Ep 179 - Our Journey Episode 9 - Property Management

Hey, everybody, Flip and Danny here, founders of the Freedom Real Estate Group family of companies. Phew. I gotta work through that every time. Now, welcome to another episode of our podcast.

And our podcast is called Freedom Through Passive Income.

Our Journey.

Yes, Our Journey. Our Journey edition. Yes, yes.

And this is. Welcome to another episode. Now, this is our. Like I said what I just said, but this episode is entitled Our Journey Property Management.

And just be forewarned, these are longer than normal.

Yes. Yeah. Just to let you know, if you haven't figured that out before from the other eight episodes, this is number nine.

So funny.

Yeah, so. And I mean, they're long for us. I mean, goodness gracious, they're not. Joe Rogan, 90 Minute Podcast. But anyway, so this is about property management. So again, now our series. Again, this goes back to us being on cruise ship and sailing the seven seas. And then we became art auctioneers. And then after that, we. I was still our auctioneer, but then you went into the mortgage business. Real estate or insurance. And then mortgage. And then we said, well, geez, gosh, because I got out of our business in 2008. What are we going to do? And so you should do real estate. So we went into real estate, and then we became realtors. We found out how much. That was a horrible experience. And so then we went into real estate investing. And then all of the different things there. Short sales, mortgage assignments, sub two, sub two wraps, seller, financing, wholesaling. And then we discovered turnkey. And we're like. And so we moved to Ohio because that's what everyone likes to do. They move from Phoenix to Ohio. We got that backwards. And then so we moved to Ohio, we're doing turnkey. And then the last episode, we talked about starting our renovations company, which we thought that was going to be one of the hardest things we have ever done. Yep. And then enter. And property management said, hold my beer. Yeah. And so. Well, it's funny, I'll let you talk about all the importance of it, but somebody said, why did you start the property management company? Well, we actually saw. I saw a video. You showed me the video with a gentleman walking through Lee Kearney. He's walking through his office and he said, right in here. And he shows the girls inside. They're working. And he said, that's my property management company. And he looks right at the camera and as serious as anything, says, no one will take care better care of your properties than you will. So have your property management company in house. I'm like, whoa, that's pretty smart. And that Was five years ago or six. Probably six years ago. Yeah. That was before we actually started Freedom Real Estate Group. And. But anyway, boy, he couldn't have been more right. Do you remember how many property management we went through? How many?

I think it's five.

Five?

Yeah.

Just five. Just five.

Yeah.

Yeah. And the last one was the doozy, so. But I'm gonna hand the baton over to Hugh at this point before I say any bad words.

Yeah. So you've listened to the episodes thus far, and if you haven't, then really coming to Ohio, started the turnkey company, and then out of that we started Renovations company second, which was yesterday's episode, and property management ended up being third. Now, when we built a turnkey company and came here to Ohio, we didn't intend on building out all the rest of these. We knew that there were a lot of moving parts and that maybe in the future we would have everything in house, but certainly not this fast. So we had outsourced this service. So we had hired property manager. He wasn't really great. And so we hired another property manager. He was really great. And we got better at hiring every single time. So we thought, until there's one thing that they can say to you when they're across the table, and then it's another thing once they actually have your assets under management. And then you're like, do you even answer your phone anymore? You got our business and now you're just gone. So we went through five people. The fifth one was we had really, really high hopes for that. Relationship unfortunately dwindled, and it wasn't again, I don't think that this person was a bad person necessarily. This person was just overwhelmed too much. Didn't have the knowledge of how to build a business and scale a business and have it sustainably, you know, doing everything that she needed to do for, you know, the property management. So it's unfortunate that ended, but we said, hey, we're gonna. We're gonna go ahead and bring it in house. And so we did it, and sooner than we ever anticipated. And it was like we said yesterday, the two hardest companies for us to build was the renovation company and the property management company, because they are just time intensive and hard as heck. The property management in particular, it is not profitable until you get to a certain amount of doors. So we weren't even at the number of doors we needed to be to be profitable. And we are bringing it in house. So we're just going to have to just suck it up and make it happen. Because our Clients mattered that much to us. We couldn't leave them in the situation that they were. So we said, hey, we'll take it over. At least now we can run down the hall and knock on the door and go, hey, you know, maybe we suck, but at least we can fix it as opposed to somebody else sucking. And we can't go over there and fix it. We've got zero control. So we committed to doing it, and it was a really, really hard road. And, you know, we didn't. We were losing money for a while until we bought another property management company, brought their staff on. So we created some of the systems surrounding that other company and what they were. We learned some of those lessons pretty fast. We ended up changing a lot of it only because we decided we just wanted to be different. Right. We wanted to build something that really aligned with everybody's interests because we were owners ourselves. Right. We're clients of our own property management company. And so we said, hey, this doesn't make sense for us as the owners. Like, we're not trying to build this company to make a profit, because quite frankly, even after you get it to a profit, property management is not a money maker. So please, if you want to make money, don't go into property management.

Yeah.

However, it is the company that saves a company. Like a turnkey company. Right. Because we're going to sell a turnkey product, and we can do a damn good job at that, finding that good deal, finding it in a good neighborhood, good house, renovating it, leasing it up, and then from there on, after we've done that job and the turnkey company circle and the renovation circle, that little, you know, hub, we have to pass it off to property management. That's the relationship.

Yeah.

For the next.

That's where they're at the rest of the time. Yep.

Yeah. So if that relationship sucks, well, that's the life of the customer right there. So you can do everything that you want over here, but if that one sucks, you lose all your clients. And that's what was happening with the past relationship and why we said, okay, we can't do that. I'm not working this hard to lose all of our clients because of somebody else. So that's kind of property management in a nutshell. But I'll just touch on one more thing, and that is that we have worked as we learn and grown, we've had. It was a roller coaster ride. It has been a roller coaster ride. We have sucked at times. Every time we sucked, we said, we're sorry, you Know, this is something that we did. This is why we did it, so we could have control. We're gonna fix it. And we would get in there and we get our hands dirty and we would fix it. We would lose money again if we had to fix it on our dime. But at least again, we had all of that control and then we got to have opportunities that we're still building upon. Chris Nino, our property manager, is always going to. Hey, we just rolled out this new thing in property management and this is what's going to help our residents. Right. And this is what's going to help our owners. And this is how we've aligned our interest by not charging these fees or these fees with the owners hurting, we're hurting. Right. If the residents hurting, we're hurting. And we're developing that really nice synergy between our clients and what they do there. And I just think it's really, really awesome. It's painful as it has been to build this company. It's a, it's awesome. It's just awesome.

And I wanted to make a note too, that we went through all those property management companies and it's not because their standards are up here. It's not that at all. I mean, there was literally, there is like numerous properties that all of a sudden we realized there's no rent coming in from these.

Yeah.

And, and it wasn't because they couldn't pay. It's just because they never went and got the rent from those properties.

Yep, exactly. Right.

This, this person hasn't paid in six months.

Yeah.

Oh, I'll see what's going on. Yeah. And, and, but that wasn't just one of them. That was, that was almost all of them. There was always something crazy.

I'm like, there was a property that had grass, like up to this table. If you're watching the video. Sorry for those of you who aren't, but that's a good three feet. Like, okay, so it was like. And so the city was like sending us letters and saying, you're gonna have like an eighteen hundred dollar fine or something. So we call up the property manager, go, what, what, what, what's going on here? Yeah. Yeah. Crazy.

Oh, those are fun times.

Yes.

Oh, boy. So pros. Well, number one, one, one pro is now we have control.

Yes. Yeah. Another pro is the think tank of ideas to be better, to align our interests with the owners. That is my favorite part because as owners, I love that there's a company out there that is saying, hey, our clients are important. That's why we're in business. So let's make sure that we align our interests with theirs so that we all win together.

Yeah. It to the next level too. They're, they're not, they're not tenants, they're residents.

Yes.

You know, and we really, we have a really great, we build a really great relationship not only with the owners, but also with the residents as well.

Yeah.

And being more in touch with owner concerns, wants and needs, that's, that's a.

Huge pro to me. Because we care, we care a lot. We wouldn't be in this business otherwise. You don't get into a turnkey business short sighted. Right. This is a long term business. You, you do it right or you fail.

Right. Because our companies are all vertically integrated. Our property management company knows that they need to take care of these clients.

Yes.

And they need to do whatever it is because they know that that's our, you know, don't bite the hand that feeds you.

Yes.

And that client is our client, you know, the main company's client that buys the turnkey properties which if they didn't do that. Well, the property management company doesn't have a job.

Yeah.

So yeah, it's, it's a big circle.

Yes. Another pro is that we built. Yeah. No, I'm not gonna even say we built out a brokerage at the same time. So because we had to build a property management company, it meant we had to get a broker, which means why not just have a brokerage too? So that all the deals that we were listing with somebody else to put on the MLS because they were retail flips. Well, now we can do it in house and we get to keep all the money in house. So that was a big pro that we didn't even anticipate. And that's kind of a side company. Right. We don't even grow that one because it doesn't. It only serves us by keeping retails in house.

The cons. Dun, dun, dun. We knew that we wanted to do it, we just didn't. We hadn't planned on it to bring it in so soon. So our hand was forced.

Yes. It's an animal to build out. That was another con. Property management is. There's so many. I mean, just the fact that you have to get a broker involved means that there's license requirements, there's state requirements, there's a lot of things. And so we had to bring on Chris at the very beginning because he had the knowledge to able to apply to what we were building out to make sure that we weren't screwing anything up. And there's just so many moving parts.

And, boy, it's amazing how many property management companies in the state of Ohio are operating illegally.

Yes. Truth.

And you know, you serve two masters. We just, just talked about that. So we got the owners and then you get the residents.

Yes.

You know, so it's, it's. It's. Wow. But they want this. Oh, no. But they said that they have to have this and.

Yeah, yeah. That is a difficult balance. I respect the property management team for, you know, keeping that balance. Another was managing disappointment through the growing pains and things that were out of our control. So it was very. It was always sad when we got a message and saying, you know, your property management company sucks. You know, and I'm just like, I told you that we were building it out way too fast and to please bear with us and to let me know when something was wrong, because I would promise you I will jump in and help fix it. But they like. And some of them were so gracious. They're like, danny, you told me to come to you. And so this is, like, happening. And I'm like, ugh. And so it was tough. So managing that disappointment for our clients, but just us too, because it disappointed us too, that we weren't getting better as fast as we wanted to be.

Yeah, well, you wanted to be better the next day.

Yes, I did. Hahaha.

All right.

Okay, here's our five.

Okay, ready?

Risk tolerance.

Next.

It goes along there with the renovation company. It's one of the highest risks you can take. Time availability.

Absolutely. Knowledge, more than any of the other ones, which I didn't think was possible.

Inner circle.

There's a little bit of inner circle involved with this, with finding the right attorneys that know how to do the right property management things and. Oh, and evictions and things like that. So.

Yes. Yep. Access to capital.

Nope.

I'll say a little bit because depending on how many you're managing, if you're employing people, it's a loss to you. You do have to fork out and pay the salaries until you get to a certain point in which the management revenue is coming in, can cover the salaries that you have.

You can just see me sitting in a canoe, just getting water out and just sitting there, not doing anything. Yep. That was us for a good couple years.

Yep. So that's our property management story and some of the ups and downs. I'm sure if we brought Chris in here, we could be telling stories for hours. And some of our other team members who went through the growing pains and building that from the very, very beginning. But tomorrow we have landed into the arena of having to build an acquisitions company because Flip was our only acquisitions person for the longest, longest time and something happened that caused us to go, crap. We need to build an acquisitions company. So you're going to hear that story tomorrow.

That's right. And so make sure you're heading on over to our website, freedomcapitalinvestments.com to join our investor club to see what we're doing today. And again, make sure you're hitting the like button and you're hitting the like.

Button because this is such a fun series. I just love telling these stories because we don't get to talk about it very often.

I hope they like them.

Yeah, yeah. Hope you guys like them, too.

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Bye, everybody.

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