How To Property Manage Like A Pro With Alan Lubinsky

Hey everybody, welcome back to the New and Experienced Investor Podcast. Today we're talking about how to manage a property like a pro. It's definitely a show you don't want to miss. I'm Alex Barnett, I'm one of your hosts, I'm the new guy.

I'm Joe Homs, that makes me the experienced guy.

Oh yeah, we have an amazing guest with us today. He's a business development manager working to help property management companies set and Achieve aggressive targets and fast growth. I can't wait to bring him on. Before we do, let's talk about our meetup really quick.

Uh, what date is it? It's November 17th, and our guest is going to be PropStream. Burton.

Yep.

Burton from PropStream.

Yep.

I'm gonna have to buy Burton a drink because when we were at BiggerPockets together, he offered to buy me a drink, but I was I'd already had my plate full.

A few?

No, I didn't have a few. I don't drink. But he offered, so that was nice. That is nice.

Well, hopefully you offer and then he declines and you guys are—

Are even. Yeah.

Yeah.

Nobody had to spend any money. That's possible. I don't think, I don't know. I don't hang around with him a lot, but I don't think he drinks, but who knows?

I've seen him throw back a few.

Have you?

No, but—

Oh, come on.

He seems like he would.

Oh, man.

I always like to remind you guys that this is a live show. So bring your questions, throw 'em in the chat. And let's jump on into it. Let's go ahead and bring our guest in today. Today we have Alan Lubinsky. Alan, how you doing?

Pretty good as well. Thanks so much for asking. How about you guys?

We're doing great.

Great.

Thank you.

Yeah.

Thanks so much for joining us. Why don't you go ahead and jump right into it? How did you get into real estate? What were you doing before and what led you there?

Yeah, absolutely. So I started out as pretty much everyone does, bottom of the barrel. I got my real estate license when I was 18 years old. And didn't really know anything about the industry. Just knew that I really wanted to make it. Started working for a boutique brokerage, kind of getting the hang of things, learning how to conduct myself in a professional manner. Coming outta high school, that was a bit of an adjustment for me. But after that, I kind of got the sense of, of how people work in that industry. I worked with my broker who was also an investor, and he was doing small-time flips. And that's kind of where I first got exposed to property management. I first got exposed to what it means like to invest and what it means like to build wealth through investments. And I quickly started helping him on the management side of things before looking for my next step. And then I met some people at Home River Group Property Management, and I made the jump full swing and stopped doing real estate sales for the most part. And Now I do property management full-time.

I love that.

Nice.

Property management is such an important skill, especially when you're thinking about purchasing cash-flowing assets. That's what everybody in their mind is like, passive income, that's what we're going for. And then—

Passive.

Yeah, yeah. And then you get your first rental and you're like, oh my God, what did I do? These people are always calling me. I don't know.

Yeah.

If you don't have the skills, it seems like it's a pretty easy thing, but it's absolutely not. And I've gone through it.

But—

Yeah, we don't want to talk about that.

Maybe you could give us some tips for people that want to get cash-flowing assets. How do they manage it themselves?

Sure, absolutely. It really does come down to the systems you have in place. And there's a saying as old as time, You buy, you make your money when you buy, not when you sell. That applies all the more when it comes to rental assets, because if a property doesn't cash flow from day one, even if you factor in whatever management fee, or if you're not using a manager, you're managing the property yourself. If you're not doing a good enough job of doing your homework before you acquire a property and it doesn't cash flow and you, and you try to wait for it to cash flow, 9 times out of 10, you can't force it. So it's really important if you're getting into buying a long-term asset when it comes to rental income, you have to make sure that you, you know, you dot all of your i's, you cross your t's, and make sure the thing can actually cash flow so you can get your money back. Otherwise, you're going to be stuck underwater with an asset that doesn't move for the most part.

You're here in California?

Yes, sir.

Is that where you do the property management? Here? Yeah. And so do you do small stuff or big stuff or both?

Both, um, to a certain extent. I mean, we're not taking on portfolios, uh, or, or apartment buildings that have hundreds of units. Uh, realistically, our company, we, we specialize in single-family homes and multifamily homes up to 100 units. And you're right, Joe, I'm here in Southern California, but we're a nationwide company. Uh, we started out as a bunch of different hyper-local property management companies in most of the major markets. And in 2016, we kind of came together and became this larger, this larger group essentially in Home River Group. But we kept all of our local presences. So you're right, I'm the guy here in Southern California, but there's someone just like me, maybe a little bit more handsome in another state as well. And we work together to make sure we, we have our, our people in all the places they need to be.

Would you recommend You know, somebody who has a small portfolio of 1 or 2 properties to manage it themselves?

I would say that it's definitely worthwhile for everyone to at least dabble in trying to self-manage their properties just because then you learn what it takes to scale that. I, when I first converted my townhome into a rental property, I did all of the management myself because I'm, I knew some of the people that were in the neighborhood that were Acted as my vendors when it comes to that. I didn't have any systems in place. I did all the rent collection myself automatically, and it gave me a good grasp of what I need to look for when I do work with the property manager because then I have something to compare it to. If you haven't done it yourself, it's very difficult to know what you need in a property management partner.

Yeah, absolutely. And when do people sort of come to you? Is it after they've Bought a property before they bought a property? Yeah. Are they like, I screwed up, can you help me? Like, what, what's like your clientele? When do they come to you?

That's a great question. I honestly have seen it in every capacity. I've seen people that are, you know, they inherited a property either through probate or through, you know, just inheriting it through their trust. And so they have no idea what to do with it. They're not sure if they're going to sell it or if they're going to try to rent it out. And they don't even know where to begin with that. On the other hand, it's, you know, sometimes there are investors that have portfolios of single-family, small multifamily homes, and they need a partner to be able to take on the entire portfolio. And they have anywhere from 40 to 50 or so properties spread about Southern California. And we come in and help at the same, you know, we're not going to— my mentality is it doesn't matter where you are in your investment journey. If you're just starting out, Or if you're seasoned, whether you're a new or experienced investor, at some point, if you want to, if you want to scale and you want to grow and you want to buy back that time and really get a sense of that financial freedom, you need to work with a property manager. And so we'll take you on at any step of that process of growth.

Yeah. Okay. So that's great. And the reason I was asking is sort of on the, the point that you brought up earlier now, If somebody comes to you, they're underwater, they're not cash flowing, are you able to help them out or are you like, get rid of this thing? You know, what, what's sort of your play there?

It really comes down to fulfilling the, the, the best wishes and, and vision that the owner has and sharing that. If sometimes there are situations where it doesn't matter how hard we work, it doesn't matter how much we would, you know, try to increase the rents or try to, you know, think of some creative solutions like doing a cash for keys, process with the tenants. Sometimes it kind of goes back to my original point. Somebody didn't do their homework. They bought a property that's not an asset, it's a liability. And the only thing we can say is, hey, we can manage this, but you're going to keep bleeding your money, you know, unless one day you'd like to sell it, but keep some kind of cash flow in the meantime. At that point, sure. But for the most part, yeah. I mean, if there's a property that's not doing well, it's our responsibility as, as a partner, not just as a service provider to say, hey, we can manage it, But it might not be doing too hot. And that's a conversation I have to have with owners sometimes when they're concerned, stressed, and the only solution might be to sell. But other times when it's something that has just been a lack, you know, resulted because of mismanagement or, you know, they don't have all of their systems in place to be able to have the property really run as optimized and maximally efficient as they can, then there are opportunities for sure for a property management company to clean things up and really Turn the, the liability into an asset because of the cash flow situation or whatever else might be happening.

Do you do any co-living spaces?

So that's something that we're exploring to do, co-living and medium-term rentals and, and anything that is not a long-term unfurnished rental. That's kind of what we built our business on is long-term, 12 months or, or more and unfurnished, just because that's what allows us to have as streamlined as a process. But we're definitely exploring the space of Co-living, short-term, even some furnished rentals that, that might, that might open up a way in a lot of markets that have that as a primary base of rentals.

Yeah, I was going to say that, you know, sometimes, you know, somebody's underwater, that may be the only option is to, hey, we got to pivot here, do a midterm rental, maybe get some more cash that way.

Yeah.

Do you find that the, the, the properties that are having the biggest trouble, or maybe like you said, someone didn't do their homework, they just didn't understand that It's beyond my mortgage minus, or, you know, what I'm bringing in minus my mortgage is my cash flow. And there it's like, oh no, you also have maintenance, you got CapEx, you got all those other things. Is that where you see people just don't understand actual cash flow?

A big, a big, a bigger reason of it is that it's that they, they, they take out the mortgage, the interest and the property taxes, but they don't factor in the potential of there being vacancy or there being certain Holding costs that have to do with setting up the rental as a cash-producing business. A lot of the other times it's just over, over-relying on certain places where you might receive information about how much it could rent out for and just overestimating that. So if they base, you know, that they think their property's going to cash flow $5,000 because they saw a number somewhere online. And they haven't really looked at the comps, and then it's it's cash flowing four thousand, and that thousand was supposed to be what covers a lot of their their costs and their profit. Well, then there's not much they can do to have the market work in their in their favor. So that's a tough pill some people have to swallow. Other times it is just not factoring in certain costs, but also sometimes it's it's just a matter of bad luck, bad timing where People are, you know, their property is not renting out for whatever reason, maybe because they don't have as much visibility on it or for whatever other reason. There's a lot of variables that can impact that. But somebody that really does their homework and they see a property for what it is, it's hard for it to not cash flow when they do the right, the right steps in order.

Tomorrow's Halloween. So I want to talk about horror stories.

Oh yeah.

And I'm going to get you started. Okay?

Yeah.

I had an agent who received— he was leasing a property, just leasing, not managing, just leasing a property. He received a text from a tenant, said, is your home available for Section 8? He said no. I see the expression on your face like, oh my God, that was a mistake. Yeah, that was a $20,000 mistake. And I, and I think he was set up because we did turn it into our, you know, insurance and they ended up paying this attorney $20,000. But they also told us that the, that attorney had like 10 more cases out. Yeah. Um, so what kind of horror stories are there with property management?

Oh, you nailed a big one when it comes to, uh, saying no to Section 8. A lot of people just don't know that that's changed in California where You know, we are required to accept all kinds of payment, including third-party payments like Section 8. Oh man, a big horror story I've had recently was with an owner. I was onboarding their property. It was a 5-unit property down in, in South LA, and this owner had long-term tenants. And this is kind of where the red flags begin to arise when you've had long-term tenants. The property was heavily undermarket, no rent increases for a very long time. For those of you know, you know, you know rental prices in LA. $1,000 is, is, is, there's a reason why he had long-term tenants for that kind of rental price. But the horror story began where we realized that there were no valid lease agreements for over 7 years. The owner lost the original ones, didn't keep up with the renewals. And when I tell you that it costs the owner more to get those tenants out than all of the cash flow he had gotten and accumulated for the past 7, 8 years from all of those tenants, I'm not kidding.

Wow.

That's probably the one that that comes to my mind first and foremost of just seeing this owner's pains. All the tenants were all related to each other. None of them wanted to move. Many, many written notices, sixty days, ninety days, nothing. So it it got down to having to do a a formal eviction. And once again, those who know California tenancy laws, it cost the owner a small fortune. So I definitely think that that gave the owner enough of a spook in the theme of Halloween to. Be very careful about the lease agreements, very careful about making— staying on top of all the documentation and making sure you don't have people living in your property with no, no documentation that supports it whatsoever.

Is that why he came to you? Because he had that existing issue and he said, please resolve this for me?

Basically. Um, to be honest, I didn't quite know how bad it was when I first started talking with this owner. He mentioned long-term tenants. He mentioned them paying way below market. I didn't know about the lack of lease agreements until I was starting to collect his information and get to know, as a property manager, we're required to have the lease agreements to be able to renew those and such. And when I realized there were none, we, I mean, we, we drafted the lease agreements for him. We, we, we implemented all of our resources to help this owner, but it was just such a bad situation because all of the tenants were in cahoots with one another and it, it, it became a mess. It, it had to lead to eviction, which is something that no, what he wants to go through, and property managers included. We always try to be proactive, not reactive to tenant issues. But this was a, this was a nail in his coffin when it comes to his ambitions for that property specifically.

You mentioned earlier you do cash for keys. What's the most you paid for cash for keys?

I had, uh, it, it was a 1-bedroom, 1-bath In, in Torrance, 390 square foot. The tenants asked for $25,000 and the owner paid.

Wow.

The, the rental upside was 29%, I think, on a, on a multifamily building. And the owner, he, he really believed in the long-term vision of the property and he didn't even bother negotiating. He just wanted the tenants out of the property. He had this plan to build, uh, in the parking lot another 12-unit multifamily building. So for him, that $25,000 was just something he was, you know, he, he, he understood he had to bite the bullet on. But for a, a 1-bedroom, 1-bath, 390-square-foot, that was the most I've seen, at least, at least pound for pound when it comes down to it.

And if you were to hire an attorney, and I don't know if you have any in-house attorneys, but if you were to hire an eviction attorney, how much would that have cost?

We do have eviction attorneys. We have our legal team in-house, and that's the team that we had to implement to help this owner with the 5 units in South LA. It really does depend. The prices can vary, depends how much the tenants fight on, fight the eviction in court. But I mean, you're looking at anywhere from mid-5 figures to low 6 figures to do a proper from start to finish eviction. For a multifamily building, when you have multiple tenants. For a single tenant, I think with court fees alone, you're looking at anywhere from $5,000 to $15,000. Good Lord.

Why is it that much?

He's using the wrong, wrong guy. I mean, we don't pay that much.

Well, no, I paid $1,500, I'd say.

Yeah.

But I mean, if it drags out, then, then that's, that's the issue. And then in LA, certain Areas, it's like they just, they just tie the hands of the landlord.

Our guy won't do anything in LA, by the way.

Right.

We referred him and he just basically told our friends no.

Yeah.

Yeah, Steve, I think, well, it was—

I don't blame him.

Yeah.

You know?

Yeah.

But you know, that's kind of what I do if I have to go through that process as a cash for keys. But I always tell them like, It's going to cost me $1,500 to $2,000 to get you out of here. Why, why would you want $25,000? That just doesn't make sense to me. I'd just rather evict you. And then that goes on your permanent record, and good luck trying to rent from somebody because they're going to pull that up and say, oh, look, he was evicted before. I don't want to rent to him.

I think they're just short-sighted, maybe.

I don't know. They're greedy.

They're not really thinking about the long-term play. This is their big cash move.

Yeah, we do flips and stuff. And sometimes there's people that we have to evict out of there. And Alex has gone with me several times. He loves it. Yeah, he loves it.

I do.

Yeah, I've gone with him. We go to court and then film the tenants as they leave the court crying.

Oh, they hate it when I film them. Yeah, they hate it.

I'm just kidding.

Obviously edit in some sad music as they're getting their bags with the snow. That's horrible.

They do not do that.

I'm just joking.

I don't. I did try and film Joe for a video one time, and some lady, I think she was at a different eviction thing, she's like, you're filming me right now? I was like, oh shit.

But, uh, we, you know, we go to court and the judge is up there and, Joe, do you want to give this person another 30 days? And I'm in, you know, in my head I'm going, no. And of course you have to say yes, you know, because if not, the judge is going to say, well, I don't really care. I just was asking you as being polite. But yeah, so we go and then another 30 days goes down the tubes.

So, well, and then, then we got the, the sheriff lockout and we get there and the sheriff's like, can you give him like another 30 days? Yeah.

Yeah. No, that like, this is the end. This is it. Done.

Yeah.

I just saw an interesting X post about that where a guy had an eviction. The sheriffs came out, And the tenant basically was like, I'm not leaving unless you put me in handcuffs. And they said, okay, we're not taking her then. And then a bunch of people in the comments were saying like, now the police were in contempt of court because they didn't remove the tenant.

Yeah.

Oh, interesting.

I agree.

I agree. Was that in California?

Uh, they didn't mention the state, but obviously everyone was like, this has to be California. And then everyone was like, delete this. Don't give the tenants any ideas.

Or Washington.

I know. Seattle's like pretty bad like that too. Like, they're— the, the cops will show up and they say, well, it's a civil matter, so then it's not criminal at that point.

I don't know.

Have you guys heard the term professional tenant in, uh, in your line of work? Yeah, I'm sure.

I'm sure. Yeah, no, I had one of those. That, that's the— that's, that's my horror story.

Really?

Like, I had one of those and she like knew enough of the court system to—

Just enough.

Yeah, to be— and she was like, I'm a paralegal. And I was like, oh, that's a good job. Yeah, come on in. And And then let her in. And it was like letting the vampire in.

Invited them indoors.

Yeah, it was bad. So that's how you learn, I guess. Now I screen very particularly.

Very, very— yeah, the last one we had, what, like 10 or 15 people? Yeah.

That's me screening.

Yeah, yeah.

No, I haven't screened them. Yeah, but that was like 10 or 15. And I think like 14 of them had FICO scores under 600.

Yep. Yeah.

Yeah. And then we finally found one. I couldn't believe her. It's like 800, where it's her FICO score. It's like, you never see that.

Never see that.

Diamond in the rough.

You never see. And then she liked it. And then we've had some issues, you know, but like I was telling them, you always have issues. At least I do when I first rent a place. I just finished renting a place in Irvine. I got all the way back to the office. She calls me, she goes, Joe, the toilet's not flushing. I go, turn the water on. I tried that, didn't work. So I had to go out there and the painter had painted the water faucet, painted it shut.

It was completely locked in place.

And then I got a wrench to open it and obviously it broke. So I had to replace all that. Wow. But things like that happen.

We haven't heard anything from them in like a week and a half.

Yeah, hopefully they're putting up their curtain rods and their curtains that they Like all scared, making it home.

I think they're just like moving in. But yeah, I mean, the place sat vacant for 4 or 5 years, just kind of abandoned. So there was definitely going to be stuff.

Yeah, some issues.

Yeah.

Yeah, we resolved them. We're fine.

We're fine. Everything's good now.

Everything's good.

We've got systems in place.

You guys are like a walking or sitting commercial for using a property manager.

No, yeah.

Right here and there.

No, totally. And that was the thing was like, I made the cardinal mistake of when I first got my first tenant in, I just gave her my phone number like a moron.

Okay.

And the floodgates just opened up.

Yeah. I was like, yeah, just let me know if anything's wrong. Then I get texts at 4 in the morning. I hear a noise outside the window. I'm like, what did I do? And they have software for that or like, make a maintenance ticket and then we'll deal with it. So, and then it just provides some expectation and a little bit of barrier.

That's, that's actually, that's one of the less, I guess, maybe talked about, but, but really big motivating factors that a lot of owners do have for property management is even if they, let's say they, they have the experience, they have the tools to be able to do the maintenance work. They, they know the people, they have the vendors, right, that they've worked with. Realistically, it does come down to Peace of mind. When you have a tenant that is living in one of your rental properties, and let's say they have your phone number, or let's say they they know how to reach out, you know that at any point in the day they can reach out to you, and that becomes your problem because that's your money on the line. And that peace of mind is something that I've seen a lot of owners go through extreme lengths to try to solve, starting with working with property management to you know going all the way to just selling off their entire portfolios because they just don't want to deal. With people, so if there's ever a reason to use a property manager, even if you have the maintenance side on lock, is we act as a wall in to interface with the tenants, and sometimes that gets nasty. Sometimes tenants get upset, especially when you're dealing with neighborhoods that are maybe aren't in the best in the best conditions. If we're talking about the C to D neighborhoods, a lot of those times it might not even be very practical or safe to directly be interfacing with the tenants. So in those situations, it is important to. It is important to outsource that because what you get for peace of mind is, I mean, you can't really put a price on it.

Yeah.

I mean, we're all chasing this passive income. Like, if you're sweating, you're like at your kid's birthday party and they're like, the gas is shut off. What do I do?

I'm like, yeah.

That was a strange one. I had, I hadn't dealt with that before. Just get a—

put the phone down.

They had, uh, a device on there for earthquakes.

Like a seismic sender?

Yes.

Sensor, rather?

Yes. And they went on YouTube and figured out how to reset it because the gas company wanted— how much did they want?

$80.

Yeah, like $80.

Outrageous.

Which is not a lot of money, but, you know, it's like, I'm glad that they went on YouTube and figured it out.

Yeah. And isn't it the gas company's sensor or whatever, right? No, no, it's ours.

It's yours. It's yours.

Great.

Yeah, no, it's yours. But I'm glad they did that. You know, everything's on YouTube nowadays, right? You know, you can learn everything on YouTube.

Yeah, we're on YouTube right now.

We are.

Yeah, I watched a— well, speaking of Halloween, we watched a horror movie the other day. I don't know what it was. It wasn't like gory or anything, but it took place in like the 1920s, 1930s. This girl, she's like from the country, goes to New York. And then she— it's in the dead of winter and she rents a room at a multifamily place and she's freezing in the room and then comes down and she's like, there's no heat. She's like, yeah, you didn't pay for any heat or water. You just got the room. There's no heat and no water.

Is that co-living? That's co-living.

It was such simpler times back then.

Sounds like some Great Depression landlording there.

It was like rooms with heat and water, and then there's some rooms with no heat, no water.

It was just to pay extra for the difference, right? Prorate the room based on hot water.

Yeah.

So I was like, we've come a long way. And now, now it's LA. They're trying— this is the word on the street— they're trying to make it basically illegal to evict somebody. What are your thoughts?

It's been tried in the past as well. Um, I, I don't remember the specific legislation propositions off the top of my head, but they've, they've tried and they've slowly over the years years done that just by giving tenants more rights in general when it comes to, um, I mean, what we've seen in the past couple of years with squatters, both— it's mostly on the coast, but you see it some inland as well. Realistically, I actually think that completely outlawing evictions is not just bad on the landlords, but it comes around doubly bad for the tenants as well, because then the landlords have to be even more proactive when it comes to their selection process because of equal housing, fair housing. You're not really able to pick and choose like, like apples, your tenants. There's a criteria that you have. Well, if eviction becomes completely illegal, then the landlords and the companies that represent the landlords are gonna be forced to have the tenant criteria be even more strict. And that's just gonna lead to all of the top applicant tenants being kind of funneled in. And a lot of people are just not gonna be able to qualify for the majority of housing. So I, I can't see that ending well for either the landlords or for the tenants. I think there have to be systems in place that enable any contract for the most part to be terminated under this very right specific circumstances. So I suppose we'll see. I don't think it's going to happen, but you never know, especially not in California when it comes to that. You really never know.

You never know.

You never know. Also fact, you can't cash flow in California. Is that true?

False. Oh, okay. It's true. It's, it's true. If you try to just purchase a turnkey property, 99% of the time it's not going to cash flow. But as we are, you know, getting into the realm of investing and learning about both creative financing strategies and learning about things like house hacking, which in California is one of the best states to do that. Do you guys go over that kind of stuff in your other episodes as well? When it comes to the podcast.

We haven't—

I mean, people bring it up, but we haven't really dove deep into it.

No.

Sure.

Well, long story short, if you're able to purchase a multifamily building, a duplex, triplex, whatnot, and live in one of the units and rent out the other units, it will definitely help you pool your equity together. And then eventually, if you move out, that property can cash flow. Other situations are if you buy a property that's distressed and you do some value add to it, In those situations, because of the amount of appreciation you're forcing from the property, you are able to cash flow the property over the long term if your financing makes sense. It really does come down to financing in California, but if you're creative enough and if you're determined enough to find the right deal for it, you can absolutely cash flow in California and you can cash flow very well in California.

Nice. Do you have like a, are you, are you full California or like, do you kind of shit? Just only SoCal or what, what, what's kind of your—

My personal portfolio. So I have, my portfolio is relatively small. I have the, I have a condo and I have a townhome, both of which were personal, personal properties that I converted into rentals. I'm looking at estate though. And actually meeting Joe at the BiggerPockets conference, I met some really great people at estate that have a foot in the, in the door when it comes to certain markets that I think are definitely up and coming when it comes to great markets to invest in long-term rentals for.

Can you share some?

Sure, I'm happy to. We've all heard of Ohio. We've heard of Columbus, Cincinnati. Toledo is actually a market that I've heard a lot of great news about, and I can give you some facts to back it up. For one, the mayor in Toledo has been putting in, I think it's $45 to $50 million annually into infrastructure. Stable growth in the area. The home prices there are typically a lot lower than Columbus and than Cincinnati. So the barrier to entry is a lot lower. And for the most part, I mean, the rents there are just as— I mean, they're just as competitive as in some of the bigger markets as well. So I would keep your eyes out on Toledo. Anything else in the Midwest, I think it's a really safe bet. If the deal makes sense on paper, it's probably gonna make sense in practice too. But you have to have the right people, boots on ground that will make that process work for you. And that comes down to investing out of state in any market. If you don't have the right people there, a good deal on paper can turn into a disaster in practice.

Sure.

Of your clients that are here in California, would you say most of them are people that have inherited properties that are, are, are I guess free and clear or like What's, what's kind of like the majority of people that work with you?

A lot of the people that I work with are free and clear. They either inherited their property through a parent or, and such, or they have converted, like I, similar to what I did, their primary residence into a rental. That being said, that those are not the only clients we work with. A big majority of our clients are either seasoned investors as well that have portfolios, or they are people, as I mentioned, that, you know, try to manage their property. Made some mistakes, innocent mistakes, but mistakes that have compounded over time to now they need some help. And because we're a national company, we have the resources to be able to inject whatever capital is needed into an area, into a market to really help the investors out there by having a team onsite that can help get them out of the hole that either they dug or the property itself dug over a long period of time.

Okay. And what are some areas that you're seeing like some some stable rent growth in, in SoCal?

San Diego is extremely lucrative just because there's never enough housing in San Diego. So if you're one of the people that holds some of the chips, you can really make your money back quickly. I would say San Diego is really great. Besides that, anything in Riverside County is very stable. There's not much happening when it comes to major legislation there. So Odds are if you buy a property in Riverside within the next couple of years, not much will change that will make that a deal breaker if something was to happen. But realistically, anywhere in the big markets, whether it's Los Angeles or San Diego, there are deals out there. Not all of them might make sense at the if you just look at it at face value, but that's where we get into. If you're creative enough to find a deal that can cash flow after you do X, Y, and Z to it, or if you partner with the right people to do it, I think any market in Southern California. is viable. I think most markets in general can be viable, but I, I personally think San Diego's a really hot market for stable growth, stable appreciation, and great cash-on-cash return for your rental.

Okay. And they already know I'm going to ask this, but you got any mobile homes?

You know, I, I had an owner call me 2 weeks ago that owned an entire mobile park.

Oh.

Mm-hmm. Similar to to what Brandon Turner does with mobile homes, right? Probably following in in his footsteps, and she really wanted us to manage them. That's another thing that we're we're trying to implement is is is unconventional housing, whether it's manufactured homes or mobile homes. It's definitely in the future. I mean, realistically, for Home River Group, Southern California is a very hot market, but we've only been in this market for a few years. Most of our base of growth has been happening around the Sunbelt, so it's kind of on my shoulders to really bring the strength and leverage that we've had in the in the on the Sunbelt regions. More importantly, you know Georgia, Pennsylvania to Southern California. So a lot of these things that we're talking about now, I wouldn't be surprised if within the next year or two are implemented aggressively because people do whatever they can to make their properties or Mobile homes for that matter, cash flow, and they need somebody to manage it. So we'd like to be able to fill those niches as well.

That's great. Yeah, I would, I would look into the co-living thing because there's not too many managers right now that are doing that. And if you guys have the infrastructure to be able to build out a system, I think that could be, I think that could be really good.

Yeah, no, I, I completely agree with you. It's definitely, we, we discuss different types of housing and different types of management that we can do. We're probably never going to fully be open to things like short-term rentals just because there's a lot that goes into it. You need, you need somebody really local that can do all of the, the turnover and all of the cleaning and such and stuff like that. But when it comes to less conventional housing, mobile homes, definitely in the window, uh, in the near future. I would not be surprised if it's implemented within, like I said, next year or 2.

There we go. That's what I like to hear. Awesome. Uh, this is the part of the show where we've curated several videos.

Fun.

And I want to get your reaction right now.

Okay.

Live, unfiltered, unedited reaction. I love it.

Let it rip.

Okay. The first video is Do Not Hire a Property Management Company.

Ooh, very cool.

Loading.

What a lot of people don't know about hiring a property management company to run your rental is not only do they take 10, 15, 20% of the gross rent, not off the net, off the gross, but they also don't pay for any of the repairs. That's still on you to do.

What a lot of people don't know about hiring a property management company to run—

The guy is pissed.

He probably got, got, uh, got some— got a PMA that, that has a 15% marker on it for management fee. And I would be reasonably upset if I was in issues too. He does make a point where yes, property management companies, we don't pay for any of the repairs. Their own the management fee. However, I don't know what market he's in, so I don't want to you know outright say anything. But I personally, at least here in Southern California, have not seen a management fee more than ten percent. Our company, for example, in SoCal, we have a pretty standard six percent management fee. Oh. Yeah, I know. I know it's anything that's single digits.

Pretty good.

That sounds pretty decent, right?

Yeah.

But but what you get for the management fee isn't so much that we're going to be paying for the maintenance, but it's we're going to be doing all of the coordination and putting systems in place. So with each property you acquire, it's in the back of your mind when it comes to all the day-to-day operations. We want you to be able to focus on the big picture, which is maintaining, optimizing, and scaling your portfolio. And you can't do that when you're fixing toilets. It's why I always tell my clients. Don't, you know, build toilets, build systems. And that's kind of what a property management's job should be, is to align with the vision of an owner and to go from there. But yeah, interesting about the management fee on that guy. I really hope he didn't sign a PMA that has a 20% management fee for a long-term rental.

Sure. And I have heard of, you know, in, in every, every property management company is gonna be, you know, different where they have their vendors there, they, that they always use. And then they'll be like, okay, we gotta, you know, send in just like, we gotta get some, some maintenance.

Right.

It'll be $300 from the contractor and then they add like $200 on there, um, for themselves.

Yeah.

So is that, is that a typical sort of game here? Or is that, I guess that is typical sort of play.

Upcharging is, upcharging is, is I would say more common than not, but, uh, if you're being upcharged, what is that? 200 on 300 is 66% or whatever that is, I would definitely think twice before going with a property manager that's upcharging that much. Um, most companies that do upcharge, the way they do it is they've been working with vetted vendors for 10, 20 years, and they're actually able to get a pretty big discount with working with that vendor. So that extra 10%, which is what our company upcharges, um, that doesn't really come out from the owner's pocket. If anything, that, that's some— the price that we incur By having these relationships for a very long time, and we're able to get a generally cheaper quote and bid for a work order than if somebody was just to call a vendor first day, get somebody to do a repair on the job. But a $200 on $300, um, work order is preposterous. I definitely would think twice before working with a company that does that.

Wow. I'm believing everything you're telling me right now.

It's the truth. I'm a pretty transparent person.

Okay, good.

All right.

What do we got next? Ready for the next one? Okay. We've got avoid costly mistakes.

We've been burnt for tens of thousands of dollars for my owners for that decision right there.

I can tell you that.

And those are hard, hard conversations to have with an owner. When you approve tenants in there that you took a chance on, and on paper they just didn't look that good, those are mistakes. So don't trust your gut. I know we want to. We want to feel good about people. We want to think they're really going to make it. But don't take that chance, you guys.

If you're—

if they don't look good on paper, stick to your boundaries.

You have guidelines for a reason. If you have guidelines, if you don't have them, start establishing them and stick to that lane. Yeah, absolutely true. There are times where you, you owners are feeling the pressure of the property sitting without a tenant and they just want to get anybody in there and they meet somebody and they seem nice and they have a cute dog and it's perfect. But then you get to the part where you have to evict them and you realize that you should have been a little bit less personally involved in that decision. Guys, I really can't emphasize enough how important it is to stick to a tenant criteria. Especially in states like California, but all in all, if a person does not look good on paper, it's for a reason. It's not because somebody's out to get them. It's because they made choices or they, they were in circumstances that have led to them not being as desired of a tenant. Of course, everyone's going to have a different window. They're all going to have a different criteria. But if someone just doesn't make sense on paper, they're not going to make sense based on meeting them or learning about them or what they like to do for fun. It has to be professional. If you're running your business like a business and not like a hobby, You have to make professional decisions and that evolves with people management as well.

And I'll tell you, they always have a story for why. Oh, yes.

Always. Always.

And I fall for it.

He does. He does. Yeah.

I mean, you, okay, you get an elderly lady.

Yeah.

She's like, my husband just went through cancer. We put everything on the credit cards and I, I had a hard time paying for those. So that's why there's a little bit of a a ding on my credit. Can I still come in, please? I'm very cold, sir. I'm very, very cold out here.

You're gonna make me seem like the Grinch Who Stole Christmas by, by that horse.

That's why we're gonna pay you the big bucks.

That's why. Yeah, exactly. I mean, if, if you're talking about another reason to use a property manager, um, I mean, the— no matter what your business is, you're gonna feel the guilt. You're gonna feel not the best about it. When it comes to an elderly lady such as that depiction, unfortunately, that, that's— that story will go as far as, as it can until the rent stops coming in.

Yeah.

And at that point, it's— you can feel as sorry and offer as much condolences to the person. But when you're now losing a lot of money every month because you have a mortgage to pay and she's not paying rent and she doesn't want to leave because she has nowhere else to go, It's, it's difficult to get out of that situation. So my only advice is to try your best not to get into it in the first place.

That's it.

As sad as that is, as, as much sympathy in my heart as I have for people like that, it just— if it doesn't make sense financially and you're running a business, it, it can't, it can't go down to, to sympathy, unfortunately.

Yeah.

Alan, um, as real estate agents, we put properties, uh, for lease. And it's been in the past, but it's changed. That used to be a commission that's paid for, you know, an agent bringing in a tenant and stuff.

Sure.

My philosophy, honestly, my philosophy has always been that I have to interview the tenant. I do that in person. And the reason I do that is because I've been doing this for such a long time that I get red flags all the time. It's like, Yeah, Joe. Yeah, just like your story. Yeah, Joe, it's like, the reason that that's there is because it was COVID and I got laid off. Or the other ones I hear is, I got divorced and my husband was really mean to me. And he racked up a bunch of credit card bills and stuff.

It's not her fault.

Obviously, it was our account. And so I got dinged for it as well. It's not her fault. Um, do you, do you do, uh, personal vetting of tenants?

Usually how our system works is we, we follow a hierarchy of, of priorities. So the first thing we'll do is we'll do the, the rental criteria. If someone goes through our application and they check every box off when it comes to having the credit score, we pull their tax records, there's nothing like that, there's no outstanding loans or liens or anything along those lines, and we get them, there's no bankruptcy And they're ready to go move into the property. Yes, we will have a conversation with the tenant on behalf of the owner because there might be some things that it's not not fully showing. That being said, we're not there in that meeting to look for red flags. We're there to confirm the green flags because at the end of the day, for fair and equal housing, if someone looks good on paper. It's as good as you're gonna get without knowing what's gonna happen in the future, without having some prophetic, you know, foresight. But of course, we'll have a conversation with the person. We want to make sure that they are who they say they are, that the papers that they have, the documentation reflects them. And when the two of them align, the the person that we're talking to and the person who they are on paper, that's when we know we have a good tenant. When there's no discrepancies, when there's no variables that we can't control when it's as they say they are, they really are. And short of, you know, some crazy change of behavior that is completely unprecedented and doesn't reflect at all on their history, we, we, we have to at that point trust the documentation and trust the process to, to verify that they are a good tenant. Um, but there have been some times where if somebody looks really great on paper And you talk to them, and it's very clear that this person, you know, for the most part had their parents, for example, doing everything for them, everything. And they were just out of college, and they have a credit score because they were on their mom's credit card, and they've lived in student housing that was paid by their parents. And now they're alone working whatever job they have, and And their income score, their parents are on cosigning, for example, their income qualification isn't enough. And it doesn't matter how good they look at that point. When you get to peel back the layers and realize that the only reason this person looks as good on paper is because of things they didn't control and things that were just happening to them because of their parents, for example, that's when it's important to have those conversations because that fully takes the, you know, the pink colored sunglasses off and you finally see the person for who they are. More often than not, if they're good on paper, they, they look— they are good on paper, then they usually are a great person in practice too.

I had an application and, you know, you always ask for a reference. The reference was his mother.

Yeah.

And I called the mother, you know, and mother says, I'm sorry to say this, Joe, but like, if you rent to my son, You're a fool.

No way the mom sold him out.

The mom told me that.

That's amazing.

Yeah, the mom told me that. And I said, you know, thank you for being so honest with me. I appreciate it.

Yeah.

You know, I wasn't actually gonna call her. It's like, why would you call somebody's mom? You know, as a reference, you know, you're gonna get glowing, you know, reviews. Oh no, she said, oh, Joe, you'd be a fool if you rented to him.

Wow.

Wow.

Do you, on top of all the documentation, do you get— do just a basic Google search of the person's name?

Facebook?

Yeah, like, do you go deep into that? Like, name V, you know, blank, blank V name.

So typically no. Oh, just because at the, at the rate that we're, we're operating, it's difficult to, to, to screen every single person when it comes to their social media, but For fun's sake, sometimes I personally do that.

Okay.

Not to do with— not to do with our normal systems and operations, but we get an application, somebody's got a very interesting name, you know, I'll, I'll, I'll bite. And, um, I've, I've had some pretty interesting things come up, right? Nothing that's ever, to be honest, disqualified a person from a property, uh, from being eligible, but just some really interesting things that give you an idea of who the person is behind the professionalism. What about you guys? Have you seen any?

I was gonna say, you would have let in a professional tenant because the one that I had checked out all the boxes because every time she got an eviction, she got it sealed. And that's the thing in California. You can get it sealed if you settle. Sealed, sealed, sealed, sealed. Doesn't even show up after we let the person in and it started going sideways, she does a Google search and it's like, she's just like litigious. Yeah. Suing everybody left and right, involved in all these lawsuits. So it could be an extra thing to add to the, you know, cuz you could keep your record clean and be a psycho.

Yeah.

Outside of that.

No, absolutely. I mean, there's, there's always, there's always that possibility and, and certain things like sealed records, Are can be a problem point. What we really try to do is we we don't really ever rely on things like word of mouth references or things like that. I mean, we we go through everything. We pull their tax records. We have we developed our own software that that kind of does that internet scrubbing.

Oh, okay.

As well. So if if there is anything like that, we're not manually looking up the person.

Okay, I got you.

It goes through our own HRG application, and then that's That's what it's— it kind of scrubs through the barrel.

That makes sense.

But, um, yeah, I imagine if you're doing it without any kind of software that does it for you, it would definitely be a bit of a shocker to see all of those court cases that just come up. Like, whoa, who even is this person, right? No, I mean, yeah, once again, California, you got to watch out for those kinds of things, guys. It's a problem.

Yeah.

And so when we finally evicted her, we made sure not to like seal it. We're like, we gotta let people know.

Yeah, yeah, yeah.

Like, let people know.

Yeah, yeah.

Who knows if it's even not sealed?

Oh, all right. Well, dang, that was my whole hope for that.

She's not an optimist. I think it's—

we finally broke the seal.

It's probably sealed. I think you can put your teeth in it.

Let Alex live his moment. It's sealed, okay?

It's probably sealed. Yeah.

No, I don't want it sealed. It's unsealed.

He's a whistleblower. Come on.

Yeah, exactly. I'm a whistleblower. I'm brave.

Okay, well, you know, there actually a long time ago— I'm thinking like 20 years ago— there used to be a website where you would put bad tenants.

Yeah, shame, shame, shame.

I think it was literally called like badtenant.com or like— Yeah, I've seen that.

And I'm sure, I'm sure they got sued and they had to take it down or whatever, but Um, I wish we could do that.

You know, that was the '90s.

Yeah, I wish we could do that. Yeah, start it up.

Let's do it anonymous.

I would love to see how, how quickly the Equal and Fair Housing Committee knocks on your door.

No, we run it with an offshore IP in the Bahamas.

And yeah, yeah, yeah, I see.

Yeah. And we, we have to go to the Bahamas to set it up. Yeah. Hawaii.

Shell company owned in Dubai.

Yeah.

Yeah.

Just to, yeah, name off some bad tenants.

Just corporate expenses, you know?

And I will say on the other side, there have been some bad landlords and that's the reason why some of these things are in place.

Yes.

Slumlords. I mean, I still see it to this day. I'm like, how are you getting away with this? But you know, then you have the tenant who doesn't wanna say anything 'cause they have a place to stay.

Yeah. But it's completely run down and Those are the hard cases where, you know, I mean, and we've seen this happen on our end as well, where we're, um, we're, we're, we're working with the landlord and owner, and we very quickly realized that up until he's been managing with us, he's been violating 5, 6, 7 tenant rights without even knowing it, just because his attitude is kind of like, oh, if there's a problem, they'll let me know. And once again, I mean, he's been lucky that the tenant's been pretty gracious overall about the, the beer because it's like a nice place and they need a place to stay. But sometimes it, it really is just the landlord's fault. And that's why we do have these rules in place. I would, I'm always an advocate for having as much rights for tenants within reason, right? Because we want it to be an equal playing field. Landlords are providing a service, a commodity. Tenants are sustaining the market by doing so. It's a team sport. I mean, both parts need to play fair. for it to make sense for anybody. Otherwise, we're not going to have an industry to work in anymore, right?

There you go. Yeah, I think we have one more video. Do we?

Yeah, we got one more video. Okay, let's go here. Home management and the illusion of scale.

It does not get easier to manage homes by managing more of them. There's no efficiencies of scale in managing homes. It's the opposite. It's diseconomies of scale. It gets harder and harder and harder The more you grow, just because you're adding people. When you add people, you need to add management and layers and layers and, you know, more benefits and, and just more overhead. You end up with 3 or 4 people touching every single issue, uh, which isn't a great experience. You know, they call a call center, it goes to a local manager, it goes to a GM. Um, people get bounced around. That's not just expensive, it's also not a good experience for the guest because they have trouble You know, they, they want to talk to somebody who knows their issue and can resolve it and is local. It does not get easier to manage. There's actually quite a bit to unpack there. I'll start off by just kind of recapping with what he said and I'll break it down. So what he was saying was that it, you know, the common trope that he's implying is that the more homes you start to manage, the easier it gets. But in reality, what he's saying is it gets harder because now for each individual property, you have multiple people touching it. If that's how you manage your properties, yes. If you manage each individual property as this is A, B, C, D, and now when you only had one property to manage, now you are having to manage that times 4. So the, the effort is just duplicated or multiplied 4x. The, what I would say to that is it means that there are not enough systems in place to make that process actually become easier. So let me give you an example. When you're managing one property, like you started, you can do it yourself. There's one tenant, one door, you know who to call for that property. Okay, now you have 2, theoretically you have double the work, 3, you have triple the work. And every time you add a property, your own effort goes up, right? That's why it's important to have systems in place, such as having somebody that would be able to be coordinating just the maintenance for all of those properties. So you're not the one doing the maintenance coordination. You're not the one doing the maintenance anymore, but you have one person that goes through and handles all of the vendors for each of the properties collectively. Then you have somebody else that can be the person that's doing the rent collection or have that be the same person. Point is, is that you really don't need that many people to manage a full portfolio as long as you have a team that you're comfortable with, whether it's local property managers or the people that you work with as partners. Realistically, you are able to grow and you're able to get that economies of scale, but it comes in the form of cash flow, not in terms of effort, because the effort is in building those systems. It stops being doing the handyman repair work and it starts being managing the people that are managing your property. And that's just a shift in mindset going from kind of like that self-employed sector to the business sector, because now you're not managing a property, you're managing a business. So I think I think that's what I can say on that point.

Yeah.

Great answer.

That's— this guy is like on fire right now.

Wow. You guys gave me a great topic to talk about.

That was awesome.

I see why they call you.

I totally agree 100% with what you just said.

Yeah.

That was awesome.

Yeah. We have a couple people in the chat.

All right, let's get to it.

Okay. We have Liz with a question.

All right.

What are 3 major mistakes you see new property owners make when they try to self-manage their own rental?

Great question, Liz. Um, no particular order. Uh, mistake number 1, rushing the, uh, tenant screening process, because the tenant is what is your business. Your business is not the property. Realistically, your business is the tenant, because the property doesn't generate money out of nothing. It's the tenant that pays for it. Number 2, assuming you're never going to have any issues with the tenant or any issues with the property, such as vacancy, maintenance, Permits, whatever else. And number three, it's kind of what I said at the very beginning: assuming that just because your property is not cash flowing now, it will someday cash flow. That can happen, but it's it's entirely speculative. If you're running, if you're doing this to run a business, you can't feel them. You can't you can't go off of feeling. So.

Yeah.

Going too quickly with the tenants, not expecting there to be periods of downturn. Not, I guess, budgeting accurately would be more accurate. Not having like a 5% reserve for manage— for maintenance, vacancy, that kind of thing. And 3 would be being too overly enthusiastic and speculative just to get a rental property versus really sitting down, crunching the numbers and making sure it will cash flow from day 1.

Amen.

We got Rami in the chat and he says, California vibes. I told my tenant, you're behind on rent. He said, no, you're ahead on expectations.

Nice.

I like that guy. That's funny.

That's pretty good.

Awesome.

Love it. Very cool. Well, Alan, this was really knowledgeable and, uh, Very informative.

Yeah.

Very informative.

Yeah.

Very informative.

Very informative.

You are very knowledgeable. It was very informative.

Yes.

How can people get ahold of you or, you know, Home River Group?

Sure. We, our website is straight up homeriver.com. If you're an owner and you're looking to get your property managed or just explore what that even means, be even without any kind of formal commitment, Just go onto there. You can get in contact with anybody in your individual market, whether it's in California or Georgia or wherever that may be through our website. And we work a lot with agents as well when it comes to our growth sector. So if you're an agent and you're looking to have a property management partner in Southern California, it's just homerever.com/agents and we'll be able to find out all the information of how to get in contact with us and what we can do to fill a gap in your Solution Management being a property management solution for agents to utilize as well.

Thank you so much.

Thank you.

Thank you guys. It was an absolute pleasure.

Yeah. Thank you. Thank you guys for joining us and jumping in the chat and sharing this far and wide. We will be back here in 2 weeks cuz Joe's going on a cruise and, um, and then we also have our meetup on the 17th. So make sure to connect with us and we'll see you on the next one.

Thank you.

See you later. If you want some more advice on real estate investing, reach out to us one-on-one.