Property management for real estate investors: 10 secrets to ROI

Hey everybody, this is Toby with Global Integrity Finance. I'm here with Mark Zimmerman with Renters Warehouse. We're going to talk to Mark about what he does and how he can help you grow your portfolio and how they'll manage those properties for you and kind of give you a turnkey service on all those buy-and-hold rentals and so on and so forth, right?

Yes, sir.

Mark, tell us who you are and what you do.

So like I said, I'm Mark Zimmerman. We're Renters Warehouse. We actually focus in the greater Houston area only. Oh, So for those clients, you all are in kind of this space, that's where we work.

So us up in Dallas can't call you?

There is a Renters Warehouse location up there.

Oh, but it's not—

but it's not us.

I got you.

And it's independently owned and operated.

All right, so you'll be doing the same service.

Exactly. I'd like to think so, right? Exactly, exactly. So, you know, we started this thing about 6 years ago. Uh, the nice thing about us is that in 1997 we got the We Buy Ugly Houses franchise.

Yeah, the big yellow sign.

Yeah.

Oh, yeah, a caveman on there.

That's right, exactly. So we started doing real estate back then. The investment group that owns Adams Renters Warehouse house. And so we've bought over 1,600 properties over the time, you know, I've been doing this. I've done about 400 personally myself.

Okay.

And so we aren't just property managers that are going to help you with the management of your rental property. We also are investors and landlords.

Just so you, you've done that.

You've been there. I like to think we walk the walk.

Right.

I laugh and say I've made every mistake you could possibly make, so I'm the person you want to talk to.

So I'm going to be able to help you not make those mistakes.

I think so, yeah.

And that's so valuable. I mean, we hear a lot of people are getting into sales trainings and all that, and you ask them, you know, so what's your background? Oh, you know, I was a CPA or this or that.

Exactly.

Well, how do you know how to do real estate? Well, you know, I went to these classes and trained. We like to find the people that have been in the trenches, have done the work, made the mistakes, and yet succeeded so that we can learn and teach our clients this is what not to do.

I totally agree, and I think there's value in that. Absolutely. Because then you have somebody that's actually walked the walk and figured out some things maybe not to do, and there's, I think, some intrinsic value that you aren't going to get anywhere else.

Agreed. So tell us about Renters Warehouse. Tell us about your services and programs.

So pretty proud of our Renters Warehouse. We started 6 years ago. Like I said, It's a franchise, so we've got the Houston franchise. We started with 3 employees and 0 properties to manage, and now we're one of the largest single-family property managers in the city.

Oh, wow.

We've got 1,200 rental properties under management. We've been doubling in size every year. I've got 32 great employees, so from 3 to 32. But I think the thing that makes me most proud is that, I think I told you earlier, we've won the Better Business Bureau Pinnacle Award.

Yes, you did.

Top property management company in Houston for 2 years down in a row.

That's amazing.

And that's all about our people.

Yeah. That's like having the JD Powers Award in automobiles.

That's exactly right. I think it speaks volumes. I never try and candy coat it. We make mistakes, but I think we're really good at not making a lot of them, and we're really good at fixing them if we do make them.

So tell me, I'm an investor, I've got some properties, I come to you, what services are you gonna give me?

Great question. So we talked about how you want to engage with somebody that does what you do, so maybe they'll tailor their product to help you because of their experience, right? We do pretty much everything that we do with property management most property management companies don't do. Such as? Okay, for example, For example, when we lease a property, meaning we're gonna go and find a tenant to put into your rental property.

So you're gonna run a credit background on that tenant?

We're gonna do all that stuff.

Okay.

Well, what we do is we guarantee that tenant.

Okay.

No one else does that.

That's amazing.

Yeah, so what normally happens—

And when you say guarantee, what does that, what does that come with?

Exactly, okay, I'll walk into that. So in most situations, when you have a realtor find you a tenant, which every realtor in the city will do that.

We'll do that, yep.

Funny, the first tenant that applies seems to be the best tenant. That's the one that's most qualified, right? He's the first one.

Great.

Don't worry about the eviction.

I've weeded all the other ones out.

That's exactly right. Yeah. So we got tired of that. Okay. So we have our leasing agents, they know that if they put a bad tenant in and that tenant breaks a lease, for a certain time period on the warranty, they have to work for free and not charge another commission to put another tenant in. Oh wow. And so I really think we put better tenants in because no one wants to work for free.

So if we get a tenant in-house and they're in there for 90 days, and then they start not making rent payments.

Yep.

So I'm still— you're not picking up that rent payment.

Nope, but we have a product for that too that we're dealing with, offers that too.

Okay, but then you will go in and evict?

Yep, we'll handle all that, and then we'll go find you another tenant.

While you go through the eviction process, you're finding me another tenant?

Yes, sir. Okay. And then we're not going to charge you a commission. The big joke that I always say is that most realtors, when you call to tell them that after 4 months the tenant that they placed, that they said was great, and not worry about that history is bailed, they'll sound really sad on the phone that they're going to have to find you another tenant.

But then that's not what they're going to do.

But they're going to get another commission. Right. So are they really that sad? Right, right, right.

I could say— they're not going to work for free. No. And right, they're wrong.

That's exactly right.

Okay.

Our agents, my agents, are actually going to be genuinely sad.

Okay.

Because now they know they've got to work for free.

They're in trouble.

They got to go work for free. So, you know, it's a nice benefit for our clients to have protection on the tenant.

All right.

But it also, between you and I and Anyway, that it's also going to put a better tenant in, right?

Well, it's going to make a better quality. You're going to make sure you really screen them out. I think you're not just trying to get a commission, but you've got to own that commission that you've got.

Correct.

And there's accountability there in place that you do not see in property management firms.

That's exactly right. Okay, never do. So that's one of the things I'm really proud of that we, that we do that a lot of other property management companies do, is that tenant guarantee. So that's one of the biggies that we do.

All right.

And so the other thing that I think that makes us really different on the leasing side is that we also have a software application that we use called RentFeeder, and it allows us to put your listing on 230 websites.

Oh wow! So most anybody looking for rentals is probably going to see my property based upon your marketing.

That's exactly right, because they say that 85% of tenants these days actually go online to look for rental property.

Everything done online today.

Everything, right.

My in-laws who are like old still have an AOL account, but they're online, but they're online every day, all day long.

That's exactly right.

Yeah, you're like, wait, you've got— you've evolved over here, but you got to get rid of AOL. But you've got to get rid of AOL. Love you, Les and Ida. I know you're going to see this.

That's funny. Well, I hate to tell you this, you know what my personal AOL account, my personal email account is?

Is it really? Is it still?

I've got 5 kids and they give me tremendous grief about having AOL.

Yeah, I'm sure.

But I've had it literally for 20 years.

At least, at least 25 years. So I did graduate to Yahoo.

My work email is Gmail, so I'm good. I'm so— you're good.

I'm going with the kids. You're evolving with the business.

Exactly. I'm trying, but on the personal side, I'm that guy. So yeah, so it's good to be out at more places, right? 230. Uh, most leasing agents— I always try and compare us to other people, so, right, most leasing agents, you know, they're going to put out on 5 or 6 websites.

Yeah.

And no more because they have to manually enter them on each one. They don't have the syndication tool. Um, and you know, I went to Texas Tech, so my math might be a little shaky. That's what I'm saying. Math be a little shaky.

You did get, uh, Mahomes out of Yes, we did.

Yeah, KC. I was talking to a guy down there about that. Yeah, but I will say that 230 has got to be better than 8, right? Or 5 in terms of websites.

Agreed. You get more exposure there.

I think so.

So if I've got— so let's just say, in fact, this is a great topic. We've got some properties coming up here in Houston. I say I want to turn those into rentals. Do you go and walk the property? Do you let me know what the average rental is in that area and how much we can rent this for and give me the the full numbers.

Yes, yes.

Profitability, put your commission, your fees, where's my net cash flow going to come into? You give me that report.

Yes, yes, yes. So that's all, all great information. So our leasing agents really aren't really leasing agents, they're more investment advisors. We really focus on building wealth through real estate, not just be a property leaser. So they understand ROI, they understand cash flow, they understand yield, they understand appreciation, they understand equity build. Okay. Most— I don't want to be— a lot of people that are in the their agents don't understand those kind of conversations just because that doesn't go on with—

it's not their day-to-day deal. They're, they're finding buyers and sellers. Exactly.

People are going to move in a house, they don't, don't even need to talk about our office, right? Correct. So I think we have that up because that's kind of our focus. And so you're going to be able to have those conversations with our agents. What they're going to do is they're going to run two different reports, not just one. One is a 6-page report that talks about market saturation, vacancy rates, trends for the neighborhood, which is flying demand, all of that. And then they're also going to run an MLS CMA that's going to give kind of what the rent should be down to the penny for that particular neighborhood. Okay, you get 2 rental reports to kind of base your decision on, on what you're renting. And so, um, that's like another leasing side thing that I think would be really helpful.

Okay. And so tenant moves in, been there for 6, 8 months, whatever, lease is up, they move out, the property's got some damage on it. So I contact you, you, you have contractors go in there and get that up to speed. Exactly. Of course, I'm paying the bill. You're not paying that bill, right?

No, but we're going to help you manage that entire process, right?

But you're going to make sure that— so I, I'm in Dallas, but I got properties in Houston. I don't have to be here, right? You're going to handle that for me.

That's correct. So we have 1,200 rental properties. Believe it or not, 56% of our clients are out-of-state, out-of-state area. So we're really good with helping that out-of-state investor, out-of-country investor investor that can't be there physically to manage that process. Okay, we're going to help you with the walkthrough, we're going to help you find that contractor. We have a vendor preferred program, people that actually— they're outside vendors. I don't do the repairs myself.

You don't want me painting, but you have third-party vendors that you've been screened, that you have been—

and here's the stick or the carrot depending on how you want to look at it, um, if they start messing up, we take them off our list.

They're down.

And we manage about 400 maintenance 400. So that's a pretty—

so that's a good—

that's a good— yeah, for somebody that's—

that's good job security. Yes, that's good job.

So you really want to walk the walk with us as a contractor because if you don't, I'll cut you off and there you go.

Now you have to go find your own business.

Yes, exactly right. So, and that's a great, great question on the management side. So I kind of switched gears. So we have our leasing department that does the leasing side. Now we have our property management department. And, um, some of the things that make us really different, again, we do things Unlike most property managers, because I'm a landlord, I remember what stuff made me kind of upset.

I didn't want to be a landlord.

I didn't either. I like the idea of having an appreciating asset. Yeah, but the tenant pays off, but I didn't want to.

But I don't want to have to deal with the broken water heater at 2 in the morning.

Exactly right.

Or HVAC system that went out, you know.

And why is that always at midnight on a Saturday night?

Always midnight on Saturday or Friday night.

It's never on a Wednesday in the afternoon.

Never during the middle of the day we can take care of it. Agreed.

So on the management side, we actually, uh, we do things differently. We have a flat fee management, uh, charge that we do. Okay, so most property managers charge a percent of the rent. I mean, what have you heard? A percent of the rent?

I, you know, I don't know. Okay, we don't— I've never gotten into rentals. Oh, well then I'm out of it.

I will ask that.

I don't want to deal with— most people don't.

Most people don't. Yeah, so most property management companies charge between 8 to 10% of the rent. All right, usually 10% is a number. That's to manage the property month in, month out, to collect the rent, to go through the eviction process.

So there's a fee to find a tenant. Yep. That's one thing.

That's a leasing fee.

Now we've got that, then we hand it over to the property manager and there's a monthly management fee.

Right, exactly.

Okay.

And it's usually 10% of the rent. All right. But something that I think you will appreciate, I mean, we have a flat fee management system for a reason. I don't do any more work on a $3,000 rental property than a $1,000 rental property. So why should I charge you $300 for your really nice $3,000 rental property and $100, and it doesn't make any sense to me.

And I've been doing the same hot water heater in both of them.

Exactly, same rent collection. In fact, the big joke is I would argue that that $1,000 rental property is more difficult to manage and takes more time because there's going to be more late pays, older properties, older property, more repairs. Yeah, so no one's ever been able to tell me why I should pay 3 times as much on my— and I do have a $3,200 rental property, and I have a bunch of $1,200 All right, no one could tell me that. So we're just a flat fee management company, which is nice. Okay, uh, we're as low as $99 a month. So, you know, for the price of, I don't know, a few Starbucks coffees maybe, it seems like, you know, you can actually get management done instead of—

and that's turnkey management?

Yes, sir. Okay, so that's one of the things that makes us a little different on the management side. That's pretty big.

What about security systems, stuff like that? So if a security system's in the house and it goes off, are you guys contacted as the first contact for that?

Absolutely.

Emergency services?

Okay, so we'll be ahead and get that content.

Basically a passive investor.

Yes, our goal is to be your professional landlord. Okay, our goal is to get you out of the day-to-day stuff. Sorry about that.

Oh, he has to bring donuts.

I know, I know. I only have— I had my wife set on emergency through. That was my wife because I've got my phone off, I swear. But I gotta take care of the CEO of my household. I take that call. So sorry, honey, if you see this, but I'll call you later. But yeah, so the Being the professional landlord, we want to take you out of all the day-to-day stuff and even the month-to-month stuff. But we're going to ask you the big stuff, like an AC system goes out, that's a pretty big repair. We're going to get you some estimates and then you can decide whether or not you want to have us help you with that, or you might have your own guy, that's fine. Again, I don't do repairs, so I'm not making any money on that. But we're going to help you through that. We're going to call you on that. When the tenant's up for renewal, and we contact our tenants 90 days out, because they have a 60-day written notification that they're going to stay or not.

Right, right.

And if they say, I'd love to stay, we're going to call you. And I'm going to say, hey Toby, do you want them to stay or you want to do something different? So on those, those big events, yeah, we're going to keep you involved. Okay. But we want to keep you out of the day-to-day stuff as much as we can because that's frequently why you pay us, right?

Right.

Not have to handle that, right?

I don't want to mess with it.

And I've actually— what's a nice way to put it— disengaged from some clients.

Yeah.

That are micromanagers that want to be involved in everything, and I just have to be honest. You need—

you don't need me.

I'm like, you really don't need me, right? I know it's only $99 a month, but you don't need me because you're— go save $100 and do it yourself if you want to be involved in every single— oh, a hot water heater supply line went out and it was $80 to fix, but they want to be able to find it. Yeah, trust me to do the right thing for you. So that's what we're trying to do is take that off of you. And so on the management side, one of the things that's pretty neat is that, um, not only do we charge a flat fee, but we have— we've gone to that European model of property management, which is a team-based property management groups based on a certain number of properties. So you—

so each management team only can— is only going to manage so many properties? Yes, that way they're not overextended.

That's exactly right. So there's two models that are kind of prevalent in the U.S. The big one is you get one property manager and they handle 150 properties, and that's your go-to person for lease collections, lease renewals, evictions, maintenance, all that stuff. I already said that. And so you have to basically find somebody that's an expert at all those things that I just said, right? Very hard. So that's model number one. That's, yeah, pretty tough.

That's, that's today's corporate America.

It really is.

Yeah.

And so we didn't even adopt that model when we started. We went with another model, which is you have silos. So you have your eviction specialist Yeah, your lease renewal specialist, your rent collection specialist. And that worked pretty well for about 3 or 4 years, but we noticed that, uh, communication was starting to drop off because you'd have one person— yeah, that was getting hammered. And if they weren't quick on calling people back, I didn't know about it.

Right, right.

So this European model is really neat. So we have an executive that kind of runs the team, a manager that deals with usually owning issues, owner issues, client issues, and an associate that deals with with tenant issues. So you have 3 people that's basically running your property.

Gotcha.

And they only have one email and they only have one phone number for you to call. So when you email saying, Mark, you are horrible, you didn't email me back like you said you were or call me back, 3 people are going to see it.

Gotcha.

So it's a very good—

there's accountability there.

Complete accountability, right? Fitted in. And so we've seen our communication increase tenfold in terms of our clients and our tenants because you have 3 people that can take that call, return that email. I got kind of called out on the carpet by their team.

I, I— you were going to take care of this.

Yes.

And so I've trusted you. Now you kind of let us all down.

So we did that about a year and a half ago, and it's transformed our business.

Nice.

So that's something that's a little different that we do that no one else does, I think, or quite a few people— quite few people do in the United States.

All right, so where do you see the market going in real estate? You've been doing this for quite a while.

Yeah, 1997.

Where do you see the industry going now?

I think that rentals are still a safe bet. You want me to say that, but you know, I mean, I—

but, but I'm new. Let's just say I'm a brand new investor. I've come to this Quest Expo, right? And I'm kind of hearing all this, but am I too late?

Not at all.

I mean, you know, it's always that you want to be the smartest guy in the room, you want to be the first guy in the room, you want to be the crook to be successful.

That's true.

That's the three things. So, but I'm not the smartest. Am I too late? And I'm not going to be a crook. So do I still have a chance of building a, a good valuation or a retirement plan in rental properties with the way the market's going?

That's a great question. So I can tell you that one thing is rental property is recession-proof. Yeah. And it's inflation-proof. People always need a place to live. People need a place to rent. The nice thing is, which is kind of wild, is not only are the millennials really focused on renting and not buying—

yeah, right— huge—

they really don't. So there's this huge portion of people that are still renting even if they're 25, 30, 35, right? And we've also seen seniors now selling their big homes and renting and actually going to the rental market, not having to deal with the maintenance. Yes. And we know what the baby boomers are doing. They're getting bigger, bigger, bigger. So there's a big pie of rental properties. And, um, everybody's read Rich Dad Poor Dad, right?

Uh, probably 20 times.

Yes. And how that was written, I don't know how many years, 30 years ago. And so what did he say? He said basically, Robert said you had 3 ways of retiring with passive income. That was income-producing dividends and stocks. Yeah. Which I'm horrible at picking stocks, I'll be honest with you. So that's—

we all are. We're not Warren Buffett.

I'm not either. Number 2 was like, be a bank. Yeah, you know, don't be a— go work at a bank, but be a bank where you get interest on your money, right? Well, I'm not a multi-millionaire that I can loan out money on, so that's off the table.

Okay.

And then the 3rd thing he said was passive income through real estate, income-producing real estate.

And that was true 30 years ago, 20 years ago, even through the crash, even the crash of 2008. Uh, people— I mean, because it's like a stock stock. You go buy a stock and it's doing great, but if it, if it tanks, you don't lose unless you sell. Correct. Now if you hold on to it and we wait, you know, wait through it all and it comes back and bounces back, then you still got profit and cash flow and all that. Same thing in the wrong property.

And we didn't see rents go down during the crash.

No, you couldn't.

Values of houses went down, but rents didn't go down. In fact, rents went up a little bit because more people needed to rent.

Yeah, people couldn't own their house. I'm like, we'll rent for you if it's a foreclosure.

That's a different event that we might put you in, right? You know, rather than something else like an eviction. So you're exactly right. And you know, I can't speak for the country, but I can speak for the greater Houston area.

Yeah.

You know, last, last year it appreciated, what, 5-6%?

I think it's close to 7.

Yeah, fantastic. Yes. And that's every year. And that's not just the value of the house, but rents are going up that too. So now you've got an appreciating asset.

Yeah.

You're allowing your tenant to pay off to do that equity build. So if you put on a 15-20 year note after they get money from you guys to take it down and get into that position to go conventional, or go through with conventional too, right?

Yeah.

Now they've got a mortgage that the tenant's going to pay off, right? Pay off your loan through rent. And in 15 years, 20 years, they're going to have a house that's appreciated and that they own free and clear, and they didn't have to pay a lot of money. Right. I can tell you the numbers. So on a, on a $200,000 house at 3%, in 15 years, that house worths $311,000.

Right, right.

There you go.

So $5,000 growth.

Exactly. Yeah, that's pretty big.

That's big.

And then think about this for a second, and this is what we kind of preach when we do our seminars, is how much would you have to put down to purchase that, that $200,000 house all in?

What would you say to go 20% down? Okay, average of $40,000.

So $40,000. So you put in $40,000 and in 15 years you got a $311,000.

Yeah.

What's your return on that?

Yeah, so you made $100,000— would you make, uh, you made $70,000 profit.

A lot. So you basically had $40,000 down and you sold it for $311,000. You actually made—

I can't do the math—

$240,000, right?

Right, right.

$40,000.

Well, if you bought it at $200,000, you sold it at $311,000.

Your cash on cash on top.

Cash on cash, right?

Because remember, the tenant's paying off your note for you, right? So your cash on yield is crazy. And that's why we all hold real estate, and that's why Robert Kiyosaki says, hey, you need to do passive income. And so I think it's a great bet still. I don't think anybody's made miss a boat. I wish I would have bought more properties than I did back during the crash. Yeah, when the crash happened and values went into the toilet.

Properties for dining.

Oh, I should have come to you guys more. I mean, I look back and I'm like, man, you know, I— anyway, but that's okay because it's cyclical. It's going to happen.

It's going to happen again.

And it's not going to hurt us as landlords, right? And it's actually going to give us opportunities as investors more leverage to pick up more houses at cheaper prices. Using your tools and your products to make that happen.

Agreed. Well, Mark, I appreciate your time. Appreciate you coming in here. Yeah, absolutely. Telling us who you are, what you do, letting our audience know. Mark, how do they get a hold of you if they want to talk to you directly?

Very simple. So you just dial 713-224-RENT, which is 713-224-7368. Had to think about that for a second. I actually ran a classified ad, true story, back when I had my Wee Bugly Houses franchise. And my number was 713-376-SELL, S-E-L-L, and I didn't put the numbers in parentheses like you should. And I had an older gentleman call me and he was very upset that he had to figure out what the number was. What the S-E-L-L numbers were. Yes, so I told him, I said, "You're exactly right, I should have put it." I said, "Well, now let's talk about that property you have for sale." True story, he goes, "Oh, I don't have any properties." He was just irritated. Irritated.

I'm like, "That's a grouchy old man." It was, it really was.

I'll probably be there someday. So yeah, so 713-224, you know, sell, or what is it, 713-224-7368. That's how they can get a hold of us. They can also go online, you know, we are an e-company, which is awesome. So it's renterswarehouse.com, pretty simple.

Outstanding. Mark, thank you so much. I really appreciate all the time you're gonna let us talk. We'll get this out and let our clients and everybody in our audience know how they can get a hold of you, take advantage of your product, your services, and programs. Thanks so much, buddy.

Appreciate it, fellas.

Thank you.