How to Turn Your Multifamily Rentals into a Goldmine!

I believe that everyone within reason should self-manage their first few rentals all the way up to 30 rentals. It's not that hard to self-manage yourself. We're talking about property management today. Really excited about this topic because this is something that Cody and I had to learn the hard way. We have a lot of what not to do and a lot, a lot of what to do. And we learned this by actually going through just about all the hardships that you can in property management. So without further ado, welcome to Multifamily Strategy. I'm Christian Osgood. I'm not joined by Cody right now, so it's just me today. Really excited to dive into this. Property management 101. I'm going to start with the things that you don't want to do. What you don't want to do, in my opinion, is immediately start with a property manager. I believe that everyone within reason should self-manage their first few rentals. All the way up to 30 rentals, it's not that hard to self-manage yourself. When I got started in real estate, I had a condo that I did a house hack in. And I managed the rental myself, and it was actually kind of hard, and I didn't enjoy it. And it's something that I learned, was I know how to place a tenant, I know how to manage the problems, and when things come up— they actually got a brick thrown through their window because they pissed off the wrong person— I had to deal with that and clean up the glass and figure out, okay, what actually happened. I learned a lot of the things that I don't like about property management by actually being in the field on one single unit. However, when I self-managed a duplex, I had no problems. Ever. Nothing happened except for one time the heater stopped working. It turns out it was something with the filter that we forgot to check. Very easy, cheap fix. Called someone, they came out, they told me what was wrong, it was fixed with, I think, $150. Self-managing, you learn a lot of: 1, what things cost; 2, what your manager is actually doing; 3, no one cares about your property as much as you do. You actually do save a little bit of money up front. It's the least important thing, but self-manage your first few rentals, you're going to be a way better hirer of the right property manager. So what is the right property manager? The first thing that I am looking for is a property manager who owns real estate themselves, or at least works for someone directly, like the ownership group owns real estate. No one manages like they own. It's completely, completely different. A service provider providing property management lives and dies by their fees. They have to make profit. If their only concern on the property is, "I do my job, I clock out, I go home," they're not going to care about the asset like you do. Because at the end of the day, you're providing housing for other people. Your money's in the deal. Totally different thing. What happens to us when we have a problem is I go, "Oh, these are my tenants. They're having a real problem." Say a heater went out. I need to fix this right now. No matter what, by the end of the day, that family will have heat. There's no exceptions. I've had property managers where we've had a major thing go wrong and they call and they go, you know what, there's just, there's no way we can get someone out there today. We're completely slammed. My contractor's busy. When we control those things as a property management company, everything tends to go correctly. So the first rule, work with people who know what it's like to think like an owner, not a service provider. The next thing that you really want to do is you want to understand what their vision is for the property. You have to convey where you're trying to get it. And you just want to ask them, how are you going to get it here? You would be amazed how many people don't ask this question. They never map out the— today we're at A, I want to get to B. That's where they leave it. They never actually map out with this team, how are we going to bring it here? If you interview 3 different teams and you lay out your— okay, today rents are a little low, we have 1 vacancy. I would like to have a fully occupied building, fully rented, and once that's done, I'm actually going to pull a little bit of money out of this and I'm going to reinvest it into the property, and we're going to make this a much nicer place. We're going to replace countertops, appliances, paint it, but I need to get from A to B first. That would be my objective. I talk to my property manager, what would I do to get from A to B? What do we expect for timelines? What do we expect for cost? If you talk to 3 different groups, you're probably gonna get 3 different answers, and that's totally fine. But that is gonna be the number 1 thing that I look for for who do I want to work with. The one who has a plan that makes the most sense for me of how I'm going to get to where I want to be on my property. Does this sound really simple and intuitive? Absolutely. Is it done by most people? In my experience, Absolutely not. Cody and I on themultifamilystrategy.com, we run a little mentorship group, and almost every single time, one of the problems that comes up is they did not spend enough time interviewing their property manager. They went with the first person who was recommended, and recommendations, recommendations are great. However, they're not everything. You need to make sure that you are working for the right person for you. The third thing that you have to do with a property manager— first, I'm I'm working with someone who knows how to think like an owner. Second, I have someone whose plan for the property matches where I want to go. Third, they have to be phenomenal at managing capital and money. I'm gonna tell you a horror story about this in just a minute. When we first started, though, investing in Moselake, we had certain deals we put under contract, seller finance, stellar properties, stellar locations. And we went We actually went in, it was gonna be partially bank and partially seller financed. On this deal, we got to the bookkeeping, they said, oh yeah, here's all our records, it's gonna be great, we'll have no problem getting numbers to you. Turns out management had almost no bookkeeping whatsoever. No leases were current, the property was considered unbankable. All the banks turned it down because there was absolutely no records that they kept. You need immaculate bookkeeping. You actually want to go through and say, what software are you using? Can I see an example of what some reports look like? You want to see how the reporting is. You need to be able to see the numbers to really know how your property manager is doing. I have seen people, and I won't name names, but I'm thinking of a few where they've gone years without ever looking at their property and without ever reviewing the numbers. We then, as a property management company, Multifamily Property Management LLC— we get super creative with our names— when we took over management We found tons of maintenance problems, tons of bookkeeping problems, invoices that weren't paid, contractors who won't work with them, all because they never did the basic thing of checking how is accounting being done, what systems are you using. So if you have a property manager, and they're hard to find, who can think like an owner, has a game plan that matches your objectives, and has great software and bookkeeping, that is probably the group you want to work with. Almost guarantee you will not find them on your first try, unless you go with us. But generally speaking, if you're you're not in Washington State and we're not managing for you, you're probably going to run into a few bad property managers. I promised a horror story. Here's one. One of the first times we ever used a property manager, and this is why we started our own company. The first time we used a property manager, they ended up several months in leaving the state. They actually took the security deposits from a lot of the tenants and all of our rents. Emptied out the accounts, spent it on their own personal items, left the state. That was a lawsuit. The lawsuit was won. It was really expensive. We basically broke even on getting all the money back. From that point, for me, I said, I'm never trusting anyone with my portfolio again. I'm going to self-manage everything. Problem is, Cody and I have 110 units, resort, and all of them are in different LLCs. It's a mess. So how do you do this? For us, it was start a property management company. We came in, we hired our team who does everything our way. We oversee all the books ourselves. We make a lot of those owner calls ourselves, or we'll talk to you about your property, we'll set up the plan. Well, we got to a point in our portfolio where we got all of our partners and us under management. We went, you know what, this is a service that we can really provide for other people. There's an advantage you have when you're an owner with a property management company, and this is exactly why You want to work with a property management company who owns real estate. I don't care about the fees. If that company breaks even, I'm good because my real estate, my friend's real estate, my client's real estate is all being managed really well. That's worth it to me. The advantage is we can actually influence market rent as you expand, because when I raise rent on your property that's next door to my property, what happens? I have a rent comp to raise my rents too, and vice versa. When I do well your rents are worth more. I can raise those rents. If you can control market rent, or at least influence market rent, you can provide great housing to great people, and you can also make a lot more money. Being an ownership company where it's, I invest in multifamily and I manage it, you can find those groups like ours. You can just make a lot more money, and they're going to think about your property completely differently. That's property management 101. There's really only those 3 steps, but I'll go over them one more time. You first have to find somebody who thinks like an owner. Then you find the person who has the same plan that you do, or at least a plan that you love. Could be better than yours. And 3, find someone who has excellent software and bookkeeping. Do those 3 things, you're gonna do just fine. Till next time, like, subscribe, and we will see you all next week.