Property Management Owner Pricing Model | REI | Investing | Property Management | REIal Talk #45

Hello, Freedom fans. I'm Aaron, the CEO and president of the Freedom Real Estate family of companies. And I'm here with Chris Soneno. He's a property manager, director of property management, and runs our whole team that does property management.

Yeah, I'm excited to be here.

This is a cool subject that we're getting into. Yeah, we touched on it a little bit in the, in the blog. And here in Podcast 45, we'll go into a little bit more depth about exactly how and why you move from a property management oriented cost structure to a owner focused cost structure for property management services.

Yeah, yeah. You've been actually pretty key in having some of those conversations about how we should approach it.

And you need to pull me into that.

Yeah, we joke, you know, run the experiment is the thing you usually say. I think I mentioned in the vlog too. But you know, you know, we talked about just briefly that how do you roll out a major change on pricing to a very interested 200, you know, owner, client, stakeholder base in a constraint in a way that shows value? And yeah, the house is interesting. The how was really interesting. So when we started, when I started having this conversation, first off, this was kind of spurred by some research that I was doing in the market and kind of putting a thermometer on why clients were transferring properties to us from other property management companies. What were their pain points? And most of them came down to fees.

Like they felt hearing pain in your customer base.

Right.

And figuring out how can we do this different?

And identifying like where we, we were also aligned with some of those things, same feelings for some of our clients and taking that personally. Like, we started really measuring owner joy is what we're calling it. But honestly, it's owner emotion, expectation and kind of a light bulb situation went off is that we, we actually manage people's expectations and deliver on those expectations and their emotion, not so much an asset, an asset's a byproduct. Kind of like the method, the mode of doing that. So how can we use that emotion and that feeling, align it with their goal? Right. They bought a duplex and they want to have five duplexes. How can we get them there? Which is the whole what premium real estate is doing. And we, we talk about passive income and financial freedom, all those things. And the PM is one of those things that needs to help.

So let's back up a little bit to the why. So, you know, you said you started measuring owner joy. We were involved in that together. We started kind of engaging. How do we Measure whether we're doing a good job.

Right, right.

And so we get feedback, good and bad, and we digest it and work through it or whatever. And you guys do fantastic job turning around. We're communicating with owners and so on. And so part of that, you also add a lot of new owners and properties doors to the portfolio that you manage. So in the process of those things, you're hearing an opportunity, lots of pain that keeps coming back to fees. Right, right. So tell us a little bit about. Let's start with how does the industry do it? Like, what's so broken about the way that the standard conventional way of doing pricing in the industry.

Yeah.

Because I think that'll shed some light on them. Like the why you went about kind of, you know, visioning a better future.

Yeah. So I attended a couple conferences, like big like training events for property managers talking about new technology and the easy way of doing things, which we adopted a couple things that kind of help streamline a lot of our processes. But one common denominator was, you know, property management companies that manage for clients outside of the company. Meaning that the owner, the interested parties that own the property management company aren't.

The ones the properties.

Right. We're talking about third party owners that are not a part of our organization. What are their big pain points? And a lot of them come down to fees. I mean, I think it's a common misconception that, you know, real estate owners make, if the rent's a thousand dollars, they're making a thousand dollars a month. There's, there's fees and things that come out of that before they get their 100, 200, $300 check. So we started looking at that and started hearing that feedback from our market, from our just, you know, a little section of the world. It was a common thing. And honestly, when I get on those calls or the clients that are thinking about using our company, they've seen us in Facebook and other areas. Talk to c. Other people here at Freedom. That's one of their biggest questions. They don't, they don't care about what the property is going to rent for. They want to know, okay, when a work order comes in, how much am I paying? And when you lease a tenant, how much is that going to cost me? Like it's their mindset as an industry is 100%, what's the fee?

Okay.

And at first, like we did, we had fees. Okay. I mean, we never really had a maintenance fee, but you know, we had a tenant placement fee, leasing fee, we had a renewal Fee, termination fee, all of those things. Because you know, we have to sustain a business model too.

Okay. So slow down, let's go through that again so that we, we, we did things the conventional way.

Right.

So the conventional way is we bill customers for what? Let's go through it again.

Specifically the time when we started, up till recently, we would have a standard management fee. Yeah. Which is comparable to the market in the industry. A tenant placement fee. So we're leasing fee or kind of.

Interchangeable in the industry. The normal thing that we're changing from this is the old way that we were doing it.

Yeah.

Is that we would bill our owner when we place a tenant in their property.

Yeah. We, if we touch a task, we build a task. Okay. With some exceptions in there, but for the most part that's kind of how the industry works. But the big mindset shift started happening when we started gauging owners feeling and gauging what their major pain points were and started to align with their interest. And it's kind of, you can't say on one hand I'm aligning with your interest, I'm going to share this pain. But then also slap them with feed.

And then when they build them every time something sucks about.

Right, Right. Water heater breaks. Yeah, yeah. Turns is a big thing. I mean we were charging a 10% fee, which is industry standard for rehab projects when a tenant moves out. Okay. But I did a quick analysis of a couple owners that had like eight nine thousand dollar turns. Not only does that hurt because it washed out their entire year's worth of cash flow, which is a pain and kind of sucks on its own. But also now we're slapping a, you know, a 900 to a thousand dollar fee on top of that and then turning around and leasing the property and charging another hundred percent in a, in a rental.

Investor's right. Life is the worst, period is the worst. So if you own a stock, you have a bear market, things go down.

Right.

That's your bad time. Right. You own a rental property, the tenant leaves and the place is trashed and you have to, you have to re, you know, kind of fix it up.

Right.

Put a new tenant in there, that's their bear market. That's the worst, that's their worst case scenario. Right. And we, the traditional property management pricing model is to bill for all of those, all of those activities that we do on their behalf. Right?

Correct.

So the, you know, the market kind of takes a dump on your investment portfolio and then we, we layer in extra stink on Top of it.

Right.

That's when I say we. I mean the conventional property management model.

Yeah.

So we. So the why makes sense.

Right?

That sucks.

That's the why. That sucks. When we talk about being like. One of our first taglines for IPM is we're a property management company for investors by investors. Because that's what we are. Danny, Flip, you, me, Steve, all these parties in this company that make the decisions. We're all investors in some form or fashion in real estate. So we couldn't say, hey, we're for investor by investor, but then also charge those and tough times. So I started really looking at the finances of the company and like, okay, where can we put a little bit back in the. In the owner's pocket without, you know, putting us in a tough spot? And the reality is, is like, let's just strip some. Some of this stuff and let's align.

Honestly with what they want to do. We can't operate with less.

Correct.

It's not like we're making money hand over fist doing property management. That's. That's part of what we do.

Correct. Process.

Right.

Yeah.

But we still have to make money.

Right. So. So I had to figure out, okay, how can I put this in a position where we're not better off? We can still provide services because ultimately that's what it comes down to. If we can't afford some things like overhead. Yeah. Then we can't sustain a business model to keep providing services to our clients. So there has to be a little bit of give and take there. So we looked at the. What is the highest impact activity that makes the clients feel warm and fuzzy. Yeah. So starting at the beginning of the experience, tenant placement. Okay. They just bought the property or it was just fresh off a rehab that they had to have some pain to spend a little bit of money to get to that point where we're putting a tenant back in. How about we just place your tenant for free? Okay. I'm not going to charge a tenant placement fee because first off, you've already gone through a bad experience. You're having to pay a little bit money out and. Or you just bought a property.

Time. That's not when we want to be delivering a bill.

Correct.

Right.

So if you buy turnkey from us, if you buy property from. From Freedom Real Estate Group.

Yeah.

That tenant placement fee is covered by the company anyway. Good. But we've rolled that into the rest of our portfolio. So if we have, you know, Joe Schmo, investor that buys in Dayton, and they choose Our company, we're going to give them the freedom bonus. So just not having a turn.

Your property is empty, your life already sucks. As an investor, we're going to help you get on your feet. That's not when we want to be sending you a bill.

Absolutely. However. Well, I've been asked, well, what's your incentive to put a good tenant in there if you're not getting paid anything? Well, a renewal fee.

Okay.

If the tenant goes in and they love the place, which means that we're, it's a gauge that we're doing a good job when it comes to renew, it's $250.

Nice. Okay, so that's a, that's a peak moment for an investor.

Absolutely.

Like my tenant decides they're going to stay longer.

Right, Right.

That's best case scenario.

Yeah. Some little running, a little shampoo the carpet. Yeah. A little rent increase, a little, you know, throw a ceiling fan or something.

You're winning.

We're winning.

Is that. Yeah.

250 bucks. And most of our portfolio, that's less. That's about 25% of the rent, maybe up to 30 or 40%. So it's not a, it's not 100% rent loss for a month. It's, it's a nominal fee. And that also shows that we're doing our job. Now there are situations that people move out and do things that have nothing to do with pm, but for the most part, people renew. They like the place. Yeah.

I remember when I was, I made this analogy in the, earlier the blog we were talking about when I was young and broke and wrote check that I couldn't cover in my checking account.

Right.

And the bank bills, you, you know, whatever it is, I don't know what it is now, but yeah, 20, 30.

Bucks or 30, 40 bucks or something like that.

Yep. So, you know, that's a painful experience.

Right.

And you're, you're down and then you're, you're kind of kicked while you're down.

Right.

You know, if the bank was, you know, charging me a fee at a time when, when I'm doing good. Right. I would expect then that they'd be saying, hey, watch your balance. You know, are you careful? Whatever. I don't, you know, I don't know how that applies in banking. Maybe it's not a great analogy. But what I love about what you're suggesting, it reminds me of that experience where like when things are the worst, my provider, my service provider is making money. When things are the worst for me not their fault or whatever, the banking example, but. And in the property management example, it's, you know, when we've done a good job keeping our tenants happy, responding to the work orders on time, communicating with them, you know, the city delivers a notice. We make the call, we engage, we help. Right. We create a good living experience for the tenants. We do all those things, and then it leads to a better renewal rate. That's a win. Right, Right. And that doesn't come for free. There's activity that goes into that, obviously.

Right.

It's a win for us as well. You know, we would. We would rather be collecting money. When you're winning, I guess it's kind of the morals.

Yeah, absolutely.

So I think what I love about it is not just that it's less painful for the owner, but it also actually incentivizes us. It incentivizes us, right, Absolutely. As opposed to, like, this old model, we're billing for turns, billing for placing tenants. It's almost like we want them to turn. Right.

Right.

We don't, but, you know.

Oh, yeah. Right. Well, and that's actually some of the.

Industry standard is exactly your money when bad things happen. So, like, you're kind of incentivized to bad things. Right.

Yeah. I've actually heard. I mean, I've actually heard that in conversations with clients, as they're like, oh, well, what's your incentive to keep a good tenant in there? And actually, some clients have had a bad experience where the tenant was great. That's what they go to, like, well, well, you know, you got paid a leasing fee and all this, and I'm just like, well, you know, that's never the summer. The goal. So the goal is to put quality tents in there, and we share in the pain if they're not good tenants. Right. I mean, yeah, we lose.

We lose revenue.

We. Yeah, we lose revenue in a billing.

Model where we bill for renewals instead of billing for placing tenants. When you lose a tenant, when your tenant turns over every year Instead of every 10 years, that sucks for us.

Right. Well, and then a step beyond that, because we're. We're in the business of emotion, is like, we also lose trust.

Yeah.

So. And honestly, for me, in this setting, publicly, like, trust is almost as. Is as important, if not more important than, you know, the revenue of a renewal fee. Because, I mean, I. We have to have clients that trust us, and part of that is they're trusting the product we provide, which is tenant placement, too. So, yeah, trust is huge.

What percentage of our Owners are local, probably a very small percentage.

Very, very small. Probably less than 10% that are local to the state of Ohio.

Not the vast majority of our owners are out of state.

Correct? Yeah.

So having a pricing model, you know, they don't get to talk to us every day, we don't get to talk to them every day. Most of them have other careers, you know, hundreds of other customers or whatever else. So having a pricing model that just aligns interests, it's like you're starting with trust.

That's huge, right?

Yeah, that's a good, good observation.

Yeah. So a couple of things that like we strip back as we talked about the placement fee. Industry standard says there's a vacancy fee. Usually it's somewhere 50 ish dollars a month and it's intended to like cover like utility billing and things like that. Like things that we have to do on an operational level. However, like we want to again we want to share in that if your property's vacant you're not, the owners aren't cash flowing, they're not making any money. You know, obviously there's some, there is a fee that we have that's. I don't remember what we call it. Essentially if like we don't have contact with the owner, like the owner's not responding and it's vacant. It's a non performance fee is what we call it. Again, it's still nominal. Right.

Because we can't do anything.

Because we can't do anything. We have to approvals and stuff. But even then like that doesn't get started for like two or three months of vacancy. Usually it's about two months. Okay. So of no communication.

99 of owners. Yeah, they really care about a vacant property and engage when those things.

Correct. Very, very.

We're not seeing extra costs.

No.

For us to oversee a vacant property.

Correct. Maintenance fees, like I said, industry standard, 10% of anything we touch, if we take a call, we charge 10% and that's for in house maintenance and vendors. We've never really build that. But one thing that we've added that's a definite value add for our clients is we built an in house maintenance crew like and that's probably ramped up probably in the last quarter, probably four or five months. But we started mid year and we've slowly just worked out props processes, worked out some kinks and stuff and per hour that billing rate is much more affordable than any general contracting vendor that we've outsourced in the past. Of course we still have to have to have Skilled trade.

We're saving money and our owners are saving.

Correct.

Building that.

Yeah, building that team and you know, and because we're saving clients quite a bit of money like the, the pricing model for the maintenance and house maintenance team leaves room for us to have a little bit, you know, as part of that. But it's still very, I mean it's still, I think pretty modest. We're pretty modest on our billing rate and it's immediate service. Like we're talking about 24, 48 hour turnaround if somebody's on site assessing and you know, we're getting. And that's also feeds back into the residents wanting to renew because that's one of the big sticky points for residents is their maintenance getting taken care of quickly. Yeah. So it kind of all feeds back into that aligning with our clients interest and it kind of comes in many different.

So in house maintenance provides us a little bit of revenue.

Right.

But more importantly reduces the cost to our owners for regular handyman and Correct and scoping kind of services that every vendor is billing, you know, 80 to 100 for.

Right.

You know, we can, we can undercut that by a huge margin.

Right. And that overall, like, like I said, we don't, it's not our maintenance fee plus 10% like it's just their hourly rate, materials, it's that whereas like a vendor for the same exact job will charge 30 to 40% more and then.

And on their schedule.

On their schedule and, and all of that a little bit more quality assurance issues, things like that. So that's a big thing. So it's not a straightforward, hey, we cut this fee. It's more of we optimize the fact that we don't never charge that fee to begin with.

So that was a little bit of a risk obviously building out that team.

Yeah.

Making. Knowing that they're going to be busy enough and that they're going to have the right skills.

Yeah. Industry standard maintenance is one of the biggest thorns in pm. It's the hardest thing to get. Right. And so it was a, it's a big risk and I think, you know, we're, we're in a position where it's coming on top. I think we're talking about adding more maintenance people and I mean that's a good position to be in. So this year is going to be instrumental to see how that rolls out. I mean there's actually companies in our market that all they do is maintenance for property management companies because property management companies just generally struggle with that and most of that's a quality standard. Some of that's pricing, some of it's. They charge 10% so they can go in and do a band aid fix, go back out and charge another 10%. So we don't. We don't align with that. So we want to do it right the first time at an affordable price.

Yeah, that really is huge because, you know, every time we put a call out to an outside vendor, our owners is swallowing a big motorcup.

Right, right.

That vendor is just going to charge more. Right, right. Same thing for your own home or whatever you call a plumber out there, just to show up. It's, you know, you're looking at 100. Right. So every time we have to use an outside vendor instead of our own team. Right. So the more plumbing, the more electric, the more, you know, gutter repair, the more whatever that we can take care of in house, the more cost savings it is to our owners.

Exactly.

And it adds a little bit of revenue if we mark that labor up just a little bit. So we get to market up some, you know, nominal. Nominal amount that would not be viable as a standalone service.

Correct.

But as part of a property management team is a huge win because it kind of aligns our interest.

Correct. Absolutely. Yeah.

That's sweet.

Yeah. A couple other things with fees, because maintenance is a big one and we probably have our own poll podcast just about.

Yeah, I know I'm cutting myself off now.

My head's immediately going, yeah, how do you.

How do you normalize the staffing level?

Yeah, I mean, a lot of it. Well, and the other thing, like another thing we did with that actually, so you brought that up is turns. So you would talk about normalized staffing level for maintenance. You know, one of the things we did was we try to bring turns in house because an average turn, like when I. When I released the documentation alerting the owners in November about the pricing model, like turns is one of those big things. Average turn last year, unfortunately was close to $8,000 average, which means that some were like 15 and 16,000. Some were two. Yeah. You know, so that's a big range. And a lot of that had to do with coming out of COVID material availability timelines. Vendors also just marking up their prices a little bit more because they can. So we made a big. A huge decision to bring turns in house, which means that we let several vendors go that had been with us for years. And we go first to our rehab team and then we also have our in house maintenance crew.

So we've Got two lines of defense there.

Right, Right.

Kind of two fronts. One is our sister company.

Correct.

Bulldog renovation. So when there's a larger scope project.

Right.

We can go to our sister company and get favorable rates because, you know, they care about our tenants experience.

Correct.

They're, you know, they're renovating our turnkey products and so on. They probably, for a lot of our portfolio that we manage, they probably worked on that property already.

Correct.

So three years later, they have to do a turn or whatever. They are familiar with that property. And then for the lighter weight stuff that takes a couple of days or whatever, our maintenance teams.

Right. So we talk about work order volume because we, you know, when we started a maintenance apartment, part of the need there was that we had vendors that weren't very responsive. And we had 400 work orders in the system, which was upset tenants, a lot of owners upset.

And we had less doors and twice as many correctors.

Yeah, I think we had. I think we had two and a half to three work orders per unit is when we actually did the math on that. On average. Yeah, on average. Yeah, there was definitely.

There's probably 50 of them that were just like repeats of the same thing. We didn't get to it fast enough.

Right. So when we looked at all that and then honestly when we started looking at this pricing model, like, you know, we hired two maintenance guys and just those two maintenance guys and a little bit of tlc, we were able to pull that volume down to on average less than probably about 40 of our properties actually even have a work order. Actually probably closer to 30 now that maybe even have a work. So when we look at that like, okay, well, there's going to be a day when we only have a couple work orders and half of those are going to be vendors like H Vac and plumbing and things that are above our guys's scope level. What are we gonna have our guys do? Right. So turns, like your first pick of turns. Because they can go in and build 10, 15, 20 hours. Huge cost saving for the client.

Start incentivizing your team to. To. To, you know, re up people's leases. Yeah. You're gonna run out of turns to do well.

You know, there's a little bit maintenance.

Guys sitting around because the properties are.

In great shape, rented and. Yeah, and I would love to be in that position. I think we're working toward that and it's going to take a little bit of time, but the big cost saving for the clients, a huge win there. Yeah, 100, dude, that's awesome.

So the, the staffing level reference I made was about that hitting that level where you have just enough.

Right, Right.

We have just enough people to stay really busy and out. You know, we're always gonna have to outsource a little bit because otherwise you're overstaffed.

Right.

And then our pricing has to be, you know, has to reflect that and so on. So.

Right.

Figuring out that staffing level and getting it just right is pretty key in delivering the perfect amount of value to the, to the owner at the. At a minimal cost. That's really cool.

The last thing is industry standard for fees. And then we'll kind of go into some factors that influence this and kind of hit this thing home. But when Danny and I sat down, I remember this. When we first sat down, after I was initially hired to come in and help start IPM and get the ball rolling, we kind of talked about our mission, vision, value and goals and what, what pain this organization had had as a turnkey product and providing PM and what that need to look like. And one of the things early, early on that was a big ticket item because we took over 56 units from another PM that our clients were experiencing some pain from and we were bringing them in house to ipm. And one of the bumps that we. Several bumps in that process, but one of the big bumps was the other PM was charging a termination fee for their contract. Now the owners are in pain like they gave notice they were supposed to in their contract, but they still got charged $200 a pop just as they exited. And so one of the things early on that Danny and I discussed was, you know, I don't want to charge clients.

That's the prenup of the future. Right.

Right.

I want you to sign this contract, you get none of my stuff and you have to pay me if you leave me.

Right.

What a bizarre. Yeah.

Right. And so we did, we did two things. So I think for the first year we had one year contracts because we acquired all those. We want to get them locked in, made sure they were taken care of. But very quickly we moved to a 30 day contract. Because you have to like me.

Right?

Like, and I have to like you. Invite. I mean, this is a relationship more than is a business agreement. So. And part of that is termination fees if, if our relationship's not working out, client to pm. That's okay. Yeah.

Trust is a big deal.

Yeah.

There's so many little tasks that have to be done. So much that has to be communicated, particularly when things are bad.

Right.

And so if there's, if there's a sniff of discomfort.

Right.

You're better off with, you're almost better off with a subpar property manager that you trust more for whatever reason.

Right.

So yeah, having people locked in and coerced into staying with us or whatever is problematic.

I don't want, I don't want feel people to feel obligated.

Right.

Like it's one of those things.

False. There's a bad relationship, deteriorates your expectations and so on.

So we have a month to month agreement now there is worded that we'd like to have up to 60 days notice. 30. 30 is preferred minimum.

Most of what we're doing takes because.

It just, it takes time sometimes, especially if we've had rapport with the residents, we have to get them aligned with somebody else. Like that's a process. It's not something we can just sever on a Friday, pick up on a Monday. However, like there's no termination fees, like there's no early termination. You give me some notice like we'll work together. We're going to facilitate that.

You said it really well. You have to like us. I mean in order to be our customer, you have to be somebody who trusts and respects and wants to be working with us. I don't want eight months on the end of a year long contract in which you're just there because you're obligated.

Right, right, absolutely.

That's not even a contract we want to enforce. So why have it?

Right, Right. And that kind of trickles into our turnkey thing too. Because old turnkey. Right. Turnkey, OG turnkey is what they say. You know they would have rules about warranties that you had to stay with the in house company for X number of years in order to get the warranty. And you know, in that caught. I mean if the, if the relationship with the PM doesn't work out like that's honestly that's why people buy turnkey is for the property management experience.

Half of it's the rehab, half of it's the.

Half of it's turnkey half. Yeah. So those, that's why I work so closely with Steve because he's the other half of this yin yang situation. And if the client has a bad experience they need to be able to leave.

Right. That puts us in a position where we have to earn their, we have to earn their business every day.

Yeah. And no. Yeah. And I don't want to sign a contract. Absolutely.

And slough off for the next 11 months.

Yeah, absolutely.

Respect everything.

So, like, when we started measuring owner experience, that was one of the things we did. We discussed about. We call him Ivan. Right. His journey. How many touches does this person have and who they knew to talk to? And part of that is we layered in, have a conversation with people. Chris phase. And because we may get on the phone and our interests aren't aligned, and that's okay. But at that point, then I can have that frank conversation with the turnkey team and be like, hey, I don't think this client's going to go with our company. Yeah. And we can set expectation and even get them aligned with another property. I mean, that happens very, very rarely. Probably.

I think we had. I think we had one recently, actually. It is rare, but I just recall.

I think one out of 20.

Yeah. They wanted to manage their property in a way that wasn't quite. Didn't fit our model.

Right.

We said, hey, we, you know, we'd suggest a different, you know, property.

Right. And that's going to work out. Actually. He end that.

The kind of asset we like to get into.

Actually, he did actually sign with us. Yeah. So for. We agreed in one year, but, you.

Know, next year, when you put the cards on the table and make sure that you're both trying to accomplish the same things.

Right.

Our capabilities, what we're great at. What are you trying to accomplish? They should match up.

That's right.

And if that changes at some point in that venture, you know, you want to. You want to turn your property into a garage that you rent out to, whatever.

That's.

That's not a strong suit for us.

Right.

Then, you know, we want to be able to, you know, allow you to do what's right for your business.

Yeah. So. And that comes into, you know, like, we don't like ipm. Our company doesn't really market for new investors. We don't go out there and advertise and say, hey, come look at us. Because we don't say no. We don't say yes all the time. Like, sometimes we say no. And that's because we're very specific and our client base is very specific. And we talk about location, we talk about what services we provide, what we don't. We talk about the owner pricing model. We talk about all those things. And I just.

I just passed a property that had a. I was out driving this morning, and it had a little bar operating out of a garage.

Oh, yeah.

Like whatever. Something, something booth or whatever. It was like a little bar operate. You want to manage a bar?

No, There's a lot of liability with that one. Yeah.

There are things we'll say no to.

Is the. Yeah. Yeah. Well, it's okay. I think at. I think people. I think there's a stigma around saying no is a bad thing. Like my dad used to say, no, say no more. You'll win more if you say no.

Yeah.

And it took a while to learn that. But part of that's like saying no to fees. Not to be cliche, but I did have a client when we were rolling this out, he emailed me privately and he was like, so how are you guys making money? And we kind of explained it here. Like, yeah, we're incentivized to do the behavior, the actions that renewal bring us the. Bring you the most value.

And when we can do your maintenance with our own team.

Right.

Like two ways in which you're. When you're winning, we're billing you.

Right. Right.

That's awesome.

And then the other thing we did is we. And this is probably a whole different podcast, to be completely honest. But holding residents accountable. Like, we're not just renting properties where we are providing homes to adults who need a place to live. So you share in that. Share in that. So there's a resident fee that we introduced and it kind of got folded into this. Like it was announced to the owners as we were announcing. Our pricing model response is pretty great. Again, nominal fee, very, very small. I think it's like 12 or 13amonth. But we provide a lot of service. Just like we provide services to our clients, we provide a lot of services to our residents that are above and beyond industry standard.

We're going to do a whole nother.

Thing, whole other thing on that community experience.

Yeah.

But when it comes to that community experience is something else that we're starting to measure and track. There's. There's a little bit of revenue from that too, but it all feeds back into the tenants love the properties. They stay. Owners are happy. Happy. And we're.

That's what we should.

We're all in it together for. Absolutely.

Creating happy tenants, happy tenants, creating good quality properties and creating cash flow for our investors. That's what we should be making money for.

Yeah.

Not for kicking tenants out and then replacing. That creates pain for.

I mean, those things do happen. And that's another thing you say expectations, like everything, every presence wrapped up with pretty little bow.

There are always going to be ups and downs.

There's going to be.

Don't want to win when you're on a down.

Exactly. Exactly. Yeah.

That's really cool. I'm excited about this. Are you far enough into it yet to see an impact to your revenue or to have feedback from a couple of cycles from your, your owner community?

Well, we, other than that, that 10 to 15% of our portfolio that we kind of started in December, which like I said, we had conversations in October, November kind of put their properties under pilot essentially, and then we added the other 500 and actually five, roughly 500 properties units in January 1st of this year. So pretty fresh. However, you know, looking at it, I think you asked me the same question. Quarter two, we're going have a lot bigger pool. I will see. I will say that when I look at owner expenses versus fees coming in, there's definitely a give to that. Owners are paying a little bit less for stuff, which is what we're shooting for. But at the same time, like the maintenance billing, the activity rent, like we're at an all time rent collection high, which again, a lot of things are play into it. Yeah. So I mean it's really early in the year to answer that fairly. But I mean, so far I'm seeing pretty good trends. Yeah.

You know that what I'm hopeful for is that we have less empty properties. So our owners are collecting more rent, we're collecting more management fee, our owners are getting more renewals so they're not doing turns, we're collecting more renewal fees. That scenario is, you know, it's a, it's a pricing mechanism where an owner can more easily establish a context of truth where they can feel like they can really be passive in their property management. So that's pretty awesome.

Cool.

Well, let's. We'll check in in six months or so after a few rounds of it or whatever.

Yeah. Give some data.

Yeah. We'll be able to analyze and see how it really worked.

Cool.

Great conversation.

Yeah. Yeah. All right.

I hope you guys enjoyed it. Yeah, I think this is pretty insightful stuff. I actually learned a coup couple of things.

I'm really excited.

Yeah, this was really cool. Thank you very much for joining us, guys. And this is podcast 45, right?

Yeah, podcast 45.

As always, invest smart and live happy.

Take care. Bye. 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.