Ep 86 - 48 Unit - Property Manager Interview

Hey everybody, Flippin daddy here. Founders of the Freedom Real Estate Group family of companies and welcome to another episode of our podcast called Freedom through Passive Income. That's right. And this episode is called our 48 unit and the Property Manager interview.

Yes. So I'm really excited about this one and tomorrow's episode as well because there's things that we want to be sharing with you guys and instead of just defining them and telling you, hey, this is what we would do, this is an opportunity because we're under contract already to not only share with you what we do, but actually the application of it because we're doing it right this second. So this is a little bit of a case study in the, in the fact that we did this yesterday, literally. And I printed out the notes from that particular call to be able to share with you. So we have a 48 unit, we went under contract beginning of March, anticipated close date, it's end of April. So we're in our due diligence period and during the due diligence period we're evaluating a lot of things. We're going to talk about those things in tomorrow's episode, but today we're going to talk about the property management meaning because in the due diligence checklist it's get the copy of the property management agreement and get a copy of all the leases. So I got those two things actually, Della got those two things and then I reviewed them and I took notes. So at the very, very top of this meeting agenda with the property manager, I have notes about their property management agreement, everything that they're charging. I also have notes about their leases and what not they hold their residence to in terms of the lease. So I put all that in there to allow me to then ask a bunch of questions because I want to see what's missing. Right. We have our own property management company and I don't freely tell, I didn't even tell the people that if they looked us up, they'd know we have our own property management company. But I didn't tell them that because I don't want them to feel threatened. So that's something that before I dig in too much, I, I will say this. When you're buying a 48 unit or any multifamily property, it's not always the wisest decision to change property management immediately because these residents have a relationship with the existing property manager. These residents know where to pay and when you close on something, especially when we're trying to close end of April and rent is due On May, beginning of May 1st through 5th. Then suddenly there's this. Okay, what are we doing?

Well, I don't know where to pay, so I'm not going to pay.

Yes. And the, a transition of an owner for, for residents is scary enough to add on top of it that you're changing out the property management team.

Now, I want to just add one thing real quick. So this, this is the 48 unit we're buying right now?

Yes.

Now a year and a half ago, we bought another 48 unit plus an 8 unit. Now that was the 56 unit. The horror stories you hear about that.

Yes.

That was a situation where you want to change property management right away. Yes, this was a situation where when we walked a property, the property management company, they knew everybody's name, they knew who they, who they hung out with. You know, not just who they were, but they knew who they hung out with. And their, their story and their children's story and their, their parents story. So it was, this was a, it couldn't have been more of the other end of the spectrum.

Yes.

Than our first property, the first property that we bought. So this was, was amazing.

Yes.

When we walked to properties, I was like, wow, this is a good property management company.

Exactly. And because the steel is in, eventually we will transition it to our own property management company. But it's important that you be strategic in everything that you do when you're dealing with a lot of people who are paying you rent and you rely on that income coming in and you don't want a mass exodus. So let's go through some of the questions that I ended up coming up with based on reviewing the property management agreement and the leases. So one of the very first things that I asked her was, what bills are you currently not paying for the current, current owner? And the reason that this came up was because in the property management agreement, it says you have to allow them 60 days to give them a new bill to start actually taking care of it. And this is something that we've learned through our first 56 unit, is that we want every single financial item on and going through the property management company. Why? Because when they print a T12, if it's not. If it's not going through them, it's not. You're not going to see it. And so we have a family of companies. Right. So we had Betty handling some bills. We had property management handling some bills. And ultimately when I got a T12, I'm like, well, where's this? And where's this? And where's this? And they're like, oh, well, Betty pays that not property mint. And I'm like, crud. And so that was a lesson learned. And so this time I wanted to make sure we're putting absolutely everything through there so that when we print out a T12, everything is there. It's already organized. We don't have to now go back and go, Betty, can you send me all these, you know, things that you paid so that we can add it to the T12 and we've got something accurate. So that was the first question. Laundry. So we asked about that because we are renting machines, right? We partner with a company and we get. It's like a 50, 50 split, right? They get 50% and we get 50. Whereas here, there's only one building that doesn't have laundry in the actual units. And so therefore, he had machines. And I was like, okay, did you partner with a company or is it actually owned? And it turns out it's actually owned. And she goes, oh, and by the way, the seller has the key to those. When you close, you want to make sure you get those. So that was another question. Application fees and late fees. Every property management company is a little bit different as to whether those fees go to you, the owner, or them, the property management company. So I asked her about those because it wasn't in the property management agreement management software. We wanted to know what they use. It would have been really nice if they said appfolio, because that's what we use.

That would have been awesome.

But they use rent manager, which rent manager is very good too. But I'm not as familiar with it. So I'm going to get familiar with it here. I'll let you do some of the questions here, starting with number five. That's where.

Yeah. So then some more of the questions are, what are your eviction costs and what attorney do you use? I mean, we use a specific attorney. We already have this in place. But maybe they have a better attorney. Maybe they have somebody that's even cheaper. Is there such a thing as a cheaper attorney? So, and then how many evictions have they had in the last last two years?

Yeah. So one was about resource, Right. What are your resources? Number two is what are your performance, your history?

Yeah, yeah. And then, you know, can we get the delinquency. Delinquency report for the last six months, see who's paying, who's not paying?

Yeah.

And what are your screening requirements when you get new tenants in? Because that's every property management Company is different.

Yes.

There's always something. There's so many variables.

Yep.

You know, everyone's usually a little bit different. Do you collect and hold all renters insurance policies to make sure that they are up to date? Because a lot of. Oh yeah, I got insurance, I got renters insurance. No problem. Yeah. So very important to know what type of move in and inspection report is done. Some people just walk. Walk in. Yep. Looks good. And walk out.

Yep.

You know, but making sure that they actually have a check checklist for both moving in and moving out. And then we talked about. Because we, we do have a renovation company and so we want to make sure that we're using our renovation company for the rehabs and the turns and making sure that that's good with them. And then the use of the T12. Just making sure in case anyone doesn't know, that's the trailing twelve. That's the last twelve months of everything. Everything that's incoming and outgoing.

Yes.

No matter what it is. And that it's all detailed. That's why you had made the point of making on there. Because if something's not on there, that doesn't make all the numbers work.

Yeah. And that's something you're going to show the bank, you're going to show your eventual buyer. So having clean books helps you be able to refinance, helps you be able to sell, etc.

The last few.

Yeah, the last few. What do you charge for leasing fees? Because that wasn't in there. What do you charge for lease renewal fees? That wasn't in there. How long does it take to lease a unit and turn a unit? Those are just again, performance questions. So I can understand the area, the type of tenants, how often that they're doing it and how long it takes. And then we went into the business plan and that was really to kind of ask her, here's our ideas for value add. This is what we're going to change. This is what we're going to do. Wanted to see her opinion, see if there was anything that we were missing or she thought some of our ideas were not good based on her knowing the clientele there. And that was really kind of the end of it, was that the entire, the end of our conversation was very much about the business plan and what we were doing. And at the very end of the call, and she said this at the beginning too, I said, is there anything that you think if you owned this building, is there anything that you would do that we haven't thought of yet? And she was like, you guys are the most thorough people I have ever worked with. And although it's been a lot of hard work, you are going to make my job a lot easier once all of this is done, because you will have improved all of the units. You guys are incredibly organized and will have all the information in the right place. So ultimately, I'm not going to be working as many, you know, as hard as I am right now, essentially. So it was very, very good. And it just kind of speaks to the fact that you want to be working with a team that you can trust, and that is very thorough. And that does. Absolutely. She hadn't even heard of some of the questions. She's like, nobody's ever asked me that. And I was like, oh, let me tell you why we asked that.

Yeah, yeah.

So this is. Stuff like, this is very, very, very important for you to be incredibly detailed and know what you're asking in going into a project.

And I want to touch on one last thing. I know this episode's going long, and I'll put a picture of this on the screen here for the podcast. So if you're just listening, I'm sorry you can't see it, but what this is, is it's. It's a landlord lock. It's an asterisk key, and I'll try to describe it for those of you that are listening and not watching. And basically, if you look at a master, like a deadbolt lock, where you put the key in, there's a. It rotates. The. The actual face of it rotates, and it can rotate all the way up, and there's another spot where you can put a key. And so that's where the master key is. Master key goes. And you can unlock the door with that. Or if you just rotate it back down to the bottom part, that's where the tenant or the resident's key goes.

Yes.

Now, when we walk these apartments, she had the property manager, she had a key ring that looked worse than the 1970 janitor for your high school.

That's true.

This thing had so many keys on it, and she's flicking through keys, and I can't count. I don't know how many units we couldn't get into because they just changed the locks. She didn't have the key. Yeah. Or something. Or she just didn't have the key. And she had, like, 40 keys in this key ring. And so that one thing we did with our first unit is our first apartments is we did that master key. So now our property management company has one key.

Yes.

One for all of the units. One key. So very, very key.

Oh, my gosh.

Very important. But I'll put a picture of that on the screen so that way you can see what I'm talking about. And I'm sure that will make her day.

Yes. Oh, man, she was so happ.

Well, we know that we ran long in this one. This was very important. And we're still going to talk more about it tomorrow. But make sure that you're going over to our website, Freedom Capital Investments, to sign up and join our investor club. That way you can get into the secret club.

That's right.

And get all the goods inside there. We also have all of our groups on Facebook, LinkedIn. We have our YouTube channel. We're on all of the podcast platforms. So make sure you're checking us out. Make sure you're letting us know how we're doing. Let us know if you have any questions. Always in all of our episodes with Invest Smart Live Happy. Bye, everybody. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions and information on this show are not guaranteed. All investment strategies have the potential for profit or loss, y'.

All. Sam.