Engineer Reveals Million Dollar Maintenance Secrets

If you tell me to my face, "Hey Johnny, you're great for rough-in, but you suck at trim-out," I'm gonna be like, "Yeah, I know." Talk about just Section 2 by itself for over an hour. My background, I'm a refrigeration engineer. I have a degree in HVAC, and I've worked every job in the industry from being a helper on new construction doing commercial work all the way up to now owning a company. My last W-2 position, I was a refrigeration engineer for a manufacturer who came out with a new refrigerant. Before the age of 30, I wrote the national training standard for refrigerants, finished the R&D on it, and then helped design a whole bunch of equipment for the refrigerant. And I'm just a guy with a, you know, a 2-year college degree. What I am is I'm a numbers guy, and I think I'm the only asset management guy who's actually here today at asset management class. Fact. Fact. So that's me. I do a lot of portfolio optimization, rebates, energy efficiencies, and if you are local to Washington State, I am your go-to energy efficiency expert. The Washington State Energy Code is an absolute pain in the ass. Sorry, trying to save my words here for your recording. It's an absolute pain in the ass, but hey, it's law, so we gotta follow it. A lot of jurisdictions are now requiring the compliance certificate for a simple remodel, and I'm getting calls frantically from flippers, from landlords, from everyone in the real estate industry because that's all I work with. Oh no, I have to do this energy code compliance form and I have no idea what I'm doing, please help. Okay, let's break it down and figure it out. That said, the very first thing that we're going to talk about is planning your asset when you are pre-purchasing. So that's our very first point, number 2. It's called pain points of pre-purchase. So this is something I want you guys to think about when you are looking at a deal, when you are first walking a deal, when you've already made that great contact with the owner and he's like, oh yeah, I'll sell you my 18-plex. You're like, ah, great, he's gonna give me a screaming deal. And you walk in and it looks like they're robbing you. And then you go, oh shit, this is not a good deal at this number.— and you sit down and you look at the numbers, well, here's the things you should be looking at. The very first thing that you always want to look at is the electrical panels because that is going to determine how much money you are going to be paying to an electrician to make sure that you can actually do what you need to do. If you are not metered correctly, you are going to have a massive headache in sub-metering all your units out. It's going to cost you money with the utility company. City of Seattle had a policy where they would only do one drop from the transformer at the street to a lot. Well, if you had a fourplex and the old way of doing it, you would smack a meter on there and four separate panel boxes and you'd split it. They did that a lot of times. Well, code changed and you had to get panel swaps done and, um, Not only did that suddenly have to be underground, your drop wasn't gonna be overhead, it was gonna be underground. You now had to get this massive 4-bay meter panel put on. It was $10,000 for the equipment itself. The number of owners that I saw got $30,000 quotes to get me— just meters, not even redoing the panel, just the meters put on, got blown away. So one of the first things you want to do is take a look at the meter. Take a look at the drops coming from the street. You can see it on almost every project. You'll just see that little overhead line and you'll see it zigging, zigging over to the corner of the roof and you'll be like, "Oh, that's where the drop's at. Johnny talked about that." If you look almost directly underneath of that almost every time, that's where the panel and meter are at. If you look at the electrical panel and you see the words Zinsco or Challenger or anything that says Stablock load center, That's $10,000 right there. You're just gonna— you're just throwing money. I mean, you can find people who will do them for $5,000. The going retail rate right now is $10,000. We'll get into talking about talking to contractors later, but we're just going to go with the high number. It's going to cost you a whole bunch of money because the stab lock load center, they were come up with in the 1930s. They were big until the 1980s when we realized that they were a fire risk because the little stab locks They're basically two little tension pins that conducted electricity. And fun fact, when you conduct a lot of electricity, things heat up. When you heat up metal, metal expands and contracts based on how much you heat it up. So if you took these two tension pins and you heat them up a lot, you can get to a point where they're just sitting there arcing because they're, they're kind of sort of falling out of place, and then they start arcing. And when you start arcing In order to jump across air, your voltage has to be about 10,000 volts, which means that you're now starting to do damage to your panel, to your breaker, and things are catching fire. This is why you've heard about Zinsco and Challenger panels. They're bad. The next thing I always look at is the roof condition, because if the roof is screwed, so are you. Water is the bane of your existence when you are trying to keep a house dry. Which is the goal if you have an enclosed structure. Water and mold are the enemy of progress because water gives you mold and mold gives you bad, bad stuff. It gives you tenant problems, it gives your tenants health problems, it gives you headaches, and it's going to be a lot of money in repairing things and trying to find things. So always check out the roof, check the roof condition. Is it asphalt? Is it rubber? Is it torch down? Do a small amount of education for yourself. And I like different types of commercial roofs, especially— excuse me— since this is a commercial multifamily asset management class, uh, look at what kind of roofs you can have in your multifamily space. You can have a white rubber roof, or what's called an EPDM roof. This is typically a rubber layer with some foam underneath. You have things that are called torch-down roofs, where it's essentially— it's basically asphalt shingle in a in a roll and then the guys take a torch and they torch the tar to actually put the pieces together. You have composition shingle roofs. This is what's normally on most of your houses and most of your quadplexes and bungalows, composition shingle roof. This is just a piece of asphalt tile. They fail after about 20 to 30 years and you can easily see the wear and tear on them. On more flat roofs, which is when you get into more rubber roofs, They're a little bit harder to tell the age, but the damage does show up a lot easier to see. Next thing I always check on: water heater. What's the age and condition? The age does not necessarily mean the end of the world. What really matters is the general condition. I have worked on equipment that is— for Cody's dad, his furnace got a sign-off and a clear bill of health. It was a 1976 furnace that I looked at 33 years later in 2019 before his dad sold his property. Got a clean bill of health even though it was a 33-year-old unit, even though it was beyond the engineered lifespan of the unit. It's a good furnace. There were no cracks. It was well maintained. It was very clean, and he did a little bit of preventative maintenance to it. Same thing applies to water heaters. Water heaters can last you 50 or 60 years. At the end of the day, it's a piece of steel and a method of heating the water inside that steel. If you do things right and you take care of them and maintain them, you can make a piece of steel last you for 50 years, no problem. You make it last you 30 years very easily. What you can't do is just buy something and ignore it and expect it to not rust and break, because that doesn't exist in the world. Um, next thing I'm always checking, you can very easily pick up a, uh, a hot stick to check if there is asbestos-laden drywall, right? Um, and then we also look at popcorn ceilings. So anything that's built, especially most from Washington, uh, anything built pre-1980, you were definitely going to be checking for asbestos in the drywall.

Definitely.

Uh, our— we had a gypsum plant and a vermiculite plant that just so happened to be on the back side of the closed-down asbestos mine, and they didn't realize that they, uh, intersected somewhere. So at one point they were just, you know, taking asbestos-laden gypsum and make it into drywall. For years we had no idea. So it goes up until about the 1980s, mid-1980s construction in Washington. The cool thing is a lot of drywall, if you get into the back of it, you can often see what the date is on it. So like if you're doing a demo on a property that you bought and you rip out a piece of drywall and you see all the, you know, printed stuff on the back and you see a date and it's after like 1986, don't even worry about it. If it's before 1986, you might want to check that and check if you need to abate it because abatement can be expensive. And if you get caught not abating things properly that are hot, you get into large, large, large 7-figure fines, and it's bad for you. Air conditioners is our next point. With air conditioners, you can do a quick visual inspection, walk by it, you can see Generally see what kind of condition it's in, how badly it's rusting, how shiny it looks, how new it looks. The refrigerant coil that wraps around the outside that's the gray steel, does it look like it's covered like a furball? Does it look like it's covered in pollen? These are all just quick things that you can do as you're walking past as a layperson to identify, oh hey, that looks like that hasn't gotten maintenance in a while. I should negotiate that down. One of our big things for water and water intrusion and water damage to your house is actually gonna be your bath fans. Tenants do not like using bath fans if they make a lot of noise. I tell people, flippers, investors, all the time, if you're gonna replace a bath fan, go get a Panasonic Whisper Series. They're about $100, $100 to $110 from Home Depot. It's Panasonic Whisper Series. They have ones for remodel. They have ones for new install. They have super duper big ones. They have super duper small ones. The real thing about them is that it's a DC motor that's on the inside. So it's kind of like, you know, your, you know, toy race car. And it's different from your standard $30 bath fan. Most people are going, oh, I just want one that's cheap. Well, you know what, I can go to Home Depot right now and find a $29.99 bath fan. My Pro X Rewards, I'm going to get 3% off of that. I'm going to punch in my tax-exempt ID, my UPI number, I'm going the self-checkout and I'm going to pay like $27.50. I'm going to bill you out at $110, you know, just for that fan, right? That's most HVAC contractors. Don't, don't do that. Tell them that, hey, I want a Panasonic Whisper Series fan because it doesn't suck. That basic fan is what's called a shaded pole motor, which means it is a block of iron with a couple wraps of wire around it, and then the inside is just a little piece of magnetized iron. And what will happen is in that paper-thin gap between the rotor and what's called the stator, which is that block of iron in the back. Any dirt or dust buildup or, or too much weight on the fan and on, on one of the fan blades because there's a bunch of buildup of junk on there, and it's going to go out of whack, and then it's going to start grinding. And the very first thing that happens when your bath fan starts grinding, you stop using it. Well, you take a 15-minute shower and you don't turn on the bath fan. All of that steam has to go somewhere, right? It's gonna soak into the paint. It's gonna soak into the drywall. It's gonna soak into the wood fixtures. It's gonna leak out of that room and start soaking into just the environment, to the carpets, to the walls. You give it a year, you give it 2 years, you're gonna see mold growth exponential, just go huge all over that bathroom, all over the caulking, all over the seals. What's gonna happen is that tenant's gonna move out. You're gonna have to go in there. You're gonna have to re-caulk the window in the bathroom. You're gonna have to re-caulk the toilet to the floor. You're gonna have to rip out and re-caulk the entire shower, shower assembly, shower pan, all the trim. You might even have to redo, start redoing drywall if it goes for long enough. I've seen bathrooms that they've had to rip out most of it because the entire subfloor got colonized. And then it got soft and you would step and it was like, wait a minute. And when they peeled back the LVP, it was just solid. The board got molded so badly from a bad bath fan that just turned that— it just bubbled the paint, it ruined drywall, it ruined the vanity. It was the one time where I was like, man, for a $100 part, you just got yourself a $30,000 remodel in like 2 and a half years. Um, next thing, uh, yes, go ahead. Would you recommend changing existing, um, Change them as needed, as you have budget available. I always recommend updating your stuff, and we were gonna get into it and talk about that towards the end, towards optimization. That is a great thing to do as part of your optimization plan. The other thing that we can look at and talk about is depending on how your utilities are configured, if the tenants are paying, if you're paying, if there's a mix of the two, if there are common areas, there are a lot of ways that you can save money, reduce energy, and get money back from the government. And we will get there.

Are you taking questions or wait?

Um, I've got a section for questions at the end. If you have a quick question on like a term that I use that you don't understand, feel free to let me know, but like stash your questions for the end, um, because we're almost done with this section and keep on moving. Um, galvanized piping, that is the steel-looking piping. It was used all the way up until probably the '80s when we switched over to CPVC as PEX was just coming out. It was the cheap version instead of copper. It was used in a lot of tract homes. It was used for a lot of stuff. Galvanized piping is wonderful. It's great. It's a piece of steel with a zinc galvanized coating on it. At the same time, this will rust over time. It is a piece of crap, and after about 50 to 60 years, which was its design lifetime, it will get so corroded that you couldn't even get a pinky through a 1-inch diameter pipe. I know this personally. I lived in a house that was not well maintained. By a local real estate investor. Fuck them. They're an asshole. Boyd, I'm talking about you. The piping to my bathtub was so bad in the house that with the bathtub just turned on, I got less than half a gallon per minute. I'm talking straight, straight, you know, took the fitting off to the pipe and it's like, hey, how am I supposed to shower in this? You can barely wash your hands in that. That is what galvanized piping will do over time. You will need to rip it out and replace it. Ripping it out and replacing it is fairly easy. You can call a plumber and re-pipe. In one of our sections, we'll talk about things that you can do yourself. Plumbing is actually one of the easiest things to do yourself. That's also one of the easiest things to fuck up when you're doing yourself, but it's kind of hard to unless you're not paying attention to what you're doing, and we'll get there. Black mastic tile. This is a really hard thing to tell when you're walking in a house. It's very hard to tell. You can usually tell by the patterning on it. But black mastic tile was— black mastic is asbestos-laden, and it was the adhesive that was used for tiles until the mid-'60s, early '70s. The go-to adhesive for vinyl tiles was this black mastic, just slathering this stuff, just rubbing it into the floor. The proper abatement after you very carefully pull the tiles and abate the tiles is to encapsulate. That's what a lot of people do. Some people just rip out the whole subfloor and replace. Some people encapsulate. It's pretty easy to do, not the end of the world. Your last big thing to look at for pre-purchase is your window condition and your pane count. So if everybody can direct your attention over here to these lovely windows that are, There's a double pane. Or no, that's a commercial single pane. Aluminum. So this is just one pane of glass right here encased in aluminum, which is great, right? It's really pretty and that's pretty standard for commercial. This is actually a commercially sized window and because of the aluminum going around the side we can pretty much tell that that's going to be an aluminum window and it's a commercial window. That is the least efficient window you can buy. It's very expensive. If you are standing over here and you just stand here for and hold your hand here, you can feel the cold coming through the window and off the window. Most of your places that you have will have a standard window size where you can make a standard window size. It was like when I was talking to Dani on Wednesday night at dinner and she's like, "Oh, windows are the worst. We have so many of them." And it's like, yeah. She was complaining about, you know, $500 a window to replace, but we got 50 of them. And I'm like, yeah, but you know, the government will pay for that. Windows are actually not that bad, but you want at least a double-pane low-E. The reason for that is what we call U-factor, which is a heat transfer coefficient that us nerds use when we have to do things like your heat load calculations or saying, hey, you need a 1-ton air conditioner "Because you have all the single-pane glass in this room, you can't get by with an El Cheapo Bandito 9,000 BTU unit. You need the extra capacity in your system because you have 3 gigantic windows that are crappy. Now, you could spend an extra $500 to upgrade your HVAC system a quarter ton, or you could spend about $5,000 replacing your 3 windows. What's it gonna be, boss?" And he goes, "Oh yeah, that's right." Just being a little bit bigger. Yes. For everyone in the room who just heard the government will pay for your windows, can we elaborate that part? So the government will not necessarily pay for your windows directly or outright. There are a series of government programs for weatherization as well as efficiency. And we will cover that and talk about that. Rebates for commercial multifamily can be as high as 60% or 70% of the project totals. That you can get back from PSE or in government grants. City of Seattle has a weatherization project where they pay like 90% of the cost of the updates are paid by a grant from the state and the county. So you can get massive, massive remodel stuff done for what ends up being very cheap out of pocket. But there's a lot of steps to get there, and we'll talk a little bit more about that. Wait, how am I doing on time? Because I just— I feel like I just burned up a good half hour almost. Well, you did. Yeah, you're still doing well. All right, um, we're gonna skip age concerns because we've already talked about that. The only thing I'll mention from Section 3 is what a heat exchanger is and why I'm mentioning it. I'm a furnace guy. Inside any standard furnace, the thing that actually gets heated up by the natural gas is called your heat exchanger. This heat exchanger is oftentimes exposed to temperatures in excess of 1400 degrees. It heats up to about 200 to 400 degrees depending on your model and the design. This gets hot, and it's a piece of steel that is exposed to heat often. If your stuff is not maintained and if it's not checked, this thing, this piece of metal, can crack. Because of the way they currently design equipment, it is just less work and less headache to just replace your entire furnace instead of replacing your heat exchanger. At the same time, because they're hard to access, because they're hard to get to, there are a lot of companies out there who will be like, "Oh hey, yeah, your heater's only 10 years old, but your heat exchanger's bad, so we need a new one." And it's like, wait a minute, can you show me a picture of the crack? A lot of people don't stop to ask. A lot of people just go, "Oh no." because the tech goes from a technician to a sales mode and they're like, oh hey, 'cause they get commission. Oh hey, you know, this could kill you and your family and you really need a new furnace right now. And they scare poor grandma and little old lady into spending $15,000 for a new system that she really didn't need just because the tech saw, you know, a little hairline something or other, didn't read a joint right in there and thought that a weld had failed. And so that is one thing to be very cautious of when you hear the furnace, you know, your heating exchanger is bad. Always ask for a picture. If they are a legitimate contractor and they are not trying to scam you, they'll be like, oh, okay, no problem, here's a picture of it. Or, hey, I can't really show you a picture because it's on my handheld camera, but why don't you come with me and I'll show you where the crack's at. And then you can be like, you know, that crack doesn't look very big, or That doesn't really look like a crack. Can we check a little more? Don't let them snow you on a whole new furnace replacement just because you hear about a heat exchanger crack. You want to trust but verify on stuff like that. The next section, which is my favorite section on the planet, is maintenance. I love maintenance. You know why I love maintenance? Because it means that I charge for maintenance by the month. You just get a recurring bill every month. If you listen to my whole spiel, it's between $20 and $30 a month per door, and I come by once a year to your house and I check the water heater and we take the sacrificial anode out and we check the whole thing and we drain it. We go to your furnace and we clean it all out and thin it all up, and then we go to your bath fans and we clean those up and lubricate those. Then we go to your dryer vent, we suck out the last couple feet of those. Then we check your COs and smokes. We slide over to your kitchen Snap photos, grab model and serial number under the equipment, check the general condition, etc., etc. And I like it because I get paid monthly. And yeah, it's only $20, $30 a month at the door. At the same time, that lets me budget for the year and keep my guys paid all year round because I have maintenance income coming in all year round. I love maintenance because it's easy and it's great and it saves people a hell of a lot of money. The reason it saves you money Things like your water heater. I keep blowing this dude's mind. I love Christian. I keep blowing his mind. Nobody knew until I started talking here at Robin Hood about what the hell a sacrificial anode is in your water heater. Most people don't realize that in the water heater, because it's made of steel and you have a greater than 20-degree temperature delta with a fluid in there, you can create galvanic corrosion if you have more than two dissimilar metals. Because say you have copper in your system, and then you have the steel of the heat exchanger on the water heater, and then you have all of the metals that are inside brazing material for all the copper-brazed joints, and then you have brass in some of your fixtures, and then you have iron in some of your other fixtures, and then your kitchen sink has this other type of stainless steel that's not the same type of stainless steel as the heat exchanger, of your water heater, and you've now created a path for galvanic corrosion. So to combat that and to prevent your water heater from being electroplated into nothingness, which is what happens, um, it's electrolysis or electroplating, galvanic corrosion, it's all pretty much the same name for a form of oxidization and removal of molecules from one surface to deposit them on another. The sacrificial anode is usually made out of magnesium and potassium and a couple other things, alloys that are very, very weak and go, "Oh no!" They're going to die first. The whole point is that they are sacrificial. It's built into the name. It's a sacrificial anode. It takes like a 1-inch wrench on the back of the unit. You've got to hand crank it because the way they're designed you can't use an impact wrench on them. But you take them out and they're about, I don't know, 4.5, 5 feet long. It's just a rod. Made out of some metals that's designed to go away. The actual— a lot of the sediment that comes in your water heater when you drain it every year, because all of you drain your water heaters every year, right? Sure, yeah, yeah, on all of your rental units, right? Yes, of course you do, because you get maintenance done to your units. So when you drain that sediment out, which is essentially a whole bunch of oxidized rust particles that if you don't drain out will increase the amount of rust in your system and make stuff rust faster. That's what happens if you don't drain it out. Um, all that stuff that you have draining out, all that sediment and crap, most of the time that's not calciums and buildup of, of chemicals from the water treatment plant. No, that's your sacrificial anode dying off. The more sediment you have, the more your sacrificial anode is dying. That tells me the more dissimilar metals you have in your system. Because that's what would make that thing die even faster. But the real thing is, it's about a $60-$70 part. Some of them are $80 depending on which fancy one you get. You can buy them at Home Depot. You have to drain your water heater and use a socket wrench to access the thing. It is a very, very easy thing to check and replace. The current, current paradigm says that you are replacing a water heater after 7 years. Right? You call a plumber, you call somebody, you talk to a home inspector. Oh, this thing's 7 years old. Look, this is about time to replace it. The fuck out of here. That is a 30 to 50 year appliance. You need to replace a sacrificial anode every 7 to 10 years. You don't replace a water heater every 7 years. Water heaters right now are $2,000. When I started back in 2016, I was still charging $1,500, $1,600 for them. So the price has gone up about 25% across the pandemic. A traditional plumber is still charging about $2,400, $2,500, and they used to be the same price as me. In 7 to 10 years, I can see a water heater being about $3,000, most likely, to, to do an install of a water heater. Why spend $3,000? Multiple months rent, multiple units worth of rent on something that you can replace a part on, a $100 part, and make that thing last for another decade, why would you spend the money to replace it? This is what maintenance does for you. On a furnace, the story about Cody Davis's dad and how his furnace, you know, was awesome at 33 years, when if you talk to the NAHB, National Association of Home Builders, they will tell you that furnaces only last 15 years on average. That's because they're talking about shittily installed, badly sized furnaces built at new construction and every fly-by-night hack mixed with everybody who actually does their math and engineering before they replace a furnace and goes, "Oh yeah, this is the right furnace for the house," and puts it in. My buddy, Eros Toker, at his mother's house in Bellevue, we're doing a furnace swap next week because the last guy 15 years ago put a gigantic unit in there that was double the size, double the capacity. But it's modulating, he told them. Don't worry about it. The bottom end of modulation was already overkill. I can't modulate from zero. The modulating equipment doesn't modulate from zero. It modulates from about 50%. And when you're 50% oversized, you're going to get an uncomfortable house. I had to listen to a very angry Jewish woman yell at me because the last HVAC guy had oversized her equipment, and she really didn't want to pay me money to fix it and do it the right way. And she was very disappointed because the last time somebody came and fixed something, it didn't get fixed. And it's been 15 years and she's been miserable the whole time. That's what happens when you don't do your job as an HVAC guy. This is what happens when you don't do preventative maintenance, because if you have another company coming in to do PM work, you can catch that. You can say, hey, Hey, your installer, they put in a unit that's way too big. Check the sizing. Why don't you give them a call? Or, hey, let's get them on the phone and see if you can get a credit back because they didn't do the install right. Or bring them out to come back and fix it. When you do preventative maintenance, you do things like blow out the entire interior of the unit. You get a unit like a 1976 furnace that is clean. It's cleaner than some of the new units I've gotten. Right, so some of the new furnaces we get, they've been sitting on the shelf in the warehouse for a year and a half, and you get it, there's just a thick layer of dust on the inside. And if you maintain a furnace, you get rid of all that dust, you get rid of all that buildup of junk. A lot of people ask, on an 80% gas furnace, there's a lot of like white crumbly stuff that ends up in and around their furnace. Like, what is this, Johnny? And I go, oh, that's the galvanized coming off the steel piping because somebody used the wrong kind of piping for your exhaust, or your unit's overfired and all that is aldehydes and formations of stripping chemicals off of your heat exchanger on the inside and damaging your system. If we see that white crumbly stuff, we know that something is wrong. We know that something's bad. We know that we need to fix it. That means that we need to address something on the system because we really shouldn't get that with fully complete combustion. This is stuff that is checked at PM. This is stuff that can go, oh hey, um, your gas on your furnace is burning too hot. We're generating all this extra aldehyde formation that's wrecking your heat exchanger, it's wrecking your furnace, it's going to cause your lifetime to go from 30 years to 20 years. You know what, I can unscrew a piece and I can hook a meter up and I can adjust that gas pressure down a quarter. And there goes the problem. It's gone. Drop your gas pressure, you're putting out just an infinitely smaller, just a little bit less heat, but you're now getting full and complete combustion, and we now no longer have a problem with your furnace. Your furnace will now last the full 30 to 40 years. When we designed these things from an engineering standpoint, we designed them for 30, sorry, 50 to 100,000 hours of operation is the minimum design criteria. 50,000 hours of operation. Well, Western Washington, we have 2,000 hours approximately per year in heating mode. We have about 400 to 600— yeah, last year was pretty mild, so I think we only had 480 runtime hours last year, uh, in cooling mode. That's only about 2,500 hours of runtime on your system per year. 50,000 hours to 100,000 hours. Your equipment should be lasting you 25 to 40 years at a bare minimum. So when somebody tells you, oh, it's 15 years old, it's time to replace, ask them why. Now, where this applies to commercial multifamily, a lot of commercial multifamily, you guys have electric heat. Why? Because people in Western Washington are crazy and they think you don't need air conditioning. I don't know why. It's going into the code. You now have to have air conditioning. You're going to start seeing stuff that you're going to complain about because heat pumps are being forced on people. You're going to, when you start pulling remodel permits, you're going to have to get energy code compliant even in the multifamily space. You're going to get told, sorry bud, you have to pull out your cadet heater and put in a mini split. That's the fastest method to compliance and it's going to cost you $5,000 and I'm sorry, but it's the way of the world. Mini splits give you air conditioning and they make your life easier. Um, I don't know why we only have Cadets here, but Cadets, Cadets are designed to be 20-year, 30-year in-wall heaters. When is the last time somebody here opened a Cadet, took the screws off the front cover, pulled the thing out, and actually cleaned the heating element? When's the last time you had somebody do that? I have, um, A couple of properties I go to, I go, oh yeah, you know, we're supposed to have that done every year. The cleaners are supposed to do that. I went, in what fucking world does your cleaner carry a screwdriver, open up your heating element, take it out, and clean all the dust bunnies out to make sure that it doesn't short? I don't know any cleaners who do that personally. I've never heard of that, but they swore up, down, and center that their cleaner was cleaning out their electric heaters. Okay, that's great. Clean out your electric heaters. That's how you make this stuff last. That's how you, you know, skate by on a remodel where you don't have to put one of those in. Our next section: how to talk to your contractors. We're contractors. We get hit up by people all the time, and everyone wants a deal. Like, my theory on sales is that everybody wants a deal. So you just gotta find a way to make the deal work. Sometimes you start way high because they're gonna haggle you low. Sometimes you don't. I hate haggling personally. I hate negotiating my price. I spend hours and hours and hours to create a price list that goes public every quarter, and it's, if you were calling me for X project, this is how much it will cost you, assuming these standard factors. This is how much it will cost. And that's that. And I don't want people who come to me and go, well, can you do that for 10% cheaper? If I pay you cash, can you knock some off? No, that's the cost of doing business. That's the minimum cost it takes for me to pay my guys, to pay the benefits, to pay for the shop, to pay for everything, and to finally pay me a small portion. So finding yourself, on that note, finding yourself a relationship-based contractor is key. A lot of these big companies, if you go to Google and you type in HVAC Tacoma, you're gonna get guys like Pac Heating, Ranger Heating, et cetera, et cetera. These are big box companies, they pay for a lot of advertising, they're very corporatized in how they do things. They're not a relationship-based contractor. If you go to them and you say, hey man, I wanna cut a deal with you, I've got, this is what I have going on, I have this many units, I'm remodeling it over time, I'm gonna need you in January, in May, and again in July, they're gonna be like, all right, well, call us then. Call us when you're ready. Have a nice day. They don't wanna talk to you. You call a small guy like me and you say, hey, Johnny, I have a project. I'm starting it right now. It'll be ready in May for you to do the first part. It'll be ready again in November for you to do the second part. I'm gonna say, great, let's put it on the schedule. Let's put it on the calendar right now. Let's work on getting you an estimate. Let's make sure that we're getting you what you need. Let's get your quote drawn up, let's get your materials list together, let's work together to make sure that you have everything prepared and ready and that you already have a spot scheduled months ahead of time. Because I'm a relationship-based contractor, I don't advertise. I don't wanna make phone calls, I don't wanna send people door to door, I don't wanna put up Google ads that blow, you see on your phone all the time. I don't wanna be that face on the grocery cart smiling at you like all those RE/MAX people. Not that I'm calling them out or anything, but I'm really tired of seeing them at the grocery store on the carts. It's getting kind of irritating. Um, and, um, I don't want to be that guy. Instead, I'd rather work with local investors. I'd rather work with people via word of mouth. That's how I get business. I get business that way. I brought on new business partners. They have a different way of doing things. They're starting to advertise a little bit. I shudder, but I realize that times are changing and we need to adapt to the market. And so we are. But you want to find yourself that relationship-based contractor who's willing to work with you on a project and not just be like, I'm a big box company, here's retail rate and top dollar. Most of the times, the cost of doing business for a tradesman is about two-thirds of the retail rate. Sometimes it can be half, but about two-thirds is usually of whatever the big box store is charging. Is usually about the minimum you're going to pay. So if you call Pacific Heating and they give you a $20,000 bid for a heat pump, you know that you can probably get by with paying about $14,000. Right, that's the, the two-thirds is about the magic number between retail pricing and your smaller relationship-based contractors. Trade work, general pricing on trade work, 2 to 3 times equipment cost is usually, or sorry, Yeah, 2 to 3 times total material and equipment cost is usually gonna end up being your final job cost. So if I look at you and I say, hey, look, man, my equipment costs $3,000, you know that it's gonna cost you $10,000 or less. You also know that it's gonna cost you at a bare minimum probably $5,000 or $6,000. Now, that is a key thing to note once you start looking at remodels and projects and once you've done this a lot, As you're walking through Home Depot and you go, oh hey man, I see that copper wire is no longer $100 for 100 feet of 14/2, which is your regular outlet wire, it's now $140. Well, you know what, my cost per outlet just went up. So you can start to see that, you can start to learn that. I definitely encourage people to, if you find a nice relationship-based contractor that you like working with and that you can get along with as a human, you can always hit them up and say, hey, can I come and learn from you on a Saturday? Like, if you're here working on my project, can I come? Can I, you know, I'm going to keep paying you, can I pay you a little extra so you can teach me a little bit about this trade? And most of us will say, hell yeah, I'd love to teach you. It means I have to do less work later. If I can do less— I'm lazy. If I can do less work later and just teach somebody how to do it, I mean Sign me up. I'd rather not have to do a whole bunch of work in 10 years. I'd rather have a whole bunch of real estate investors that all know all this shit and are just telling me what they want me to install and I don't have to go and figure everything out. That'd be rad to me. Um, when it comes to negotiating with us, when Jesse Lee calls me and asks me for a furnace— sorry, I love you, Jesse— when Jesse Lee calls me and asks me for a furnace and I say, hey man, it's $4,750, and he goes, Well, Peter the Heater can do it for $2,400. And I say, all right, great, call Peter the Heater then. That's my response. When you tell me that, well, so-and-so can do it cheaper, and you don't rattle off the name like another major contractor like Pac Heating, Ranger Heating, Mercurio's, if you're not going to quote me, quote my price to their price, cool, call them, let them do it, and then you'll be hiring me in a you know, a couple months when that shit breaks and I have to come and redo the Ritzville. I've had it happen hundreds of times in this region where, oh yeah, your price is too much, and then I come back to that project that is now a rental, and I come back to that project and it's like, oh yeah, it's broken. Hey, by the way, your guy didn't install it right, call him back. Um, I have one of my major clients, property client near and dear to my heart, who's based out of Tacoma. You can probably put two and two together. They have a guy who always gets the install work. I love them dearly. I get called for all the service work, but he refuses to do service. And I say, hey, this is broken. And they bring him in and he does the install and gets all the install profit. And then 3 to 6 months later, like clockwork, I show up and I'm like, oh hey, I gave you guys an estimate for this and I see you had the other guy replace it and it's broken. And I got to the point where I said, don't call me for those. You gotta call him back. And they're phasing him out because I just got sick of it, because I refused to service a client who's going to, you know, beat me down in price and then not give me the chance to work with them. Not get the— on install, there's a larger profit and it's a greater return on investment for me as a business owner. It's a greater return on an investment The maintenance and service will last me a long time, but as far as like dollars per hour, an install is always going to be a higher profit. And we need some of those. We don't need all of them, we need some of them. And you can't always cut your contractor's throat. You'll hear contractors talk about that a lot. Ah, stop cutting my throat, or you're kicking my balls, or you're always beating me down. You can't always Hey man, I need you to go lower, I need you to go lower. A lot of times we hear that all the time, but we're already as low as we can go. So what you're really asking for is you want it to come out of our pocket. You want me to pay for your project. That's how I look at it. When you're like, oh man, you gotta come, you gotta come down more, you gotta come down more. Well, what do you want me to— here, let me pay you for the privilege of, uh, installing equipment on your project. I see that smile back there. It's like, that'd be great. Happen. We're not going to do that. We're not paying for your project. You're paying us for our expertise and our skill and our installation capabilities. Um, lastly, project management, project managers, and preventative maintenance. Just 3 things that a lot of people need unless you're doing 100% self-performed. Let's do 100% self-performed property management. These are things you need: project managers, people to manage the items, property managers, and preventative maintenance. It's the last part of PM that everybody misses and everybody misses out on hard. All of the property management companies that I work with, 2 of them have maintenance guys. 2 of them. Because the maintenance division is very expensive and it's hard to find the right guy and it's hard to find a guy who's not a knucklehead and it's hard to find a guy who will get in and do the work for the $23 to $28 an hour that he'll get paid to do the maintenance work for this property manager. And then all those cost overruns because there's trucks and there's tools. And I find that it's— I get these complaints from property managers who don't have any trade skills, don't have any construction skills, have never done a flip. They were only ever on the other side of the real estate industry. They were a broker or an agent, and then they got into opening up a property management company because they saw they could make a quick buck and they have no idea what it takes to do maintenance on a property. And they open up a property management company and you get a call from the project managers, oh hey, this is broken. Oh, why does it cost so much money? Vet your PMs of all types and get yourself a PM contract. It's the number one way to make good friends with the contractor is to be like, hey, uh, let me get set up with your preventative maintenance contract across my whole portfolio. I'll pay the $20 a month and, you know, I'll turn around and say, hey, you know what, that means you get 10% off on all your service. That means you get like 5% off on all your install work. So that is how you get the deal because you're paying me in another way. You're allowing me to make sure that your equipment is gonna last you twice as long, 3 times as long. But if you take, and this will be my last example before questions, if you take a house and you say, I'm buying this house or I'm buying this multifamily, Let's take a 4-unit complex. I'm gonna buy this quadplex and I'm gonna hold it for the next 30 years. And you have 4 furnaces and you have 4 water heaters. Well, the normal paradigm would be that in that 30 years of ownership, you're gonna replace those furnaces, you're gonna replace 4 furnaces at a minimum. And if you're a nice guy at sale, you'll have to replace them again, 'cause they're only 15 years old, right? You gotta replace them. So you'll end up replacing 8 furnaces, in 30 years at a cost of $5,000 of furnace. That's $40,000. In that same 30 years, you're replacing your water heaters about 4 times apiece. You're putting in $32,000 of water heater and $40,000 of furnace over a 30-year time period. At the same time, those 4 doors cost you $80 per month, 12 months of the year. So what is that, uh, $1,000 a year? So you can spend $30,000 a year to have equipment that you never had to replace, or you can not spend the money and have spent $72,000. And that's just your water heater and furnace. We're not even talking about your bath fans. We're not even talking about how much your dryer vent. I mean, how many people here have cleaned out the dryer vents of their rentals or had them cleaned out in the last 3 months? Good. 'Cause they just bought it. Winter season is when a lot of dryer fires happen. Because a lot of people are lazy. They do all their cleaning in the spring, and you know, that gets done in the spring, and then the dryer gets backed up in the winter, or it's been a few years and it's cold out and everybody's running their dryer and fire happens because the dryers get backed up and blocked off and there's buildup of lint and dust. Good on you. Good on you guys for doing that. So once you factor in the cost though of doing the maintenance versus doing the repairs and replacements on all this equipment, It's a no-brainer over time what's gonna save you money. Do you wanna pay a small fee every month to make sure that your stuff is gonna last for a lot longer? Or you just wanna be one of those landlords who just says, ah, fuck it, I'll fix it when it breaks. I get that one all the time. I'll fix it when it breaks. And that's it. So there's your food for thought. Do we have questions, comments, concerns?

I have two, but one longer. Uh, I'll start easy with the EPM, the, the rubber roofs on flat roofs. EPDM, yep. Whatever that is. How often do you recoat or maintain that?

Recoat? Almost never. This is the cool thing about the EPDM, um, you don't really have to recoat it. It's not a coated roof. You do have to hose it down and brush it off every year. Every year. Um, that is one of those, if you have an EPDM rubber roof on a commercial multifamily building, Talk to your roofing contractor. They will give you a maintenance package. It will probably be, I don't know, $200 or $300, $500 a year maybe to come out and do a maintenance to your EPDM rubber roof. I know a guy who was a contractor out here who he'd done so many installs that he just did maintenance at this point of the white rubber roofs that he installed over 25 years. All he did was maintenance. He's like, oh yeah, you need a repair or replacement, I send you to my buddy at such and such roofing company down the road. I don't do them anymore. He goes, I'm just— it's down to me and a guy from my, you know, my heyday of 30 guys. It's down to me and a guy, and I just do the maintenance. And it's nice and cheap and easy because all you got to do is make sure that it's cleaned off. You got to take care of it. They inspect the joints, they check all the seals, they make sure it breaks. The thing about an EPDM roof is there is no fixing it as a layperson. There is no fixing it. You must call a roofer, and 9 times out of 10, you need to call the roofer who installed it back to maintain the warranty. So a lot of roofing is done by warranties, and you have to call back the installing contractor. And if you have a nice shiny roof and you don't know who the installing contractor is, you call that old owner up, or you call the agent of your deal up, and you go find out who that contractor is because you want that warranty. Because those warranties are 30, 50, and 100 years.

I thought that was the signal. Sorry, good explosion. The other one is the contractors. So I have two contractors and I've been worried about this. I've got one contractor that's really good, comes in on budget, on time, and he does the job. The finishing touches, man, he sucks. So I have another one that comes in after him and does all the detail work, and I know that they know each— they know about it, but I'm just worried about pissing either one of them off. So I know you probably can't answer that, but sometimes I have a fear. Oh, I took them out to steak dinner.

Oh, take them both to lunch and be like, hey, I like you, you're great, you do a great rough job, but you do a terrible trim job. Yeah. And you over here, you do a fantastic, you know, finish job, and but you're too expensive for me to use for the whole project. So why don't you guys figure something out in a way that you can make it seamless? Or you just keep doing what you're doing because you're already managing your contractors in the right way, right? You said you took them out to a steak dinner. Yeah, you took out their whole family. I didn't know he had 5 kids though, but I, you know, it's expensive but worth it, but it worked. And I'm sure that contractor goes, man, I really like this client. He takes good care of me. And that's the thing is once you've worked with a contractor, you know where their weaknesses are. So you don't use them for where they're weak. Right.

But I just don't want to piss them off.

If you give it, if you tell me to my face, hey Johnny, you're great for rough-in, but you suck at trim-out, I'm gonna be like, yeah, I know. I know I suck at trim-out. I know for a fact. That I am one of the worst trim-out guys because I, I don't like doing fine detail work. I'm really good with big picture stuff, but you get me doing trim or you get me doing— like, I got stories for days about me trying to do crown molding. I'm not a finish guy, and in order for me to do finish work, it takes me a really long time to make it nice. This is why I do HVAC. Where it's all roughed. Our job is 95% done at rough-in, and I don't even set my vent covers on construction. I hand them to your drywaller or your painter and say, good luck, have fun, you can put these up, because I don't want to put up your drywall covers, your HVAC, because they're going to look off. So, um, this will be the last question for this series that will snag Johnny in the in-betweens. Yeah. Is there an education or training that you'd recommend as far as like learning more about construction and that whole part of the business? Yes, I am writing it right now. I started on Wednesday after my conversation with Christian. I'm actually in the middle of writing a course on— I'm starting off with the HVAC for RE, but my goal is to take you through, you know, basic— some of the basic trade work, trade skills, things like electrical, things like plumbing, things like basic construction. To get you guys the knowledge you need, to be able to give you guys the education that you guys need so that you can be more informed. 'Cause the better job that you guys do in giving me information, the better job that I can do for you guys. You know, when my big Tacoma client, when they called and said, "Hey man, we need you to replace this furnace," and I show up to the house, sight unseen, with the furnace in hand, 'cause we have a negotiated rate, and I go, "Dude, this isn't a furnace. This is a fucking electric heat air handler." There's two different kinds of types of systems that one does not beget the other. I have to go back to the supply house and return this and get a new thing. So education is always great, and there will be some in the next 3 months or so. Are you sending it out through Christian? Probably. Here, probably. We gotta, we gotta, we gotta figure out how to negotiate out that, uh, that sales contract, but, or, or how to tie it to multifamily strategy. But yeah, where I'm working on a, a basic trade and construction introduction for real estate professionals, specifically targeted at, you know, the people who are here, people who already want to learn.