On today’s episode of The InvestFourMore Real Estate Podcast, I talk with Noel Christopher, who is the Vice President of Business Development at Renters Warehouse. Renters Warehouse is a national company that is working on streamlining the property management business. Renters Warehouse started in 2007 with the franchise model for property management. They have since moved to a corporate model that provides across-the-board service and fees for every market they serve. The company charges landlords flat fees for management, does not up-charge on repairs or maintenance, and provides tenant warranties. Not only does Renters Warehouse provide reliable property management, but they are also expanding rapidly by purchasing existing property management companies.
What is the background on Renters Warehouse and Noel Christopher?
Renters Warehouse was started in 2007 with the goal of providing franchises for property management. The company stuck with that model for 8 years until a private equity group made a large investment in the company, and the franchise model was dropped. The company found that using a franchise model for property management provided inconsistent service because every company had different policies and procedures. With the corporate model, Renters Warehouse could implement the same training, policies, and procedures for every location.
Noel previously worked with Investability and Rent Range and was a real estate broker for many years. Noel helped investors acquire, repair, and manage over 3,000 houses.
How does Renters Warehouse provide consistent service for landlords in multiple states?
I first met the Renters Warehouse team at a real estate conference. I was impressed by their model and their prices. They usually charge a flat fee of $79 to $99 per month for single-family rentals. The prices vary based on the market they serve. They also charge one month’s rent for tenant placement, and they guarantee the tenant for 9 months. They do not up-charge for any maintenance or repair costs like many other property management companies. They can also help landlords find contractors and even give insight into certain markets around the country.
Renters Warehouse has locations in Seattle, Las Vegas, Utah, Colorado, Texas, Illinois, Missouri, Alabama, New Jersey, Florida, just to name a few. They are also expanding into many other locations. They have worked on opening locations in areas that have the best rental markets.
How is Renters Warehouse expanding into new markets?
Renters Warehouse expands their coverage are by buying existing property management companies across the country. They look for property management companies with at least 100 doors, but in some cases they will buy smaller companies. They take over the companies and revamp them using their corporate model but often retain the exisiting managers or owners of the company. They especially look for property managers in Oklahoma, Indianapolis, Florida, Alabama, Texas and Colorado.
How can Renters Warehouse help investors invest in out-of-state rental properties?
One of my biggest problems, which is also a problem for many other investors, is finding good markets for rental properties. Many markets are too expensive to cash flow in, which means investors have to buy out-of-state rentals. It is tough buying a rental property that is not nearby because you have to find a great contractor, property manager, and agent. You also need to learn what to watch out for in certain areas of the country. Some states are very friendly towards tenants, but in other states, it can take up to a year to evict someone.
In their local markets, Renters Warehouse has connections that can help with repairs, maintenance, and—of course—property management. They can also help investors learn what they need to know about local markets and put them in touch with great agents. One of the biggest concerns for out-of-state investors is finding good property management. Thanks to Renters Warehouse, you know you will get consistent policies and structure.
Noel left us with some tips for out-of-state investors. He mentions that Renters Warehouse works with a lot of turn-key rental property companies. Some turn-keys are great, but others are not so great. The biggest downfall with a turn-key property is usually the property management. Make sure you research the turn-key company thoroughly before investing with them, and remember that you can choose your property management company. Noel also advises people to be careful with buying lower-end rental properties as they often come with the biggest headaches and hassles.
[0:00:58.8] MF: Hey everyone, Mark Ferguson with InvestFourMore and welcome to another episode of the InvestFourMore real estate podcast. Today, I have a great guest in a great company who we’re going to interview and talk to, Noel Christopher with Renters Warehouse, which is a national property management company. They’re in 25 states now, constantly expanding, they manage over three billion dollars in real estate right now and over 18,000 doors.
So they are growing at an incredible rate. I met them in IMN conference which is real estate conference and I was really impressed with their philosophy, how they manage properties and I want to talk to them and help some people, some other investors who might not have a good property management company. We’re also going to talk about property management companies themselves as well.
Noel, thank you so much for being on the show, how are you?
[0:01:50.7] NC: I’m great, thanks for having me, I really appreciate it.
[0:01:53.3] MF: It’s great to have you on. I’d love to start out with kind of, you know, we’ll get to Renters Warehouse, but talking about your history, how did you get involved in the company and what were you doing before that?
[0:02:04.2] NC: Sure, so I’ve been with Renters Warehouse for about a year, previously to Renters Warehouse, I was with a company called Investability and RentRange. They provided data solutions for the single family rental space, and prior to Investability and RentRange, I was a real estate broker in Chicago with both commercial and residential real estate, really focusing on the investor market.
In 2012 when the large institutional investors started buying, I had a brokerage that we acquired about 3,000 homes for investors large and small. Whether it was an invitation homes acquiring a couple of hundred homes a month to smaller, mom and pop investors, really focused on the Chicago market and that’s really kind of what got me into the single family rental space and we did everything from buying to underwriting the homes, buying the homes, placing tenants, managing the construction, we did a lot of different things.
That’s what really propelled me into the space. About two years ago I moved out from Chicago to Colorado, started working with Investability and then transitioned to over to Renters Warehouse and I’m the senior vice president of business development. My focus is on acquiring and buying property management companies, creating strategic relationships and then working with some larger single family rental investors.
So I kind of cover a lot of different areas and we’re really — Renters Warehouse is expanding in a lot of different ways. Organic growth is always going to happen, but to really scale and scale into new markets, we do it a couple of different ways. One is to have an investor, a larger single family rental investor who wants to move into, let’s say for example, Oklahoma City and what we’ll do is we’ll go identify a property management company to acquire and fold them into our process and then start managing their doors as well as the investor doors and it creates scale into our market.
[0:04:03.9] MF: That’s fantastic. It’s funny, I didn’t realize you were in with Investability before. I had Dennis Sistern on a couple of months ago and he is a bright guy. He’s on top of his real estate knowledge, that’s for sure.
[0:04:15.9] NC: Absolutely, he is.
[0:04:17.2] MF: Very cool. So I have one question before we get into Renters Warehouse, what do you like about working in the corporate world versus being kind of your own boss as a broker or agent?
[0:04:29.7] NC: That’s a good question because up until this last year, I worked — and with Investability, I was a consultant for a while and came on as an employee for a little while but that was really through their transition from being acquired by Altisource. I was working for myself, managed my own time and business for over 20 years. This opportunity came up with Renters Warehouse and when I originally met the private equity group that acquired Renters Warehouse about a year and a half ago, I thought they were crazy to get into the property management business.
But as I learned about what was happening with Renters Warehouse and understanding the single family rental space being institutionalized, which is a good thing, and we can touch on that later. But, I realized there was a great opportunity here and, you know, one of the things that I did prior to working with a larger SFR investors in Chicago was help acquire real estate brokerages for a firm that was doing a similar model where they saw an opportunity to acquire a company that was originally a franchise and really saw the opportunity of rolling up those franchises into a corporate, centrally-managed model.
What that means is that you know, service you get in Denver is going to be the same service you get in Dallas, which is going to be the same service you get in Chicago and those are three completely different markets. Not only do we have to be able to provide that same service, we have to be able to work with the nuances within each market and that has really enabled us to be more efficient, to scale quicker and to work with these large and mid-sized investors even though our 18,000 homes we manage, we do that for around 13,000 different investors.
So we’re still focused on that smaller investor but what’s happening with the single family rental space being institutionalized, is that we’re able to give great processes and efficiencies to work with this larger investors and that starts to trickle down into the smaller investor, and that’s really what’s happening in the space. It’s the service industry is now coming up to help manage and create more professionalism in a higher-level service in efficiencies and increasing yields for large and small investors alike.
[0:06:45.8] MF: All right, bring us back to the very beginning, how did Renters Warehouse get started and how long ago was that?
[0:06:54.6] NC: So Renters Warehouse was started back in 2007, it originally started out as a franchise and you know, there’s a couple of moving parts there but there is a franchise setup in Minnesota. So Brenton Hayden was the original founder of Renters Warehouse and then he started working with Kevin Ortner and Jon Ortner and Donovan Reese. They are other partners that came in and they grew this into a franchise model, you know, over eight years.
It really grow into a great brand, it was really working well, a lot of people really were curious or why we switched from the franchise model, but about a year and a half ago, a private equity group named Northern Pacific Group came in and they invested into Renters Warehouse, started really looking at the space and where it was evolving to, and really thought the best idea was to roll up these franchises and turn it into this corporate model.
So a couple of misconceptions or things that people don’t realize is that we’re no longer a franchise mode, we have a few franchises left, not many and we’re not selling any new franchises. But this company is built for, you know, this year’s our 10 year anniversary. So this isn’t a new company, we’re very established and we’re spending a lot of time and energy and money into technology and creating processes to really scale this to — we’re at 18,000 doors, we want to be at a hundred thousand doors in a couple of years here. So we’re opening new markets and expanding and working with different types of investors and partnerships and things like that.
[0:08:26.7] MF: Yeah, I was impressed when I talked to you guys at I Am Man in phoenix, you know, it’s a pretty large conference there but I first heard that it was a property management franchise and that scared me. I was like, “Oh man, property management companies, they’re so all over the place with their service, with management, with tin can investors or tenants.” I’m like, “How can you possibly know what you’re getting when a different person owns every franchise?”
And then when I heard that you’re going to the corporate model where everybody’s kind of the same model, the same checks and balances, I was much more excited about that for property management business than the franchise model. I’m guessing that’s part of the reason why they went to that model.
[0:09:12.2] NC: Yeah. So I learned this very much in Chicago, working with small and large investors that came in to Chicago and maybe they were working in four different markets and they would have what would be considered a national property management platform but it was a franchise and each market ran their business differently. They had different processes and you know, while they were so branded under one name, it was not a consistent level of service and professionalism or across the different markets.
So that was really a big draw for me personally and for the company and private equity group to really put this into a consistent brand so we talked with investors all the time. They might own — Whether they own 400 properties or whether they own five properties and five different markets, getting that consistent service is a big draw and I’m sure Dennis with Investability talked about how now you can live in California and comfortably identify a home, buy a home, have it rehabbed, get it tenanted and get it managed without having to worry so much about all the different moving parts.
There’s a lot of turnkey providers that can provide that service for you and we’re starting to work with a lot of those turnkey providers as well to give them that professional property management that, you know, many lack. So it’s all the pieces falling together, it’s great to see.
[0:10:36.4] MF: That’s a great point on the turnkey providers, because I think that’s one of the biggest questions a lot of people have about buying those turnkey properties is, “What’s the management going to be like?” The numbers can be great but if the property manager suck, you’re not going to make any money. So if you have a solid model with a national company, that would probably alleviate a lot of those concerns.
[0:10:56.3] NC: Yes, you know, what we see is that a lot of turnkey guys do the property management themselves because they don’t trust anybody else to do it and they’ve had, you know, the bar’s been pretty low in the property management business. There’s different opinions on investing and having the same group that bought the property, that sold it to you, that puts a tenant in it and now they’re servicing that property on the property management and the maintenance side.
You know, for me, the way I look at it is really working in a vacuum, so there’s no competitiveness on the repairs and maintenance. What the investor gets and what they see is what they see. They don’t realize that maybe there’s some efficiencies that are being left on the table and that’s why one of the things that we do is we don’t upcharge the repairs and maintenance business, we don’t own the repairs and maintenance business.
We have a platform that manages that process but we competitively go out to vendors and our platform is really good at showing the efficiencies of vendors and really getting a great price and making sure we’re aligned with the owners so when a call comes in, we’re not financially motivated to send a vendor out there. We’re motivated to mitigate the issue and keep our owners happy and increase their returns on these properties.
As prices have gone up, people have had to go into secondary markets in order to invest and that poses some risk so these yields starts to get compressed and it’s very important to have an efficient process that can control the controllable expenses. There are uncontrollable expenses and controllable expenses. Where we excel on tenant turns and leasing and efficient repairs and maintenance process, those all equal a higher yield for the investor.
[0:12:46.6] MF: That’s great. One thing, some people may not realize, is with a lot of the property management companies, they either own the maintenance company or they have — they will charge 10, or 20% more than what the maintenance companies charge them and that’s an extra way for them to make money. Now they’re supposed to disclose that, legally, but they don’t all do it. So that can save a lot of money when you guys are not up charging for that.
I have one question, I don’t know this myself. If someone bought a new property, it’s in Florida or whatever market you guys are in and it needs $20,000 in repairs, can you guys help with the initial repairs, or is it more of just an ongoing maintenance and repair agreement?
[0:13:27.8] NC: So, we’re moving into those types of repairs through our platform. We can, in certain situations, help manage that process. Most of the time we prefer to keep it in the turns so when we’re turning the property and it needs some minor repairs but we’re getting into that a little bit more and we’re also getting into what we will do is help you find a good contractor to do that. Mostly, we like to focus on the property management side. So that’s from tenanting to tenant turns to getting the property leased, managing the repairs and maintenance ongoing.
Certain markets are starting to test it out, doing more of those kind of construction, but it can go from a $20,000 repair to a $50,000 rehabs very quickly. We’re not contractors, we’re not project managers, so we usually stay away from that a little bit. But we can also help resources and there’s groups like Investability and things like that can also help with resources to get the property rehabbed on the front end.
[0:14:35.9] MF: That makes sense. Can you talk a little bit about the costs and what you charge landlords for using your services?
[0:14:42.5] NC: Absolutely. We work on a flat fee model, and it varies by market. For example, in a market like Chicago, Illinois we’re at $99 a month flat fee. In the other markets, we might be in between $79 and $99, depending on the cost of the market, the average rents, things like that. So what we find is that in a Chicago market, we’re very much below the — when you have a higher average rent in the city of Chicago, upwards of $2,000, we’re charging in some instances half of what other guys are charging.
Now, for tenant placement services, we charge one month’s rent and then we typically do a lease renewal of around $350 for a lease renewal. What that is included in all of that are four inspections, so a moved out, a moved in inspection and two random inspections. A move out and move in inspection, are full video inspections and we will give some insight on what work needs to be done to turn the property, any of the damages, things like that.
It’s still ultimately up to the owner, but we will help guide them through that process and that’s why we coin the term “rent estate” and “rent estate advisors”. We really want to advise you through that process. With our tenant placement, we offer a tenant warranty and what that means is that if someone signs a lease of 12 to 17 months or zero to 17 months, we will do a nine months tenant placement warranty. If for any reason that tenant stops paying and ultimately moves out, we will place another tenant without charging our tenant placement.
If it is a longer lease, that tenant placement warranty can go up all the way to 18 months and that’s just a service that puts the onus on our team and our leasing agents to make sure we place good tenants into the properties because all of our leasing agents only work for Renters Warehouse. We cooperate with other leasing agents but our leasing agents only work for us, only place tenants for our properties.
[0:16:43.2] MF: Very cool. So what happens, say worst case scenario, you get a tenant in there and they stop paying rent right away and you have to go through an eviction, how does that process work?
[0:16:54.0] NC: While our tenant warranty would be covered there, as long as we place a tenant. Now if, there’s always situations where we don’t recommend a tenant but the owner decides to go ahead and move forward with that tenant then that’s something different. But we will also quarter pack the process of the tenant eviction and work with our local counsel to get that tenant evicted.
There are some fees for that. Most of those fees we’re passing on from what they attorney will charge and in each state is a different process. Those costs vary by city, really.
[0:17:27.6] MF: Very cool. Now you guys are constantly expanding, you’re trying to grow bigger. So you’re in 25 states right now, what are some of, I mean, you don’t need to list ever single state but what are some of the major markets you're in at the moment?
[0:17:38.4] NC: Absolutely. Let’s see. We’re covering, I’ll kind of start to the west to the east. We’re in Seattle, we’re in Las Vegas, we’re in Utah, we’re in Arizona, we’re in Colorado, we’re in Texas, Oklahoma, Minnesota, Wisconsin, Iowa, Illinois, Missouri, we’re in Alabama, Florida, North and South Carolina, Ohio, Michigan, we’re in New Jersey and then we’ve got a lot of markets that we’re looking to move into.
We’re looking acquisitions and opportunities to move into pretty much any market. We really have the big focus right now to finish up Florida and the Orlando market and acquire — So kind of the back-track a little bit, we will acquire property management companies in an existing market to add to our portfolio or we’ll acquire property management companies in a new market and in many cases, we will hire the owner that we buy the company from on to run that market.
So that’s a big opportunity for people to join our team, it creates a lot of interesting dynamics within our company because we’re bringing in this entrepreneurial owners and having them join our team and it’s a lot of fun because we’re gathering and implementing a lot of new ideas on the fly that we see that work in this business.
[0:19:01.8] MF: Okay, I have question for you.
[0:19:02.9] NC: Sure.
[0:19:03.4] MF: Real quick here, I don’t know if you can answer this or not? If you can’t, no worries. But seeing these different market and the different, all the landlords you work with, are there certain markets you see that are more profitable for landlords?
[0:19:16.3] NC: As, you know, in the last five years here, the prices have gone way up in a lot of markets. In the typical markets where all the hedge funds started to buy there’s still a few markets in Florida that are attractive, the Midwest is very attractive, Kansas City, Saint Louis, Cleveland, Cincinnati, Alabama, Huntsville, Birmingham, Tampa Bay, Orlando are still some good markets.
There are opportunities in some of the major markets when you're talking about Chicago or Phoenix or Vegas. It’s just a little bit harder to find them and it takes, you know, you have to buy right and rehab right and really do your due diligence. But these secondary markets are starting to get a lot of interest, and again, the service industry is coming up to be able to support them, you can find a property, you can get it rehabbed, you can get it tenanted. Or you can go through one of this turnkey providers that we work with and they do everything for you and then we manage it on the back-end. So you’ve got that third party managing and working on your operations to really give you that comfort level.
[0:20:19.0] MF: That’s great. It helps, I’ve been interested in Florida myself and I’ve heard of course Ohio has been a cash flow central for a while. But I have a turnkey in Cleveland. So, it’s good to hear and yeah, you know, I’m in Colorado like you are. Prices here are just insane, so it’s changed form a great rental market to a horrible one in a few years.
[0:20:40.8] NC: Yeah, it’s funny when I see some of this reports that come out and they say, “Great markets to invest in,” and they list Chicago or I mean, they list Colorado or Denver. Now, there’s some markets in Colorado, they’re good to invest in but they’re just pulling some basic numbers and not really taking a look at the actual market. So yeah, it’s tough out here in Colorado. But there is that Midwest, Southeast, there’s still a lot of opportunity, it’s a yield play. It’s not a home price appreciation play in most of this markets.
So you have to be very careful where you buy and even in Chicago, there’s still some opportunities but again, it’s a yield place. So if you hear about how Chicago’s gone up, you know, crazy, it’s really in certain areas of Chicago, the areas that investors buy, it’s that one to 3% appreciation per year, just kind of steady and sometimes it will have a flat year. So as long as people understand and they’re not looking for that big appreciation play, which happens if you bought in 2012, there is some great opportunities.
[0:21:41.4] MF: Great. Now one thing too I’ve heard from a few people, maybe you can help on this as well is I’ve heard Chicago is crazy for doing evictions and just incredibly tenant friendly, is that true?
[0:21:53.8] NC: It is and I was just actually in Chicago this last week, I am the managing broker for our Chicago office and I was renewing my real estate licensing and it was those 24 hours of classes and I took it and we talked a lot about that and so Chicago itself, the city of Chicago has some very strict tenant-landlord laws and it’s all based around the deposit. So in the City of Chicago most investors charge move in fees and they do not take a deposit. It’s practically impossible to comply with the tenant-landlord laws on deposits.
Now, that being said, most of the true opportunity in the Chicago market is actually outside of the City of Chicago but sometimes you might still be in Cook County. So doing your due diligence on that end, understanding how those laws work, and making sure that, you know, where people get in trouble is if the property management company is taking the deposit and they’re not properly documenting that deposit and abiding by the tenant-landlord laws.
That’s when you as an owner can get in some hot water when you are trying to evict a tenant. I’ve had tenants in Chicago that I had to evict and some have been smooth, some haven’t. It depends on the areas you’re in and it depends on how adept people are and working the system but you just have to be aware and go into it with eyes open and understand and make sure you’ve got the right partner that’s going to do the right things for you as an investor.
[0:23:18.9] MF: That makes sense and every market is different. You guys are all over the place but if someone is looking to invest from Colorado into Florida or something, can you help provide insight on the market, what to look out for as far as tenant laws before they buy properties there?
[0:23:36.2] NC: We can, and that would be done in our local level with our local market leaders. So the way our model works is that we have roots on the ground in each market. We’ve got market leaders and rent estate advisors who are experts in their area and in their market that are supported by a corporate model of all the back office.
Whereas most property managers are having to rent properties during the day, go home and get back to the office later in the afternoon and do the books, and if they own a repairs and maintenance business do all the invoicing and it’s a lot of administrative work. So they take that all out of their hands and they are just focus on growing the markets and becoming experts in that market. So the short answer is yes.
[0:24:15.2] MF: Okay, very cool. Some of these questions I’m even asking for myself because as an investor in Colorado I’ve looked at Florida and different markets and property management is one of the big question marks when you are investing out of the state is if you get a bad property management company, they can really put you in a bind and I would think having one system property management company that can provide insight on all these services would be a huge advantage so it’s good to know.
[0:24:42.8] NC: Absolutely.
[0:24:43.9] MF: All right, so switching gears a little bit, we’ve talked about it some but the acquisition side, talk a little bit more about you’re looking to buy pretty much property management companies all over the country, right?
[0:24:54.8] NC: Yes. So we’ve got some primary markets that we focus on. Right now we’re focusing big on Indianapolis also on Alabama, Florida, and places like [inaudible]. But then all of them are just the same markets as well. So the process is, because we are centrally managed, when we look to acquire property management company we’re really looking at the doors, the property management contracts and we’re less concerned about how that property manager performs on a net revenue basis.
We’re more looking at the gross revenue of what that door produces and then we plug it into our model and that spits out an EBITDA, it spits out a net revenue and then we figure out what we can pay per door for a contract. Sometimes it’s easier to say we are buying the company and in many cases we are, but we’re really just focusing on the property management business and we’re not looking to buy the repairs and maintenance and a lot of these companies their repairs and maintenance business might be 70% of their revenue.
We’re not interested in that part of their business, although they can stay and continue to service the portfolio but they would have to abide by our standards, which for some it works, some it doesn’t. So what we do is we have a quick conversation. We ask for some basic data points and we look at getting it on a per property level. So we’re on a per address level, we underwrite the portfolio and we come back with a number we can pay and we put a deal together. We typically are paying a combination of cash and note on the portfolio and we usually close between 45 and 60 days.
So it’s a pretty easy process. Probably the hardest part of the process is supplying us with the information. We found that a lot of people are working from spreadsheets and different notepads even and so it took a little while for them to understand what they really have. But once we do that, we have a few conversations, we negotiate a deal and we’ll happily acquire their doors. In many cases, like I said, we might hire the owner on and if it’s a new market, many of the employees to continue to run that market.
[0:26:59.9] MF: No, that’s great information and are there any certain markets where you’re really looking to expand in more than others right now?
[0:27:06.7] NC: Oh yes, well I would say on future markets, markets that we’re not in we’re looking at Tulsa, Oklahoma, Indianapolis, Orlando, we’re looking to acquire doors in all of our markets; Jacksonville, Tampa, Miami anywhere in Florida we’re very aggressive. Same in Alabama, which we’re now open but we are looking to acquire more doors in those markets and Denver, absolutely. Dallas, San Antonio, Austin, pretty much all over.
If you go to our website you’ll be able to see where we’re at. We’re pretty much interested anywhere and it’s not only just acquiring property management contracts, it’s also small, mid-sized investors. We loved to do investor take overs. We don’t buy investor doors meaning that if you own a hundred doors, we’re not going to compensate you for those doors because we believe we should win that business and we have a very good value proposition.
We have a division called Portfolio Services that gives some investor-focused services. So it’s called portfolio services division and it provides investors, particularly ones invested in multiple markets, a solution with a single point of contact, institutional level of reporting and we’re uniquely positioned to service these investors with our corporate-owned offices and centralized back office operations. So we’re also looking for those investors. So guys who own anywhere from zero to a thousand doors and we can offer them a great level of service.
[0:28:43.1] MF: Awesome and when you’re buying these property management companies, is there a minimum to maximum number of doors that you’re looking at for those?
[0:28:50.6] NC: So yes and no. We will acquire doors on a smaller level for sure. We work with a ton of realtors who refer us business on a small level and that usually what we do is that’s handled more in our local market team. So our local market leaders will work with those realtors or smaller investors. For my team for it to be interesting it usually needs to be over a hundred doors because these transactions take some time to put together.
Everybody’s got a different model, there’s a lot of due diligence. So we want to keep it something meaningful. But that being said, we love to look at guys who have 40 doors, who have 30 doors. We usually do just a straight referral acquisition there where it’s not so complicated. When we get into our larger doors, per accounts. We have to take into account turn or turnover of the portfolio going forward and we want to tie people in to make sure that they’re there to make sure the owners don’t jump ship.
Or maybe we’re already out the door before we even started the transaction because it wouldn’t do us any good to buy it. We are paying somewhere between $700 to $2,000 a door. So it’s a considerable amount of money when you really get into it.
[0:29:58.8] MF: Yeah, I was surprised when you said how much you guys are paying for those. It’s pretty substantial and pretty attractive, I would imagine, to a lot of property managers.
[0:30:08.3] NC: Yeah, you know, our target market is we negotiate some larger deals and we do some larger deals meaning over 500 doors. Those are a little bit more complicated because most people in the property management business, once they hit that 500 door mark, they’ve got a pretty efficient business model and efficient process and they’re doing pretty good for themselves. A lot of people struggle between zero and three or 400 doors.
It’s tough, it takes a lot of work and time and so sometimes those property managers are a little bit more interested in doing a deal and getting out of the business or whether it’s a turnkey provider or somebody who really likes to focus on real estate and they backed into the property management business during the down turn and it’s gotten very competitive on pricing, on level of service, and things like that.
[0:30:54.7] MF: Very good information. All right, so switching gears a little bit again, you see a lot of investors, you see a lot of people buying in other markets, do you have any tips or advice for people looking to buy in other markets, some major things to look for that maybe they aren’t thinking about?
[0:31:10.4] NC: Absolutely. Well I think doing your due diligence is very important. So I love the turnkey guys. I think it’s a great service they provide, but you really have to look at their reviews, do some research on that property or a person who’s providing you a property and if it seems too good to be true, it probably is. You’re not going to get a property that, if your average renter is of lower social economic status and you’re going into let’s say section eight renters for example. They are going to have higher maintenance cost and higher turn cost when you do your yearly section eight inspection.
So the 20% return that’s promised is usually inflated and you just have to really do your due diligence and understand that in many markets, since the pricing and the values have gone up, it’s caused people to have to push into the transitional areas. So areas of the city or counties where it quite hasn’t turned into being a nicer area, and so there’s sometimes can be some risks and we’re taking a little bit of a gamble if this isn’t an established area.
It’s simple as going on a hot pads or something you see how many homes are for rent in that area? It’s probably not a good idea if you’ve got a huge saturation of rentals that are on the market to buy another rental and try to compete with that. So there are some little things to look at and you want to do a lot of due diligence, especially in areas where a high return is promised.
[0:32:43.6] MF: Right, that makes sense and I have seen a lot of turnkey companies who are advertising 15 or 20% returns and you look at the numbers and you don’t include any maintenance or any vacancy cost and so a lot of red flags.
[0:32:56.1] NC: [Inaudible], right? So then cut it in half, right?
[0:32:58.6] MF: Right, awesome. Well no, I think you’ve provided a ton of information. I think you guys have a really cool business model and idea. You are looking for people, property management companies, investors who are managing their own properties, maybe investors who are looking to change from property management companies they aren’t happy with now to someone else. Is there anyone else you’re looking to talk to and that you can help out with in this business?
[0:33:21.8] NC: Well, so a couple of things on the investor side and this is for even property management acquisitions. What we offer for our customers is great. We are currently investing a lot of capital into technology and there really is no off-the-shelf property management solution that can do everything that we require as a level of service and that goes from full transparency to knowing what is going on with the repairs and maintenance.
You know, look, we’ve looked at this, we have a lot of investors, we pulled a lot of people and the number one concern or there’s a couple of big concerns; repairs and maintenance is a huge concern. Not knowing what is going on with the property. Getting paid in a timely manner. Getting charged in a timely manner for the repairs and maintenance. So you will see a lot of companies that get behind on their invoicing and so they will invoice you from repair work that is done two months ago. Well that’s not acceptable.
Not knowing what charges are on your owner statement. So saying, “Hey there is a $1,000 repair what is this? What is it exactly?” Itemize it, pictures, before and after pictures, in real time you can see what is going on, understanding the leasing process. Just full transparency, getting paid on time, and having an efficient process is really important. So we’re investing a lot of money into technology too to cover that so it’s something I didn’t cover before and I wanted to add that. We’re happy to work with anybody and we’ve seen a lot of people who have been upset with the property management solution and it’s really diving in and understanding that and being able to solve those problems.
[0:34:52.6] MF: Oh that’s awesome and yeah, I’ve got links to pages, information for property managers or investors looking to use property management companies in their market or other markets as well. I’m sure you guys would love to talk to anybody, give them as much information as you can, whether they use you or not but at least give them an idea of what you can help them with.
[0:35:11.8] NC: Absolutely. Yeah we can do that. That would be great.
[0:35:12.7] MF: Awesome. All right, well anything else you want to add before we head out of here? I’ve learned a lot, I think you’ve given a lot of great information. Any last tips?
[0:35:20.9] NC: No, I think that’s it. Just go, you know, tell everybody to go to your website if they are interested for some more information, whether they own one house or they own a hundred, we’ll definitely give them the service they need.
[0:35:30.7] MF: Awesome. Noel thank you so much for being on the show, for giving us all of this information, giving me some background and in-depth analysis into what you guys do. I appreciate it and hopefully you taught a few other people some things and we’ll have to keep in touch.
[0:35:44.0] NC: Okay, sounds good.
[0:35:45.6] MF: All right, have a great weekend.
[0:35:47.4] NC: You too. Buh-bye.