, and we're focused on the search engines in the beginning—the challenge was, this is an industry (I saw) that has very little name recognition. It's an industry that has very little understanding in public opinion as to what property management is or what a property manager does. Random people that have rental properties just weren't looking for property management. It's what seemed to be the situation.

The challenge was we just had clients that would play that game, and they found the trap of some of the marketing agencies. Every marketer sells what's easy. It's very easy if people still come to us. It's very easy if somebody comes to us and says, "Hey, I want SEO, I want pay-per-click, I want content marketing, I want social media marketing." This is what everybody says you're supposed to be doing online. "I want pay-per-leads."

These are the things people were looking for. Sometimes the confusion people have about DoorGrow is like, "What do you guys do if it's not those things?" That's all people know what to do, is what marketers are telling them. Why? Because that's what marketers sell. They're selling it. They're not doing it because they're evil. They're doing it because that's what customers are asking them for. Maybe they're in some ways smarter than me. This is what the client is saying, "I want." Even though my perception is, "It's not working. It's not working for a lot of these companies."

The challenge I saw is that if the companies weren't at least 200–400 doors, it didn't even make sense to be running ad campaigns, getting all these cold leads, and trying to take the time to do it. Really, there should be part-time sales people that only have 10–15 hours a week to focus on leads. If they're getting these leads that are colder, they weren't even answering their phones. The lead's only good for maybe 5–10 minutes a lot of times. Then the close rate or conversion rate dropped significantly. The challenge was when we're running ad campaigns and doing these things for clients, they weren't capitalizing on the leads. And because they didn't have the bandwidth, they weren't answering the phone calls.

Usually, companies have to be about 200–400 doors minimum, they needed a full-time BDM, they needed that just to do pay-per-click on the SEO side. If they're in a big city market and it's super competitive, maybe there's more search volume, even still property management's very little search line. No matter how big the market is, there are very few people looking.

It felt dishonest or disingenuous to sell it to clients just because we can make money. All the time I started realizing, it's not effective. I started because I've talked to thousands of property managers. We literally have hundreds of clients right now that are active. I get to see inside their business. They come and ask me for help, and they ask me for coaching. I would occasionally run into a client doing something unique. They come to me and say, "Oh, yeah. We've been in business for three years. We're at 300 doors." "That's amazing. How did you do that?"

Every now and then I would notice an exception. I will pay attention to these things. I will get super curious and I'll ask questions. Over time, I suddenly noticed things that were working, and it wasn't the digital marketing stuff that they were doing. Now, that doesn't mean that if you don't do the foundational basics, that it wouldn't make sense to then shift and start doing more. The analogy I would typically use with clients once I understood this, I would say, it's just like in bodybuilding. You can go get creatine, glutamine, supplements, protein powders and whatever, but if you're not getting sleep and you're not eating food, even though you're working out, you're not going to get great results because those things are ancillary.

That's how I view a lot of digital marketing. It's ancillary to the foundational basics that are involved in a business. The sales pipeline and word-of-mouth is significantly impacted by your brand, your website, your reputation, your sales process, all these things that we focus on in seed programs. That's why I built the seed program to shore up these leaks.

The ironic thing is I originally built the seed program because clients weren't ready for the digital marketing stuff that I wanted to sell. They weren't ready. I was like, "Let's get them ready. I'll create a program that once they do it, they'll be ready for all this digital marketing stuff. They'll want to do cold lead advertising and marketing with us. Then we'll make more money." If there weren't enough companies that can capitalize on it and if they're going to try doing it and fail and quit, I'm going to create a program that gets them ready to have this stuff. So, I built out my first iteration called the SeedPackage of the seed program. I created this and clients get these amazing results.

The crazy side effect of it was when they went through, and we shored up all these trust leaks that existed in their sales pipeline because trust is what closes deals, they didn't need or want cold leads anymore. It didn't do what I wanted to do. It didn't get us more marketing clients to actually prevent them from meeting it at all. Even though they were the ones that most likely to be able to use it now. But they didn't need it because they're getting so many warm leads and warm leads the closer is so much higher.

Then I started putting up this message like, "SEO won't save you." A lot of people view SEO as savior. They thought, "If I could just get the top spot on Google, all my hopes and dreams for my property management business would come true." It's just like playing the lottery or gambling. If I just get that one jackpot, I'll have everything that I need financially. It really is. It's like the SEO lottery. They would play the lottery and I kept getting stories of losers coming to me from other property management marketing companies.

They were sad, they were upset, they've done a one-year contract of doing uncomfortable videos, doing SEO, doing content marketing stuff, and they didn't have doors to show for it. They were really, really frustrated. They didn't trust me. There was a distrust in all marketing in general because they've been burned. I think a lot of property managers have been burned because it's very easy for people to sell what people don't need if they're asking for it. I felt like it was unethical.

Jon: Yeah. It's definitely a space where there's a spectrum of charlatans and all the way to people who are in integrity and really good at SEO. I think everything that you're saying is right in many ways. SEO and pay-per-click is getting the cart before the horse.

From a fundamental level, what makes marketing work is really great storytelling. You have to be doing and saying something that is interesting or remarkable for any amplification of that message to convert. What people think they need to do is just hire somebody to write four articles a month, and eventually they're going to be on page one of Google. That's the lie of digital marketing and SEO.

I'm going to give some really practical tips and advice for any property manager that wants to start doing an effective in-house SEO campaign. I promise that before the end of this podcast, we'll give you some action items that you can walk away, so that you can start shifting away SEO in the right way. What happens is when you first start, especially if you're in new business or never done any type of optimization on your website, you're likely showing up on page 8, 9, or 10, or not even being indexed by Google. The way that people search the web is they type in "property management Austin Texas."

Then they open the first 10 links on page one of Google in 10 different tabs. Then they quickly scan each of those pages looking for something that feels like resonance to them. They're looking for some kind of a hook that says, "That's the person I want to work with."

If you haven't effectively created that hook for your business, then no SEO is going to convert for you even if you're in page 1 because the page 10 spot is going to convert better than the page 1 spot if the page 10 spot has a better story and is creating more interesting trust indicators on the website. What that comes down to is making sure that you have a really solid reputation in your local community—that has a lot to do in online reviews—then making sure you're showing up as a thought leader and an authority in your local space. That means that you actually have to be an authority or bring an authority onto your team. You have to learn how to effectively communicate that authority.

SEO can be a really good delivery mechanism for thought leadership and authority but only if you already have those things and are showing up in your community as that. One of the things that I always resonated with the way that you approach digital marketing and SEO—it's the things I always have reached in my own consulting practice—is that you have to learn how to tell an effective brand story before you spend any money on any type of amplification of that.

Jason: You're right. SEO and [...] Google's [...]. It's really hard to dethrone somebody that's been there for 10–20 years. It can be really expensive, it can be really time costly, and a lot of these property managers starting out, that maybe not the game they should play. You're right. There are companies with the top spot in Google right now, due to the way the market is right now, they’re losing more doors than they're getting on due to the sell off.

It's really difficult to outpace the market when the market shifts with marketing. Yet, there's this huge blue ocean of potential property management clients that are not aware of property management yet, of real estate investors, people that run rental properties. We see only in the single family residential only maybe 30% are professionally managed versus Australia which is 80%.

There are all these opportunities, yet people are fighting over the scraps that fall off my client's table. They're not focused on the word-of-mouth. They're not focused on networking. They're not focused on community marketing, going out, connecting with that blue ocean, establishing rapports, building trust, and being an authority. They're focused on, "I'm just going to pay a company to just shotgun for leads and hope I get something," then you're getting the coldest, most price-sensitive worst stuff, that are what’s leftover at the end of the sell cycle, after word-of-mouth capture the good stuff.

Jon: Yeah. When you talk about the blue ocean, I want to unpack that a little bit. I think that's an important concept because when you're paying for leads or when you're trying to SEO your website to be able to compete for search terms, you're only competing for a very small sliver of the overall pie that is available. Only maybe 10%–15%, depending on your local market of property owners that are open to finding a manager, are actively searching at any given moment. That means that 85%–90% of the potential market place isn't actively searching. You wouldn't be able to track those people through PPC or SEO anyway.

I think there's a misconception that if you rank on page one of Google that you're going to have access to all of the available leads out there. Actually, the larger slice of the pie that's available in the property management industry, and really in any industry is the 85%-90% of people who would be open to some kind of service or some kind of value add, but they don't have enough pain to be actively searching for it. However, if someone they trust said, "Hey. You know, this person works with people like you or businesses like you. They're showing up in the community in a really interesting way right now. Maybe you should talk to them," that's a much easier handoff to somebody to make. That's why having a really strong community-driven purpose is an interesting foundational element to create that will then benefit you when you start to do an active SEO campaign or pay-per-click campaign.

If you don't have that powerful story that is going to create a resonance and the competitive advantage over the other 10 people that are in the 9 of their tabs that somebody has opened in their Internet Explorer or Google Chrome, then no amount of investment in the pay-per-click or SEO is going to be able to convert at a ratio that will make it valuable for you. That's why at DoorGrow and the advice I've always given when people come to me for SEO advice is, what's your story? How are you aligned with your community? How are you aligned with some purpose above and beyond just making money?

That comes back to good business planning. In the property management space and in a lot of service-based industries, people start as a solopreneur. They're not always thinking about the big picture. "Where is this business going up in the next 5–10 years?" They're just kind of nickel-and-diming trying to make enough where they can pay for their families' expenses. That puts them in the weeds and fires of the business, which doesn't allow them to show up as a visionary or even develop their authority in the community. They have no real competitive advantage. Because they're operating in the place of solopreneur scarcity, they're not closing at a conversion ratio that would warrant spending money on advertising or SEO.

One of the things that SEO can be really good at doing is helping you create that community authority. You have to look at what you are actually an expert at. What a lot of people do, they hire somebody in another country, or they hire somebody who's just a generic content creator, who's good at writing but knows nothing about the property management industry. What does that person do? They pull up property management on Wikipedia. They rewrite some of those articles so that you have the right keyword density in your article. Ultimately, it's a big nothing burger because when somebody comes to that page, it creates no emotional resonance. Yeah, maybe you captured the click-through from Google, but they're going to immediately click back. That actually hurts your ranking.

You always want to make sure that the SEO post that you are writing is providing genuine value to the person who lands on the page. Google will actually penalize you if you have content that ranks on page 1 of Google and somebody clicks through it, then it's not the answer to the question or it doesn't hold them on the page for longer than 90 seconds, if they click back, you're going to be penalized for that.

The thing to think about as a property manager, when you're meeting with prospects, what are the most frequently asked questions that you get? How do you answer those questions in person? Sometimes I'll have people record the way that they answer certain objections or questions, and then transcribe those. That could be a good basis for a solid SEO article that starts to give the prospect value and sets you apart as an expert and an authority.

Another really good piece of content is neighborhood-specific content. Everybody's focused on these macro keywords. If I'm in Austin, Texas, then the keyword that every property manager in Austin, Texas thinks that they want is "property management Austin." All the articles are targeted towards that macro keyword phrase. There's actually all kinds of what we call long tail phrases which would be like neighborhood phrases.

In Austin, there's a neighborhood called Brentwood. You could write a post all about why Brentwood is an interesting place to live as a tenant, but as a property owner, how you serve the Brentwood community. That is going to be an easier term for you to rank for. You're going to be able to provide some actual expertise about how you manage properties in that specific neighborhood. You're going to be able to reference landmarks, grocery stores, and local venues that makes the property owner feel like you know what their property needs because you're familiar with the neighborhood.

What that does is "property management Brentwood Austin '' is an easier keyword to rank for. It gives you SEO juice that then points up to the main keyword phrase that you want—that macro phrase of "property management Austin." You build out 50 neighborhood pages and those all start ranking well, you're going to rank for this macro phrase. But most people do it in reverse order. All their articles are these boring regurgitations of Wikipedia trying to rank for a macro term. They're providing no value. They're not ranking for any long tail keywords. Ultimately, their SEO investment nets them nothing because they're not tuned into how competitive the marketplace is.

Jason: And it's just that noise instead of value. It's not having real value. One of the things I always said to clients for over a decade, my philosophy when it comes to Google is, "Google's goal is to please people. That's how it's able to sell ads." If your goal is to please people and help people, you're always in alignment with that. Now, what most people do is their goal is not to please people. It's to manipulate the search engine and the robots. If that's your goal, eventually, you're going to be penalized for that. That's going to be viewed as black hat.

You might find the hack, somebody who has the hack that they're doing, where they're doing SEO on videos, and they've got 20 different company accounts. They're making them all, liking comments on each other's stuff. Google's smart. It's going to figure out that you've got a game going on.

I had one property management company out in Atlanta. He had paid these guys in India to do backlinks. Any backlink was considered relevant. A backlink, for those listening, is a link to your website. So they would go out, scour the web, and find any website they could, directory they could, and they would put links to his website in Atlanta. Then Google realized people were playing that game, trying to manipulate the search engines again.

What they did is they started adding a quality score. They started gauging websites that are not reputable or not relevant and which ones are. Then they release an update. His site wasn't just down-ranked. It was removed from Google rankings all together because he had so many shady, [...] backlinks. Google said, "This site must be bad. It's dangerous to people." They pulled it down. It was like a sandbox.

Jon: Yeah. One of the things on any consulting call that I have was somebody about SEO, very often that comes up. "What if I invest all this money in SEO and then Google decides to remove my site from search?" They're only going to do that if you're working against their terms of service and if you're not providing real value. Ultimately, like you said, they want Google to be the search engine that immediately takes you to the content that is most relevant to you. Their algorithm is always shifting to determine what the most valuable content is. That's why everything, even as they're moving to artificial intelligence, everything more and more, is being catered towards who is the thought leader and who's the authority in this local market place around this topic.

The way that you identify yourself as that person is by having a stellar reputation with a lot of five star reviews, and then making sure that every single article that you write is providing value where if you were your customer, and you read that article, would you actually read it? Or would you immediately be like, "This is an SEO article"? That's a dead ringer. If you go to a website and the first word is bolded out, there's all these links linking to other pages, it's all keywords that are linked, and you're not actually answering the question that is in the user's head, then you're going to be devalued in the eyes of Google because if that person bounces off your website which means they clicked on Google to your website, they didn't see what they wanted, so then they clicked back to Google to go to a different website, that ultimately is not going to serve you.

You can spend a ton of money on SEO, and if it's not the right content, it can actually hurt your business and hurt your website. It's better to add one really high quality piece of content a month than it is to add 30 super low value pieces of content that don't help the user in some way.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

Download this Episode

Feb 25, 2020

What is cost segregation, and how does it work? If you're knowledgeable of the tax code and understand what you’re able to do, you will put money in your pocket.

Today, I am talking to Kim Lochridge, Executive Vice-President at Engineered Tax Services. The company started with about six employees and has grown to 130 to do 150-200 cost segregation studies a month. Kim loves talking about taxes. She’s here to help make sense of it all!

You’ll Learn...

[03:10] Investment Depreciation Concept: What you get when you have an investment property. It's a tax deduction.

[05:15] Depreciation is everything and anything, including buildings, carpet, walls, paint, countertops, and cabinets that depreciate over 27.5 years (unrealistic).

[07:17] Cost Segregation Metamorphosis: IRS allows building professional/engineer that understands property and tax laws to segment each component of a building.

[10:30] Does Kim use cost segregation? No matter how big or small, she doesn’t do a deal without cost seg.

[11:53] Cost Segregation Studies: How long are you going to own the property? What are you going to be doing with the property?

[12:03] Justify Numbers: Don’t do a cost seg study unless it makes sense financially to pay less in taxes for more money to reinvest.

[15:10] Audit Defense: Engineered Tax Services covers questions from IRS about cost seg performed by internal engineers.

[16:00] Tax Strategy: Know how to use it and when to use it. Too many people don't understand taxes and let their professionals handle it.

[16:21] Motto: We do believe that everyone should pay tax, but there's nothing in the code that says you have to leave a tip.

[16:55] When and when not to do cost seg? Ask questions. If something doesn't make sense, make it make sense.

[21:35] Bonus Depreciation: Too good to be true? Or, leaving money on the table by not doing cost seg? Probaby 80-90% of real estate agents are missing out.

[29:30] Depreciating Bonus Depreciation: Do it now before it decreases from 100% to 20% in 2026.

Tweetables

Engineered Tax Services’s Motto: Everyone should pay tax, but there's nothing in the code that says you have to leave a tip.

Depreciation: What you get when you have an investment property. It's a tax deduction.

Don't do a deal without cost seg. It doesn't matter how big or how small.

Bonus Depreciation: It’s a big deal, not a scam, to spark the economy.

Resources

Kim Lochridge’s Email

Engineered Tax Services

Schedule E

W-2

Form 1099

Tax Cuts and Jobs Act (TCJA)

Opportunity Zones

DGS 118: Investing in the United States 0

Transcript

DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it, you think they’re crazy for not, because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income.

My guest today is Kim Lochridge. Kim, welcome to the show.

Kim: Thank you, Jason. Thanks for having me.

Jason: Kim is here with Engineered Tax Services. We're going to be chatting a little bit today about cost segregation and how it works. Those of you that don't really geek out on accounting, that's okay because I pay people to help me with that stuff. I don't either, so I'm going to ask all the questions. We're going to figure this out and make sure it'll all make sense.

Kim, give us a little bit of background on you, and how you got started with Engineered Tax Services.

Kim: Thank you for the internal question. I've been with Engineered Tax Services. I'm the Executive Vice-President, and I've been with them for about 10 years. I started out as an associate. I was on the board of a manufacturing company, and they were looking into some energy-efficient tax credits. It was just a brand new program that came out and tax rules. I found this company because they were doing that early on. That was really my beginning and how I met them. I just thought I came on board.

We've been growing the company since we started about five or six employees. Now we have about 130 across the country. We're doing about 150-200 studies a month across the country. It's pretty impressive.

Jason: All right. We will get into what those studies are in just a minute. Let's get into the subject at hand. Maybe we start in the preshow, in the Green Room, we were chatting for just a little bit. It was like, "When is this stuff?" "Maybe I should explain it a little bit to you, Jason." You did which is very gracious of you.

Why don't we start with the concept of depreciation on an investment? Just to make sure those that are not yet investors, or they're just new in the space, and they're starting to deal with real estate investors, understand this concept.

Kim: Okay. Depreciation is something that you get when you have an investment property. It's a tax deduction, essentially. On top of the mortgage interest or any of that expenditures that you spend on that property, you also get depreciation.

Depreciation is calculated depending on the type of property that you have. If it's a single family home or some type of residence like a multifamily and then in capacity, you're required to depreciate that property over 27½ years. If it's any other type of property like an office, retail, or anything commercial, that is 39 years. For today, I think almost everybody in the audience is more of a single family-owned, we’ll target more at 27½. Just know that that's interchangeable with 39 if it's commercial.

Essentially, if you have (say) a $300,000 single family home, you're going to be able to depreciate according to the IRS. You're going to divide that by 27½ and you end up getting $10,909 every year, that you can help use that to offset the income that you made on that property and then not pay tax on it.

Sometimes, if it's a smaller home, that might cover it, that and any expenses, and you won't have to pay any tax on the income (which is nice). But sometimes, if your cash flow's pretty good, once you're high right now, mortgage rates are low, you might've owned it for a while, then this could be something that could help you. If you have that, your income is more than the depreciation, then you're going to want to make sure to do something else. This is where cost segregation comes in.

Also, if you end up having multiple properties, and one is cash flowing much more than another, then you can basically take that cash flow, and you can do from one to another if it's in the excess. We'll go over some of those details a little bit more.

Essentially, the depreciation is just that. You have depreciation. You're required to depreciate a building if it's on a Schedule E or if it's a rental income. If it’s a second home, you're not going to depreciate it. It has to be a Schedule E or some sort of an income revenue-generating project.

Jason: The idea with depreciation is that everything in the property is going to depreciate at the same way?

Kim: Yeah, everything. It contains the whole building, whatever you bought. That means carpet, walls, paint, countertops, cabinets, anything that you bought in that purchase is going to be depreciated over 27½ years.

Jason: [...] lasts about 27½ years, right?

Kim: That's what the IRS says.

Jason: Okay, that's not reality. How do we solve this problem there?

Kim: Yeah, it's not reality. For decades since the 40s, cost segregation as a whole, what we're going to talk about today, has been around since the 40s when it began in court cases. That's because property owners went and argued the fact that, "This is what I'm doing. This isn't really fair because assets that I'm depreciating over 27½ years or 39 years are not going to last that long. I'm replacing them, in some cases, multiple times over the course of ownership. I want different rules. I want to be able to depreciate those separately."

It made it very difficult for a CPA to say how much is the carpet or how much is the building when you just bought up a building. You didn't put it in. You don't have receipts. You don't know how much the roof, the HVAC, the water heater and all that were. They can't break it down. The CPA doesn't have the ability to do that.

The IRS came back and over years of morphing cost segregation, they said, "We're going to give you the ability to do cost segregation, which means you have to have a building professional or an engineer, somebody who understands property and tax laws to come into the building, and segment (hence, the segregation) out each of the component of your building."

As a result of segmenting those out, you can depreciate them in different time zones, or different buckets. For instance—these are just some examples, depending on the purpose on some of those components—carpeting is always going to land in a five-year bucket. You're going to be able to depreciate all of your carpet in five years, not 27½.

Things like all of your landscaping, your driveways, curbing, gutter, landscape bushes, trees, all of Rockwell expenses, all of that stuff, gets to be depreciated over 15 years. That's more realistic. Things are going to be overgrown. You're going to have to rip things out. You're going to have to replace fences, all those types of things. They'll give you that bucket as well.

The law also says that you can break down certain components like mechanical, electrical, and plumbing, as long as it's for specific purpose for the building, and not necessarily for the building itself. It has to be for the business.

It gets pretty complicated and these rules have morphed since the 40s. There have been massive amounts of court cases that give us these rules today. As an example, something traditional out of today, if you have that same $300,000 single family home, percentage-wise, we're going to be able to take (conservatively) about 40% of the cost of that building or $120,000, and we're going to be able to shift that into faster class lives for you. You won't have to depreciate all of it over 27½ years, but we can break it out.

Essentially with that, that would be $180,000 gets depreciated over 27½ years, and about $120,000 gets split up between five and 15 years. Those are the good rules of thumb numbers to use. Following so far?

Jason: I'm with you.

Kim: I have to tell you, I love tax. I know it's really geeky, but it's okay. I can help you through it.

Jason: That's why people hire you. You're weird.

Kim: I get excited about it. Just to kind of give you an idea, I'm also a real estate investor myself. I have my day job, but I'm also an investor. I have invested in about 800 doors in multifamily in Texas. We have cannabis warehouses, we have a mobile home park, just my husband and I. We manage them all ourselves (which is pretty incredible) plus a full-time job.

Jason: Do you use this? Do you use cost segregation?

Kim: Of course. I don't do a deal without cost seg. It doesn't matter how big or how small.

Jason: That's the cool phrase for it, it's cost seg.

Kim: Yes, short for cost segregation.

Jason: Guys, get yourselves some cost seg. Pretty dope. Explain how your company helps with this. Obviously, accountants can do these. The property manager isn't doing this. The investor doesn't know when they will buy this property. How do we solve this problem?

Kim: Engineered Tax Services, this is our specialty. This is one of the main service lines that we offer as cost segregation. This is where I was saying that we do about 150-200 studies per month across the country, whether it's a single family residence all the way up to something like the AI Building in Chicago—big, high-rise, office buildings. We do cost segregations. We're very good at it. It's cost effective.

Most CPAs, if it's not over $2,000,000 then it's going to be too expensive. We have single family home rates. We have different levels of studies that we can do according to how long you are going to own the property, what you are going to be doing with the property and those types of things. Maybe we should go in and talk about some numbers, Jason, just to tell everybody (the listeners and the viewers) what it would mean for them.

Jason: Yeah. I don't know if this is where you're headed but if you're saying that a lot of people say, "Oh, that's for the big properties. That's too expensive to do for my clients on this single family home or my investment property." Help them justify the cost of doing this study. Nobody would ever do it with you ever unless it made sense financially.

Kim: I haven't since a project that isn't at minimum like a 50-to-1 return. It's going to be better than any improvement you can do in the house, any tenant change over, addition, or whatever you're going to do, your returns on this are going to be [...].

Jason: By doing this, by getting the cost seg study, working with you guys, and with their accountant to make this all happen, what has this allowed the investor then to do that they wouldn't have been able to do otherwise?

Kim: They're going to be able to depreciate more in the first years rather than just the $10,900 on the $300,000 property that we talked about.

Jason: Which means they're just reducing their tax liability? Paying less taxes? Which maybe means they have more money to reinvest?

Kim: Exactly. I want to preface this with the fact that there's a lot of investors that this is passive income for them. If you don't know whether your income from your investment property is passive or active, you want to talk to your CPA because sometimes this gets locked up. We're only talking about if you're a non-real estate professional, how to offset the income from the property so you're not going to have to pay tax on that.

This isn't a loophole. This is nothing that is illegal. This has been around for decades. This isn't something that I’m going to get in trouble if I do this. This is simply just a different method of accounting and it requires a professional to come in. Just like an inspector or an appraiser would come in to tell you more specific about a building that you're building. This is basically more of a professional coming in to explain more of the accounting side of it.

Jason: Okay. What do you call these experts that come out to the property to do a cost seg?

Kim: They're engineers.

Jason: Engineers?

Kim: Yeah. Engineers come out. They're either structural professionals or mechanical engineers that understand building mechanics. They understand how to break down different components in the building. They're our own employees across the country. They come out to do those studies to document everything.

Just keep in mind that the IRS says that if you have the building professional onsite, then that is required by the IRS. A CPA can do some sort of cost seg if they're knowledgeable about it, but many of them aren't going to be able to tell you how much the [...] costs. If they do, they're just going to do it from a square foot allocation. It's not going to be able to stand up in the event of an audit.

We offer audit defense, so if the IRS does come back and question this, we're going to cover all of that for you. We're going to defend that for you. Our reports are going to be solid. We're going to be here and that's what this covers. We're going to stay behind the product.

Jason: Okay. What else should people know about cost segregation or about your company that they may ask?

Kim: I think we need to talk about tax strategy because I think this is really important for people to understand. So many people (and I think in my opinion, too many people) don't understand taxes, and they let their professional handle it. That’s exactly what you said in the very beginning, Jason.

Jason: Yeah, that's what I do.

Kim: Yeah. We have a motto at Engineered Tax Services. The motto is we do believe that everyone should pay tax, but there's nothing in the code that says you have to leave a tip.

Jason: I love it.

Kim: If you're knowledgeable of that tax code and you understand what you are able to do, you will literally put money in your pocket. That's what this strategy does. That's what these studies do for you. You have to know how to use it and when to use it. That's what I can help with.

We help with realizing when is the good time to do cost seg and when it may not be a good time. When it would not be a good time to do a cost seg study is if you just flip. You're going to buy and you're going to renovate it. You're going to get rid of it. You will probably not want to accelerate depreciation. It's just not smart because you're essentially taking more depreciation upfront because you're going to hold on to those assets like the carpet, and you’re depreciating it over five years. You're not going to get all that money and keep it if you sell the building.

Jason: Right. You don't want to pay for the future owner of the place’s carpet.

Kim: Right. Unless you're doing substantial rehab—that's a different story—and if you're actually going to depreciate the property on a flip, you usually don't depreciate it because you're never placing it in service, if that makes sense. You're never really putting in service because it's all going to be under renovation. You're not going to depreciate it.

This does not include flippers, but it does include people who are renting their property. If you have this passive income, let's just take our $300,000 example from the beginning, you're giving the $10,900 in the depreciation every year. If your cash flow is bigger than that, more than that, and you're still paying some tax on that income, you might have to figure that out because you might have a job in your W-2, and you're not really sure what part of this is what you owed in tax because of the house and the income, and what's on your W2.

It's really important for you to see where this is coming from. "How much of my paying tax is from my rental property?" Ask those questions to your CPA, or we can work with you on that. We're looking at tax returns and can help you there. That's the first thing. Just ask some questions. If it doesn't make sense, let's make it make sense. Let's make sure that the common sense is there. At least, you trigger certain things in the brain.

When you get into that and you start realizing that you are paying tax on the income, that $10,000 isn't enough, then you're going to want to do some sort of cost segregation, so you can accelerate the depreciation faster especially if you're going to do renovations.

Many times we buy property, and then we're doing renovations, either immediately or very soon after or even just repairs and maintenance, and we have to capitalize that in many cases. Now, you're actually depreciating two assets. Let's say you bought a building that had a roof, then the roof gets replaced in five years, now you can't write off the roof. You have to capitalize it which means you have to depreciate it. You don't just get an expense for the cost of the roof. You have to capitalize it and depreciate it. Now you have two roofs. You're depreciating one in the purchase and you're depreciating one you just bought. That's where we really want to come back from that and say, "I don't want to depreciate two roofs. When I sell this property, I'm going to get killed in the accumulated depreciation on both of those assets. I only have one in the building. Why am I depreciating two?"

If you do a cost seg study on the original purchase, then you replace the roof, not only do you have to capitalize the new roof, but you can write off the remaining depreciation of the old roof. Traditionally, CPAs can't do that because they don't know how to value the roof if you don't have a cost segregation study.

Not only are we going to help you with your depreciation, but you're now going to have a very detailed fixed asset report that's going to outline every single aspect, every component of that building, and it's going to have a number attached to it. Every light switch plate cover on the wall, every baseboard, every layer of the roof, HVACs, and hot water heater. Now, you have this really great report that every time you do any improvement, it has to be capitalized. You're going to write off the remaining depreciation of the old.

Let's think about this for a minute. Let's say you buy a property. You have it for three years and the hot water heater goes out. It's a significant dollar amount, you have to replace it. You can now take that hot water heater if it's not expensable. You capitalize it and write off the old hot water heater. If you have it in a straight-line depreciation, that water is being depreciated over 27½ years. That means you're going to have 24½ years left of depreciation on the old one. Now, you're depreciating two of them. Why not get that money right now and help cover the cost of the new water heater? That's the beauty of cost segregation.

Jason: Nice. You mentioned real estate agents. Are they not allowed to do cost segregation on their properties if they're an agent?

Kim: No. It actually gets better for them. If you're a real estate professional, this is a whole different conversation.

Jason: A lot of our listeners, they're property management business owners, but they're also brokers, real estate agents, and are licensed, most of them.

Kim: Yeah. That's where we really want to get into. This is part of the tax strategy that I was talking about. If you are a real estate professional in any capacity, whether you're self-proclaimed real estate professional and you're managing your own property, or if you're actually a real estate professional, an agent, or a manager.

If you are paying tax, if you are a W-2 employee or if it's a 1099, if you're paying tax, and you're a real estate professional, you have had some misinformation. This industry right now, we have a real estate president, like him or hate him, it doesn't matter. He's a real estate president. He walked in and just literally handed the real estate industry a gift with a big red bow. It's called bonus depreciation.

Remember what when we said the $300,000, you'd have over 27½ years. You'd have $10,900. Then if we did a cost segregation, we would be able to accelerate the depreciation. That would be a lot better, actually. Now, with the Tax Cuts and Jobs Act of 2018, President Trump passed the bill for bonus depreciation. Let me go back a little bit in history. Bonus depreciation has been around since 2006. It was 50% bonus depreciation (and I'll cover what that 50% of what in a minute) on new construction or renovations. You're essentially able to really expense a lot of stuff to a certain point—at least half of it—for a long time from 2006 until through 2017.

In 2018, President Trump passed this Tax Cuts and Jobs Act. Not only increasing the bonus depreciation to 100% from 50%, they also expanded it to allow purchases not just new construction. What this means is that, say you're a real estate professional. Let's say you're making $200,000 a year. Maybe it's tons more, but let's just call it that. Let's say you're making $200,000 a year, and at that level you're probably paying 33% tax rate or something like that. Maybe a little bit less. Let's call it 35% just to be generous.

Each year you're paying about $70,000 in income taxes. If you are a real estate professional and you go buy a property, let's just say you go buy this $300,000 house, and you're going to start renting it out. We have the cash flow, we have the income from that which is also a factor, but let's just talk about the tax for a minute. When and if you do buy a $300,000 property and you're a real estate professional, then you do a cost seg study on that building. Essentially, we're going to be able to write off about 40% of it. That's $120,000. Normally, if you're not a real estate professional, that's locked up in your passive income and it cannot offset your W-2 wages. It has to just stick with the income from the property or other properties that you owned.

If it goes in your Schedule E, if you own 10 properties, then that $120,000 will house all the other properties. But it is still stuck on the passive side because it's passive income. When you're a real estate professional, it's an active income. This is active depreciation, which also covers all of your regular W-2 or 1099 income when you're in the real estate industry.

Remember when I said that the $120,000 will be shifted over five or 15 years. We have to prorate that all out over these buckets. What's really cool about bonus depreciation, that means 100%, not 50% anymore on purchases, but 100% of your purchase price that is allocated to a class life less than 20 years. You heard me talk about the 5-year buckets and the 15-year buckets. Anything in a cost seg study that you reclassify that's less than 20 years which would be about 40% of this building, you're going to take as a writeoff in year one.

Now you get this $120,000 in the year that you purchase it. You can go buy a property on December 31st and it closes before the end of the year. You can offset your taxes by the amount of your results of cost seg study. In this case, $120,000 that you get to offset, all of your $200,000. You've made $200,000, you're going to depreciate $120,000. Now you're only paying tax on $80,000. But if you buy two houses, you basically just wrote it off, and you can pocket that $70,000 that you would've paid in taxes.

Let's just run the numbers real quick. If you have $300,000 and you're saying you're going to put 30% down, that's $90,000. Let's just say the $120,000 times the tax rate of 33%, so $40,000. Basically, what the $120,000 would equate to is about $40,000 in cash. Instead of coming up with your down payment of 30%, if you have to come up with 30%, you've got to come up with the $90,000 down payment to buy that $300,000 house. But you're going to get $40,000 back in your pocket. Immediately. As soon you file your tax return. You get to write that off. Buy two properties and you just write off your entire tax liability for the year.

Jason: Okay. This sounds almost too good to be true. Help me understand. How many agents do you think are doing this type of stuff, that they're not doing cost seg, and they're just leaving tens or hundreds of thousands of dollars on the table.

Kim: Probaby 80%-90%.

Jason: This is a pretty big problem.

Kim: That’s why I’m on the show because I want to raise awareness. I will tell you personally, I'm an executive, my husband's an executive, we have high incomes, and when they came out with this bill, the first thing that I told my husband was, "We have to go and buy some properties." I am a real estate professional by trade because of what I do anyway, so I'm a professional. We are under contract to buy a mobile home park. We're closing on December 31st. We have good income and I bought it, but I actually am going to have about $400,000-$500,000 write-off this year for my taxes.

Jason: Nice. Is there anything else that people need to know about this? That was a really good point. Any other major things that we should be aware of?

Kim: Yeah. Bonus depreciation goes through 2026.

Jason: Okay, then what happens?

Kim: Then it starts to phase out starting in 2023. It goes from 100% to 80%. Then 2024, it goes down to 60%. Then 2025, it goes to 40%. Then in 2026, there's only a 20% bonus depreciation. It doesn't mean cost seg is not beneficial. It's still beneficial to do that just like it would've been without bonus depreciation, but there's a greater incentive to do it now. This is all brand new tax rules that just came out in 2018. If you're saying to yourself, "Hey, why haven't I heard of this? This has got to be a scam." It's not. This is a big deal. It's huge for President Trump [...].

Jason: It's a big deal. Was this done to basically spark the economy? Is that why they're throwing this out there? Such a big [...], so to speak, then they're depreciating their bonus depreciation over time? They're going to be taking it down, but is that the mindset of why was it put out there?

Kim: Yeah. I'm in the tax community for the real estate roundtable in Washington, DC. When the Tax Cuts and Jobs Act was being formulated, we had long discussions about how to deal with depreciation and what to do. Everyone was worried about the real estate being in the 7th or 8th inning as far as the cycle goes. “Hey, we’re a little bit worried about this. How can I continue to be sustainable at this rate?”

The big talk of this Tax Cuts and Jobs Act on President Trump's docket was solely to raise the GDP and just really get the economy going a little bit better. What they did to incentivize that is to offer this bonus depreciation. This was part of that incentive to buy property, exchange property. They also, in this package, were part of the opportunity zone, which I know a lot about. If you don't know about that, we can do a whole another show on that, about purchasing property in an opportunity zone, and having essentially no tax liability on that after you held it for 10 years (as long as you do some improvements). That's a whole another show that we can do.

All of these are part of the Tax Cuts and Jobs Act. It's very powerful, and in my opinion, I think we probably, at that time, went from a 7th or 8th inning in real estate back down to a 5th or 6th inning. That's where it really continued to boost and postpone any kind of real estate downturn.

Jason: Who is aware of this and is capitalizing on this? Obviously, your company and your clients. Who's been taking advantage of this?

Kim: We do a really good job educating CPAs across the country. We try. There are a lot of CPAs out there. We cannot touch them all. We've got 120 people and there's literally hundreds and thousands of CPAs. We do the best we can. We love CPAs. We want to educate them. We want to connect with them. If you are not doing this and you want to do this, it would be great for us to work together. I really want to talk to your CPA because he has more of use out there that I want to make sure he’s or she's aware and give him or her resources to be able to let other people know that we do this. We do this very economically.

I work with a lot of property management companies, investors, and funds. I work with a lot of family offices. I work with a lot of individuals. The word is now starting to get out there. There's a lot more individuals that are starting. We do a lot of shows like this to bring what really the wealthy has done for a long time down into mainstream. That's really what we've been doing.

Jason: Random seg question, if property managers came to you, and they've got lots of investors, is there some sort of service that they could work with on you that they can add as a new revenue stream to push their investors towards you?

Kim: Yeah. Absolutely have them call us. We can do some sort of [...] share or something like that, or just the finder's fee or something like that. Property managers, historically, have been difficult. Property managers do the property management. They usually don't get involved in the taxes. It's hard for them to have those discussions because a lot of times with the owners they'll say, "Hey, you should really do cost seg," they're going to go, "Oh, it's taxes. My CPA handles that." Now you're dealing with two different layers.

Just like you said in the beginning, "If it has anything to do with taxes, I'll let my CPA do it." Those people have that mentality like, "Oh. I'm sure my CPA's already doing this if it's that big." I'm telling you, please listen to me, most CPAs are not doing this. I'm telling you that right now. Most of them aren't. Be proactive. Take your own taxes and your knowledge into your own hands and ask the appropriate question.

I will leave you with a kind of case study of a project I've been working on right now. This is incredible. I literally have a client that I was referred to from a CPA. The CPA brought me the client—a very good CPA client of mine. He owns tons of property all over the country. His family owns property and I've done all their cost seg for about five or six years. We finished the project.

I was in my closing call with them, explaining those studies in the last report and everything. He says to me, "I'm part owner in this mobile home park. I think we should probably do this. Do you think it will be worth it?" I said, "Absolutely. Mobile home parks are killer. They're amazing." They do way better than single family homes or multifamily with that matter.

They said, "Yes. It's absolutely worth it. Get me the depreciation schedule, and we'll go over it." He put his partner on the phone with me, and we talked about it. Then, they finally sent me the depreciation schedule. The mobile home park was put on their depreciation schedule as land, $3.5 million as land. I looked at that and I almost gasped, that I called, and I was like, "That's not good. You're not depreciating this at all. Land is not depreciable. It looks like you just bought a raw piece of land." He goes, "Well, that's just all there is. We don't own any of the parks." I go, "Yeah. But you own the pads, the electrical post, you own a laundry facility and there's a house there, there's fencing and there are all kinds of stuff. They are land improvements. That's all 15 year depreciation. You have to pull out the land first then depreciate what's left." He goes, "Oh, man."

Long story short, we get on the phone with the CPA. They're like, "Why didn’t you depreciate this? Why is it all on land?" He's like, "Oh, well. I didn't know." The CPAs don't know this stuff. Make sure that you're asking questions. If you have even just the inkling, reach out to me. I try to be very responsive to my emails, text messages, and whatnot. Email me. It's klochridge@engineeredtaxservices.com. Shoot me an email. Give me some synopsis on what's going on. Send me your depreciation schedule and I'll be able to tell you real quick if we can do something or not.

Most CPAs are not doing this because we don't have the resources. They don't even know. How was a CPA to know how much the electrical post we're going to depreciate? How was he supposed to know how much the pads are? They don't. You have to have a professional to go out there.

Appraisers can't do it because they're going to tell you what's in there and what's the total value is. They're not going to break it down. Inspectors are going to tell you what's wrong. Nobody's going to tell you what the cost of every component is in that building. That's where the power comes.

Jason: Awesome. This is really interesting to me. I appreciate you coming on the show, Kim. You gave out your email address, which we will have in the show notes as well, and on the website. How else can they get in touch with your company?

Kim: Our website is engineeredtaxservices.com. I'm also on the back page with our team. Just pick my profile and shoot me an email from there as well. I'm happy to help you. I have an assistant that can handle all the influx of emails that might come. We'll be able to work through them all. I'd love to hear it from you and please just reach out, so we can at least talk about tax.

Jason: Perfect. Kim, thanks for coming out and hanging out with me here on the DoorGrow Show.

Kim: Anytime.

Jason: All right. We'll let you go. Bye.

Kim: Okay. I’ll talk to you soon. Bye, Jason.

Jason: All right. There you have it. Really interesting topic. I didn't know about that. It's really fascinating. I'm sure it might be new to a lot of you. If that was helpful, make sure to reach out to them. If you are watching this on YouTube, make sure to subscribe, and catch these videos as they come out. If you are paying attention to us on iTunes and listening, make sure to subscribe on iTunes. If you can give us a little review, like this video, whatever you can do to help us about, it means a lot.

We're putting out a lot of free content. We would love it if you would reciprocate just a little bit and help us out. It helps us get the message out. It helps us get greater awareness and help more property managers change this industry.

I'm Jason Hull of DoorGrow. This is right towards the end of the year. This may come out in 2020 on iTunes and other places. To everybody, happy holidays. I hope you have a fantastic 2020.

If you're looking to grow your business, you're wanting a vision for 2020, you want 20/20 vision, you have a plan, and you want to do something different, reach out to DoorGrow. I'll say this real quick, if you didn’t get the results you wanted in 2019 or the result you wanted in 2018 or in 2017, you know exactly where you're going to be at the end of 2020. You're going to be at the same level of results you had every year so far. That's your default future.

If you want to have a creative future that's dramatically different, then I would love and be honored to help you create that. We've helped hundreds of companies do that. Those that listened to me, followed, do what I tell them to do, and show up to our coaching calls, they get those results. They get it. I would love that to be you.

That's it. Bye, everyone. Until next time, to our mutual growth.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

Download this Episode

Feb 18, 2020

What do you want to do with your life? Sit on the sidelines in a cubicle or travel the world? Take control of your life instead of watching it pass you by. Consider investing, start your own business, and enter the world of entrepreneurship.

Today, I am talking to Reed Goossens, Lead Asset Manager/Chief Operations Officer of Wildhorn Capital, about investing in the United States. After spending two years abroad, having a great time, and meeting the girl of his dreams, Reed returned to Australia to sit in a cubicle as a civil structural engineer and wonder how he could get paid to travel.

You’ll Learn...

[03:17] Real Estate Investing: Rich Dad Poor Dad ignited Reed’s interest in being an entrepreneur.

[03:45] Reed’s Journey: Leaving the safety of his cubicle in Australia to moving to America without a job for the love of his future wife.

[03:58] No job, no network, no problem: Took just six months for Reed to find a job in the United States and purchase his first investment property.

[04:29] Investing in the U.S. and 10,000 Miles to the American Dream: Reed went from reading Rich Dad Poor Dad to writing his own books on real estate investing.

[04:51] Structural Engineering: Prepared Reed for his future in America when it comes to construction. He’s built about half-a-billion dollars worth of infrastructure worldwide.

[06:21] Do you want financial freedom? How to get started in real estate investing.

[07:37] Benefits: Real estate investing creates cash flow, appreciation, and amortization.

[08:07] Rental properties aren’t turnkey, but property management is key to success.

[10:00] How to find a good property manager? Business culture with growth opportunity.

[14:10] Ok Boomer: It’s not just about doing work whether you’re miserable or not. People want meaning and purpose.

[15:27] Invest in Yourself: Self-educate by reading books, listening to podcasts, joining local meetup groups, and expressing a willingness to learn.

Tweetables

Structural Engineer: Scheduling, foundation and soil issues, you name it, throw it.

You make money when you buy, you lose it through bad property management.

Culture: Critical and pivotal to foundation of business and why clients can trust them.

Change and grow. People want meaning and purpose. Get out of your own way.

Resources

Reed Goossens

Email Reed Goossens

Rich Dad Poor Dad by Robert Kiyosaki

DGS 117: Brand Standards and Rising Expectations in the Market 0

Transcript

Jason: Welcome, DoorGrow Hackers to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, impact lives, and you are interested in growing your business and life, and you are open to doing things a bit differently, then you are a DoorGrow Hacker.

DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it, you think they’re crazy for not, because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income.

Reed: Good day, Jason. Thanks for having me on the show, mate.

Jason: All right. You’ve got a really cool accent. Tell everybody where you’re from.

Reed: From deep West Texas, mate, down below New Zealand and Australia.

Jason: Very deep Texas. Got it.

Reed: I’m originally from Australia. Grew up an Aussie, I went to school there, and moved to the United States back in 2012 when I moved here for two loves. One love was for my then girlfriend and now wife, and the other love was for the Big Apple. That’s really how it got me to the United States.

Jason: All right. Those women man, they get us to move. They just do it. Awesome. We’re going to be talking about investing in the US but before we get into that, tell us a little about how you got into this and then lead us right into this topic.

Reed: Sure. Let’s do it. My background is in structural engineering. I went to university for structural engineering, graduated in 2007, went abroad which means going overseas, and worked in the London 2012 Olympic games for about a year back in 2008. Then, I moved to the south of France, had an incredible life journey down there and that’s actually where I met my American wife or at the time, girlfriend. We fell in love and after galavanting around the south of France, I crossed the Atlantic Ocean. I worked for some Russian billionaires on some super yacht (it’s a whole story in itself). I found myself back in Australia in 2010 in a cubicle working as a civil structural engineer.

The whole idea of I spent these two years abroad, having a great time, meeting the girl of my dreams, and I’m now sitting in this cubicle going, “Geez, what the hell?” I want someone to pay me to live this life of travel. Really, the thing that came up to me was investing, but I didn’t know what entrepreneurship was. I didn’t even really understand real estate investing. I picked up the book Rich Dad Poor Dad, and that’s back in 2009, a decade ago. That was the spark that got it all started.

From there, I took the blinkers off a little bit. I definitely felt like a star athlete sitting on the sidelines, watching my life go by, and I really wanted to take control of that life. Over many years of self-education, I ended up moving to the United States. I quit my safe engineering job in Australia and moved in early 2012 to chase Erica, my wife.

I moved here without a job. I didn’t have any network here and over a short period of time I was able to find a job. I think within six months of moving to the United States, I had my first property purchased, a triplex. The various [...] here in the United States for those people who are not aware are very, very low compared to Australia. The whole thing about Rich Dad Poor Dad says, “Get started by putting cash in your pocket and having assets.” That’s really where it got started.

Jason: All right, and you’ve written some books.

Reed: Yes I have. I’ve written two books, Investing in the US which is the podcast form, now in book form. I’ve written a second book with a couple of other Aussie entrepreneurs called The 10,000 miles to the American Dream. We’ve all moved out here and successfully invested in real estate, inside of real estate businesses, and now we’re sharing our story with the world.

Jason: Structural engineering, how do you feel that prepared you for the stuff that you’re doing now.

Reed: It hugely prepared me. I probably can walk into a room and run rings around most people in terms of when it comes to construction. As a project manager in a career, I had built about half a billion dollars worth of infrastructure, multi-family retail across the globe. Scheduling, understanding foundation issues, and soil issues, you name it, throw it at me, and we can go bat if you want to go bat. It also got me into a role that I worked for a developer in Long Beach for many years and learned the business side of the real estate game through them as well.

Jason: Where are you located now?

Reed: I’m in LA. I was in New York for a couple of years back in 2012–2013, then moved back out to sunny California because it was just too cold in New York.

Jason: I get it. I’m just north of you. I’m in Los Angeles county, in Santa Clarita.

Reed: Nice. We have to go meet up and go surfing some time because I love the beach.

Jason: Yeah. The beach is cold, though.

Reed: Let’s see, mate. Let’s see.

Jason: Yeah. Reed, really cool to connect with you. Let’s get into this topic of investing in the US For those that are listening across the pond or those that are in the US, let’s make this relevant for both of them.

Reed: Sure. Let’s do it. What do you want to know? I’m an open book.

Jason: Where should we start? How does somebody start investing if they have no clue? You’ve been there at one point and if somebody has never done real estate investing, they haven’t invested themselves whether they’re here or not, how would they get started?

Reed: Well, I think the whole idea is about what you want to achieve in your life. Do you want financial freedom? A lot of people get started in real estate investing to achieve some sort of financial freedom.

Per my story in the beginning of the show, I felt stuck. I felt trapped in a cubicle. I wanted more to do with my life. The whole thing that drives me, Jason, is the fact that I have a fear of regret. If I wake up when I’m 65 years of age going, “Geez, I wish I’d given that a go,” I’ll have regrets. The whole thing that gets me driving, gets me up in the morning is going out and pushing my boundaries and being uncomfortable.

The whole thing about real estate investing is you’ve got to ask yourself, “What do you want to do it for?” Is it to create financial freedom for your family? Is it to create a little bit of extra income? You love your job, but you just want to put your money to work and not sit in a bank? Whatever that might be, real estate investing is really big compared to the stock market investing. It’s one of the best investment vehicles in the world because it has all the benefits.

There’s the four benefits as cash flow, there’s appreciation, there’s amortization, and it has appreciation of a long-term in terms of market appreciation. There are many benefits that you can have through investing in real estate compared to other stock investing or bond investing that make it a really quite a safe haven. It really goes back to, “What do you want to grow for your family or for yourself personally?” Once you answer that question, we can get off into the details of how you go do it.

Jason: One of the challenges that you’ll see in the real estate industry is that a lot of people will make these claims. You see these gearers that are like, “Hey, just get into real estate investing. Buy this matching program and then it’s going to be easy.” And then they end up with these rental properties that are really difficult and they realize it’s not so turnkey. They’ve got tenants. They’ve got renters. Property management, maybe more than anything, is kind of the gateway to this because property management played a role in the properties that you tend to be involved in or the real estate investment that you do.

Reed: Yeah, 100%. In property management, you make money when you buy, you lose it through bad property management. If you don’t have the right property managers on board, you can be royally screwed. We’ve experienced it. We have the daily grind of running a real estate investment firm at Wildhorn Capital, we have a constant struggle with trying to find good bums and seats to make sure that when they’re running our $40–$50 million assets, that they know what they’re doing, and they’re competent.

You might be in certain markets which might not attract the right type of property managers. You really got to be really careful at how you select the people who sit at the helm of the ship of any property that you buy. We happen to buy large multi-families, so we have 200–300 units at any one property. There is a lot going on, a lot of moving pieces. Making sure that you have those right people in those positions, to make sure that they’re steering the ship in the right direction and you’re not going to lose money, and the deal’s going to continue to perform for the investors, is really important.

My job within Wildhorn Capital is to make sure as a Lead Asset Manager, Chief Operations Officer, is really to make sure that those individual property managers, those individual sites are doing what they’re supposed to be doing. The original point, property management is the key to success.

Jason: Love it. I get asked this question all the time when I go on other people’s podcast. They’re always asking me, “How do you find a good property manager? How do you identify them?” I want to put this on somebody else for a change. What do you look for when you’re looking for either a good property management company you’re going to partner with, in situations where you need that, or when you’re doing hiring to find a good property manager?

Reed: Let’s answer the first question. To give some context, we have 1700 units across 8 assets in Austin, Texas. We have a third party property manager. I live in Los Angeles. My business partner lives in Austin, but we stood third party better.

Probably, what a lot of people would do whether you start with a single family or you’re buying 150 units, you’re probably going to go out at the beginning to a third party. How do you identify those third parties? We just recently went through a transition. We had to fire our original property management company and it really boiled down to a couple of things.

One was culture. Business culture is really, really important. If you’re going to be attracting someone to earn, sitting at an asset, $50,000–$60,000 a year, managing a $45 million asset, you better bloody have a good business culture. You need to have room for them to grow, and they want to grow into more than just being a property manager. Maybe they want to be regional. Maybe they want to get into the executive office.

If you don’t have that growth opportunity, combined with somewhat a decent pay, and then also the training wheels (I’ll call it), the training services and programs within the company, within the organization, to help those people blossom, really, what we as owners employ these property managers for is to go out into the market and find the best “eggs on the shelf” and form those eggs into great, successful, property managers so our assets can be successful.

We look for a couple of things. When we do interview asset managers, we look at how many properties are they currently managing. How many units do they have on the contract? How long are they doing this for? We go and get references from other owners. How have working with ABC property company been? Have you enjoyed their reporting systems? Have you enjoyed their business culture or are they really transparent with you?

There’s a lot of things out there that you need to be aware of when you’re hiring and sitting down and “dating” a property manager because you need to go and understand all the rigmaroles that go on with asset managing it. I hope that answered your question.

Jason: Yeah. I would agree. I think one of the first things when a property management company comes to me that’s struggling to grow and to figure out how to grow the business, that I will tackle with them is helping them get clarity on that cultural piece. It’s never the thing that they think they need but it’s so critical and pivotal to the foundation of their business. It’s why clients can or cannot trust them.

Helping them get clear on their personal why and then helping them get clear on the why their business exists, and to feed that personal why. One of my goals is to create this golden thread all the way from them, the business owner, the property management company, their why, through to the business why, through to the person with the rental property wants. If I can help them create that connection with each potential client, sales happen really quickly. Deals happen very easily because there’s a golden thread of trust between what the person wants and what the business owner wants, the property manager wants. They can see that. It’s transparent.

That’s so critical and we have to have culture. It has to exist in order for that to happen. If your team can sense that and can see that, then you’re able to attract A-players. B-players are not going to stay in a company without good culture. Especially millennials and Gen Z, they’re not going to work in a situation in which they’re just getting paid to do something that keeps them miserable. They want purpose. They want meaning.

You’ll see a lot of dinosaurs in the industry get really frustrated because they’re saying in business… Then there’s this trend of the “OK Boomer.” But the Boomers are like, “Well, we pay you, so just do the work. Do the freaking work.” That’s not how people want to live nowadays. It’s not just about hunkering down and doing work whether you’re miserable or not. People want purpose.

Reed: You bring up a good point. This comes not [...] also rent a business culture, but how you run the business with OK Boomers and a historical way of smacking someone over the back of the head if they’d done it wrong. They’re the old school dinosaur ways of the ways managers work. We’ve come a long way and as much as we—I’m a Millennial, I’m on the early end of it—get criticized for not working and all that sort of stuff. Look at my track record. I come from Australia.

For most people, I don’t want to swear on this podcast but you know what I’m going to say. Millennials also have created a lot of changes and disruptions in the way that we approach things and change through our thinking around it. That is really important. If you’re not willing to change and grow, then you’re going to be stagnant and someone’s going to eat you.

Jason: [...] Xennial which is kind of Gen X and kind of Millennial, and sort of bridges the gap. I remember dialing phones with the rotary dial.

Reed: I was born in 1986, so I still remember that. I remember my first mobile phone in Australia was actually when I was 18 years of age. It was the Nokia 3310 and it’s funny.

Jason: I had the Blackberry and I’ve had just about every version of iPhone that’s existed.

Reed: Exactly.

Jason: I think there’s a big shift in culture. I think that if business owners of larger property management companies, the most successful companies, they all have culture. They all bring up culture. I think a lot of smaller property managers hear them talk about it and go, “I don’t get it. That doesn’t make sense.” Then you’ll see a lot of property managers get to maybe about 200–400 door category and this is where if they don’t have culture, they get stuck.

I taught the second sand trap in property management. It’s because they don’t have culture, they’re not able to maintain and retain good staff, and they don’t have a clear vision, clear purpose, clear values, a clear mission statement or whatever you want to call it. There’s a disconnect, and they’re wondering, “Why can’t I just find good managers?”

One of my business coaches said this, “If you don’t have the business that you dream of, you’re not yet the person that can run it yet.” I think that a lot of times, we as business owners externalize everything. “Oh, it’s the Millennials. Oh, it’s my marketing. Oh, it’s my website.” Really, I found that if I could get the business owner to see that it’s them and make changes, everything else changes by default.

Reed: I have a similar business coach. You have to be a key person of influence in your industry. Whatever industry that is, if it’s property management, if it’s being a real estate investor/entrepreneur. I’m trying to attract investors to me, so I’m putting all the content out there. I’m sitting on this podcast right now, talking about the ins and outs of building business culture.

It’s easy as humans to blame something else. It’s someone else’s fault. It’s this one’s fault. But that’s why as humans, we can’t stop learning. If you stop learning, you stop growing. If you stop growing, you’re dead. It’s really about that embracing of change. Ignorance isn’t an excuse anymore. If you don’t know something, go ahead and freaking learn it. If you don’t want to go do that, well then you’re dead in the water.

That’s this whole mindset of changing the way in which we were historically taught to learn, grow, do business, manage people, expectations, and blah-blah-blah. We can get all into it, but it boils down to, you were right, you have to be a key person of influence in yourself. Your business is you. You are a business and you’ve got to start there. From that, people would want to feed off you, be around you, and then want to grow with you. If you don’t have that growth opportunity, you can’t attract better employees, better clients, and have better outputs for your company. I like this a lot.

Jason: It certainly makes a lot of people uncomfortable, too. I get a lot of flack in it in this industry just for being a change bringer. Some people don’t like it. They don’t like that I’m not a property manager, I’m from outside, and I’m bringing change to this industry.

Reed: “You don’t grow, you don’t know.”

Jason: Yeah, and for a while, I was kind of fearful of that fact. I thought, “Well, I’ll just stay in the background.” My business coach has consistently pushed me to get more and more uncomfortable as we were talking about earlier.

Side question. You’ve got all this business in Austin which is so favorable and friendly to business because I’m legitimately looking to move to Austin. I’m seriously considering it. Why are you still in LA?

Reed: Two things. The beach and my wife’s family are from here.

Jason: Oh, yeah.

Reed: But it’s insane. I set up my company to be a life by design company. It’s me and my business partner and I’ve got a couple of other small employees. I still outsource the general contracting. I still outsource the property management. As we grow, we have 17,000 units now but a 150 million under management with our investors.

We want to keep it lean. I’m Australian. I just got back from a 2½ week vacation. It wasn’t really a vacation, I was working every day, but I went to the Rugby World Cup in Japan. I was in Australia. If I have Internet, I want to work and my business partner’s completely aligned with me. We’ve always joked that if we ever need to get HR within the house, we’re done growing.

Part of the business of owning multi-family real estate is what can I control? The engineer within me wants to control everything. It’s the business systems, it’s the ecosystems that you create that can truly create true wealth, but like property management, do I want to go off and create a property management company?

I know how much property management is a thankless job. I was literally sitting in my property management company’s head office in Austin the other day, beating him over the head about budgets in 2020. Literally beating him over the head. And having clashes with upper management, that they’re saying stuff in these meetings that should have been prepared, so I’ve just literally experienced it with, and that’s got nothing to do with property management. That has got to do with how you manage your people.

Some people come into the meeting not prepared for budget review. I literally flew in from LA. What else are we going to do? The expectation is I’m sitting here ready to review budgets with you and you don’t know if these are baked yet.

There are all these things that go on with any corporation, that you got to make sure you have your systems in place the hierarchy, and to your point before that, the old dinosaurs, there’s a couple of old dinosaurs in that organization that we have to get a bit of feathers ruffled, but you got at those honest conversations because I am the client and I do expect things to be presented in a certain way. And that’s regardless of the fact that there’s a property management company.

Jason: Okay. What did you notice difference-wise between the Australian market? I would imagine you’re still connected to that. We get a lot of Aussies coming over here, where property management is very well-seasoned in Australia. We talk about a property manager as a household word, like a realtor is here, like people know what property management is over there is not as common here. Stats like 80% of single family residential rentals there are professionally managed by property managers. The US is nothing like that yet.

What is your perception on the differences between the US market and the Australian market when it comes to real estate investing, rentals, and property management?

Reed: I’m going to answer your first question first. This is because I’ve got a different lens on. Yes, you’re correct. My dad has an investment property and he has a property manager. When they say property manager, they’re really a real estate brokerage company that does sales for new homes. To keep the ecosystem going and the lights on when the market’s crap, they do single family rentals or vacation rentals, something like that. So that’s definitely well-baked.

What isn’t well-baked? In Australia, we don’t have the per the construction way of financing set up in Australia. We don’t have large multi-family. I moved to the United States and I, as a 29-year old, bought a 150-unit complex. I would never have had the opportunity to do that in Australia because the way in which the financing is set up is that, it’s a condo market. Before it goes into construction, they need to pre-sell X amount of units before it goes under construction. We have all this condominium market.

Within the condominiums, you might get ABC property manager to manage one of the units and you have someone completely different managing the other unit. Unlike here in the States where if I go to Texas, there’s a leasing center and I walk into the leasing center because one entity owns the entire thing.

One thing really missing from the Australian market is in [...] the commercial property management game. I just mentioned the other day in the corporate office of my PM firm, is like, “Guys, there’s an opportunity to go to Australia and start this out as multi-family starts to have more traction.” I see this as the opposite, that in the commercial multi-family space, America has it dialed in. It’s a true business. I know universities offering degrees in property management now, whereas in Australia, because we don’t have that commercial multi-family space, you haven’t driven that professionalism that I’ve come to expect here.

Again, I’m not in the single family world as much you plug in both here or in Australia, so I can’t comment as much on that, but just from the large multi-family commercial space, Australia is very mid-90s, like the Internet was in the mid-90s. No one really understood what it was, so that change. Does that answer your question?

Jason: Yeah, very much. That’s very interesting. I love hearing about the contrast, because contrast gives us perspective here in the US.

As far as investing in the US, what are some of the most common questions that people ask you when they hear about what you do, they’re curious, and they’re interested (maybe) getting into this?

Reed: From a high level, it doesn’t break down what the United States is. I’m going to compare to other western countries, so Australia, Europe, and Canada to some extent. I’m just going to break it down to Australia because I’m from Australia. You guys have 300 million people who live in this country. You are the king of capitalism. You guys have this financing options up the wazoo. You’ve got thousands and thousands of financing options.

With a large population, you have forced and you can inhabit north, south, east, west. You can pretty much inhabit the entire land mass. You force these what I call secondary markets. You have the New Yorks, the LAs, the San Franciscos, the Chicagos of the world, where people want destination cities. But then, because of the population and where jobs are being driven to, you have these secondary and tertiary markets. Through secondary and tertiary markets, you have more affordability. And that’s purely driven from a population point of view because you just got so many people.

Compare that to Australia, we got the same land mass as America (excluding Alaska, we roughly got the same land mass), but we only have 25 or 26 million people. We have not even one-tenth of the population of what you guys have. America has this really weird, awesomeness of having so much population, so much affordability, it drives cash flow. But there’s also appreciation, it’s got a ton of pro-business, all these things and you compare it to other first world countries.

We don’t have the cap rates that you guys have. You look at Charlotte, North Carolina or Austin. Historically was a seven- or eight-cap market. It’s now transition into these very low digit sort of four-fives. You compare that to Sydney, Brisbane, London, or Hong Kong where commercial real estate and real estate in general where cap rates have been like 1% and 2% because the supply and demand is forced to go that low.

So, there’s these still pockets of growth in America where, because you can inhabit all these different parts of the country and through job growth, that you guys have these awesome opportunities for investing, and that’s where a lot of people have heard about it, where you’re cash flowing in the States. You got appreciation and all these great financing options. It’s also the US dollar, like where do I come? Where do I sign up?

A lot of people hear about it internationally, and they come and want to invest here. That’s why I started investing in the US, and it was more of an idea of my journey, about how I’ve got started because when I first moved here, I had no idea what a credit score was. I had no idea what an LLC was. I had to learn all that stuff.

Jason: All right. I think there’s an advantage of doing that. There’s an advantage in coming into an industry or into a market with no experience in it because your eyes are wide open. Nothing’s assumed, you have to learn everything from the ground up.

That’s been my experience coming into the property management industry. There were so many things that I looked at and said why is everyone doing it that way? Why are people doing it like that? That doesn’t make sense to me. And why is pay rent the largest called action on their website when they want more owners and that’s the primary goal with this website?

There’s this disconnect and I think that’s the advantage of coming in with this outside perspective. You coming into this, what do you think Americans are missing? That they just assume? That has given you this advantage? Because you’re doing obviously quite well.

Reed: And thanks to America, I have been doing quite well. Let’s not get any wrong here like I haven’t made money in Australia. People ask me, “How do you make money in real estate?” I’ve never purchased anything in Australia. I got my fishing lines in the water out there, but until I actually go and do something, my whole portfolio is here in the United States.

You are correct. Perspective is the difference between what gives me an advantage over someone else. A lot of the American ethos is being around, “I got to go to school, I get this huge debt, I can’t go traveling after university because I got this debt, and then I will get no job. Once I’m in a job, I can’t leave, I’ve got a 401(k).” All of a sudden, you’re 65 and like, “What the hell just happened?”

As Australians, it’s in our DNA to go traveling. I didn’t come out of university with six figures of debt. It was absolutely more socialistic society back down in Australia, but that it allowed me to travel the world in open and give me that perspective so I can, when I move here, I can see an opportunity to go invest in America, I’m going to take those with two hands because I can see the opportunities compared to where I come from, how cash flow is so much more prevalent here. The barriers to entry into the United States market from a real estate investing perspective are so much lower than Australia. I can see a lot of people like that, a lot of international folks like that.

The message I have for the American folks is realize what’s in your backyard. Don’t be ignorant. I’m telling you this for a reason. Perspective is good. Listen to what I’m saying. Go out and educate yourself on what is in your backyard, what is in the state across from you, or in an affordable market where you can start buying and investing.

Ignorance isn’t an excuse anymore. I’ve said that earlier in the show. It’s really true that if you stop learning, you stop growing, and I think that’s what people get in there. Not just Americans. I’ve got Aussie mates back in my hometown, they’ve not left. They’re in that same blinkers on type of scenario. Not that that’s an issue, which is that if you want to understand the benefits of real estate investing, then get out of your own way sometimes and just start going out and educating yourself on what’s in your backyard.

Jason: What would be a good place to start with getting education towards this?

Reed: Well, sitting here right now talking about it, listening to your show. I still remember when I moved to the United States, I was going to real estate investment seminars made up in Aussie, and I remember being pitched to pay $10,000–$20,000 for a guru to help me teach everything. Then, when I got to the States, particularly in New York, the Big Apple, the firehose of information, it was all readily available at my fingertips. Websites, podcasts, books, meet-up events.

You don’t have to spend a lot of money, but at the end of the day, you do have to spend time. If you don’t want to spend the money investing in yourself or the time, then you’re never going to go anywhere. You got to understand that this is an investment in yourself.

So, I would start by listening to podcasts. They’re free. Picking up a couple of books that can start educating you on whatever niche you want to get involved with, with real estate. Maybe just financial education and literacy that you need to be sharper on.

Join a local meet-up group for real estate. I encourage everyone listening to the show, if you don’t have any experience, if you go to two meet-ups a month for the next six months, that’s 12 meet-ups. I bet your bottom dollar and I bet you $100 that they will know, or they would have created a circle around them, more knowledgeable than they were listening to the show today.

It’s about getting out there, being willing to pick-up a book, being willing to say, “Hey, it’s okay that I don’t know what this is about, but I’m willing to learn.” I’m an example of that. I’m self-taught, I went to university with structural engineering, and now I run a multi-million dollar investment firm.

You can change. The real advice is that we are in the digital age. It’s all at our fingertips. Go out, start investing yourself from an education perspective, and you will see change.

Jason: Reed, it’s been a pleasure having you on the show. How can people get more information from you as to what you’re up to or get plugged into whatever you’ve got going on?

Reed: Simplest way, go to my website. It’s reedgoossens.com. I live in Los Angeles. If anyone wants to hit me up for a beer, coffee, or lunch, just shoot me an email at info@reedgoossens.com. You can check it out all there. Find the podcast, find the books, find the videos. It’s all there, so have fun.

Jason: All right. Hey, thanks for coming on the show, and like Reed said, start getting involved in investing. Just start, right? There’s this power in just getting started. Set that intention, start going to some meet-up groups. You can check out meetup.com. You can check out Facebook groups, there are all kinds of resources available, and maybe you’ll find your passion the way Reed has.

Reed, I appreciate you.

Reed: Thank you so much for having me on the show, Jason. I really appreciate it.

Jason: It’s been a pleasure.

All right, so if you are a property management entrepreneur and you’re wanting doors, then reach out. We’ve got some cool programs that we’re adding to our lineup of what we’re doing. We’re really excited about something new that we’re launching, the DoorGrow Referral Amplifier that Jay Berube and I are doing, so make sure you check that out.

He is an amazing entrepreneur, one of my clients that was able to close and acquire over 300 doors into this property management portfolio from ground zero in Florida in about two years. He did it largely through outbound, reach out to agents for referrals, and he systemized this. He’s now even got VAs helping do this for him. He runs his company remotely from another state now, and it’s still growing.

So, reach out and check us out if you’re interested in this. By the time this airs on iTunes, it will probably already be filled. We’ve only got 20 seats, so if you’re watching this live, then get in. We’ve already sold about half the seats already, and we haven’t even announced it publicly. I’m just throwing it out there now. Get in before we close out the remaining 10 seats. Bye everyone.

Download this Episode

Feb 11, 2020

Not tech-savvy? Afraid to use technology to meet elevated brand standards at scale? Are you willing to manage and centralize chaos by leveraging automation and mobile functionality for those maintaining and caring for your properties?

Today, I am talking to Tucker Cohen of Breezeway, which brings operations and service optimization software to the property management space. By combining deep-learning technology, robust property data, smart messaging, and mobile-first task management, Breezeway makes it easy for managers to deliver the best experience for guests, tenants, and owners.

You’ll Learn...

[03:05] Problems Solved: Breezeway helps property management business owners when short- or long-term tenants move out to determine condition of property.

[05:15] Breezeway Bio: Created by FlipKey founder and acquired by TripAdvisor. Breezeway uses 75+ years of industry experience to build the future of property care.

[07:00] Systemize business to be more effective and save time for brand standards and rising expectations in the market.

[10:23] Conferences and Companies: What does a conference need? Everything a business needs. Company growth and expansion doesn’t always make things easier.

[14:45] What are brand standards and rising expectations? People and perceptions are extensions of your brand. Trust and transparency meet standards and expectations.

[21:25] Dating Analogy: Am I the person that the person I want to attract into my life or into my business, would they be interested in me? Come down to their level or level up.

[23:05] Running a Business: If something isn’t working, it's your fault. Take ownership, don’t blame your team that is following your lead.

[27:20] Expectations tend to rise, but sometimes expectations are artificially wrong, unrealistic, unmanageable, and express entitlement.

[29:22] Situational Sayings: If nothing changes, then nothing changes. If you want dramatically different results, dramatic changes are required.

[30:59] Status Quo Challenge: Some people aren't ready for change. Ultimately, everyone moves toward an operations tool, like Breezeway.

[36:00] Platform Integrations: Breezeway strives to be a connected system, but wants to work with Rent Manager and others.

[38:35] Three-Legged Stool: Cleaning, inspection, and maintenance of property care and operations.

Tweetables

Everything looks shiny and pretty, but business is tough, being an entrepreneur is tough, and the inside of companies can be tough.

The main thing must stay the main thing in the business. Keeping focus is power.

Expectations tend to rise, but some expectations are unrealistic and unmanageable.

The sooner you can automate, the better. As you scale, you have that process in place.

Resources

Breezeway

Tucker Cohen’s Email

Tucker Cohen on Twitter

Tucker Cohen on LinkedIn

FlipKey

TripAdvisor

Todd Breen

Extreme Ownership by Jocko Willink

DGS 116: Automated Income Verification in the Property Management Industry with Stephen Arifin 0

Transcript

DoorGrow hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it, you think they’re crazy for not, because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income.

Today, I am hanging out here with Tucker Cohen. Tucker, welcome to the show.

Tucker: Thanks a lot, Jason. That was fantastic. For some reason, I thought that was recorded. I didn’t know you did that a lot.

Jason: I just say it each time. Sometimes, I screw it up even though I wrote it.

Tucker: It’s perfect, you nailed it.

Jason: I'm reading it. I think I haven't memorized, I probably do, but I read it because even I get nervous doing my own show sometimes. Tucker, we're going to get into Breezeway and our topic today is brand standards and rising expectations in the market. Give us a little bit of background before we get into the topic at hand. Tell us a little bit about what is Breezeway and maybe we can dig in more into that as we move through the topic.

Tucker: Absolutely. First of all, thank you so much for having me. I'm glad that we're able to reconnect since Orlando, probably like a month ago now. I’m super excited to be here. It's interesting. The topics are largely in line with what we're up to. I doubt that's much of a coincidence, but what Breezeway aims to do is allow property managers, like the ones you're talking about, the ones who aren't afraid to adopt technology, go out on a limb, and do something first, to meet those elevated brand standards at scale.

The way we're doing that is through leveraging automation, through leveraging mobile functionality for folks in the field who are helping maintain and care for your properties. Without getting too much into it, I'd say that we're really in line with that brand standard piece you mentioned.

Jason: Cool. I want to touch on this before we could move on, but what problems does Breezeway really solve? Property management business owners are struggling with what? They would be really interested in having a conversation with you.

Tucker: I think there's a number of different ways to answer that with regards to the folks who I think are probably tuned in now. It's going to be more aligned along the lines of when someone moves out or when someone checks out of one of your properties, be it long-term or short-term, you don't necessarily know the condition that the property was in when they got there.

With Breezeway, we have a system of record for every single detail down to the serial number of your appliance when someone checked in and every item into a certain room or a certain part of the house that often goes unnoticed or you have an owner coming in to check-in, I think it’s just managing the chaos would probably be the best way to describe what we're helping folks with.

Jason: Now, my initial gut reaction hearing this is that sounds like a lot of work, of data entry and getting all these things, just to go around to each unit and feed all this stuff in. How do you deal with that objection that people are probably, I'm sure it's come up. That sounds like a lot of time.

Tucker: Totally. With any of this type of stuff, you get what you put into it. If you're willing to go through the due diligence upfront, make sure that everything is set up right, and you have all your property information in the system, then it pays dividends down the line where you don't have to go digging through a Google Drive with hundreds of different files about your serial number on the microwave, that property number 150. That stuff is all there anyway. The only difference is that it's just buried somewhere, whether it's an email thread, a text chain with a cleaner, an inspector at your property, or a maintenance guy. You have most of this information anyway. What we're doing is we're centralizing everything in there under one hood.

Jason: Got it. Now I'm going to read a little bit of that bio that we received when getting ready for the show because I think it makes you guys sound pretty credible and I want you guys to look really good. Breezeway brings operations and service optimization software to the property management space, combining deep-learning technology, robust property data, smart messaging, and mobile-first task management.

We make it easy for managers to deliver the best experience of guests, tenants, and owners. We are serving a global customer base across a broad set of verticals, including short-term vacation managers, residential property managers, cleaning and maintenance providers, hospitality operators. This was created by the founder of FlipKey which was acquired by TripAdvisor. The Breezeway team is using 75-plus years of industry experience to build the future of property care.

What you're working on is you are directly with the sales team. You're building the sales team inside that. This says, “Having skilled companies from series A to unicorn status in the past.” What does that mean? Explain that to me.

Tucker: That's, of course, like privately-held software company jargon right there, but basically, what that means is a company that's pre-Series A, like us here at Breezeway, means we've raised a very small round of money. In the future, we may raise a Series A, which is more of an initial investment, proper venture capital raise, and then all the way up to unicorn status, which is commonly referred to in Silicon Valley as a billion-dollar valuation for the company.

Jason: Okay. Let's get into the top of your hand. Brand standards and rising expectations in the market. This sounds like you guys are primed for growth. It sounds like you guys have a really cool technology in place that's going to do some stuff for property managers to help them systemize their business.

I think you could answer my question better in saying that it's going to help them save time in the long run, right? It’s the bottom of the line. There's some time that it takes to get this stuff set up initially, but it's going to save you the hassle of all this time in the long run. Overall, it's not costing you time.

Tucker: Yeah, you got it.

Jason: There you go.

Tucker: Most folks are already doing a lot of this stuff anyway.

Jason: They're just doing it poorly.

Tucker: Again, you said it, not me.

Jason: Most things in most businesses. I get to see on the inside of hundreds of companies and everything's shiny on the outside. It could be shinier. We can help you with that, by the way, property managers. It could be shinier on the outside, but the challenges on the inside, that's like the whited sepulcher they talked about in the Bible like, “How's everything going?” “Oh, it's great,” but they're drowning. That's businesses on Instagram. Everything looks pretty and is great but really business is tough, being an entrepreneur is tough, and the inside of companies can be tough.

A smart entrepreneur I’d spoken with today on a sales call said, “What's your internal organization like? How do you run your own business?” I just started telling him because us, entrepreneurs, we know what it's like to run a company. It feels like herding cats sometimes, it feels like chaos, wrapping some constraints around that and moving the business forward towards scaling towards growth takes work. You help manage some of the herding of the cats information-wise.

Tucker: There you go. Absolutely. To that point, it's such an interesting timing. I actually just started listening to this other podcast called Under The Waterline. Have you heard of that one?

Jason: No, but Under The Waterline? Like drowning?

Tucker: It's pretty straightforward, but all about what you're saying. Everybody tells the story. When a company goes well, all you hear is the above the waterline, which is clean, beautiful, and nothing ever went wrong. I'm drawing a blank on the host. I only listened to a couple of episodes far, worth checking out.

He digs and he interviews with entrepreneurs, and talks about “Tell me the honest take. What happened here? How did you do this? Was it good? Was it bad? Was it ugly?” really digging in on that under the waterline grit that it takes to successfully build a company like you're talking about.

Jason: Yeah. I've made all kinds of mistakes. I jokingly tell people that DoorGrow has been built on thousands of failures, I mean really. I did a conference back in November and some of the listeners were probably at this conference. We had 150 attendees. This was our inaugural event. It was phenomenal. We had amazing food. We had great speakers.

Here's the dirty secret about doing that conference. People were like, “Why aren't you doing it again this year?” I thought it'd be this great thing, our business is healthy, we're doing about $1 million in revenue, we've had 300% growth, then like, “Let's do a conference this year.”

Tucker: Why not?

Jason: The thing about starting a conference, property managers can compare this to—if they're in residential going into commercial, or deciding to start in a new market, deciding to do associations, or whatever it might be—some expansion and they think this will be easy. There’ll be just this other thing. This other thing was like starting a whole new company because what does a conference need? Everything a business needs: sales, marketing, branding positioning, lots and lots of organization, everything that a business needs. It was like starting another company.

Guess how much growth we had the year that we were doing a conference? No growth. We had no growth for a year. We were healthy-ish but we weren't growing ironically. Our company is called DoorGrow, but it was because we were distracted because everything had to go towards this conference. Once you decide to do a conference, you're all in. You're on the hook with the hotel, you've got vendors, people sold tickets, there's no going back.

There are lots of companies that have gone bankrupt just for doing a conference. I was like, “How was that possible? No.” We're [...] than that. Not me, no. That's every business owner starting company. “I'll be better than all those other property management businesses. They all suck but that won't be me.” I hear that all the time. “I'm starting a property management business because all the other companies in my market suck.” I hear that every week and they won't be that one.

Tucker: What you're talking about, too, Jason is just like spending your time efficiently and effectively. If you are a small shop, you can't really afford to necessarily make mistakes like that with where you're allocating your time. In your case, it was a conference that did it. You did it, you pulled it off but someone who, like you're saying—

Jason: Yeah, everybody loved it, everyone's like, “It was so great,” and I didn't love it. It was super stressful because I'm somewhat introverted. I'm an ambivert but that situation was incredibly uncomfortable for me because it was just so much pressure. But it went off well, everybody had great feedback but it cost me $2 million in opportunity cost easily.

Tucker: No ROI there.

Jason: I could do a conference that cost tons of money, broke even sort of thing. The conference probably cost $120,000 just to throw because we did everything great but the opportunity cost, the fact that my team were all focused on it, and everything else instead of on the main thing. I think as entrepreneurs, we need to remember in our business, the main thing is the main thing. If your business needs sales and revenue, then that's what you need to focus on, otherwise, you end up with a sales slump and then you're scrambling.

The main thing has to stay the main thing in the business. That was a huge lesson that I got from that. I got to make sure the main thing always stays the main thing. Entrepreneurs, we’re always tempted by opportunity and there's always a distraction, there are always new options, opportunity, and distraction, whether it's expanding into a new market as a property manager or something. Keeping focused is power.

Tell me what are brand standards? Rising expectations? Let's get into this.

Tucker: I have a hot take on brand standards. I think it's a pretty lukewarm take, I think it's pretty straightforward, but it’s really like, “This is what your expectation is.” There's this sociological theory, which is that there are three versions of you. There's you as you see yourself, there's you as other people see you, and there's a version of you that you think other people see as you. It's your projection of what people's perception is. It's one thing from a personal standpoint, but from a business standpoint, you actually can control that in a lot of ways.

That's what we're talking about with brand standards. You have expectations as an entrepreneur, as the CEO of your own company, you expect things to be done a certain way. How do you make sure that the people who you're trusting to impact your business, whether it's someone taking photos of your property for a posting, for listing, cleaning your property, or inspecting your property before someone checks in or moves in? Those people are extensions of your brand. You're effectively trusting them to meet those standards. A lot of times, you don't necessarily have insight into that but maybe that was a hot take.

Jason: Yeah. I'll add to that. Branding is one of the main things that we have property management businesses with. I consider myself a branding expert. This is something that I dealt with in helping clean up the branding for hundreds of property management companies. We've helped some vendors even recently.

We helped clean up Virtually Incredible’s branding. We helped clean up their new logo. It was designed by my team. I had some great conversation with Todd Breen on helping him focus on the main gateway that was feeding his business and recognize that other things were back-end products that came later in the sales cycle, instead of putting out the message that he did everything, which one feeds the business. I think property managers need to recognize that, too.

Property management is often the front-end gateway product even if they also do real estate. It works more effectively usually that way. I think they need to focus on that, but a lot of property management businesses in the branding are real estate companies, which scares off the people that want a specialist. They want a specialist that manage their biggest investment ever. I've helped double some property management businesses’ real estate revenue commissions by eliminating real estate from their branding, ironically, because once the property management side is healthy, it's what's feeding them the majority of the revenue that’s coming into that.

It goes back again to focus. We can tie this back in, but it goes back again to focus that in order to deal with people's expectations and in order to manage the perception of your business, I think the key is that you need to align it towards what starts the process, not towards everything that you do.

I'm dating now. Imagine that you're in the process of dating, you're going out, and you just vomit everything about yourself and what you do. You can't do that. You got to start with where's their interest level at. Start in that space first. “Oh, you're into music? Me too.” You have to start somewhere. There has to be a beginning.

The same thing with our businesses, there has to be a beginning because you [...] what you're doing. You're trying to create a relationship and you can parallel this to dating, but you're not going to show up and try to make out with them on the front porch as soon as you meet them. That's what people try to do in sales a lot of times. They just vomit everything right on their lap, they're in a state of overwhelm, and they're like, “Okay, that's a bit much, buddy.”

I think also with branding, transparency is so huge. You said something that I felt anxious just hearing you talk about the expectations with yourself, with others, and then what you think others are perceiving. That can be such a big head game that people get caught up in. They’re like, “Oh, my gosh, how are people perceiving me? Am I okay? Do they like me? Am I being right for them? Am I doing this?”

Ultimately, as we get older, we learn to just not give an F. You don't care as much because you become more confident, you love yourself, you like yourself. When your business is confident, when you're confident in your business, and you're confident your business can deliver, you come from a greater space in which you can be the prize that the client is trying to get instead of thinking that they're the prize.

This is called prizing in sales. I think it happens when you’re transparent because transparency creates safety, it creates trust, you don't have to try and be something. The problem is, a lot of times, the brand is not in alignment with what's on the back end, what's on the inside. It's not in alignment with the business owner.

Tucker: That brings up two great points. One is you say in your personal life, you grow up and you're just like, “Yeah, I don't really care. This is who I am, take it or leave it.” What we're talking about here, unfortunately, is a place where we don't have that luxury. We're talking about the rising expectations that are taking place across every element of property management and then the brand standards.

Jason: Due to increases in technology. People have iPhones. If they have iPhones, they expect more.

Tucker: It's one thing to say, “Yeah, this is who I am, take it or leave it,” but if it's your business, you say that, and you provide a bad experience, that's where I think branding really comes down to is the experience that your client ends up having when they engage with you, be it at the very beginning of your relationship or throughout the lion's share of it all the way to the end.

Jason: Yeah. Let's go back to the dating analogy. If I'm overweight, I'm not getting my hair cut, I'm not brushing my teeth, and I just grow my beard down to my ankles, and I just say, “Screw everybody else, this is how I am. Take it or leave it.” That's cool, I will only attract people that are interested in that. That might not be what I'm interested in.

Here's the thing. I love this question, “Am I the person—that the person I want to match with, or attract into my life, or into my business—they would be interested in? Am I at that level? If not, I even need to lower my expectations or I need to make some changes.”

Tucker: Right, either come down to their level or you level up. That's it.

Jason: Right. Either way, I need to get in touch with reality. I need to make some changes. A great question that I've had several coaches I've seen throw out or coaches I've worked with ask is, “Who do I have to become in order to be that person? Who do I have to become? What would it take? Who do you, as a property management business owner, have to become in order to have the type of business that you want?” Here's the thing. One of my coaches said, “If you don't have the business yet that you dream of, you're not yet the person that can run it yet.

Tucker: That's meta.

Jason: That's meta. Right, that's really simple. If you don't have the business that you dream of, you feel like it's not right, and you're frustrated with your team, you're not the person yet that can create that. But as entrepreneurs, it's so easy for us to externalize all of that. I get many people come to me and they want to focus on their website, they want to focus on lead gen, they want to blame their team. Everything is external.

The ironic thing that I found is if I can get them to focus on themselves, get clarity on who they are, what really makes them feel alive and in momentum as entrepreneur, they get really clear on their purpose, then we align the brand, the business, everything around that, everything changes. The website's going to end up changing, their messaging is going to end up changing, their sales process changes. They fire some of their team members. Their team members change.

Everything changes in a business once the business owner, the entrepreneur at the helm who is the sun at the center of the solar system changes. Everything has to change by default. But what's incredibly costly, time crazy, and painful is the folks trying to change everything externally without changing yourself which is really creating all that.

Tucker: Do you know Jocko Willink, the ex-Navy SEAL?

Jason: Yeah, he's written some good books.

Tucker: He's got the book Extreme Ownership. That’s his whole thing, it’s extreme ownership. If something's not working out, it's your fault. You got to take some ownership, it’s not the team's fault. The team is following your lead. You're the leader.

Jason: I'll share an example. I was talking with somebody and they were complaining about all these different people that had come into their life. They were complaining about this guy, that guy, and this. I said, “Hey, there's one common denominator among all of this. There's one commonality.” Because they were like, “I don't know [...]. All these people are so different.” I said, “There's one thing in common. You. That’s the one thing in common.”

The most dangerous thing in the world—property managers know this if they've been in the business a while—one of the biggest red flags for property manager is if somebody comes to them and says with an existing manager or they just fired their last manager and they're complaining about their previous managers. “Oh, this company was terrible.”

The dumb property manager would listen to all of that and they would say, “Oh, yeah, they're terrible. We'll be way better.” The correct property manager would say, “Okay, maybe it's this person so I better ask some really good questions before I take them on because I might be the next company that's on their [...] list that's getting attacked on online reviews and negative. I don't want to be that.”

That's a red flag. Another red flag is if somebody's referring a client to you. We can't really help them. I teach my clients to do that, to refer the clients they don't like to somebody else. I'm sharing this transparently, everybody. If somebody's referring a client to you, it could mean that they're a terrible client. Sometimes, though, it may just mean that they’re not a fit. One man's junk is another man's treasure when it comes to property management. Some people can deal with that difficult investor and others can't. Some difficult investors can exchange the good ones just by setting a real strong fence and a boundary that some managers aren't capable of doing. That's all they wanted in the beginning, they just wanted safety. That's another advantage you can create.

Tucker: The takeaway there, do your homework always. Larry David had a good episode on that. Don't get foisted.

Jason: Foisted? I don’t know that term.

Tucker: I'll send you a link. Curb Your Enthusiasm episode.

Jason: All right. I’ll avoid getting foisted after I launch this episode.

Tucker: Tough referral.

Jason: Perfect. Expectations do tend to rise but sometimes, expectations are artificially wrong. I saw a post from one of my buddies who's in the restaurant industry today. This girl wrote this note on a receipt saying, “I'm not giving you a tip because I'm only a few days away from my 21st birthday and you wouldn't allow me to have alcohol.” No tip for their whole party, from the whole party of food.

This just shows the entitlement that exists in some people. That's ridiculous. Sometimes some people's expectations are unrealistic. I don't think it's too much for somebody to provide good service but to break the law for somebody so that they can have alcohol because, “Hey, my birthday is only a few days away,” come on.

Tucker: That's an unrealistic expectation at its finest.

Jason: As long as it's in the past. Yes. Some expectations are not manageable and it's not possible for us to raise to that level of their expectation because it's without foundation, it's a pie in the sky, it's a pipe dream, it's not realistic. Now I think the challenge with property managers is there's some things that they think, “This is a status quo, this is how we’ve done it. This is how it is. It's just hard this way.”

They think everything else is pie in the sky or fluffy and not possible. They exclude themselves from making those changes. It’s like the guy that's like, “Oh, all girls are just difficult. I'm just going to sit on my couch and eat Cheetos all day. They only want a rich guy or they only want whatever. They just choose out.” In business is the same thing, we can just choose out.

Tucker: An all-encompassing saying for every situation you can think of is if nothing changes, then nothing changes.

Jason: Right. I've also heard it said if you want dramatically different results or if you want dramatic change, it requires dramatic change.

Tucker: There you go, case in point. Then, of course, another bit of jargon of rising tide lifts all ships. That’s it.

Jason: I think I touched on that one on this show before of rising tide can raise all ships if the tide is already high enough, but I think the challenge in property management is that the tide is all the way down in some areas. It's low. There are some property management businesses with holes in them like you wouldn't believe and they're sitting on gravel or sand. They're there.

A rising tide is going to sink some ships in this industry, no question, and they need to sink because it's going to help the entire industry. There are property owners businesses that should not be in business or they’re going to have them patch up some holes and make things work better.

Tucker: I think to that point, Jason, it's really the ones who are going to sit back and say, “This is the way we've always done it or this is status quo,” because frankly, at the end of the day, the customer has all the power. They're the ones that can make or break your business with one bad review at the end of the day. [...] natural selection, I think. You’re right.

Jason: Let's apply this to Breezeway. Breezeway, what are some of the challenges that you deal with in selling your services to property managers? Some of the things that you'll typically hear from them.

Tucker: That's a really straightforward one, is that status quo like, “This is where we've always done it.” It's not that big of a headache for us now. We don't think we would use it that much, or what we talked about before, it might be too much work upfront. It's okay. Some people aren't ready for change but we stand by the fact that ultimately, everyone will move towards an operations tool like Breezeway, if not Breezeway.

In most cases, when people say no, they come back. We believe that's going to continue to happen as this tide continues to rise and the expectations continue to rise. If you don't have high brand standards, you don't get to be a brand any more because (like you said) the ship sinks. If you can't meet the customers expectations, you're probably not going to have any customers for much longer, so the status quo.

Like we said, this isn't stuff that people aren't doing already in a lot of cases. They're just running around and managing chaos in order to effectively do it. What Breezeway allows them to do is both automate as well as ensure that it's actually happening in a way that they hope it will, meeting those brand standards.

Jason: You've got customers, right?

Tucker: Yeah, we have some.

Jason: Okay, good, me too. Can you share an example, a case study, or maybe even some typical situation that you've seen where they've gone from not doing it, struggling, not using Breezeway, to implementing your services, and what results they've been able to achieve?

Tucker: Without naming any specific clients, another big piece of pushback that we receive is, “I don't know if my service providers will actually use this,” which is fair, generally considering the fact that service providers aren't tech-savvy, what have you. But one of our clients down south were able to effectively roll this out to their service network. Each one of those service providers now uses our app to download all of their checklists offline.

Before, there was no good way for them to do that until they can download the apps all offline. They had pulled them and said, “Hey, would you want to go back to the old way?” which was email, paper and pen, checklist, they’re coming into the office, “Hey, here's your assignment for the day,” or emailing them out to some of the further ones, then they had to submit them all back manually with all the photos attached, and they're like, “Absolutely not. Of course, why would I ever want to go back to the old way?”

A bit of an anecdotal story there about some of those challenges that we're seeing at the onset of conversations all being overcome and Breezeway being in a spot where they know no other way now.

Jason: There are a lot of tools that a lot of property managers probably shouldn't even touch until they’re maybe about 50 to 100 units, they can't even entertain the idea. They don't have cash flow, they're not ready to use a service, they're a solopreneur maybe, at what stage do you feel like Breezeway can be implemented in a business? Where do they need to be, roughly, in terms of door count, size, who do you guys generally work with?

Tucker: Good question. It is on a case-by-case basis to some extent because some entrepreneurs, like you're saying, have higher bandwidth for stress and they can deal with some of those chaotic nuances that go into managing a higher door count as opposed to someone like me who I like to ensure as much automation as possible so I don't let things slip through the cracks in the first place.

The sooner I can automate, the better. Then as I scale, I have that process in place. Typical door count, from a short-term perspective, we’ll work with folks in the 50 to 100 range but all the way down to 5 doors too. Again, [...] pay. They like to just automate as much as possible. In the longer-term world, we're talking about the same, range only on the higher scale. So, 50 all the way up to 500 and 1000 doors.

Jason: Okay. They can get started with you guys at any point. You guys don't have like 100-door minimum, 200-door minimum, or anything like this?

Tucker: No.

Jason: Okay.

Tucker: We're not turning people away just yet, Jason.

Jason: Okay. I do but I'm picky. I'm just kidding. Tucker, this is really cool, the future sounds like technology. Does Breezeway integrate with any platforms? There are so many different tools in property management, I think a lot of people listening to my show nowadays are like, “Oh, gosh, Jason just shared another stupid tool that I'm going to have to figure out how to plug into my business that I really want,” and they've got this to-do list of tools they want to add and implement. How difficult is it to get started with Breezeway and is there any concern about connection, integration, or any of this thing that is really significant?

Tucker: I understand why people get concerned with this type of thing. Of course, whenever you're introducing new technology, there's always a concern, especially because folks (like you said) have been burned in the past like, “Oh, another one of these things I have to do.” But at Breezeway, we really aim to be a connected system. From a long-term standpoint, we're working with the folks of the likes of Rent Manager and other folks like them.

Then short-term, all the 20-plus of the biggest PMS systems out there. But our goal by the end of this year and the coming year 2020, we're going to just be one of the most connected systems out there, whether it's your remote locks of the world all the way to your streamlines and your rent managers of the world as well.

Jason: Got it. People listening might get confused and think, “Is Breezeway a complementary tool to maintenance coordination tools or is it a replacement for these type of tools, where we have, maybe EZ Repair Hotline, Property Meld, and Latchel, these services?”

Tucker: Wow, that's a loaded question, Jason. I knew you’re going to come at me with that.

Jason: It’s an obvious question.

Tucker: It is an obvious question.

Jason: I’m just asking what I know my clients are going to be like, “What is this? How does it fit in the overall mix?”

Tucker: It's true. Listen, like I was saying before, we want to play nicely with anybody who's out there so we're not going to go ahead and say that we’re a direct competitor for these folks. The other thing is we do a handful of the same stuff. You'll be hard-pressed to be using one of them for maintenance, using Breezeway for cleaning and inspections, and not using us for maintenance.

There's a three-legged stool with regards to where Breezeway plays in the operations world and our aim is to supplement the PMS regardless of which one it is, we want to integrate with them. Then if they're using something else for maintenance, that's fine too.

Jason: Explain the three legs, what are they just for people that are a little bit lost.

Tucker: Yeah, sorry. I'm a big analogy guy.

Jason: Take the analogy into reality.

Tucker: Here’s the reality, you have your cleaning, inspection, and your maintenance. Those are the three legs we believe of property care and operations.

Jason: Got it. What other frequently asked questions do people have when they're approaching you for interest in Breezeway or just any other questions that we haven't covered?

Tucker: I don't know, it runs the gamut. We're creating a new category to speak of, property operation which is really something that people haven't heard of. We're excited about it. The main question is probably what is property operations. It's just what I'm talking about. It's really thinking about not just managing a property but actually caring for it and taking into consideration preventative maintenance and safety measures. All that stuff rolled into one in a way that you can do it as hands-off as possible.

Jason: Perfect. Okay. Tucker, I think we’ve talked about brand standards, we’ve talked about rising expectations in the industry, we've talked about Breezeway. How can people get in touch with Breezeway? How can they find out more if they want to get in touch and they're interested?

Tucker: We are at www.breezeway.io. If you would like to check out our integrations page, it's very simple /integrations. If you would like to meet with me, you can send me an email, tucker@breezeway.io, @CorpoTuck on Twitter, on Linkedin, Tucker F. C. I know a lot of folks are on Facebook, I'm thinking about getting on there, but that's about it. Happy to fill any questions now, it looks like we're getting some coming in on the chat.

Jason: We can touch on that. Is this available for homeowners or just landlords and property managers?

Tucker: Yeah. Listen, right now, it is primarily for landlords and property managers, but we do see a world where a longer term this will be used by homeowners and the connected home Internet of Things world of the future that we see everything sliding towards.

Jason: Someday, Breezeway may know whether my Roomba has done its job or not.

Tucker: Exactly. Your Roomba would be automatically scheduled by Breezeway.

Jason: All right. Tucker, it’s been great having you on. Everybody check out, it’s breezeway.io. I appreciate you coming on the DoorGrow Show.

Tucker: Yeah. Thanks so much, Jason. This is great. Glad we made it happen.

Jason: All right, I'll let you go. All right, there you have it, check out breezeway.io. I'm always curious to hear your feedback on this so make sure you guys are inside the DoorGrow Club Facebook group. This is our community for all those DoorGrow Hackers out there, property management, business owners, entrepreneurs. You can get to that by going to doorgrowclub.com and that will take you to the Facebook group. Answer all the questions and we'll let you in if you're a property management entrepreneur. Get inside that group.

As always, I'd love to hear feedback on what you think about different tools, different things that you're using, and ask questions to other people inside the Facebook group. We’ll give you some free gifts when you join that group, including a bible of fees that you can tack on your property management business. We have a list of really cool tools and vendors in there. You will get an email drip if you provided your email when you join the group. We will be giving you gifts to help you grow your property management business.

Eventually, you'll be able to learn a little bit more about what we do at DoorGrow. Make sure you get inside that group if you're not in our community. There are amazing people in there, they're helpful, and they align with my vision of creating collaboration over competition. That's what this industry needs right now. Until next time everybody, to our mutual growth. Bye everyone.

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Feb 4, 2020

Do you need a place to rent? But you can’t complete or submit your application because you don’t have the required information and documentation for the property manager? This is a common and frustrating problem.

Today, I am talking to Stephen Arifin of The Closing Docs, which offers automated income verification in the property management industry. The Closing Docs is a modern way to help applicants prove their net income, which is the best indicator of their ability to pay rent. The Closing Docs provides property managers with income information needed to make a decision that can be defended.

You’ll Learn...

[01:48] Early Entrepreneurship Experience: Stephen started solving problems using technology to make money from the time he was in kindergarten through college.

[02:50] First Job Out of School: Full-stack Web developer at Microsoft, where a small team taught Stephen the fundamentals of how to build a Web application from scratch.

[03:08] Missing Entrepreneurial Spirit: Stephen leaves Microsoft to pursue broken industries in need of technological innovation to save time and money.

[03:31] Mortgage Lenders: The Closing Docs was founded to fill in the gaps of loan application processes by automating income verification.

[05:21] How it Works: The Closing Docs receives permission from applicant to prove their net income, the money that goes into their account to pay their rent.

[07:00] The Closing Docs has developed integrations with property management software, including Buildium, AppFolio, On-Site, and Yardi.

[12:18] Why switch to The Closing Docs and not follow the status quo? Information collected directly from banks is better and trustworthy for an approval recommendation.

[13:38] Operational Cost Savings: People and software are expensive, so what can property managers/applicants expect to pay for The Closing Docs? $10 per screening.

Tweetables

Broken Industries: Paper-and-pencil processes are ripe for technological innovation.

Net income is the best indicator of applicant’s ability to pay rent.

The Closing Docs doesn’t ask or expect clients to change their software.

The Closing Docs’s standardized information helps people close more deals faster.

Resources

The Closing Docs

Automated Income Verification Process: How It Works

Stephen Arifin's Email

The Fair Credit Reporting Act (FCRA)

DGS 115: How to Be Successful In the Short Term Rental Market with Rob Stephens 0

Transcript

DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it, you think they’re crazy for not, because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income.

At DoorGrow, we are on a mission to transform property management businesses and their owners. We want to expand the industry, transform it, eliminate the BS, build awareness, change the perception of it, expand the market, and help the best property managers win. I’m your host, property management growth expert, Jason Hull, the founder and CEO of DoorGrow. Now, let’s get into the show.

I am hanging out with a special guest today. My guest is Stephen Arifin. He is with a company called The Closing Docs. Stephen, how are you today?

Stephen: Good, Jason. How are you?

Jason: I'm doing fantastic. Thanks for being here on the show. Stephen, before we get started, give us a little bit of background on you. Tell us a little bit about you, your entrepreneurial journey, your adventures here, and what led you to The Closing Docs.

Stephen: Sure. First thing, I'm a tech guy. I've always been around technology and computers growing up. My dad was a programmer and started his own banking software company. I was always around entrepreneurship and technology.

Even at a young age, I would always try to solve problems with technology. For example, in kindergarten, all my classmates were really upset when the school installed the website blocker that prevented them from playing their online games. I created my own website and hosted all of my classmates favorite games so that they can play at school. Of course, I took the nominal donation, and made a little cash.

I studied software engineering in college. I love building apps. I was in a fraternity and we were having some major issues collecting and organizing our finances. A buddy and I built a better invoicing system, launched the company into our fraternity, and help streamline their finances. That was probably my first real entrepreneurship experience.

My first job out of school was at Microsoft, where I worked as a full stack web developer. It was a small team and taught me a solid fundamentals of how to build a web application from scratch. I consider myself really lucky to be in a team with so many talented engineers, but at Microsoft, I really missed my entrepreneurial drive.

While I was working there, I've began investigating broker industries. I started with industries that has many paper and pencil process, and were ripe for technological innovation. An obvious contender was the mortgage industry. I started finding gaps where technology can save time and money.

After talking to a few dozen lenders, it was clear there was a breakdown in the [...] application process. Typically, their proof of income. Why were they taking screenshots of paystubs in W-2? In 2017 and even today, why are loan officers forced to review these data sources in so many different formats? It's cumbersome, it's time-consuming. It invites human error and judgment. Honestly, it's just downright painful. There had to be a better way.

Thus, The Closing Docs is born to provide automated income verification. I started in the lending industry. I really tried to help verify their applicant's income. But my lack of industry knowledge made it really difficult to sell. After speaking with folks in the real estate industry, I learned about similar problems in the property management space—a far less regulated industry and one that is even more disaggregated than the lending universe. At this time, it made sense for me to combine forces with someone familiar with the startup landscape, someone familiar with starting and operating businesses, and all their direct industry knowledge.

The Closing Docs other founder and my partner, Mark Fiebig, had started a handful of companies, successfully raised venture capital, and also happened to have deep real estate industry knowledge including owning a property management company himself. Together, along with my technical knowledge, we combined our assets and knowledge, and created what The Closing Docs is today.

Jason: Cool. Explain what is The Closing Docs today.

Stephen: We provide automated income verification. Essentially, a modern way to help applicants prove their net income. Here's how it works. With the applicants permission, we can obtain a years worth of deposit history directly from their banks, and share a report that illustrates an applicant's net income. Why are we reporting net income? It is the best indicator of an applicant's ability to pay rent going forward. The money going into the applicant bank account is the money that will be used to pay rent.

Our message to property managers is clear. We'll provide the info you need to make the decision you can defend instantly. So often, applicant provides incomplete information. Whatever info they do share, it comes from so many different formats from so many different sources. At the closing docs, we streamline the process significantly. Based on our client's usage data, we are seeing time spent from applicant screening fall by as much as 30%. That means that three hours screening timeline turns into two hours. We're saving our clients real money. If you do the math, that's one full-time employee for our property management firms seeing around 2000 property.

It's honestly fun for us to be on the phone with our customers and have them jumping for joy because they're super excited. We help them simplify and expedite their workloads. In essence, The Closing Docs is standardized information delivered right into your inbox or pushed directly into your property management software through our integration. We help people close more deals faster.

Jason: All right. That sounded very pitchy but it sounds cool. Tell me which software does your software integrate with, that some of my listeners might be familiar with? A lot of them are using AppFolio, they're using Propertyware, they're using Rent Manager, they're using Buildium, some of these tools as a back office.

Stephen: We've developed a number of integrations with Buildium, AppFolio, OnSite, Yardi. Those are many of the popular property management software systems out there. We're continuing to grow that list. We don't ask or expect our clients to change their software or stop using what they love or what they're used to.

We know that property managers pay multiple logins and switching between apps, so we made it as easy as possible for them to use our income screening. If they want, we also create an online rental application as well.

Jason: So, they're going through this process of using your application (probably) instead of maybe what's built into their software. This is helping to gather all the documentation or documents (The Closing Docs) that they might need in order to verify their net income. What happens next in this process? How easy is it for them to use the software and figure out whether somebody is a viable candidate for this particular property?

Stephen: There's two different entry points that property managers can use in our tools. One, if they are a firm with around 100 doors (usually), they can use our standalone web service. Essentially, they type in the applicant’s email and it sends the applicant an email to our site. The applicant authorizes their banks and they authorize us to pull all the information needed to aggregate metrics like net income—yearly net income, monthly net income.

We also count non-recurring deposits like bonuses, W-2 tax returns. Once that information comes in, the applicant gets the chance to review the information so that we remain FDR-compliant and they know the information that's being shared with their property manager, then they click a button. What we do is we print an income report. We deliver that directly to the property manager's email. That's the first way we do it.

The second way is for bigger property management firms around 1000 doors, we actually integrate our income verification directly into our online rental application. We have an online rental app and it has different controls. All the information that the property management firm requires, we can require it to the applicant so they don’t skip it, and the income verification is built into the rental app.

When the rental app is submitted, the property manager receives the rental application along with our income report. It's all in one combined package. That helps the back-and-forth issue that property managers so often get into, where the applicant doesn't submit all the necessary information and they have to go hound the applicant to, "Hey, can you submit this paystub? It's from two years ago." We save a lot of property managers time that way.

Jason: I imagine, even one piece of back-and-forth is costing probably, sometimes even a day. Sometimes, 10, 15, or 20 minutes minimum. If there's pieces that are over and over again that are missing, they're working a one application, this adds up. You have 5 properties that are vacant that you are working on right now, 10 properties vacant that you are working on right now. Your staff are going to be really busy. It feels like it's such an essential, critical thing that just has to be done to move these things forward to get things rented, but what you're saying is a lot of it can be automated.

Stephen: Right. When you’re trying to get more information about the applicant, that unit is in a limbo state. It's not really on the market. It's not really off the market. We're trying to prevent stuff like that.

Jason: And the renter gets frustrated. Everyone's been in a situation where you have a key providing more information. They keep asking for more information. It just starts to get frustrating. I'm sure there's instances where they just decide to move on to something that's easier.

Stephen: Right. One of the sites that want to [...] from starting this company, the property manager loves us, but their customers, their applicants, actually love us as well. They get approved faster, it's super easy, and they save a bunch of time. Really, everybody wins.

Jason: Ultimately, that's why every business exist. It's to create some win-win, maybe win. You're solving a problem. You're shortening the [...] the time. What are some of the other benefits why should property managers pay attention to this instead of just doing what they've been doing and following the status quo?

Stephen: We receive our information directly from the banks. We support about 15,000 banks which is about 99.9% of all of the banks in the United States. We get trustworthy data. We get better data. Since the information is digitized, we're also able to produce and approve a recommendation. We use 2.5 times the net income to rent ratio. If the applicant makes 2.5 times more, then the units rank and we give them a thumbs up. If they don't, we give them a thumbs down.

Property managers can make a decision really easily. Their applicants qualified. If it doesn't qualify, we'll give all the details of the transaction history and deposit history. They can drill down and see a little bit more detail where applicants [...].

Jason: All right. So, they’ll be able to have a little bit of information is to why they maybe didn't qualify, that sort of thing. I think another issue here that were a benefit to any piece of technology is that there's going to be an operational cost savings. If you have a staff member that's manually doing this, they're doing phone calls, they're texting, they're emailing saying, "Hey, we need this piece," they're trying to get stuff out of an email. They're trying to store documents in a certain way. They're asking people to send things, "Send me a picture of this," they will go into your bank, download these bank statements, and send them to us.

The challenge is, you're going to be paying somebody to spend the time to do this, somebody on your team. People are expensive. You're spending (for a decent team member) probably $15–$30 an hour. If you have hundreds of properties that you're dealing with, vacant properties, you're going to be spending hours and hours of money towards something that could easily be handled by technology.

Help those listening understand, if you will, maybe a little bit about the cost of the software. Just get them a ballpark or help them understand if this is something even feasible for them to be doing in their business.

Stephen: Our pricing is super simple, $10 per screening. There's no implementation cost. There's no sign-up cost. There's no minimum fees. It's just $10 per screening. The time that you save, especially when we have clients with a lot of doors and there's just a lot of applicants, especially during busy seasons like the summer season, applicants are just piling in by the truckload, each minute count. Each mental step that you actually even skip, it all adds up. It's really great. We have a lot of clients saying, "Man, we love your software."

Jason: This $10 application fee, they're probably passing on to the renters, I would imagine.

Stephen: We support both the property manager or the applicant. We have clients that do both workloads. It's a business that's usually up to your [...].

Jason: Okay. They can do it either way. They can build it in as a part of their application process. Most property managers are going to have some other steps besides just income verification as part of their application process that they need to take into anyway. This would be one piece of that puzzle. This would be the income verification portion. Just to make screening even more solid.

I would imagine that the financial aspect is probably one of the number one indicators as to whether they're going to be able to afford it and pay for it. They're going to be looking at things like credit. They're going to be looking at other things. Bottomline, if they don't have the funds available, it's okay. They're likelihood of making rent every month is going to be pretty slim.

What are some of the frequently asked questions that some of the people may ask when they're looking at your software? When they're looking at your solution? What are some of the most common questions that property managers would probably be curious to hear about here on the DoorGrow Show?

Stephen: Something with our income screening is that it requires the applicant's permission and the applicant's involvement. It's not like a hard inquiry on credit where you can just type in a social security number then they automatically pull credit without the applicant's involvement. We need the applicant to authorize their banks. That's how we remain FDR-compliant. Our data showed actually that we have around a 97% quiet rate which is honestly awesome. We do have some applicants in the older generation that is a little unfamiliar with technology. They get a little worried when authorizing the banks.

We're FDR-compliant, we have the same security protocols of banks, and we never see any of the sensitive credentials. But sometimes, applicants worry about that. Whenever we incorporate our income verification in an online rental app, we give the option to go the route that we've all come and known by uploading bank statements and pay stubs. We give that option. But like I said, 97% of the applicant go for the more streamlined option because it just saves so much time.

Jason: Okay. So, if they get a conspiracy theorist grandpa, that's been living in a basement, he's freaking out, wearing his tinfoil hat, he's worried about giving his password through your software tool, he can still do things the old school way if the property manager's willing to tolerate it.

Stephen: Right. If you think about it, they’re still uploading all the sensitive information. They're uploading their [...].

Jason: It's less secure. Let's be honest.

Stephen: It's a perception.

Jason: Yeah. If they're sending these stuff through email, that's even more ridiculous. Some emails open and passes through multiple servers. We understand that as nerds. That's okay. We need to help out our less technological brothers and sisters out there.

Stephen, it's exciting to hear about your tool. I hope people will check it out. How can people get in touch with you or with The Closing Docs and learn more?

Stephen: Our website, theclosingdocs.com, has got a lot of great information. It also has a contact form. You can get in contact with our team. You can also email me at stephen@theclosingdocs.com. If you sign up at theclosingdocs.com on our site, you'll get three free screenings to try out our tool.

We're pretty confident that you'll be hooked by the first screening. It'll give you a chance to try out this new workflow. In the end, it is a new workflow. As a business, you need to adjust your business processes to accommodate for new tools that you incorporate in your business.

Jason: All right, cool. Somebody was asking a question. They're asking, "How do you integrate with AppFolio since they don't have an API?"

Stephen: We use a Chrome extension, a browser extension. That allows people to create screenings directly from their browser no matter what website you're in. They're still using AppFolio, they're still using the tools that they love, but they can access our income screenings through our Chrome extension or a browser extension.

Jason: It's a clever solution to that. If anybody has any other questions, reach out to stephen@theclosingdocs.com. I appreciate you coming on the DoorGrow Show.

Stephen: Thanks, Jason. Thanks for inviting me on the show.

Jason: Yeah, you bet. Those of you that are watching, check out theclosingdocs.com. If you are watching us for the first time or maybe it's the 50th time, be sure to like and subscribe. Check us out on YouTube or leave us a comment on Facebook. I want to see people that are involved and see who's interested in the show. I love seeing that feedback. If you're on iTunes, do me a huge favor and leave us a review. I would appreciate it. We'd love some real feedback.

Be sure to test out your website. You can do that at doorgrow.com/quiz. If you're doing any cold lead marketing, advertising, go to doorgrow.com/coldleads. Go through that calculator. I want to give you a gift and show you some leaks in your business that you may not be seeing right now. I would love to help you out, so reach out to us at DoorGrow. Until next time. To our mutual growth. Bye, everybody.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

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Jan 28, 2020

What do most skiers and snowboarders dream about? Owning mountain property. But most of them don’t have the necessary wealth or money to purchase a second home, especially in expensive real estate markets.

Today, I am talking to Rob Stephens of Avalara MyLodgeTax. As a Denver resident and lifelong skier, Rob was fortunate enough to buy a three-bedroom condo in Vail about 20 years ago. But even then, it took Rob, his wife, and wife's brother-in-law to make the dream a reality.

You’ll Learn...

[02:57] Short-term Rental Market Options:

Hire local property manager/real estate agent.
Post property online via VRBO, Airbnb, Expedia, etc.
Rent-by-Owner: Book guests, collect money, and provide on-site services.

[03:48] Complex Tasks: Apply technology and manage challenges for property owners, managers, and operators. Know what taxes to charge, collect, file, and pay to agencies.

[05:50] Lack of Awareness: Property owners trying to manage their short-term rentals have never dealt with these types of transactional taxes.

[06:20] It’s not rocket science, but multiple layers of government are involved. State and local tax rates and requirements are specific to rental property location and address.

[07:10] Avalara MyLodgeTax: Online hosted, Cloud service similar to TurboTax but for short-term rentals with vacation, occupancy, resort, and other taxes.

[09:27] Penalties to Avoid: Long-term, multifamily operators getting into short-term rental space need to understand rules and risks involved.

[11:40] One less thing to worry about. Partnerships with property management companies is when Avalara handles everything occupancy tax related.

[13:02] Common Questions and Concerns: Shortcuts and consolidation for creating awareness and understanding the mechanics of administrative work.

Tweetables

Increasing scrutiny and regulation on the short-term rental space, makes for more paperwork and forms to be filed.

Lack of Awareness: Property owners managing their short-term rentals have never dealt with some types of transactional taxes.

Short-term rentals involve multiple layers of government. State and local tax rates and requirements are specific to rental property address.

Resources

DGS 114: Everything You Need to Know About Federal Criminal Reports with Jason Waggoner 0

Transcript

DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it, you think they’re crazy for not, because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income.

My guest today is Rob Stephens and his company is Avalara MyLodgeTax. Rob, before we get into talking about your business, I’d love to hear your background of how you're connected maybe to the real estate or property management industry. Maybe you could share with us just a little bit about your entrepreneurial journey just to qualify yourself to our listeners.

Rob: Sure, happy to. Thanks for having me. I love the intro, good stuff. My story, I live in Denver, Colorado, lifelong skier like a lot of us, lifelong skiers here in Colorado. One of our aspirations is to have a mountain property. As a relatively young professional, this is about 20 years ago, was fortunate enough to be able to purchase a three-bedroom condo in Vail, Colorado with my wife's brother-in-law. The three of us went in together.

At that point in time in my life, we wanted a second home in Vail, great skiing, be up in the mountains more, but part of that is when you make that financial investment—Vail is a very expensive real estate market—when we purchased it, we really needed income on that property to make the economics work. We certainly didn't have the wealth or money sitting around just to have a second home for our own personal use when we wanted it. We really needed to generate income.

This was in the short-term rental market. Back in the day, this is the late 90s, you really hire a local property manager or real estate agent that would get you bookings. At the time, somebody told us about a little website called Vrbo, it was pretty new back then. We tossed it on what's now Vrbo. It was frankly really amazing to see the bookings and we were immediately connected to travelers really across the globe. Through this one subscription would cost us about $120 a year, we're able to keep our property pretty booked and you're talking $30,000, $40,000 a year in rent.

Doing that, and I'm sure your audience will appreciate this, we were pretty clueless doing the rent-by-owner thing, there are all these other tasks to go along with it. You have to interact with guests, book guests, collect money, maybe have a rental agreement, you have to have on the site service, cleaning services.

My background is I’m a CPA, accounting and finance background, worked for some of the big accounting firms. But even as a CPA at the time, we just stumbled across the requirement to collect, remit sales, and occupancy taxes.

It was really through that experience, one being successfully doing this on the internet, managed my own property, and then coming across the complexity of managing these taxes even from my own little rental in Vail, we realized this is a powerful model. We think this online short-term rental, these sites have a lot of opportunities, but this tax is going to be a stumbling point.

A few years down the road, we started a company to really solve that problem for people. Our model was to apply technology and manage all these complexities for our customers, which would be registering with the different agencies, knowing what taxes to charge, and then once you know what taxes to charge and collect taxes, then automating the monthly, quarterly filing and payment of those taxes to the different agencies. Just to be clear, this is like a hotel occupancy tax, the same taxes that hotels pay to apply to short-term rentals.

That was our inspiration. We got started and we're able to form some partnerships originally with Vrbo and some of the other larger operators at the time, but the industry has certainly grown. Now you've got Airbnb, which I think really a ubiquitous household name, but the short-term rental industry, it's just everywhere now. We've been fortunate to be a little part of that on the back-end with our tax service, but about 4½ years ago, we sold our company to Avalara.

Now we're part of the Avalara family, but our whole mandate in life, Jason, is to really support, whether that's an owner, property manager, or a large operator like Expedia or Airbnb, help all these taxes, apply technology to make all these taxes simple and keep that back-office function as simple as possible.

Jason: Got it. In doing all of this, what are some of the complexities, some of the challenges that people are dealing with that have rental properties? Why is this a service that they might need?

Rob: I think there's a lot of confusion in this arena. I think in the smaller segments of the market, if you think about property owners trying to manage this themselves, they've just never dealt with these types of transactional taxes before. If you mentioned tax to a property owner, they're thinking income tax. There's just a great lack of awareness and the complexity comes in. This isn't necessarily rocket science, but wherever you're renting, like for my property in Vail, I have to deal with the state of Colorado, the Colorado Department of Revenue for sales tax and then the town of Vail has their own local room tax or lodging tax, so that's very common.

There are multiple layers of government involved, these are state and local taxes, and it's all specific to the rental property address. If you’re a manager and you have a portfolio, depending on how dispersed you are, each city, town, or county, and certainly, state, has their own tax rates and requirements. There are different forms and it can vary by city. That's the complexity. It's highly localized and each location has their own set of requirements.

Jason: Now, your service can cover any city anywhere in the US?

Rob: Yeah. We cover every location in the US. We don't do anything international yet, but that means we tell people the exact tax rate for all the properties they're managing or even if it's just one property, we register them. It's very common in this environment, you have to get a business license, short-term rental permit, or rental permits. There's increasing scrutiny and regulation on the short-term rental space so there are more paperwork and form.

We manage and do all that on behalf of our customers. Then on the back-end, these taxes need to be collected on all short-term transactions. Your software platform automates the monthly filing and paying of the taxes. I sometimes compare it to TurboTax. It’s kind of an online hosted in the cloud service where you can log in, put in your data, and the technology does the heavy lifting and calculation of filing. We're similar, just a different type of taxes with these hotel taxes.

Jason: Got it. What are some of the filings that have to occur that the typical homeowner would probably not be thinking about?

Rob: Again, the typical homeowner (like I said) thinks of these taxes in the context of income taxes. I'll go back to my Vail property as an example. Every quarter, I have to file a Colorado sales tax return with the state. I have to file—this is where it gets confusing—a Vail special marketing district return which is also paid to the state even though it's a Vail tax. Then there's a Vail sales tax that's paid directly to the town of Vail.

For my little example in Vail, I've got three different filings to two different agencies every quarter. That's pretty common. If you're in Florida, it's going to be a state sales tax filing and a county tourist tax filing. If you're in Texas, it's going to be a state hotel tax filing and then a city or county hotel tax filing based on your location. It’s multiple filings, it's always a sales tax or lodging tax, a very specific tax to providing accommodations.

Jason: If somebody's listening that has a property like this and they're like I haven't really been paying too much attention, I probably don't need to, what penalties could be coming down the line that they're just not aware of?

Rob: One of the things we're seeing is in the multifamily space. We're seeing a lot of operators that typically are in the residential long-term rental market, that are being pulled in at the short-term rental market because I think it's become so popular, it's become easy on these big platforms like Vrbo and Airbnb. The rent, the nightly or weekly rent can be very compelling, depending on your location of property relative to what you can do on a long-term lease. That's a huge trend we're seeing in the space is typical long-term or multifamily operators getting in the short-term space.

One of the issues for those folks is that now they’re doing short-term rentals, the short-term nature of their rental is what triggers the requirement to deal with all these taxes. To your point, there's a risk there. Certainly, the very larger multifamily operators are very sensitive to it. They want to have all that covered before they engage in short-term rentals. For smaller operators, I think sometimes they'll get it going and then figure out as they're doing it, seeing if a short-term model is going to work for them.

Again, there's increasing scrutiny on short-term rental operators, but the risk is that if you're audited or found not to be paying the tax, you can be assessed, not only back tax, which you would have typically just collected from your guest or renter—they're very accustomed to paying it—but then you've got penalties and interest on top of that. It's certainly something that can add up. We do see those cases and we do help people that are in that situation where they've got a back tax liability to figure that out. The penalties can be pretty significant. Tax, probably like everything in life, is better to do it proactively versus reactively.

We certainly encourage our customers and people we interact with to try to get out in front of it, make sure you understand the rules, are registered, and collecting the taxes, so you don't have that liability jump up and bite you as you're trying to manage your business.

Jason: For property managers that are listening to the show, they have investors as clients. Some of them may have short-term rentals. Do you typically work with property management companies and how might that work for those that listen?

Rob: We work with hundreds and hundreds of property managers across the US in the short-term rental space. We actually do work, like I said, in the multifamily space. We're seeing a lot of those operators and we work with companies that often have largely been in the long-term rental space, they're getting in the short-term rental space. Our largest segment is still the rent-by-owner or the Airbnb host crowd but we certainly work with a lot of managers and we're a solution for them. Everything tax, occupancy-tax related, our model is to really handle that from soup-to-nuts, A-Z, like I said, registration rates.

I think our property manager partners really value us as a way to take everything occupancy-tax related which includes licensing and registration, to hand that over to a trusted partner (which is us), and just make sure everything's done correctly, accurately, on time. It's just one less thing they have to deal with.

Jason: Perfect. What are the typical questions that a property manager or a homeowner listening to this would be curious about knowing about your service?

Rob: Good question. There are two different buckets. In the homeowner space, there's often generally just a lack of awareness of what they even need to do. It's more of a conversation about, “Oh yeah, if you are renting in Vail, here's what you need to do.” When owners understand that—and they often are very surprised about these requirements—they're often eager to outsource. Our service is $20 a month for that single user. Not to be cavalier, but we'd say it's a very affordable way, just to make sure you know the taxes are all getting paid on the right form, to the right agency, on the right date.

For the rent-by-owner crowd or host, they're just generally not aware. For the manager, generally there is awareness. The first question a manager would ask us if they're new to the space would be “Hey, do I have to file this for each of the properties I'm managing in our portfolio? How does that work?” Generally, for managers, we can aggregate their portfolio onto one set of filings. We can really do it much more efficiently.

There are some locations that require property level filings, but usually for managers, we can do things very efficiently, we can combine all their listings under one, what we call an umbrella account for the management company. Instead of filing 30, 50, or 100 returns for each property, we can file a couple for the management company that covers the 30, 50, or 100 properties they're managing in their portfolio.

Managers often have a lot of questions around the mechanics of those type of administrative mechanics about how it works, how can we do it, and do they have to do it by property, by owner, or can we do things more efficiently? The good news is in the manager segment, there are shortcuts and consolidations we can do to make things easier.

Jason: Right. Because usually, most of the properties are in similar geographic areas, you can bulk those together.

Rob: Exactly. Most of our managers are obviously concentrated in one area. Sometimes they span across two, three, four cities, or a couple of counties, so there are maybe a handful of different jurisdictions or filings that need to be managed. We do work with some of the national operators like Evolve or TurnKey Vacation Rentals, we work with the Saunders and the Lyrics. A lot of their [...] comes out of that multifamily space.

Certainly, the national operators have a much more complex set of tax requirements, so I think we can be a good partner. But you're right, most of these companies are localized within a certain area and they're dealing with a couple of tax agencies, not hundreds.

Jason: Basically, you have streamlined tax compliance for property managers. You're going to be able to group some of these filings together so that they're not having to do as many, and then you're focused on things at even the local level, state level, and just making sure that they're compliant all throughout all these different tax situations.

Anything else that those listening should know and how can they get in touch if they're interested in trying out your service?

Rob: The one thing I had passed along, we sometimes see reticence on the multifamily or long-term operators. They certainly know what's going on in the short-term rental space and they certainly know maybe there are a few homes or some of their portfolios that would really work there, but they're often intimidated by these taxes. I'm talking about even multi-billion-dollar multifamily operators that we work with, they're very concerned about managing these taxes correctly for the liability.

I think that's fair but I would encourage people if you want to get into it, experiment with it, or you think there's better revenue yield in the short-term space for some of your properties, I would encourage people to jump in. These large websites are very effective at generating your rent. Certainly, relative to the tax piece, we're applying technology to really just take that burden away from people and know that they can operate in this market, be fully taxed, and license-compliant. That's my advice.

In terms of reaching us, we're a hosted service. We're on the cloud. We like to do things through technology. The best way to reach us and get information is through our website, which is mylodgetax.com. Once you're on the website, there's information about tax, our services. If you want to send us an email or give us a call, we do have phone numbers published there. We're happy to pick up the phone and walk through people's specific situation like what are the requirements for their city, how doesn't work, what would it cost to use our service. We feel those types of inquiries and happy to talk about it all day long.

Jason: Perfect. All right. They can check out mylodgetax.com. I appreciate you coming on the show, Rob, and I wish you guys success.

Rob: All right. Thanks so much, Jason.

Jason: You bet. Bye-bye. All right, check out mylodgetax.com if you're concerned about the taxes, especially for your short-term rental properties, take a look at that.

If you are a property management entrepreneur that’s wanting to grow your business, add doors, it might be time to take a look at your website. Test your website out. Go to doorgrow.com/quiz, test your website out, and see how effective it is at making money because it's not just about having a pretty website. It's about having a website that's effective at creating conversions, capturing business, and creating trust. If your website isn't, you could be potentially losing out on one, two, three, four deals every single month, maybe more.

The typical deal for most property managers is probably worth about $6000 lifetime value. Say you can make $2000 a year per door and you can keep them on for maybe about three years on average, that's about $6000. If you're missing out on just a door a week or maybe about four doors a month, and if you're getting on about four doors a month, you're probably missing out on just about that many. That's about $24,000 in future ROI that you're missing out on every single month.

Websites are not that expensive. Making the changes are not that expensive. That's a leak that's easily shored up. Check out the DoorGrow Score Quiz and you can then easily schedule a call with our team. Nobody builds more effective property management websites than DoorGrow. Other people are trying to manipulate and focus on search engine optimization and rankings. You don't even have to have the top spot or even show up on the first page of Google in order to have a business that's crushing it with growth. We can show you how, so reach out to the DoorGrow.

That's it for today. Until next time, everybody, to our mutual growth. Bye, everyone.

Download this Episode

Jan 21, 2020

Before you accept a bunch of cash from applicants who drive up in a BMW to rent a property for a few years, check criminal background reports. Otherwise, you could end up with drug dealers with grow operations as tenants. You may be their next victim!

Today, I am talking to Jason Waggoner of ACUTRAQ, which offers accurate and reliable criminal background reports. He knows what property owners/managers deal with when it comes to tenants and how ACUTRAQ makes a difference in communities.

You’ll Learn...

[01:50] Who is Jason? Started out by fixing and customizing cars to selling vacuums.

[02:40] Buyer’s Remorse? Selling a vacuum to the right person led to ACUTRAQ job.

[05:00] Federal vs. Multi-state Databases: Criminal reports are important, but don’t capture all crimes and court activity.

[07:02] Federal vs. State Crimes: Federal reports include most heinous crimes.

[09:41] Don’t Ask, Don ‘t Tell? Avoid lawsuits and being liable for renting to criminals.

[13:45] Aliases: Know tenants by all their names via social trace for criminal history.

[15:41] Why use ACUTRAQ? What does it offer compared to others? ACUTRAQ specializes in where accurate information comes from and how it’s relayed to landlords.

Tweetables

ACUTRAQ: We love what we do. We love making a difference in the community.

Some state criminal background systems generate reports that have a lot of holes for criminals to crawl through.

If landlords don’t do background checks, it doesn't take long to destroy rental properties.

When you run a background check, know applicant’s past alias names...all of them.

Resources

ACUTRAQ

ACUTRAQ’s Email

ACUTRAQ’s Phone: 479- 439-9174

Office of Foreign Assets Control (OFAC)

FBI’s Most Wanted List

DEA’s Most Wanted List

50 State Sex Offender Search

Social Trace

National Crime Information Center (NCIC)

Multi-State Criminal Database

iCORI System

National Association of Residential Property Managers (NARPM)

DGS 113: Land Investing for Passive Income with Mark Podolsky 0

Transcript

Jason H: Welcome, DoorGrow Hackers, to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, impact lives, and you're interested in growing your business and life, and you're open to doing things a bit differently, then you are a DoorGrow Hacker.

DoorGrow hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you're crazy for doing it, you think they're crazy for not because you realize that property management is the ultimate, high-trust gateway to real estate deals, relationships, and residual income.

At DoorGrow, we are on a mission to transform property management businesses and their owners. We want to transform the industry, eliminate the BS, build awareness, change perception, expand the market, and help the best property management entrepreneurs win. I'm your host, property management growth expert, Jason Hull, the founder and CEO of DoorGrow. Now, let's get into the show.

My guest today is Jason Waggoner of ACUTRAQ. Jason, welcome.

Jason W: Good afternoon, Jason.

Jason H: I'm a little biased but I like your first name.

Jason W: It's a good one. We had some creativity going on in the 80s.

Jason H: Yeah. There's a lot of Jason, a lot of them. Let's get into this. First, I want to get in your background a little bit. How you got connected to the industry, how you got connected into doing ACUTRAQ. Give us a little bit of background for those listening on who is Jason.

Jason W: Very fun story there. I started when I was 18, I actually went to school for autobody to learn how to work on cars, fix wreck cars, customize cars, [...] did that, got out of that, winning the sales. Years later, I was actually in between jobs at the moment and besides, this was in 2006. For 20–25 days, I sell vacuums while I was putting in resumes and different things. Thought nothing of it, got another job in inside sales.

A month later, I went back to doing that. Two years later, Jeannie Baker, the owner of ACUTRAQ, calls me and ask me if I'm still doing sales and said that I had sold her a vacuum cleaner two years prior to this and wanted to go to lunch. We went to lunch, she had a great product, and believed in it. My father-in-law inherited a rental property. The things that he went through over the course of that first year, he ended up selling it and getting away from it. This was when I was young, 17–18-ish.

After seeing him go through that and seeing what products she had that could have prevented it, it just made a home seem like a lot more. That was in 2008. I've been with her ever since and since then, the company has grown. We used to just be in a few states, now we're all in the lower 48 states with offices throughout the country and a staff of about 12 in Arkansas. Just good, consistent growth over the years. We love what we do, we love making a difference in the community. That's how I get hooked up in ACUTRAQ. It's not the normal story you hear from people.

Jason H: You sold her a vacuum?

Jason W: Yeah.

Jason H: You sold her a vacuum and she was so impressed at how you sold her the vacuum. She didn't have buyer's remorse. She wanted to have more of you, she wanted you to work for her. This is great.

Jason W: She got up that morning and looked over the corner and thought, "I know who my salesman is."

Jason H: That vacuum was an anchor. Every time she saw that vacuum, she's like, "That guy sold me. I need somebody like that." It's interesting because as entrepreneurs, we're always looking for the person that's going to help us with the thing that we're weak at.

Jason W: Right.

Jason H: You filled a gap for her.

Jason W: Definitely, yeah. She had done it for 10 years by herself at that point and had grown where she physically can't do it by herself anymore. A lot of planning, a lot of sleepless nights, we've been somewhat successful in growing this business and creating something that she started back in 1998 and just continuing to watch it grow.

Jason H: The topic at hand, the title of this episode is Everything You Need to Know About Federal Criminal Reports. Let's talk about what we need to know.

Jason W: The federal criminal reports are important and a lot of people don't understand the difference between what most landlords run, meaning a multistate database and they sound similar. Multistate, federal, you think all the federal just covers all those different states. The reality of it is, the multistate database is what most landlords run. It has a lot of holes in it, it has States that don't even report to that database.

For instance, New York, they report to the Department of Corrections but not their County data. Massachusetts has its own system called the iCORI system. There are holes in it but those are derived from state repositories from the Department of Corrections from different places like that. Let's say I get in trouble. I'm in Houston, Texas. If I get in trouble here, I go to Harris County, they book me in and if I get convicted, if I do prison time, I'm going to do it in a Texas state prison.

The difference with the federal criminal report is it's a different set of courts. Let's say I do that same crime. Let's just use drugs, for instance. Let's say, I do drugs and I traffic those drugs, now, I go to Louisiana, to Alabama, to Mississippi. I went across state lines. That's a federal charge now. I've messed up not only in my state but federally and that would be trialed in a different set of courts.

Most landlords and even some employers do not get those federal court records because it's a smaller percentage. It's 8%–10% which is still a big chunk but the type of our crimes that are tried there are embezzlement, kidnapping, bank robbery, crimes against animals, child pornography, a lot of crimes. If a landlord knew that person had been convicted recently or maybe even in the past, it may change their decision on whether or not they would rent to that person. Most people don't know those records exist.

The reality is, most landlords have probably placed somebody that had previously robbed a bank or an ATM, or somebody that had previously been convicted of kidnapping or embezzlement, things of that nature. A lot of computer crimes regarding identity, identity theft, things of that nature. The thing about the federal crimes that there may not be as many but they're all the crazy ones. They're all the ones that if that person had committed that type of crime, it would definitely change the decision.

Jason H: They're the worst.

Jason W: Right. That's the difference in those federal criminal reports. We offer them as an upsell to our clients for an extra $5. Whoever people are using, it would be wise to go back to their provider and say, "Hey, am I getting this federal criminal report? Can you show me that we're pulling that report?” because there are a lot of heinous crimes that can be committed under the federal level.

Jason H: I just want to point this out because I thought this was really funny, that you're using an example of somebody committing crimes and you used yourself. You did this. You're like, "Let's say, I do this and I commit this crime." Most people do, "Let's say there's a guy named Fred."

Jason W: Allegedly.

Jason H: Allegedly. Here's what's funny. When I met you at the conference, you were this half criminal, half business suit costume like this thing. Sometimes, you even said you shaved half of your beard and you're like Dr. Jekyll and Mr. Hyde, or two-faced.

Jason W: Yes. At the Florida conference, the NARPM conference, the beard was just coming in. I couldn't quite get the half shaven down and make it look presentable. That piece, it really shed some light on what people come in looking like because we actually had applicants that showed up in BMW, with a briefcase full of money, and wanted to pay for the next two years in cash. Then, you look them up and they are known drug trafficker, they've been involved in grow operations and everything else, and you were going to be their next victim.

Without running that report, you never see the criminal side of what they're bringing into that rental property because somebody's not going to buy a house and then trash it, do that stuff, dig down to the electric pole, and tunnel in all the things that it takes. They're going to do that to a rental property and then hit the road as soon as they have everything they need.

Jason H: Do you think some property managers would just rather keep their heads in the sand, kind of don't know, don't ask, don't tell? You think there's some that are like, "I'd rather just not do this extra work. I'd rather just not know. If that happens, I did something and they just didn't show up on that so I'm absolved." What would you say to those that they're thinking about listening to this, "I don't want to do extra work."

Jason W: The thing about it is, let's say somebody moves in to that property and does something crazy, commits a crime. We've seen this before, it's the same way with our property managers. There's a lot of their stories that sound like sales pitches but they're really not. They're crazy stories that happened and they want to do whatever they can to help somebody avoid those again.

Let's say somebody does something heinous in a property. The first thing that the courts are going to do is go back to the person that leased that property and say, "Who put this person in there? What checks did you take to ensure the safety of the community around you?" Typically, they think that the homeowner has the deepest pockets. When something goes crazy, who's the first person they sue? The homeowner.

It may trickle down the line if there's a property management company involved, but the ones that are just out here doing it think maybe something is going on but like you said, they don't care enough to go to the motions. Whatever they do there is their business. It can be really scary, the things that we've seen. For the homeowner’s side, everything can be scary from the investment. You're looking at this company as an investment. So, if you get somebody that goes in and guts it down the studs, and puts all the stuff that they need in there to do, to set that house up for whatever they're setting it up for.

Just to give you an idea, the things that go on, I'm actually in Kingwood, Texas which is the Northeast tip of Houston, Texas. Suburbs, everybody pretty much deems it a safe community. We let our kids play in the street. Last week, there was 79 arrest made from a sex trafficking operation. 79 people. How big that operation must be to arrest 79 people that are involved in?

Jason H: They just said, "Let's pick a really safe community. We're going to fly under the radar there probably." Those property managers aren't using ACUTRAQ so we're going to get away with this.

Jason W: Right and even some of those. Those people are legit on paper and the career criminals know how to get by those background checks and we put everything in place in ours from identity alerts. We've tried to add a lot of things to try to catch these people when they're doing this. The reality of it is though, they're going to do it in rental property.

If you get a property manager, I'm not even a property manager, in most cases, they're doing background checks. Let's say you get a home-based landlord, they just have six rental properties and the first one finds out that they don't do background checks or anything, as soon as one of their properties come open, "Hey, let me know if you have anything open. I've got somebody I know needs to rent a house, too, and I love recommending you." It just goes that line.

Jason H: "I've got four other criminal friends that would love a place."

Jason W: Yeah. "Landlord Johnny here does no background checks. It doesn't take long for those properties, the value and everything.

Jason H: Let's drive this home to our target audience here. The property management business owners listening, they've got hundreds of rental properties. If somebody has figured out how to game their system, they don't really cover this check in this state. If we've done stuff in this state, we can fly under the radar. They're only running this light-level background. We get the pick of the litter. They got 20 properties available for lease, that just beat them up.

Jason W: Yeah, it can happen. That's the thing. For instance, when you run that background check—this is for anybody that's in this world—you need to know the people or the person's past alias names. If somebody's been married three times, you need to actually run the married name and all three married names to get an accurate representation of that person's criminal history. If they changed their lives name, they change their date of birth, that's the only way criminal history is ran for a tenant’s screen is by name and date of birth.

The career criminals, let’s say they say they know they have criminal history but it slides by, they automatically know that they either typo-ed something in it and it slid by, or they changed something on purpose and it got through. The next time they tell their people, "Make sure to change your data birth, your last names." If my last name's Waggoner, I may put it down on paper as Wagner. Even if they're looking at my license, if they're not matching it up right beside each other, it looks close enough that Jason Waggoner, Jason Wagner, it's all the same. That would cause a criminal hit to miss in most cases.

The best thing to do is there's a search called a social trace and we put everything we have just because of how important it is but if somebody's not getting it, ask your provider about the social trace because it provides all the past alias names that that person has used with their social. If you signed up for a cell phone and utility, anything you had to put your social down, it's actually stored with that name used and the address used. That helps a lot in finding the alias names when people are trying to tell you they don't have any.

This is the only name I've ever had. No, you've had two other ones and then, one nickname that you used as alias, too. Running those can make a difference. The career criminals, once they find the loophole, once they find the window or door opened, it's just like a house. They'll crawl through and they'll their other friends to come right behind them.

Jason H: It's party time.

Jason W: Yeah.

Jason H: Okay. There's a lot of different screening services out there. Help those listening. I'm sure a lot of them have something that maybe came with AppFolio or they got something with Rent Manager, something with Buildium, something with Propertyware. For those listening, why should they use ACUTRAQ? Help them understand what's the contrast between what they had typically and what you're going to do for them.

Jason W: You bet. In Rent Manager, we're actually an affiliate of, some other software, too. Typically, the reason somebody will go outside of their software to use us for these reasons. The background check is a no way an afterthought. Not only that, if your applicants have trouble, they call us if they have a dispute. That's one of the big things.

With tenant screening, it’s making sure your applicants have a way to dispute the information because you can have a Junior and a Senior. Senior's been arrested 10 times, been in prison his whole life. Junior didn't know him growing up.

Jason H: Junior's a good kid.

Jason W: Senior's criminal history still keeps showing up on Junior's report. Every time he gets an application for an apartment, he has to go through the whole process. "That was my dad. It's not my criminal history." Having a way to dispute that, it can mean them having housing or not having housing with those reports being accurate. If something like that does come up. Having that documented and being able to help him is one of the biggest things.

The support side of things, that's what we do, is background checks, there's nothing else on our plate. The biggest reason is to have a third party, unbiased source outside of your company, outside of your software, all these people do are background checks and if something goes wrong, you could bet that we'll have your back and search through it, anything at all. That's the difference of having somebody that does that and having that as just an ancillary service.

Jason H: It's probably fair to say if their intuition is saying something's off about somebody but everything comes back clean, maybe they should put you to the test and see if you come up with something that [...].

Jason W: We love the [...]. The other thing too is not a lot of companies can staff and have people to make the phone calls to the landlords and employers. With our full premium report, you'll get an employment verification plus the current landlord and the prior landlord.

You'd be surprised that the different reports we get from one landlord that’s trying to get rid of them currently and the one from a year ago that lays it all out and lets you know what's coming. With those added, it really just helps give a better representation of how that applicant's going to act in that property and how they're going to pay rent and all that good stuff, everything to do with their character.

Jason H: We talked a little bit about why they should use ACUTRAQ and what makes it a little bit different. What are some of the typical questions a property manager might ask you about ACUTRAQ went during the sales process? You're the sales guy, I'm sure you dealt with some objections. What are some of the typical questions that you get for those that are listening?

Jason W: We generally start with the application process. They want to know about that. Onboarding the applicants and how that process works. The biggest thing with the process is the application in our eyes because that's where it starts. That's the first thing that an applicant sees of your company, if you're a landlord, and whether they're doing it, the software's doing it, or a third party like ACUTRAQ. That's the first phase of the company. That needs to be a smooth process, the relationship, you get off on the right hand.

The other thing is they typically want to see an itemized list of everything that's going to be on that background report. You think we're getting a criminal report. What does all that include? There are a number of different things that should be included on that and I hope most everybody listening is getting these with their provider, but of course, it's the 50 State Sex Offender search. It's the social trace that we talked about that has the alias names.

The OFAC which is very important nowadays and that's the Office of Foreign Asset Control. They are the ones that have the terrorist database searches, the terrorist watchlist. Anything to do as far as that goes, that's where that information is going to come from and it's OFAC. A lot of people want to know about that one because everybody wants to make sure that we're not housing some terrorist cell in the middle of Houston or Atlanta Georgia, somewhere like that.

The FBI most wanted list. That's another thing that's included that we forget to talk about a lot of time or the FBI most wanted list, the DEA most wanted list. Something a lot of people don't know is every major city has their own list for those. Along with the Top 10, every major city has their Top 10. Searching for those, understanding where the data comes from, and what you're getting like we were talking about name and date of birth only. So many people think it's tied to a social or driver's license number, or something like that, but in reality, it's not.

The police officers and firemen are the only ones that have access to what we call the National Crime Information Center. Unfortunately, landlords don't have that luxury. Understanding where the information comes from, how important it is to make that decision can literally mean life and death from somebody on the block if you house a violent person in there, if you house a sex offender or something in that nature.

That's a lot of the questions that we get. Spanish speaking, that's getting to be more and more prevalent, so we did add that a year-and-a-half ago. We do have bilingual staff. A lot of different things like that. What we specialize in is where the information comes from, how do we relay that back to the landlord in an accurate manner.

Jason H: All right. So ACUTRAQ is your sole focus, is doing this screening, and you have these itemized lists, lots of different sources that you're going to be checking like OFAC. It goes well above and beyond what they're typically going to get. You integrate with some property manager software like Rent Manager.

Jason W: Yes.

Jason H: I think I gave a light summary there, some of the pluses. This sounds like a really cool thing. How can people get in touch with ACUTRAQ?

Jason W: acutraq.com. You can always reach us at info@acutraq.com, that goes to myself and the owners so we will reach back out to you directly. The website is the best way. If you want to call us, feel free to give us a call at (479) 439-9174. That would be the corporate office in Fayetteville, Arkansas and I'm out in the Houston, Texas office.

Jason H: You guys are making property management safer for the property managers that are the boots on the ground, you're making neighborhoods safer, and in general you're helping property management have a better reputation. I appreciate that.

Jason W: That's our goal.

Jason H: Awesome. Thanks for coming on the DoorGrow Show.

Jason W: Thank you.

Jason H: All right. You guys check it out, ACUTRAQ.

If you're a property management entrepreneur and you felt like your website might be a little bit leaky, you're just not seeing enough business come through, you think you need more lead, if you just had more leads, everything will be better, it's not leads. Leads are not your problem. You've got leaks in your sales pipeline. Leaks are at the very front end of the pipeline. If you've got leaks throughout it that are causing attrition and without even changing your lead sources, if you're shore up all those leaks, leaks of trust, you can have more business coming out.

You're getting some business now. It's not hard to double it just by reducing the friction that's happening at every stage in your sales pipeline. Reach out to us at DoorGrow, that's what we specialize in. We also can clean up your property management website, that's what we specialize in. I don't believe that anybody does better property management websites than DoorGrow. Our focus in not on trying to manipulate Google and with search volume is relatively low and it always has been for property management. Our goal is to facilitate greater trust which helps you close more deals and that's really what your website is for. It's a trust indicator.

People don't buy property management. What they really want to buy from you is safety and certainty. That's what they want to buy. You can create more of that through your website, through your branding, through your sales process, through your pricing strategy, through your reputation online. We'll help you get these things optimized so that your business can grow. Check the site site of doorgrow.com. Until next time, everybody, to our mutual growth.

Find any show notes or links from today’s episode on our blog at doorgrow.com. To get notified of future events and news, subscribe to our newsletter at doorgrow.com/subscribe. Until next time, take what you learn and start DoorGrow hacking your business and your life.

Download this Episode

Jan 14, 2020

Do you work because you want to or have to? Have you ever considered investing in land to generate enough passive income that exceeds your fixed expenses?

Today, I am talking to Mark Podolsky of Frontier Equity Properties. Mark’s passion is investing in land, creating wealth efficiently, and helping others develop their inner geeky entrepreneurial spirit. He’s known as, “The Land Geek,” for buying and selling thousands of raw and undeveloped land deals. Also, he’s the author of Dirt Rich, a guide to building a passive income model in land investing.

You’ll Learn...

[02:40] Beat Friday Blues: How and why Mark became a land investor.

[05:40] Breaking Down Passive Income Model: No emotional attachment to land and distressed financially.

[07:26] Property Checklist: Due diligence to confirm ownership, back taxes, no title breaks, and no liens.

[08:25] Buy the property free and clear, and sell it in 30 days or less.

[08:40] Neighbors: Built-in best buyers to protect privacy, views, and expand holdings.

[09:09] Other Options: Sites with specialized buyers and sellers of raw and undeveloped land (i.e., Craigslist, Facebook, Land Flip, Land Moto).

[10:00] No renters, rehabs, renovations, and rodents; exempt from erroneous real estate legislation.

[10:48] Price Point of Fixed Expenses: Typically, $10,000 a month in passive income.

[12:05] Operating Entity: Spend a few hours a day on land investing business, and automated software/virtual assistants do the rest.

[14:35] How to get started? Everything is hard in the beginning. Embrace the suck.

[16:00] What Mark loves about land investing? No physical inventory, no competition, inefficient market, one-time sale, and passive income.

Tweetables

Core Business Philosophy: Happy customers guaranteed.

Raw land is the best passive income.

There’s nothing not to love about land investing for passive income.

True Wealth: Work where you want, when you want, and with whom you want.

Resources

The Land Geek

Dirt Rich by Mark Podolsky

Frontier Equity Properties

The Land Geek Podcast

Warren Buffett’s Margin of Safety

Land Moto

Land Flip

Dodd-Frank Financial Regulatory Reform Bill

Real Estate Settlement Procedures Act (RESPA)

DGS 112: Building a Billion Dollar Business with Pat Hiban 0

Transcript

Jason: Welcome, DoorGrow Hackers, to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, impact lives, and you are interested in growing your business, and life, and you’re open to doing things a bit differently, then you are a DoorGrow Hacker.

DoorGrow hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it, you think they’re crazy for not, because you realize that property management is the ultimate, high-trust gateway to real estate deals, relationships, and residual income.

Today, I am hanging out with Mark Podolsky. Mark, welcome to the show. I’m going to read your bio here because we want to qualify you and then we’ll let you brag a little bit because you got to do a little bit of starting out here.

Today’s topic (for those who are just tuning in) is land investing for passive income. We’re going to learn how to use land investing to create a passive income stream. Mark J. Podolsky (AKA The Land Geek), is widely considered the country’s most trusted and foremost authority on buying and selling raw, undeveloped land within the United States for almost two decades. Mark has been actively investing in real estate and raw land and has completed over 5000 unique transactions.

Mark’s company, Frontier Equity Properties, LLC, is an A+ rated Better Business Bureau real estate company. Mark has achieved this level of success largely due to his core business philosophy, happy customers guaranteed. Mark is the host of one of the top-rated podcasts in the Investing Category on iTunes, aptly titled The Best Passive Income Model and The Art of Passive Income. He is also the host of The Land Geek podcast: Work Smart. Earn More. Learn How.

Mark, there you go. Give us a little bit of background on you and how you got into this land investing.

Mark: Let’s rewind to 2000 and imagine me fighting traffic, 45 minutes in the car there and back, micromanaged, stressed out at an investment banking job, working with private equity groups specializing in mergers and acquisitions. Jason, it got so bad for me that I wouldn’t get the Sunday blues anticipating Monday coming around. I’d get the Friday blues anticipating the weekend going by really fast and heading back to work on Monday.

My firm hired this guy and he’s telling me that as a side hustle, he’s going to tax deed auctions, he’s buying up raw land pennies on the dollar, he’s flipping them online, and he’s making a 300% return on his investment. Jason, I’m looking at companies all day long and a great company has 15% EBITDA margins or free cash flow. Great company. Average company is 10%. I’m looking at companies all day long, less than 10%. Of course, I’ll believe him.

We go to New Mexico. I do exactly what he tells me to do. I’ve got $3000 saved up for car repairs so I can only buy $3000 worth of land. I buy 10 half-acre parcels, an average price of $300 each. I put them up all online and they all sell 30 days later from an average price of $1200 each. It worked. 300%. I took all that money, I went to another auction in Arizona (which is where I live) and again, it’s 2000. There’s no one in the room, there’s no competition, I’m buying up lots, I’m buying up acres for nothing. Over the next six months, I sold all that property and I made over $90,000 cash.

I go to my wife, and she’s pregnant. I said, “Honey, I’m going to quit my job. I’m going to become a full-time land investor.” She says, “Absolutely not.” So I worked land investing part-time and it took 18 months for the land investing income to exceed the investment banking income and then, I quit. I’ve been doing it full-time ever since.

Jason: It’s so easy, anybody can do it?

Mark: Yeah, I wish. I wish it was so easy. It’s a simple model but anything worth doing in life is not easy. What I could do is I could walk you through the model and then, odds are you’ll just stop the podcast and quit doing what you’re doing and start land investing with me, but that’s okay. That happens a lot. You want me to walk you through it?

Jason: Yeah.

Mark: Jason, where do you live?

Jason: I’m in Santa Clarita, California.

Mark: Okay. Let’s imagine that you own 10 acres of land in Texas. I go to the county treasurer and I get a list of people that owe back taxes. Sure enough, there’s Jason Hull in Santa Clarita, California, $200 in back taxes on this 10-acre parcel. Jason, you’re advertising two things to me. Number one, you have no emotional attachment to that raw land. You’re in California. The property is located in Texas. Number two, you’re distressed financially in some way. Because when we don’t pay for things, we don’t value them in the same way. And you haven’t paid your property taxes. As a result, the county treasure keeps sending you notices saying that, “Jason, if you don’t pay your taxes, you’re eventually going to lose your 10 acres to a tax deed or tax lien investor.

What I will do is I would look at the comparable sales on that 10-acre parcel. I’m going to take the lowest CUP and I’m going to divide by four. That’s going to get me what Warren Buffett calls a 300% margin of safety. I’m going to actually send you an offer of $2500 on that 10-acre parcel assuming that the lowest CUP is $10,000. I send you an offer for $2500. Now, you accept it because for you, $2500 is better than nothing and you haven’t gone out to look at the property. You just don’t care about it anymore. In reality, 3%-5% of people accept my “top dollar offer.”

Now that you’ve accepted the offer, I’ve got to go through due diligence or in-depth research. Number one, I got to confirm you still own the property. Number two, I have to confirm the back taxes are only $200. Number three, I have to make sure there have been no breaks in the chain of title. Number four, I have to make sure there are no liens or encumbrances.

I have this whole property checklist and it goes on and on and on. If it’s a property deal that’s worth less than $5000, I’ll actually close it directly with my team in the Philippines. We’re hooked up to an American title company. I pay $11 for due diligence. They’ll give me a whole property report. I’ll get the GIS maps, the plat maps, aerial maps. If it’s an area I don’t know, I’ll have somebody go out there, stamp on the property for me, take a video and shoot photos throughout the property checklist. What are the neighbors doing out there, what’s the road like, all these things.

Everything checks out and now, I buy the property from you for $2500. You get $2300 of it, $200 goes to the treasurer, and now I have that property free and clear. I’m going to sell this property 30 days or less. The reason I’m going to do this is I have a built-in best buyer. Do you know who it is?

Jason: No.

Mark: The neighbors. I’m going to sell that to the neighbour saying, “Hey, here’s your opportunity. Protect your privacy, protect your views, expand your holdings, know your neighbour.” Oftentimes, the neighbors will buy it. If they pass, I’ll go to my buyers list. If my buyers list passes, I’ll go to a little website you might not have heard of called Craigslist (10th most traffic website in the United States). I’ll go to an even smaller one. It’s called Facebook buy-and-sell group and marketplace. And then, I’ll go to these platforms that specialize in buying and selling raw land, landmodo.com, landandfarm.com, landsofamerica.com, landflip.com. It goes on and on.

Now, the way I’m going to sell it is I’m going to make it irresistible. I’m going to ask for a $2500 down payment. I get my money out on the down, within (let’s say) six months of that. I’m going to get a car payment, let’s say $449 a month, 9% interest over the next 84 months. Essentially, I’ve got a one-time sale, I have passive income of $449 a month, 9% interest over the next 84 months, no renters, no rehabs, no renovations, no rodents.

And because I’m not dealing with a tenant, I’m exempt from Dodd-Frank, RESPA, and the SAFE act (this onerous real estate legislation). The game that we play is can we create enough of this land notes where our passive income exceeds our fixed expenses and then we’re working because we want to, not because we have to. The beautiful part about all of this is 90% of it is automated with software virtual assistants. It’s great.

Jason: What is the price point of fixed expenses typically?

Mark: For most people, after you earn about $10,000 a month in passive income (that’s $120,000 a year), you’re in pretty good shape. Now, we have some clients who are doctors and lawyers. I have a client. He’s been working with us for 10 months. He’s at $15,000 a month passive and he just went from 5 days a week at his law firm to 2 days a week and he’s spending the rest of his time with his dad who needs help working with him and the other two days doing what he wants to do.

We have so many clients that once they hit that point, they retire their spouse. They quit their job. They do what they really want to do in life because the whole idea of this is that we can always make more money but we can’t get more time. For me, true wealth means you wake up and you don’t have to be anywhere. You work where you want, when you want, and with whom you want. That’s really the goal of doing all this.

Jason: Love that. What else do people typically ask you about this? When you say it, it sounds really easy. It sounds like something that maybe anybody can do, but it’s like starting a part-time job if you start getting into this.

Mark: It is. It is an operating entity. We ask our clients to spend about an hour or two a day doing this. That will move the needle because with our virtual assistants and our software, it’s pretty automated. We actually have automation software for marketing. We can automate our craigslist and our Facebook postings with a posting automator.

The only two things that (as CEO of your land investing business) you, Jason, actually have to do, is county research because if you get that screwed up, that whole thing falls off the rails, so you have to pick a good county. From there, you’re going to make sure that you get your pricing right, so you might want to work with a VA, train them, and show them, “Hey, look. Here’s our lowest comps dividing by four. We need a response rate of 3%-5%. If it’s under 3%, our offer is too low. If it’s over 5%, let’s get nervous. Why are they selling us their property? We might have to renegotiate.” We have our metrics in there.

As far as the rest of the process, you can get virtual assistants to do our due diligence. You can get an intake manager that can actually talk to your sellers (because that’s a big time-suck as well). From there, you can close. We like to use Simplifile accountings, so that we can record our deeds online, so I don’t have to go and do a lot of whole paperwork that way.

Once we own it, again, we have an inexpensive virtual assistant getting us through GIS, all the neighbors information, uploading that to our software, sending out our neighbor letters. There’s an API with lob.com, which does our mailings. On the backend of it, we use a software called GeekPay.io that is a set-it-and-forget-it system on collecting our money.

We get our down payment via credit card and then we get our monthly payments via ACH. It does all the amortization. It does all the calculations. It charges fees but it does it through notifications. If that ACH bounces, it will charge the credit card on file. We went from an 8% default rate to a 4% default rate. I personally worked two hours a week in Frontier Properties, doing the kind of volume that we do.

Jason: Sounds great. That’s pretty incredible. How hard is it for somebody to get started with this that’s new?

Mark: It’s like anything in life. Everything is hard in the beginning. You know what’s really hard, Jason? Learning to read. We don’t remember it. We forgot how hard that was in the very beginning but you had a good teacher, they broke it down for you step-by-step, and you are with other people. It was just a thing, like everyone can do this and you’re just expected to do it. It’s the same kind of thing.

What happens is we’re so ingrained after all these years of schooling that you have to achieve what you achieve, to go back and embrace beginner’s mind and embrace the suck. It’s hard. If you can do that, if you can be comfortable being uncomfortable and you have some grit, you can be successful in anything in life, whether it’s my land investing niche or growing your doors. It doesn’t matter. Nothing worth doing is easy.

Jason: It sure is nothing worth doing is easy. The challenge is if somebody is going to choose into doing this, choose into doing property management, or choose into doing any business, they have to fall in love with this. They have to get excited about this. Help the listeners understand what do you love about doing this? Your clients that get involved in this, what do they love about it that’s different from other entrepreneurial ventures that they get into?

Mark: The main reason that people like this model is number one, there’s no physical inventory.

Number two, there’s little to no competition. If you go on HGTV or the DIY Network, you’re not going to ever see me on Flip This Land. The before pictures is raw land, the after pictures is raw land. It’s not going to be much fun to watch me in front of a computer. If you go to [...] meeting and there are 100 people in that room, 99 of them are house flippers, landlords, or wholesalers. You and I are the only land guys.

Number three, you have an inefficient market. I’ve got a hedge fund manager that loves this business because he’s like, “Mark, there are very few inefficient markets left out there. Nobody knows the value of raw land.” Now, that can be very frustrating in the beginning, but it’s also very exciting once you get your arms around it.

No physical inventory, no competition, inefficient, and then you have the fact that it’s a one-time sale and then the passive income versus let’s say I flip a house. I make $20,000 on a flip. I have a new problem. What do I do with my $20,000? I can’t put it in the bank. It’s not going to earn anything. I have to keep redeploying that capital.

Once we get to let’s say $10,000 a month of passive income, what our net worth? How long would it take you to have an investment of $120,000 a year at say 2% interest in the bank? That’s over $3 million you and I would have to save. How long, Jason, would it take for you to save $3 million? How long would it take anybody to save $3 million?

Jason: I probably would never do it.

Mark: Yeah. 12-36 months, you can have that kind of cash flow and then your bankers are really happy with you because your net worth is over $3 million. The fact that—I’m not proud of it—I can’t even screw in a light bulb. I tried to flip a house once. I am not interested in physical things so the subs come out there. I meet the subs. They don’t show up. Just the capital outlay, I started with $3000. My buddy, [...], started at $800. You’re not going to ever get knocked out of the game in this niche. The dollars are just too small.

If you go into multifamily housing, you do one bad deal and you’re done for 10 years. You’re BK or you’re just a pariah in the investment community because you lost all your investors money. This is not like that at all. You have an easy entry point, you have no physical inventory, you have no competition. You have a one-time sale on passive income. You have an inefficient market. There’s nothing not to like about it. I think what’s interesting is if you go to a party and you tell people you’re a land investor, they’ll yawn. It’s not sexy. Definitely not sexy. Maybe you lie and say you’re in multifamily housing.

Jason: I don’t know if that’s super sexy sometimes either, but yeah.

Mark: I mean it depends who you’re talking to.

Jason: How do people get started in this? It sounds interesting. My interest is piqued. I’m sure some people listening are interested. How do they get started with this because I’m sure there’s a fairly steep learning curve? There’s got to be a reason why everybody isn’t doing it. How saturated is this?

Mark: It’s not saturated at all because again, it’s just not sexy. It’s not conventional. The marketing budgets of the people that are in the house flipping world like Robert Kiyosaki or FortuneBuilders, that’s really where people thought to. Land investing, you have a mental hurdle for people where they think, “Well, I’ve never bought land.” We all know everyone needs a place to live. Nobody needs raw land. You don’t wake up today and say, “Boy, I really got to own 10 acres today.”

Jason: That land that nobody is using and nobody seems to want. That land.

Mark: Right. It’s a marketing business. You have to interrupt somebody’s day, pique their interest, and make it irresistible. I’ll tell you, after over 5200 deals, I’ve never been stuck with a piece of land. You buy any asset, 25–30 cents on the dollar, there’s someone else on the other end of that deal. Whether it be a piece of land, a car, a trinket, it doesn’t matter. The market is the market. So to get started, I would say you’ve got to learn from somebody who’s done in.

For example, let’s say you and I are going to go to Mount Everest together. We’re going to climb this big mountain.

Jason: We’re not just going to wing it.

Mark: Yeah. You’re going to someone who’s done it a million times and they can tell you the best routes quickly, efficiently, and safely to do it. That’s what you want to do. You can start with that. In fact, for the listeners, I would say that I have a $97 course that I’d love to offer them for free. If they just go to thelandgeek.com/launchkit, they can go ahead and get that course for free. Start there and then see if they like it or not.

Jason: Their time investment is 1-2 hours a day?

Mark: If that, yeah. It depends if they’re using tools or not. It also depends if they have a scarcity mentality or abundance mentality. A lot of people, when they start doing this, they think they can penny-pinch their way to wealth. They don’t want to use the tools that are out there.

Jason: “No, I’ll do it myself. I’ll watch 120 Youtube videos and figure out how to do it myself.”

Mark: Yeah, and you can do that. But again, my whole philosophy is that I can always make more money. I can’t get more time. So, anything that’ll save you time, I’ll invest in.

Jason: I say something very similar to my clients. That makes sense. Anything else anybody should know before we wrap this up and how can they get in touch with you?

Mark: If you have that mindset that Zig Ziglar says, “If you'll do for the next 3–5 years what other people won't do, you’ll be able to do for the rest of your life what other people can’t do.” You’ve got to get your reps in and you have to embrace the suck. Again, nothing worth doing in life is easy. It might be a simple model, but it’s not easy. You have to take action at some point

Again, the best way to get a hold of me is thelandgeek.com. I’ve got an audio book. I’ve got a book on Amazon called Dirt Rich if you want to just read about it and hear my story as well. It got really good reviews. People seem to like it. It’s not because I’m such a good writer. It’s just that they like it.

Jason: Nice. Perfect. Look for the book, Dirt Rich, or check out thelandgeek.com. Mark, this is interesting. I think it’s a new idea that people certainly haven’t heard of this before on the DoorGrow Show. I appreciate you coming on and hanging out here with me.

Mark: Jason, thank you so much. Again, I apologize if you’re just going to quit your business and go [...] with me.

Jason: I love what I do so.

Mark: See? There you go. You can do both.

Jason: Both. All right. Maybe I’ll get a few people from this show that are wanting to do both. There you go. Mark, thanks again for coming on the show. We’ll let you go.

Mark: Thanks, Jason. I appreciate it.

Jason: If you are a property management entrepreneur and you enjoy the show, be sure to like and subscribe. If you’re watching this on Youtube or on Facebook, be sure to share it if you would. We would appreciate that. If you’re in some property management groups, we’d love to see your comments. And if you’re on iTunes, give us a review. We would really love to get that feedback. We’re putting out this content for free. We would love a little reciprocity, people. That would be really sweet of you. I would appreciate it greatly. It helps us get the word out and make a difference in this industry.

If you are a property management entrepreneur that wants to grow your business, add doors, you’re struggling, you’re feeling that there’s a scarcity in the industry, there’s no scarcity in property management right now. 70% are self-managing. There’s plenty of opportunity. Reach out, talk to us, and let us help you see how you can align your business towards more warm leads and stop spending so much time trying to go with cold leads, time keepers, and time wasters.

The people that are at the very end of the sales cycle are the coldest, crappiest, most price-sensitive. Those are the people searching online. They’re the leftovers that fall off the word-of-mouth table. Come sit at the table with us. We’re DoorGrow. We’ll talk to you soon. Check us out at doorgrow.com. Bye everyone. Until next time, to our mutual growth.

Download this Episode

Jan 7, 2020

Have you ever played the board game, Monopoly? Were you successful at buying properties, and charging people rent? Did you go from buying and selling the little green houses to bigger houses? Did you dream about becoming a successful real estate agent, making billions, winning the game, and retiring at an early age? You’re not alone.

Today, I am talking to Pat Hiban, a real estate agent who got better over time to have an illustrious career in the real estate sales business. Pat practiced what he preached and like most agents, bought houses and then rented them out. At 46 years old, Pat retired from selling homes for commissions to living off the income he made from the real estate that he purchased.

You’ll Learn...

[02:45] Labeled as Learning-Disabled: How Pat overcame it, and didn’t let it bother him.

[03:35] Go Getter: Don’t reinvent the wheel. Listen and copy others to sell houses.

[04:09] Done is better than perfect: Things don’t need to be perfect, but need to get done. Hire others to make them perfect and fix problems.

[05:58] Building a Billion-Dollar Business: One sale at a time, one staff member at a time, one commission at a time. Get rich quick is a slow process and takes discipline.

[07:54] What holds people back from growing their business? Themselves. There's someone else that has the same goals, but there's no difference between them.

[11:00] What’s going to happen? You're going to quit affirming and focusing on your goals, or they’re going to come true.

[13:25] Unwilling to Give Up: Entrepreneurs tend to have tenacity and relentlessness.

[14:31] Are they not setting goals? Or, are they setting goals and failing? If they don't have any goals, they're never going to get anywhere.

[15:30] GoBundance: Find accountability partner for positive peer pressure to set goals, create affirmations for each goal, and make sure each goal and objective gets done.

[19:42] Why people fail to succeed? They give up too soon and don’t establish proper mastermind.

Tweetables

Stick with Superpower: Getting business, doing business, and making money.

Done is better than perfect.

To get rich quick is a slow process. Get rich slowly to succeed.

Your circumstances are a direct result of your goals and how often you review them.

Resources

Pat Hiban on Facebook

Pat Hiban on Instagram

GoBundance

Tribe of Millionaires

Think and Grow Rich by Napoleon Hill

Robert Kiyosaki

The Secret Movie

Jim Rohn