Why I Started My Own Property Management Company Across 600 Units

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0:00 Hello and welcome back to Multif Family Strategy. Today we are at my 80unit building. We're also going to go over to the 144, but I am talking about property management. [music] Do you need to start your own company?
0:09 Should you self-manage? Should you use a hybrid model? [music] I'm going to share today why I decided to start our own PM company and how [music] we operate.
0:17 Follow me.
0:19 The first thing I do is I make sure that we have office space to run our company out. If we do a zone strategy, I'll talk a little bit more about on this video, but you [music] need to have a central
0:27 hub. This is one of my favorite offices in the entire portfolio, but buy properties that are large enough to come with the office space. That's around the
0:35 time you should look at starting a PM company. Now, for most people, you can self-manage up to about 50, 60, maybe up to 75 units. Hybrid management [music]
0:43 also works really well where you start using a little bit of third party, a little bit of self-management. What I found for us is we tried manager after
0:52 manager after manager after manager, and all of them were terrible. And every time we'd buy a [music] building, I'd retain the employees. Now, I won't name
1:00 any specific properties or individuals, but I have had employees where we picked them up. We found out they were stealing [music] from the company. Uh we had one
1:07 who was stealing from tenants. They were actually uh charging to lease free spaces, [music] pocketing the cash.
1:14 They're like, "Oh, yeah. This is a new management thing." Ridiculous. I also had an employee who had hidden one of our couches in a side room and was
1:22 sleeping on the job. All of them I picked up from some of the biggest PM names in the state of Texas. Like if you're in real estate at all in Texas,
1:30 you know these companies. And it's every single time we pick up a [music] building. So what we found is that we have a competitive edge. We were better
1:37 at maintenance, better at leasing. The properties, made more money, and it was easier to raise capital when I could control each and every piece. So when you're starting, I recommend
1:45 self-managing. But as [music] you start expanding and scaling, when you get a few hundred units, it can actually start making a lot of sense to start doing
1:53 [music] your units yourself, building your own team, your own system. Today, I can't imagine succeeding in buildings to the level we had without [music] those controls in place.
2:07 So, let's first [music] talk leasing strategy. The most important part of leasing that is overlooked is you need to have a campus that looks like somewhere that you want to rent. So your
2:14 landscaping, how clean things are is really important. We're here in Abling, Texas. This is 80 units senior living.
2:20 So [music] this is all 55 plus, not assisted living, just senior. But look at the quality of the buildings as we go [music] through here.
2:29 But beautiful [music] buildings that look like somewhere they want to rent.
2:32 The next thing that we found for these buildings is that having an on-site presence [music] is really helpful, especially in 55 plus, but on all properties. So, we make sure that we
2:39 have people available on site and it's very clear where you can meet members of our team. Marketing is going to depend market to market. I've had different [music] things be successful. Some
2:47 markets love Zillow, some hate it. Some do really well with signage where you have the actual street flags for lease.
2:54 You [music] have a big phone number for the PM company. Facebook Marketplace has worked for us in every single market, but you have to be very fast in
3:02 responding to people and encouraging them to submit an application. We run all of them simultaneously. the online presence, Zillow for big buildings,
3:11 apartment.com, [music] but test it. It's a little expensive and it works differently markettomarket, but get on all the big sites, clean up [music] your property, do your individual signage,
3:20 and if you can have an inmarket presence, someone who lives in the market, either an employee or yourself, you'll get the leasing down. We run a
3:27 model that's called 9595. We want every building in our portfolio within one year of [music] purchase, 95% occupied at at least 95% of [music] market rate.
3:37 Now, this property, we happen to be exactly where the rent's [music] income is allowed to be. It's a LITC property, so we have rent caps and we are 100%
3:46 leased. I would show you inside of a unit, except that I can't because there's none available, which is the problem that you want to have with Well-run [music] PM. One of the biggest pieces is going to be the bookkeeping.
3:56 We went through four bookkeepers to get to where we're at today. [music] A lot of property managers are good at one thing or another thing. If you want to run your portfolio correctly, you either
4:05 need to find someone who's good at the books and good with the people, which is two completely different sides of your brain, or you need to build your own team and stack your team with those
4:13 people. Here at Abling, I have two key employees. They do leasing, they do maintenance, they go back and forth between the two [music] properties. And
4:21 then I have a team of contractors who I love working with both in Stevenville and Abalene. You build out your roster, you build out your systems. [music] what
4:28 you end up with. The more real estate you buy, the higher the savings are and the more [music] efficiencies you create. A lot of people say that you
4:35 make your money on the buy. I found you make almost all the money in the operations. [music] You set yourself up to make money when you purchase, but you
4:43 actually make money when you can bring the expenses down, make the units nicer, keep your tenants [music] loving the property so you avoid
4:50 turnover, and ultimately keep everything leased up at [music] or near market rent. If you maximize the property, you maximize your income. Come inside. I'll
4:58 share some quick math with you on why this works so well. But when I realized this math, this was the difference maker for me. So here's the actual math. So if
5:07 you can on average through reducing vacancy, [music] optimizing your rents, keeping units full, and getting [music] at or near
5:15 market rent, and then you can reduce your expenses by let's say $50 per tenant per month. that [music] you run clean operations, you run great leasing.
5:22 You can on average, let's say that we [music] add $100 net, we have $50 more in rent than our competition, [music] and we save $50 per month per tenant in
5:31 expenses for our competition. Imagine this over 600 units. If you do that math, it's uh quickly off the top of my
5:39 head, that would be $720,000 saved for myself and the [music] people I manage for in that portfolio. Now, I
5:47 invest in seven cap markets. So all that means is that if you invested in cash, you'd expect a 7% return. That's how you value real [music] estate. So divide by
5:55 7. If we add $50 to our income, [music] we created no new expenses. And if we reduce expenses by 50, we've created uh
6:02 no loss in income. [music] So a net increase of $100 nets out to $10 million of value added, which comes down to that
6:11 little $100 increase that we do through management. When I realized that the [music] opportunity for our current portfolio was $10 million doing this
6:19 right, you better bet it makes sense to start PM and hire the right people, which comes to our next lesson. [music] By the way, it is finally out, the book
6:27 on creative real estate. The link is below. You can actually pick this up right now, but it's how I bought deals like this one and deals all over the country. I go through the actual
6:35 stories, the structures, but this isn't theory. This isn't some gimmick or a one-sizefits-all strategy. just the actual strategies that I utilized and
6:44 how they were implemented to close every single deal. You can check it out on Amazon right now. Links below. Here's the office for the 144 unit. This is six blocks away from our other property. But
6:52 welcome in. So, welcome to the office of the 144. I love this space, but this is what we look for anytime we open property management in any [music] given
7:00 market. I'm looking for a big open space somewhere where tenants can visit. We actually have a computer lab, gym,
7:04 [music]
7:05 actual dedicated office space, but I want somewhere for leasing. I want somewhere for maintenance. [music] I want a central hub where tenants can come and we can service other buildings.
7:13 When we have this hub, we [music] can then expand into the other buildings.
7:16 So, if we wanted to, for example, buy a nearby 12plex [music] that wouldn't come with its own office, we can service it here, and we can play zone instead of
7:24 man-to-man, property to property defense. Follow me over here. This is another critical piece. If you're going to be running a PM company, we get
7:32 destroyed on maintenance cost [music] in Texas all the time. So, we'll run stuff like this. Here's the maintenance room.
7:38 I'll actually feature this in another video more in depth, but you have places [music] where you can store all of your supplies. You have inventory for like filters, paint, fire alarms, the stuff
7:47 that you can buy in bulk. This ends up cutting costs for both us and our investors. It's the little things, but if you have this central [music] hub, it's actually much less expensive to
7:56 play a zone strategy, and you need hubs like this to be able to execute it. So, one of the biggest savings you can do is
8:04 actually standardizing [music] all of your items across every property in the portfolio. We're in one of our storage rooms. Everyone should look more or less like this, but you want to keep
8:12 everything very organized and go through and keep all of your stuff on inventory.
8:16 So, in here we have our different toilet valves. I maintain, you know, different pieces for sinks, countertops, smoke
8:25 [music] detectors, but everything is always kept in stock. We buy everything in bulk. It's the little [music] savings that allow you as a larger investor to
8:33 save a lot of money. Our overall goal is over 600 units, save $50 per month per [music] tenant by buying things in bulk, staying on top of maintenance.
8:42 Ultimately, that equals $360,000 [music] a year or in the seven cap markets we invest in, over $5 million of value [music] added through good operations.
8:51 But it's the little things like rooms like this where you make the [music] $5 million. A lesson that I learned really early in my career is that you cannot
8:58 build an A team with B and C players. It just doesn't work. I actually took an investor out to a property. There's a broker in town who honestly wasn't very
9:06 good, but he' helped me out on some projects. I was like, "Hey, I really need you to meet [music] this guy. He's on the C team, but he's good to know." That investor immediately said, "Hey,
9:14 actually, let's cancel that meeting. I played select soccer. [music] I don't want to meet the C team. I play with A players. I'm competitive." And while that sounds a little harsh, I rolled
9:22 that out to every [music] single company, every project that I do. So if we find that we have a B player on a team that needs to be playing at an A level, and again, we're talking $10
9:31 million of opportunity if we run this right. There's no room in there for the B players. So we actually do fast to
9:38 hire, fast to fire. I want to make sure that we have the right people. You never know who you get in an interview. You make the best decision you can as
9:45 efficiently as you can. You put them in the [music] role. You do everything you can to help them succeed. you give them every resource available. But if you identify it's probably not a good fit,
9:54 make that decision quickly. That changed my business. [music] We compete against a lot of PMs that have BNC players parked at properties. I know cuz I've
10:02 bought a lot of the buildings [music] that come with BNC players. We have never in our company's history successfully [music] retained old management. We've kept employees. We've transitioned them in.
10:13 We've given them tons of resources. We welcome them on the team. They have never worked out. Why? we [music] just run to a higher standard and that is
10:20 again a 8 figureure decision that we made for our companies. So in conclusion the decision for us came down to our scale and our standard of operations. If
10:29 you find that you have a partner in your market who's an amazing PM who does everything correctly for you. They've built an A team 100% use that a team.
10:38 Don't reinvent the wheel. Don't build a business that's not needed. It takes time. It takes effort. It takes money. I am really proud to be running a debt-free company that is independently
10:47 profitable. That is a big accomplishment, but it's also a difficult thing to do. Also, to go in PM, you have to build a team that's good at bookkeeping, that's good with tenant
10:55 communication, and good with owner communication. The person who's the best with your tenants is almost never the person who thinks like an owner. You
11:02 need to build the right team. It's a hard project. If it's available in your market, leverage [music] it, use it. If you find that you have an inefficiency
11:09 like we found in Stevenville, Texas, in Abene, [music] Texas, in Houston, Texas, in central Washington, you might have to build it yourself, but really look and
11:18 identify for yourself what do I want to scale to? And if I [music] can save 50 to 100 per door, either on increasing
11:26 topline or decreasing bottom line, that's really your decision of when is it worth it to manage your own team and control your own thing. So, as long as I
11:33 am buying real estate, I will own and use my own property management company until we expand to a market where this is already built. This is most markets
11:42 in [music] the country. Especially if you're buying in secondary or tertiary markets, this is a strategy that will work for you. Again, check out my book here, the book on creative real estate.
11:50 If you want to figure out how to actually acquire these things so you have the management problem to solve, this book goes through the actual deals and what I did in each of the deals and
11:59 the strategies we applied to actually close them. This is applicable to everyone in every market. Check it out and I'll see you guys on the next episode.