0 to 4,000 Apts Owned (No Outside Capital): Logan Rankin

I think the worst thing you can do is give somebody more than 3 KPIs. If you do that, you start turning your team into generalists. And I think in today's world, they have to be specialists. I mean, we're going on almost 2 years. We haven't been above 1% in delinquency, and I'm buying a lot of mismanaged properties. We don't have property managers that do 25 different things. We have a legal team that just does delinquency and evictions and collections. 3 things. You know, when you walk into my headquarters office, you're going to be greeted by an engagement specialist and they only have 3 things, right? They're measured on the quality of conversations they're having with people and they're measured on the speed. And then each one of them has like an ancillary thing. If you can think about like 3 major KPIs and ask your team, like, these are the only things that we're going to write your review with, instead of getting average results or even above average, you get elite.

Welcome back to Peter Lohmann's podcast. We're here today with Logan Rankin, who my guess is you've never heard of. That's because I found him on Twitter and demanded to chat with him. Actually, that's not true. I think you reached out to me and we've had a couple of great conversations. Logan, you've got a simply amazing story, and I want to, I want to turn this over to you now and give you 90 seconds to kind of bring us up to speed. On who you are and what you've been up to. And then we're going to dive into some of these juicy details. And I'm just like so excited to share some of this with my audience today because your operation is truly one of the tightest operational companies I've ever seen. And I've been in and around a lot of property management companies and it's, it's rare these days that I find someone that makes me kind of sit up and go, whoa, there's something interesting going on here that I haven't seen before, but you're one of them. So with that exciting sort of introduction, let me give it over to you, Logan. What's going on with you?

Yeah, I appreciate that. I was just joking with you too that I've, I used to do a few more podcasts a couple years ago, but I haven't done as many and I think it's because we don't get a chance. I'm so busy digging into different things that we're trying to do in my businesses now. But I love that you have your own business and you're doing a really good job from a property management standpoint. So, I'm excited to dig into things that I don't always get to talk about and hopefully add some value to the people that listen to this podcast. My, uh, quick 90 seconds, um, uh, short version, and then you can dig into whatever you want. Graduated from college, played 4 years of college basketball, double majored management marketing. Then I spent a decade working for a Fortune 50 company, um, Target Corporation actually. Started as an intern, um, and then over the course of the 10 years promoted 6 different times and really learned a lot about leadership. I learned a lot about operations and I learned a lot about P&Ls and, you know, getting the opportunity at some higher-level leadership jobs to, you know, look, I got to oversee 19,000 people at one point. You learn something about firing people, hiring people, developing, training, and there's just so many learnings at a young age that I was able to help get. And also just know some things that I'm naturally good at and even maybe more important things that I'm not as good at. And then at that, now I have about a decade, 11 years, started in 2013 in real estate. So if my first decade in Fortune 50 was learning, I think my second decade in business is more about applying. So started in 2013, bought a single family home, self-managed it, saved up all of our money, Next year my wife and I bought a duplex, so 2 units, self-managed it. Next year bought 2 duplexes, so 7 units in 3 years, you know, got to learn a lot. Then I went from 7 to 252 units, had a third-party management company, and then 252 units to today. I own 4,086 units. I don't have partners, never done a syndication, still retain all the equity. So I think that's what makes this a little unique. Worked really, really hard at that and I built my property management company, which has been an extreme opportunity for me to be able to catapult my wealth as well too. So the construction company started with 4 employees in 2019. If you include part-time, we're about almost at 150 and it has a big construction arm as well too. I mean, we did $14.8 million in just renovations last year. So, Definitely as much construction as we are property management, and we just continue to scale and do some pretty good stuff there.

Love this. So just to recap, so 11 years you went from 0 to over 4,000 units, and these are owned 100% by you. This isn't family money, this isn't outside investors. You didn't go onto Twitter and raise a bunch of money. This is literally your capital that's been compounded. And just recycle it into deal after deal after deal. And if I remember right, these are mostly multifamily these days. So a lot of your properties that you're buying now are like 100+ unit multifamily, but still got a pretty good number of like single family and small multifamily, right?

Yeah, that's correct. I think I posted it the other day. My first 180 units were all single family duplexes, 4 units, 8 units, you know, small stuff because as you said, I didn't have parents are not wealthy. They're great, great parents. But my mom was a teacher and my dad has worked various different jobs in a factory and just awesome family upbringing, but just we didn't have any wealth and I didn't know anybody with wealth and I didn't know anybody in real estate. So, just kind of self-learned through books and the opportunity to fail over and over. But I did that on a lot of smaller properties. I think everybody today kind of wants to jump into the 100-unit apartment complex, syndicate the whole deal. And maybe there's nothing wrong with that, but for me, I really like to understand where I'm putting my money. And quite honestly, in the beginning, even that single-family home, we put everything into there. I was very aggressive, always on offense. My first 3 to 5 years, we did not have a lot of reserves. We put everything into those properties. So I wanted to understand where my money was going and how do I have control over it. And I wanted to make sure those investments paid off. And for me, since there wasn't any outside capital, if they didn't pay off, I couldn't buy the next deal.

So one of the things, so first of all, I know the questions that are on the audience's mind right now. There's two big questions I know everyone wants to hear about. One is, how do you find these deals? And the second question is, how do you buy these deals without outside money? But we're going to come back to those because before we answer those questions, I want to get into some of the operational details that really stood out to me during our first conversation. So one of those is around turns, and I've got a quote here from you that, um, I forget what percentage, but I, I believe you have the capability, or most of your turns are being done including total flips in 72 hours. And That is just mind-blowing to me. And when we talked last, you explained some of how you've structured your team and how you've set up the incentives in order to make that happen. So I'd love for you to paint a picture of these, these turn crews that you have, how quickly they're doing the turns, the different levels or standards that you've selected for your turns, and just bring me into this because I can't, hear enough about it.

Yeah, for sure. And I think like for those listening, you know, we have really, really strong property management where we can manage the properties efficiently and effectively. But one way to create wealth is obviously you, you take the business, that's the apartment that you're buying, and you obviously change the business as, as quick as you can to a more profitable business that your residents or tenants still love. But you gotta do that quickly because there's so many people that acquire a deal and they're celebrating as soon as they've bought the deal. I don't celebrate when I buy the deal. I celebrate when I refi the deal, and that's when the risk is off the table. So, you know, back to the 72-hour question that you asked, it's like I started realizing that all this risk is when you're, is coming from when you're changing the business itself. So the faster that I could do it, right, the safer the investment could be. And potentially the more money the business could yield. So everything in our business is about steps. So if you want me to get a little bit into the weeds, I'll go through it. Just stop me whenever you want. But you know, now we have 22 different rehab teams across about 26 cities, I think it is. We only manage my properties and my employees' properties. So we have about 4,300 total units. And then the 22 teams are split into 2 operational leaders. So the leaders oversee the 22 teams, and then there's one construction director. So just to give you perspective on what that looks like, but you can do it small too, right? It started with just one team and one team for us is we have a crew captain and then we have a rental tech 2 and then we have a rental tech 1. So it's very easy to be able to develop in this because like a rental tech 1 will typically do things like demo, right? They'll come in, they'll demo the unit, they'll rip out the old floors, And then they'll put in the luxury vinyl plank, they'll put in the trim, you know, things that are relatively easy to do. As that person advances and does a great job, then you can promote to a rental tech 2. A rental tech 2 is typically starting in things like the bathroom, right? Putting in the bathtub, the toilet. So he has to understand and be a little bit more skilled when it comes to plumbing. And then the crew captain is doing things that are usually the most complicated, obviously besides leading and managing the the team on site that day, you know, given the Rental Tech One time goals, like, hey, this living room's supposed to be— is this much square footage, so it's supposed to be done in this amount of time. Make sure you stick to the best practice that we have. Um, but he's also hanging the kitchen cabinets, right? He's checking out the electrical. Um, so he's, he's making sure that we have all the supplies for the day because that's one of the biggest things that slows down these turn teams. So that's kind of what, like, that's what we have, uh, within the, the team itself and what they do in general. Now, you know, when there's things that you need a 2-person team to do, then they'll maybe jump in and be able to do that. And then there's, you know, obviously people like cleaners or painters that you can do overnight. So there's some of those things too. But the real secret sauce is what I realized when I had a third-party management company that most people are not doing. It's the steps leading up to the turn that really add a lot of velocity. So when I was getting my apartments managed, it worked like this. A tenant put in their 60-day notice and then nothing happened. Then the tenant moved out and then the property management company went into that unit. They inspected the unit, they wrote everything down on a sheet of paper. Then they gave that sheet of paper back in 2 or 3 days to the leader or whoever talks to the owners. And then I would get a sheet of paper and it would say, hey, like we want to renovate this unit and it's going to cost you $15,000. Are you okay with this? Then you would say yes or no. Another week goes by, then they find the general contractor, another week goes by, then the general contractor fits them in the schedule. I mean, you get where I'm going with this. It's just like the time, right? Like in my state, I'm a majority in Wisconsin and on average it's 45 to 60 days to renovate a single unit on average. Well, a lot of that's because of what I just shared with you, right? So we, in all processes in my company, there's step-by-step accountability and timelines. So for us, when a resident puts in a 60-day notice, we have a retention specialist that has 3 days. Okay. So one person, time, they need to reach out to that retention, that resident and their goal. We can talk about this later though, is to try to feel like why they're leaving us, right? Is there any opportunity to transfer 'em to a different property? You know, what did we do wrong? Why are they moving, et cetera? But if they cannot save that person, let's just say they're moving to Florida, we don't have any property in Florida. And then they have to put the property in the queue.

What percent of the time are they able to save a move-out notice?

About 20%.

Okay. That's pretty good though.

Yeah.

I mean, 'cause if you think about most apartments are turning over about every other year, if you can reduce that by 20%, that's actually, pretty huge.

Yeah, it's feedback for us though too. It means we're not doing a good job telling our story. Like, we're really working on a loyalty program right now. Most of that 20% is because they didn't realize we're in the city that they're moving to. Um, so we're, so we're not doing a— so it's good, uh, I'm glad we're capturing this, but it's also feedback for us as a company. It's like, well, why don't they know, you know, that we had this apartment in the city that they're moving to? Um, they had a good experience, they probably, you know, would have asked us. Um, so we're actually working on a loyalty program to help get, get the word out. But yeah, so anyway, they put in the queue and then that signifies our operations leader. They have 7 days to go inspect that unit. So if you're with me, by day 50, we have now walked that unit, we've inspected that unit. Day 50, they haven't moved out. So the 60-day notice, 3 days, then 7, they walk it. We have an iPad, they put everything in the iPad, it's approved. If Employees are my units. There is no, hey, should we do this? It's just what is going to give us the greatest return on investment. This is what the— this is what residents will pay for. This is what they want. This will yield the highest ROI. So this is what we're going to do. There's no approval. You just— if you want us to manage it, it's like our process, use the best ROI. So you just say yes. So that helps too, right? Yeah, it speeds things up. We're not a third-party management company, which I, which I understand. Anyway, that gets sent to our people that we use to provide all the materials. Lowe's Corporation is one of the biggest ones that we use. We're actually the second biggest buyer of Lowe's Corporation other than Chicago Housing. They're number one. But we send it to them, they pick it, they pack it, they put everything on a pallet, and they even deliver it to us for free. Obviously, that comes with economy of scale. And they're there at— if the tenant's moving out at noon, it has to be, it has to be ready to go at 11:59. So like, you know, 50 days before that resident has even moved out, right, we had everything decided. Everything is getting picked, it's getting palletized, etc. Then 5 days go by and our leasing team has to list the unit. So this is big, like people forget about this. If you were at our company, we only renovate units 4 different ways. We're like a car wash, you know. So if it's the gold standard rehab package, our leasing team knows what that is. Our rehab team knows what that is. Lowe's knows what this is. Our luxury vinyl plank provider knows what this is. Everybody knows what it is. It's simple. The best processes are simple and you, you can just make— and that, that allows you to be elite. So I, I love this.

I want to pause there for a second. So you've got 4 different levels of turns, like turn quality or, or like renovation level, uh, and you gave them names. What are the names again?

Yeah, so the lowest package, the Silver package, and then you have the then you have the Elite, then you have the Gold, and then you have the Platinum. So like if you picture yourself like going into a car wash, right? Like, like you gotta select which one. Each one has something different. So mine, like a Silver package is a pretty basic package for us. It has all new luxury vinyl plank, all new trim, all new paint, maybe a fixture or two, right? That's updated. But like that is our gold standard package. And what big, basically you're looking at like, a pretty simple like ROI equation. Let's just say this is a studio apartment, I don't know, a lower square footage, and it's going to cost you $5,000. So if that silver package costs $5,000, our operations leader is going to look at the chart that says in this city, this rent should be here. The difference is $150 per month. Okay, so you just take 150 times 12 and we get $1,800. And then he takes $1,800 divided by the $5,000 turn, and then you get 36% return, right? So if they do the math and a gold standard package, which we literally do everything right, new cabinets, toilet, bathtub, everything, every fixture, stainless steel appliance package. But we don't want to stick $15,000, $20,000 into a gold standard package if we could only yield $200. It doesn't make any sense. And then maybe over time, what's really cool about our packages is you can go from a silver to a gold because the gold had the new flooring, the new trim, the new paint. So it's kind of cool. It evolves with that. There's only one package that doesn't evolve with each other, and that's the platinum package. And that's— we're just putting in premium products. So think about like B+ to A-class properties on the water or wherever. I only have 10% of my units in A-class, but the residents there will want it— they care that it's granite versus composite countertop.

Got it. So I'm pulling out a couple of themes here already. And just to tease out some of the other stats we're going to get into to sort of underscore your, your bona fides, 97% of work orders completed within 48 hours, under 1% delinquency. You guys are doing 150 turns a month. We do barely 200 turns a year over here. So, and what I'm taking away from even hearing you describe what you have so far is a few themes. One is to focus on speed. You're very oriented around speed. And I know that you even take it so far as to start renovating properties before you close on them because you're such a believer in the power and the impact of doing things quickly. Another thing I'm noticing is that you give things a name. I think there's real power in that, right? You don't just have like level 1, level 2, level 3. You actually gave names to those different turn levels. And there's a couple other things that you've been describing where like you had a specific name for it. I'm a really big believer in like, once you give something a name, it gives everyone that common terminology, gets everyone speaking the same language. Everyone has a picture in their mind they can call up. When they hear something that has a name versus just a loose description that may change and evolve over time. And another thing I'm noticing is like a really, I love that explanation of like how you decide what level of turn to execute is that percent ROI calculation. What I didn't hear there was, um, some funny cap rate math that some people try and use to justify various, uh, things at a property. And I know you've talked before about how you don't, you, you very much don't assume any appreciation. You don't speculate as a real estate investor. It's all about the cash flow. So there's a lot to talk about there and we're going to get into a lot of it. But what I want to know before we go further into like the operational details of property management is how much of this is stuff that you came up with just as in the natural course of getting immersed in this business and how much of this was learnings that you're able to take from Target and from your experience in the corporate world at big operationally intensive retail businesses and bring into real estate? Like what about your work at Target has translated? What did you learn there that you've brought into our space?

It's hard to put a, that's a great question. I don't, hard to put a percentage on it. I, if I had to say, I'd say 30% probably from working the Fortune 50 company and then 70% from trial and error and books. I'm, I'm a, I, I read all the time. So, and then, but I do think like 70% is just, I've actually never paid to go to, paid a mentor or went to some sort of event either. So all, most of it's been like try, and not that that's wrong, like I think some people provide a lot of value. For me, it's just been just trying to figure it out. But you asked like what came from working the Fortune 50 job. So I, I mean, I'll give you a couple examples. You know, when I got promoted to a district manager, I was leading store managers that made high six digits. Then there's assistant managers that made $50,000 a year, and then there was team leads that made $30,000, $35,000 a year. And then there's team members that made anywhere from a cashier, right, to a logistics team member, anywhere from when I first started, you know, a long time ago, somewhere around $8 an hour to $15 an hour. And what I realized is even the best process, if it's too complicated and not everybody can understand the analogy or what you're trying to do, you will not drive elite results. It's too— it's way too complicated. So I would say one of the biggest takeaways I had was the leadership lesson that when you want to drive elite results, how you communicate to every level of, of, of people that you have on your team really, really matters. So I got the opportunity to just lead a lot of different levels. And if you don't take the time to understand how everybody thinks, then it's really hard to be able to establish the results that you want to. For example, that cashier might want, probably want something different than the store manager that's making $150,000 a year. And if you say, hey, we want to, we want to improve the speed of which you're cashiering and you only— what you say to the store manager should look probably a little different than what you say to the cashier. Maybe the cashier is a college student, right? Working there, trying to get through college. So how you motivate them and what you say and the analogies that you build. Anyway, that, that was a really big takeaway for me. I would say another big takeaway Uh, that, that I've realized, um, and that I apply now in the businesses as well too. Most people I see, uh, don't, uh, create things as simple as they should be, and they'll pile on all these other job responsibilities or metrics or KPIs. I think the worst thing you can do is give somebody more than 3 KPIs. And, and I think if you do that, you start turning your team into generalists. And I think in today's world they have to be specialists. You know, you mentioned, I mean, we're going on almost 2 years, we haven't been above 1% in delinquency and I'm buying a lot of mismanaged properties. I mean, last year I bought, you know, about 1,100 units. Most of those were mismanaged. And to stay under 1% when you're not even choosing the tenants that you acquired is extremely difficult. But we don't have property managers that do 25 different things. We have a legal team that just does delinquency and evictions and collections, 3 things. You know, when you walk into my headquarters office, you're going to be greeted by an engagement specialist and they only have 3 things, right? They're measured on the quality of conversations they're having with people and they're measured on the speed. And then each one of them has like an ancillary thing. But anyway, what I took away from as I continue to grow at Target is if you can think about like those 3 major KPIs and ask your team, like, these are the only things that we're going to write your review with, instead of getting average results or even above average, you get elite. Um, so that was another big takeaway.

Love that. And, and on the topic of getting elite results, I know you've got a really cool incentive structure with your turn team that has helped, uh, increase the speed and, and encourage folks to move up. Share a little bit about that.

Yeah, so, um, So there's two ways for our rental techs and we, we have, I think to, there's not too many people that have bonuses for the majority of their field teams, but we do even service techs get 'em. Our service tech bonus structure is pretty cool too for rental techs. It's, uh, so you would get, um, depending on how long you've been with the company and what your results look like, some of this varies a little bit, but essentially we score 'em on quality. So quality is when a resident moves in, did we have to go back and fix anything? So we, our score last year was a 98.5%. It has dipped a little bit this year, but that means for every 100 tenants that have moved in, only 1.5 of them have called us back or said like, hey, something's wrong. Which if you're going to spend, like you said, 100 to 150 rehabs per month, you imagine how much I'm spending per month on construction. You really don't want to be sending your team back. So we want— and not only that, it's not even about sending them back. You know, we talked about speed, but we didn't talk about standards and experience. When a resident walks in, there is something about wowing them when they walk in their front door that actually matters for retention too. So we just— there's— they should walk in and everything should be set. The last thing they should have to worry about is a scratch in the trim or like something that disappoints them. So we put a really, really high bar on quality. Obviously we have a metric for speed, so they gotta get the turn done in that 72-hour time span like you said. Unless, I don't know, it's a really big turn, but we'll score 'em on speed as well too. And then we score 'em on seamlessness. We don't talk about this very often, but if you're renovating units, there are also people living there and it matters. Like I do not want to be living in a construction zone for a year. So for us, you know, when we first started, I started noticing like, Oh, I can tell we're renovating a unit because all the garbage and shit is on the patio outside making it look horrible, right? Oh, I can tell we're renovating a unit because the common areas is filled with styrofoam and shit all over the carpets that every other resident has to look for, right? You can hear the music blaring. So we really like made a big pivot about, I don't know, a year and a half, 2 years ago. And we actually added that as a third requirement for them to hit their bonus is that if the— so now our crew captains know this, like you're going to lose a third of your bonus if even one time there's not seamlessness that we can see the garbage, we can hear the music. It's not— we want— we really want people to not know we're renovating these units and not disrupt them in their living spaces. So anyway, yeah, how it would work is you would— if you hit those metrics at the end of the month, the crew captain gets 50% of the bonus, the rental tech too gets 30%., then the Rental Tech 1 would get 20, uh, which in which that is awesome too because yes, they get scored for, they get the regular pay, but then they get bonuses, uh, for hitting these elite results. But they also get a percentage of the bonus, which we did that because as a Rental Tech 1, that motivates you, right? To gain the skills to one day become a Rental Tech 2. You know, a lot of people ask, how do you go from 1 team to 22? You gotta have really good training and development programs. You know, you got to inspire people to get to the next level. So if you're— and to be eligible for those, you have to consistently be in the top 30% of our company. So like if you're a rental tech one, if your team sucks, you're never going to get our licensed plumber to come teach you things about plumbing. You're not going to get our licensed electrician. You're not going to get our carpenter to come. You know, we have different people in our company that will come work with you for weeks at a time and sign you off on different tasks. So that helps them, by the way. And once they're signed off, obviously they get paid more per hour too.

Did we finish the discussion about the turns? Did we get all the way through the levels? And I think I interrupted you in the middle of that.

Yeah, that's fine. I mean, that's fine. I mean, basically what I was trying to say is I think we're at like, you know, day 50, we've already turned everything, we already ordered all the materials. Then my leasing team has 5 days to post it. And that's what I was just talking about. That's such a big advantage because if you know, if you already have a picture of the gold standard, I just feel a lot of property management companies or owners, they're always looking like for like a special. So then they'll change the floor color. That's not efficient. Like even if you save a few, you know, $500 on this turn, but it doesn't look the same, you're forgetting the fact that your team can't sell that same unit. So, you know, once I buy a 100-unit apartment complex and we pick a gold standard turn, you know, the same flooring, the same cabinet, everything's the same. So we can list that 45 days before and the tenant hasn't moved out. Just remember that. So there's a lot of times that we have this thing listed, right, and leased, you know, before we've even renovated the unit. So it's just a big advantage. So and then, yeah, our team get— our team goes through, we have checklists, walkthroughs afterwards, sign-off process. I think at the end of the day, one of the biggest things I advise if you do go for Most people think about cost when it comes to renovating. Peter, I would tell you that you will actually make much more money if you think about speed because it will provide more value. And if you want to talk cap rates, you can talk about that $15,000 turn and how much more you're getting NOI because it, it probably will lower the R&M a little bit. I mean, if you put brand new stainless steel appliances in and new flooring and stuff like that, like You're not— you are going to have less calls to fix the fridge. Like, so you can really drive, you know, quite a bit of value. And the speed eliminates risk and drives a lot of value for that apartment complex. So thinking about how to do that faster, I think is worth additional cost. If you don't— if for those that are listening that don't have the scale that I do, and in the beginning I didn't either, you got to remember, right? It's all my own money. At 250 units even, like there's, that's, that we, we had a lot less crews. I don't know how many crews we had there, but not many. And I still was like, it's worth, and so it costed me more and it's worth it costing more if you can get done with it faster because that is the opportunity to be able to access your money or your capital again.

Got it. And is that because you're able to refinance more quickly or is it just because the cash flow starts flowing faster because you have a tenant in there? Both.

Okay. Yeah, both.

Got it. Right.

If you're, if you sit on it for 60 days, I find that, yeah, I was helping an investor the other day and he was talking about what a great deal he got in his turn, but his turn sat empty for 90 days and that's when they posted it. So I'm like, well, how long is it going to take you to lease? He's like, oh, we definitely should get it leased in the next month. Well, that's 120 days. Did you, what are you leasing it for? And he said $1,000. Okay. So you lost, did you, did you capture the $4,000 that you lost? And he didn't, right? So you thought you got a good deal, but, but did you get a $4,000 good deal?

Right. And vacant units are also very risky. You have risk of break-in and, and where you are and where we are, you also have to deal with frozen pipes or leaky pipes, or there's all kinds of things that can go wrong in a vacant unit. And if I remember it, you, your turn crews will even, you have folks working 24/7.

Right?

Yeah. Yeah. Which that, again, that's like unheard of, right? The idea that you'd set up painters or cleaners to the point where they're willing to work overnight for you just so you can get a turn done in 72 hours instead of 96. But when you're at the scale that you are and you have the experience and the systems in place, it all, it all comes together, it sounds like. Yeah, for sure. Another theme I'm really taking out of this is systems, you know, and I'm a systems-oriented guy, so I'm loving like all of these details about you know, how you've structured it and the incentives and the names that you give everything. Let's talk a little bit about your occupied maintenance. So we've spent a lot of time talking about vacant turns. Share some of how you've organized occupied maintenance and why you've given that such a focus.

Yeah, I think, you know, we want to provide value for value. In everything that we do. And I think that one of the ways to do that is to think about, well, why would residents ever want to leave? And take the cost out of it, like how much rent is and stuff like that. Because people still go to Disney World and Disney World's very expensive. And when, and people don't talk about necessarily how much it costs, but they talk about the experience and the details and like how everything is just like ready to go for them. So if you think about it, there, there's a, there's a few different reasons that people leave. And one of the number ones, if you are paying good rent and something goes wrong in your apartment, that's super inconvenient. And then it shouldn't take a long time to be able to fix. So I think in our— I think you understand this really well— in our industry, I think property management in general is really, really bad at fixing things that go broke in a timely manner.

So So let me, let me pause you there because I do want to push back on this a little bit. So what you're describing is like a focus on resident experience, which I pick up as a theme also through everything that you do. Everything from like you talked about how like you don't want the turns to disrupt the residents and you want their moving experience to be great. And I want to talk more about like the value of that resident experience in dollars and cents, but getting to like resident expectations around things that break. I think you're right when you said residents get mad when stuff breaks, like obviously, and they want it fixed right away. I, I, I, there's part of me that just, that makes me mad though. And I'm like, you know what? No, because I own a home and when something breaks in my home, I have to wait 2 weeks to get a contractor to come out. And I own a property management company. I've got a huge Rolodex of contractors and vendors. They're booked out. That's how it is. Tough shit. Right. So that's kind of, and I correctly or incorrectly, I bring some of that back with me to work. And when residents get upset, when they call in the morning and no one's there by the afternoon, I'm like, your expectations are wrong. And I will not contort my entire business model around your messed up expectations that you got from Amazon or whatever.

So.

How would you respond to that?

Yeah, I think I would respond to it like this. I think people thought it was impossible to do what Amazon would do even 5 years ago. Like there's no reason that my wife needs to order something off Amazon and that it needs to show up the same day. Like there's no reason that she orders in the morning before I leave for work and I get home and it's sitting there. There isn't, but she loves it, right? And when I worked at Target, That drove me crazy. You know, so what I realized with Jeff Bezos and what he was doing though is he was giving the customers or exceeding their expectations, which was really driving a lot of market share and a lot of retention and a lot of goodwill. And I think that really pushed the competition and pushed other people to have to raise their bar too. So I think one of the, to answer your question or the pushback on your pushback, I don't think we have to do that, at least right now. I mean, you know, if you look at the facts, I mean, it's really, we're in a good multifamily's in a really good spot right now because it's just so hard to build as fast as people need homes. But just like anything, I think there'll be cycles. And I do think that if you exceed the customer's expectations, it not only drives retention, but it also drives your brand. And I do think that just like Amazon, people will end up wanting to rent from places that they know things that get fixed in a timely, timely manner, that instead of 2 weeks, it can be done in 2 days. And I do think that they will pay for it. I think the people that rent today are not baby boomers anymore. Like we gotta remember like that, that ended a couple years ago. That shift of who is living in our, in our places, they want amenities, they want experience, but you know what else do they want? They want convenience. Convenience matters. They're busy more than ever. I mean, I, I study this all the time. It's crazy. Like women are having kids 3 to 4 years later. There's more dual income people working in a family now before than ever before. So you got a lot of young people that are very career driven that are living in our apartment units that don't have a lot of time and they want convenience and they just want things done quickly. And I think by being able to provide that to them, they're willing to pay for it too. So I think it is like in an ROI sense, like by delivering or exceeding expectations, it can come back full circle.

Like I know they want that. Of course they want that. I guess I just, I mean, when, when you have a new prospective resident and they're touring an apartment, of course, I'm sure the leasing agents tout the statistic, oh, you know, 97% of work orders are completed here within 2 days, so you can expect fast and timely service. But I'm sure all the apartment communities say that. So I don't get the sense that you would be able to charge more rent just based on a promise. Now, maybe it's the case that at renewal you could capture a higher rent because of that, like proven experience that they had by living there for a year and they saw the results of the fast maintenance turnaround time. And then when they're weighing in their mind like, well, I could move somewhere else and save $100 a month, but It's worth it to me to spend an extra $100 a month because I know that these guys are responsive and they give a shit and they're going to come and fix it really fast. Is that— that must be playing out for you. I mean, you're a dollars and cents guy. If it wasn't working, you'd be, you'd be like, you know what, now we didn't notice any difference. We're back to a one-week, you know, standard.

Yeah. That. And what happens if we could guarantee it? Would you pay more on the way in? Like if I said, Peter, if you move in for us, we will guarantee that if something breaks, We will fix it within 48 hours, or you don't pay rent for every day that we don't have it fixed.

Well, rent for every day that it's not fixed, it's not as much as people think, but yeah, I mean, it could add up, right? 2 weeks. If it took 2 weeks, that's half a month, right? Yeah, I guess that, that starts to get interesting.

I think it's less.

Yeah, I think that would be interesting.

I think it's less about the dollar and cents. I think it's more about the psychology of the message. Yeah. Like, okay, like, and by the way, we're, we're 90 plus percent of our units are, are, have one of these packages. So, you know, one of the reasons that we can be so quick is we also don't have as much going wrong as the multifamily property management company, right? That has a 1970s product that hasn't done any renovations. But that's what we're working towards. We've already started some of our guarantees. Like a resident can move in at our company and within the first 14 days they can leave for any reason. Like break your lease, no penalty, no nothing, go.

I like that.

It's a guarantee. And it does, it makes them feel a little bit more confident signing that lease to be able to go in to know that, hey, I can walk in my unit, I can see everything. And if I don't like it, and we don't want, I mean, we have a 98.5 satisfaction rate, so we feel pretty confident in the product that we're giving in the first place. And honestly, it's better for us too. If somebody moves in and they're just not happy, we don't want to totally agree with that.

We don't want to. Yeah.

For the next 12 months, trapping somebody that's not happy in the first 14 days.

I don't want to do that.

We've tried that. Believe me, you don't want to do that. No, it's so— it's a win-win. And so one of the things that we're really working towards is these guarantees, like how can we separate some sort of the competition? And we're close. We're close when it comes to really interesting thing.

Yeah. So we also like if someone wants out within the first 2 weeks, we will also let them out because we've tried the other way. Like we're going to hold you to account. You signed the lease, right? Listen, if they don't want to live there, believe me, you do not want them there. But what's interesting about what you're doing is you're actually sort of advertising that or you're marketing that. You're using it as, you're turning what's a negative, which is the fact that you kind of have to let people out of the lease if they don't want to live there. You're using and turning that into a positive of, hey, we offer a lease guarantee. You can move in in 2 weeks. You don't like it. You can move out. We'll give you all your money back. That is a really good idea. And I also, I like the idea of the maintenance guarantee. There's a lot of discussion in our industry, in my world, third-party managers, about guarantees that you make to the property owner, right? You can have a pet guarantee or you can have an eviction guarantee and different things like that as a way to attract new owners. But there haven't been a lot of discussions about resident guarantees, some of the promises that we can make to residents in order to attract and retain residents. What's funny though is the, the thing you described about like giving a credit on the rent day by day that something isn't fixed after 2 or 3 days or whatever it is, residents think that anyway. They, they, that's already what they expect. So you might as well just, hey, if they're gonna ask for it anyway, let's give it a name. Let's make a promise and let's orient our operations to make that happen.

That's really cool. No matter how much you tell 'em it is illegal to withhold rent even though something is not fixed. They will still, but yeah, I mean, we're not, we're not there yet, but that is, that is something that we're, we, I mean, honestly, we want to be so good that with my Amazon example, that somebody could put in an Amazon order as they put in to get the garbage disposal fixed and we can fix the garbage disposal before Amazon delivers the package. And we just believe in that the brand itself is going to drive an ROI. So we've been measuring it for a while, obviously incentivizing our team What's hard, I would tell you, is still giving the same quality of experience. You know, you want to be fast, but you also just can't go in there and just like shove the tenant over and go fix the garbage disposal. And then when you picture a service tech, most people don't picture someone really friendly, like the person that can like fix things for you and then knows how to fix things for you. You picture probably somebody else. So just like everything in our company, we try to make things really easy. Like I know about a year and a half ago, this is a cool story. I'll share this with you. And this is— I think your listeners can take this away or give this advice to a property management company. But our best service tech in the company has been with us, you know, almost from day one. His name's Tony. And what Tony Tony is very good at fixing things and fixing things fast, but wasn't necessarily known for his experience. And this is when we had about 8 other service techs and we wanted to start bonusing them not just for quality and cost and speed, but we wanted to add a 4th one, experience. And I knew how this was going to go.

Wait, I thought you can't have more than 3 KPIs.

Yeah, you're right, you can't, but you can bonus. You can bonus.

Uh, okay.

All right, all right, fair enough. So And quality and cost are like the same thing, right? If you don't, if you don't fix it, it's gonna cost more anyway. So I would say that, uh, before we had this meeting, I knew that Tony would push back, right? Because he's like, this is, he, he's ridiculous. So I actually like pulled him aside and, uh, had this whole conversation with him before the meeting. And I said, what happens if like we can make this super simple? What happens if there'd be like just 3 things that you could do when you, when you roll up to the unit that I think would deliver like a 5 out of 5 for the resident. And he goes, I don't believe it. Like, what is it? And I go, okay, so step 1, you already do. You knock on the door and you greet them by name because obviously they have their name on the maintenance request right on their phone. So we've already done that. But you knock on the door, you greet them by name, and all I want you to do is just ask if you want to take your shoes off or put on booties. Okay. Cleanliness matters. You're going to somebody's home.. So we just, I'm like, is that, could you do that? Step 1. He's like, oh yeah, yeah. That's not, that's easy. I'm like, okay, well then when you step into the door, I want you to give one compliment. Okay? If there's a dog, say cute dog. If there's a picture, say nice picture. If she has nice haircut, say beautiful hair. Can you just like give one compliment? He goes, just anything? I'm like, yeah, literally walk in and say something nice. Can you do that? He goes, oh yeah, I can do that. I'm like, okay, step 3. Go fix the thing that you need to fix by working neat and clean. Say thank you and leave. He goes, so this is all I have to do. And you think this is, 'cause I think he thought, you know, Logan, I'm not gonna go there like giving high fives and like, you know, yeah, yeah.

Doing, you know, they're not gonna be all salesy. Yeah.

We can't expect that. But so he is my biggest advocate. He crushes it. Like tenants love him. Like all he does is give one compliment and he takes off his shoes and booties and he works neat and clean and neat and clean's underrated, right? You're in somebody's home., but we try to keep things simple like that in different areas of our company, because I, I think that, I think you're right. I, in the beginning you said I, I talk, just as much about experience as, speed. And I do think it's, that balance matters too. Speed in itself is a good experience, but our words and our actions and what we do when we're in front of the residents matter. Yeah.

And did I, did I catch you say earlier that you're really big on breaking things down into steps? Steps, like, and I heard you articulate those 3 steps for the maintenance tech. Is that a big theme with you too, is you— everything's broken in into steps? Yep.

Yep.

Got it.

Gotta make it. Yeah. You— I mean, one of the things that sometimes our leaders, uh, struggle with in my company is like when somebody is not performing. So here, here's something I, I teach all my, my leaders is step 1, when somebody is not meeting your desired result, Is our expectations clear? That's step 1. Don't worry about anything else. Step 1, do you think expect— are expectations clear? And expectations are clear when the steps are clearly laid out and you have delivered them and you've asked, are expectations clear? And the team member says, yes, I understand the steps. I understand expectations are clear, right? Here are the steps. Here are the timelines. Here's the desired result. But it's usually, that's, that's the first thing you should do. The second thing. 'Cause you could do that and results still aren't met. Like, have you had a team member that like, I fucking told him, uh, 20 times and he's still not doing it? Well, step 2 is, are they trained? Right? So before you even start coaching the team member, are expectations clear? And then have you trained them? And training is like, go through each step. And I just went through a step with you, right? Experience. Like, how do you provide experience? Did you do these things? And make sure that they feel really confident. In, in training. So like even ask 'em afterwards, uh, we live by like, I do, you do, we do. Like, did you go through those steps? Do they feel really good with it? And then, and only then you move on to step 3 when you're coaching a team member. Now they have expectations, now they have training, now it's a performance. Did you recognize them when they did a good job? Oh, you didn't? Well, obviously that's not gonna build goodwill. Did you coach them when they didn't do a good job? Like if you don't tell 'em they did a bad job, right away, then they'll continue to do a bad job. So like step 3 is more of the performance coaching. Um, but I've, at least I'm just speaking from my experience, a lot of our newer leaders, they jump right to performance coaching. Like, oh, I can't believe Betty didn't greet this, this, uh, tenant this way. Did Betty know how to greet them? Like, did you even level set expectations? Well, no, but like, wasn't that in the training?

They should know, right? They should know by now, right? You hear that. Right. Yeah, that's great. And, um, yeah, the, the, the, the training and the steps, um, it all fits together for me. And like, you even just articulated that even coaching has steps, right? Um, and what, what I really noticed in that explanation, especially in the beginning when you were describing, um, like setting expectations is that You can't do that with a generalist very effectively. If you have someone called property manager and they have a territory and they're responsible for rent collection and evictions and maintenance and leasing and lease renewals, it's impossible to set and hold expectations for all of those different things, for all of those different properties. And it sounds like from the beginning of your— from when we first jumped on that, you're set up in what we would call in my world departmental, which means everyone has a narrow function that they execute for the whole portfolio. Like you described your collections team, which was responsible for all of those activities for the whole company, not just for a certain territory. So that, again, we call that departmental in my world. It sounds like that's been really effective for you. Did you start out that way or did you start out with a more traditional portfolio style where you'd have like 3 property managers and they're responsible for everything happening at 123 Main Street?

No, we started out that way. Okay. When I acquired my first apartment complex, I had a third-party management company, and even then I asked them not to have a property manager on site. And it was because when I interviewed a property manager, I had no idea what the hell I was doing. And I just asked, you know, you just got to ask what they do. And do it once. Like, it's, it's crazy. Just ask a property manager what they do at a, even a 50-unit apartment complex, 100-unit apartment complex. And it's kind of like you said, Peter, it's like, it's crazy what we expect. Like, we expect them to have sales, like be a salesperson. We expect them to be an attorney. We expect them to, to be able to hold a general contractor accountable. It's like they have— I mean, the person I interviewed or I was just talking to, I had to stop at 27 different things. They were doing 27 different things. Yep. And we expect them to run a $10, $20 million property for like, you know, I mean some, and they're getting paid like not enough to do what they're doing.

Right, right. Yeah, exactly. And, and the, the steps you described in coaching and holding leaders accountable, you can't do that when someone's responsibilities are so abstract and so diverse. You just, cuz you try and pin 'em down on one thing and they're like, well, I'm so busy. Like, I have all— here's all the other things I'm doing, right? So I continue to be a believer in like the departmental structure, and this is just yet another example of where that really shines. I think I heard you say something about measuring like resident satisfaction. Do you guys do like NPS surveys or anything like that?

Yeah, we do. AppFolio sends out a survey on different things when somebody moves in, when somebody gets a service request done. So when we fix something, they'll get like an automatic survey. So we get a general surveys on different topics that we want to measure.

Okay, got it. And so you're, you're, you're tracking that. I know you're big on data and reporting, so you're tracking that over time and different properties just to keep an eye on everything.

Yeah. And I would say like, this is a big one for me. Like, I— we didn't even talk about this because we didn't get to the end of some of these processes, but the best processes have visible scoreboards. And everybody can see them. Like in my company, every single day, like every department knows how many calls they answered on the second ring. Like we measure how fast we pick up the phone. We also have a weekly scorecard on quality because every leader audits on quality and we have a score rubric. Like, but I'm a huge advocate. Don't, if you're gonna tell somebody to meet a metric, then you need to score it. You need to send it out. On a consistent basis so everybody sees the metrics. But here's the last thing is you want as many people to see that as possible. We have TVs in every Workstream room, right? We have TVs in the lobby even, and they are filled with recognition of people doing the great things. And when we, you know, I, I once had an HR ask me, he's like, whoa, whoa, whoa. What, you know, Johnny, like, I don't think we should, you know, Johnny had a pretty bad week. Like he's gonna be, when he sees that, like, that's not good.. And I, I looked the HR in the face.

I said, good.

And, and, and, and she's like, what, what, what do you mean good? I'm like, well, only two things are gonna happen. Okay. When Johnny sees this really terrible week. Okay. Number one. Okay. You're afraid. Am I, am I, I'm assuming you're afraid he's gonna quit. Yeah. Yeah. I'm going to, I'm like, good. Cuz he's, he's not meeting our expectations. So if he quits, like, that's, that's okay. Cuz I want elite people on my team. Or option number 2, and I hope Johnny takes this, Johnny looks up and he sees Tony, the number 1 for the week, and he calls Tony because he wouldn't know this if it wasn't all posted and you couldn't see this. And he goes, Tony, man, I had a really bad week. You know, can you gimme some tips? Like, you know, what are you doing to be able to help with this? And all of a sudden Johnny starts getting better and the leader didn't even have to coach him, right? The people I want on my team, you can have a bad week, you can have some bad results, but they're, They, they see it and it, and it does bother them. And because the scores are visible now, you know who to reach out to. And we encourage that, right? Hey, we're, we're posting this because I mean, we want you to know exactly where you stand. Would you like to go to your review, Peter, at the end of this year and like be hoping on the, on the pay raise you're gonna get? Well, I don't want that. Like, I want a company that they know exactly what they're gonna get at the end of the year. And they do that because we're consistently telling 'em where they rank. And where the highest amount of compensation would rank and where the lowest would. And they also know that we need to perform at this level consistently. So if you're not performing there consistently, obviously here's a few different ways you can do that besides your boss helping you. I think there's a lot of value in somebody else, you know, a team member on the team that can give you a few insights too. So anyway, you said metrics. I just think that's So underrated in a company. Yeah.

Love that. One of the metrics that you threw out, um, was that 98% of phone calls are answered by the second ring. And that just blows me away because in my world, we're, we're literally having conversations like, is it even worth answering the phone anymore? Because most of the calls are just kind of a waste of everyone's time. And in fact, one of the guests I had on recently— I'm not sure what order these episodes are all going to air in, but my friend Donnie Thompson, who's— who operates locally here with about 1,800 units, low income, he doesn't have a phone for residents. He doesn't have a phone number. He doesn't provide a phone number. It's all through text and email because he thought it was a total waste of time. It was just taking up too much of his team's time. To keep answering the same questions over and over and just, just burning up those hours. So it's clear that you're very focused on resident experience and the metrics bear this out. I want to unpack that a little bit. We've started to, um, let me take the counter position for a second and articulate resident experience doesn't really matter. Like, let's pretend I believe that and I'll give you some reasons why that could be true. Residents are going to do what they're going to do, right? They're going to move away because they're getting married or they're buying a house or their sister moved in this Florida. They're going to go be with her to help with the baby. Who knows, right? So residents are going to do what they're going to do. So in terms of lease renewals and all that, it's luck of the draw. It's basically just whatever's going on in their life. The other way I would articulate this is the property Like they either like it or they don't, given the location, given the crime rates, given their commute, given their particular preferences around weird stuff that they just strikes them that they don't like or don't like. They're just either going to like it or they're not. They're going to like it or they're not how they pay the rent and all these other details that we have to decide for residents. And at the end of the day, it's just like we've got these industry standard lease renewal rates. Or turnover rates, however you want to look at it. And if you're doing, if you're doing what I would call the bare minimum, which is just responding to maintenance requests and being polite and professional and making it easy for them to pay the rent, the rest of it is just, doesn't matter. It's really not going to affect whether or not the resident decides to live there or decides to renew. So that would be how I would articulate the position that like, resident experience doesn't really matter. And I think is part of why my world, the third-party property managers, are so focused on the property owner experience because they're, for us, they're the ones who pay us. And so they're like the customer in our mind. The resident's a customer too. So you've taken like 180-degree opposite, like you and my buddy Donny are like opposite ends of the spectrum in terms of how you think about resident experience. And how you navigate your property management business around that orientation. So share a little bit more like what, like what's underpinning this perspective that you have? What have you seen that bears it out? And I don't know, I'm just really interested in it because I know a lot of folks in your world, like big multifamily GPs and operators who don't do third party. And even the ones who I consider to be pretty focused on resident experience are, have not taken it to this level. So you're almost like, you're doing like some science for us a little bit. You're, you're like pioneering, like, what would it look like if we were just maniacal about resident experience, like to the nth degree, like share some of the results and I don't know, just react to that, I guess.

Yeah, for sure. Um, I will answer that in two buckets. Well, and before I do that, first of all, I do think it matters. Like, you know, if you are a third-party manager and you only do, like you said, Section 8 or Section 42, well, there's— I mean, you're literally capped on how much you can charge for rent. And so there might be a significant diminishing return because you're not doing market rent. You know, all but 190 of my units are market rent, just to be clear, because I feel like that matters. My first bucket I would tell you is that I think we know who we are. Like we want to provide, like our target market or our avatar does care about how their apartment complex looks, the experience, the technology, and they will pay more for it. So we've done that through surveys. We see it because they pay more than the similar property next door and they stay long. Oh, that's interesting. And they stay longer. So I think it's like when you go to a theme park, it's the same. It's a, it's a, uh, I stole this from Disney World, right? It is very, the, nobody has raised, almost, I shouldn't say nobody cause I don't really know this, but if you look at how much Disney World has raised prices over like the last 50 years, it is crazy. Um, but nobody else can touch 'em. Like you go to Disney World because you care about the experience. And so we know what we are, you know, we, we're, we're not necessarily scenario, like our, we are the market that we're catering to. We know that they care that the grass is edged, like they want the grass looking great and fertilized and landscaped the right way. They're proud to bring people around there and that matters to them and they're willing to pay more. They are, they want to live somewhere where the maintenance request is done really quickly and you can do it through text or through technology that makes their life really easy 'cause they're very busy. So I think just like in general, You should know who's the target market or who you're going after to be able to provide what you're providing. And then for us, we've seen an ROI in both retention and what we can charge. We're, we can't charge as much as brand new development and construction, although we definitely take inspiration. Like we don't just guess what we're putting in. We have construction programming. Like every single year our brand team goes into new construction, you know, steals, takes, borrows those ideas to be able to upgrade our gold standards, our, our, our packages., you know what I mean? So, you know, in my market you could pay $2,000 for a brand new, you know, developed apartment complex, or you can come to one of my 1980s. Everything is brand new, but it was built in 1980. And then you can, you can be in that for, depending on where it is, $1,200 to $1,500. And so it, it, it's a little bit of the same person, right? That wanted to live at the A-class. So we just increase, we think Our service is better than the A-class building. We think our standards are higher than the A-class building. So all those things about— because of our target market and what we're going after actually really, really matter. And then like you, like I said, we do see it on the retention standpoint, like comparing myself to other property management companies. And we do have a lot— like we look at stabilized properties versus unstabilized. You know, I took over apartment complex, a 90-unit that I mean, I think 75% of it were dealing drugs and there's pests, you know, there's just, it's not great.

Yeah.

You're going to have a lot of turnover, but we look at retention after we have placed the resident. How long do they stay and when do they leave? Like we think that matters a lot too. But even on the way in, Peter, we're seeing our market rent from the same property across the road. We're full, you know, we're somewhere between 96 and 90% occupancy, 3 to 4% vacancy all the time, even with repositioning. And we can charge more. So I think that's the bucket number one. Bucket number two, as a rebuttal to that, it just feels good. It feels better at this point. So like, I don't— I wasn't this— I wasn't this— my feelings weren't as strong when I was building my portfolio. Put it that way. I think I was probably maybe a little bit more in your bucket, but I think as I've learned, I'm betting on two things in this bucket. Number one, it just feels better to provide a better experience and to build my business and to have a better reputation. So forget about the ROI. I like, I like that. And at this point in my career, like, I'd rather provide more value, take a little bit less to have that feeling. And, and part of that bucket is I'm also just betting that the brand will continue to grow, which maybe in the long run will actually help my ROI and reputation too. But if it doesn't, I can't prove that, right? I can't like, but it, at, at my point in my career, that just feels better.

And I think that's 100% valid. I actually really like that answer of like, you know what, this is how I like doing things. I like people who have strong opinions and just act on them and they don't even need a reason. It's like, this is how I want my properties to look. This is how I want the experience to be for a resident because I think that's proper. I think that's underrated as a reason for doing things actually. So I'm glad you said that. What, oh, the other thing I was, I find interesting is I wonder if it's not a coincidence that you don't have outside investors and maybe that's freed up some headspace for you to allow you to be so focused on the residents, right? As third-party managers, we of course have our property owners that are a big distraction, quite frankly, and consume a lot of our time and, and So our attention is quite divided between our residents and our property owners. But even, even a lot of our friends on real estate Twitter and a lot of our developer friends and real estate GPs who have been very, very successful, have huge portfolios, they have investors. And so they also are having to think in the back of their mind, what might the investor think about how much I'm spending on the landscaping or, you know, If it's the difference between hiring a couple extra people and lowering like the, you know, the IRR for my investor just so the phone gets answered a little faster, I wonder, you know, it's interesting to me and I'm just putting this together now that you are both maniacally focused on the resident experience and you don't have outside investors.

I wonder if that's not a coincidence. Yeah, I mean, I think that's a fair point. I've never even looked at an IRR, right? Like, I don't care. I, because I, and that's why I don't sell. I mean, there's plenty of opportunities where like we've repositioned a property in 9 months that should have took us 3 years. The IR would be sick if I sold it for the value that it currently is, but I just like, I'm, I'm, that doesn't interest me at all. So I'm, I'm thinking about like, what does the next decade look like and what does the long-term look like? And I don't have to report any of that to shareholders. Now maybe, maybe in the beginning, I mean, again, I, I think my 11, 12 years now, it has evolved on how we do things and where, how I want to do things for sure. I like, again, I, in the first 5 years, man, like some of the stuff I'm doing, I look back and I'm like, that was so risky. Like, wow. Like that was so risky. So how you invest, how you run your companies, I do think that evolves.

That's a good point. Yeah. Well, I teased 2 questions at the beginning. One of them was how do you find your deals? I'm actually not going to ask you to answer that because you've answered that quite well on a number of other, you've got a great YouTube channel and you've been on a few other podcasts, so we'll find a good, we'll find a good one to link to if folks are interested in hearing more about that. The other one I do want to put in front of you though, which is how do you keep buying more deals without raising outside money? So I think most people, it would intuitively like, yeah, you can buy a few single-family homes and maybe a small multifamily property with a little bit of money saved up and there's a little bit of cash flow coming in from the other properties. But how do you just keep going and going and going at such an aggressive pace? Like, where is this money coming from?

Yeah, I think there's a lot of— I mean, I'll share as many different ways as I can, I guess, and just ask me if you want me to go deeper. You know, we won't get into how I find the deals since you can link that, but there's a lot of different ways. But let me tell you about the deals I'm buying too. Like in the beginning, because it was, it's a, it is way easier now. So I think more people care about, or I imagine more people are around, you know, don't have 1,000 units. In the beginning, it's so hard with all your own capital. So I would just buy problems. Like, so it's what I was buying that matters. And I am in the Midwest, I'm Wisconsin primarily. There is a lot of, there was a lot of buildings that somebody has owned for 50 years and they just didn't put any money into it., right? So there's a ton of deferred maintenance, ton of deferred CapEx. And they, they, but in trade for that, they kept the rents really, really low. And so I would find these opportunities, I, let's call 'em instead of problems, and I would buy those opportunities. So I'd buy 'em at a great basis. So I think that matters. I want, you know, the first thing is like, I'm not going out there. I could not do this if I was buying A-class 5 to 10-year-old buildings. I'm buying, The building I'm sitting in right now is built in 1891. Okay. So like I had to get really good at buying things, problems that nobody else wanted to buy. Old buildings, people that are causing crime, drugs, et cetera. Deferred maintenance, CapEx, et cetera. And significant, significant like mom-and-pop operators. So just not running it like a business at all, right? Hey, I'm going to, I'm going to show up. I'm going to, I'm going to actually be there in person to collect the check. And what I found is like those opportunities at that basis is just amazing. If you can turn that around, you go talk to those tenants. They want things fixed, you know, they want an upgraded unit. They want their house to look a little bit better, their duplex or their 4 units. So that's what I would do, Peter. So instead of finding a lot of money, what I would do is I'd find that problem. And then I, over and over again, I would implement a really strong business plan. And I think this is what separates me from a lot of people. Just like all the other processes I started realizing, I, I hate, I like strategy, you know, and I do like operations. I just don't like doing things over and over again. Okay. So just to be clear, even though we talk a lot about operations and processes, I hate being in them. Okay. So I like to create them. So anytime I started, like, by the time I bought my third duplex, I'm like, this sucks. Like, this is terrible. I have to do this. I have to get my insurance lined up. I got to do this. I got to do this. I can do it. And I started realizing like, dude, these aren't properties. These are businesses and everything's repeatable. So I just started like, well, what could I do before closing? So like, could I line up my general contractor? Right. Could I line up like X, Y, or Z? Could I have everything ready to go? So by the time I closed, the day after closing, I would be able to come in and I could either rehab that, put on the siding, update the roof, you know, whatever needed to be done. And I started realizing, oh wow, like there's a pretty big process here and reposition these properties faster. So that's one of the biggest things that I, that I think my company does really well now too, is we can take a 100-unit apartment complex and instead of taking 2 or 3 years to rehab every single unit, to redo, to renovate the whole building, we can do it in 6 to 9 months. Like, and yes, some of that is what you alluded to. I don't recommend this if you're an inexperienced real estate investor because there's significant risk. Some of it is we get in before it's closed. If I have a really good feeling it's going to close and it's worth the risk, it's— and there's one 3-bedroom, one 2-bedroom, and one 1-bedroom. Why not get one of those renovations done? So on the day of closing, I can literally list those for maybe even above what my business plan said. And if they go, what great validation to continue with the renovation plan like that. Or if they didn't, I can adjust early on, you know, to make sure I hit my returns with what I'm doing too. But in summary, like I spent just an— I do spend an enormous amount of time with like taking a look at how the business is currently running, looking at the P&L, looking at the systems, walking every single unit. I still walk every single unit, every single one of them. And because I want to, I want to see if like how this property, how this business is running, like what, what is the numbers not telling me? Like for example, you can look at the numbers on a P&L, on an income statement and see that water is $40,000, but then you can walk the units and see that because the landlord was paying for water, there's 100 units and 60 of them have water leaks and the tenants weren't saying anything because they don't care. Well, a $10,000 per month reduction in water is $120,000 of savings. Why don't you take $120,000, buy a six cap? That's a sick amount of value that you could create from just like fixing something that should have been fixed in the same place. So like all my value and a lot of the capital came early on is just realizing, okay, wait a second. What are the different levers I can pull? How do I create repeatable systems? And then how do I do those as fast as possible? So that in itself, okay, so then you'd renovate it, then I would get there. Obviously one of the biggest levers that I pull is refinancing. So if you can buy a, you know, $5 million apartment and then implement all the things that I said, create a lot of value and now it's worth 10, right? Then you could put 75% debt on it. So now you can go from, you know, you can have $7.5 million of debt on that $10 million apartment. You're able to take out all the capital that you put into it, sometimes all the renovations, right? Depending on the basis that you bought it for. And now you have all your capital back and you still have a cash-flowing property. And for me, I paid a lot of attention to debt service credit ratio. So loan-to-value matters, but debt service credit ratio matters way more. So what is your ability to be able to pay the loan? And mortgage interest is a write-off. So I like, I know I was telling an investor that didn't have very many units. He's like, dude, I have a duplex and I'm cash flowing $2,000 a month on this duplex net. I'm like, that's way too much. That's way too much. You're going to pay so much taxes. Like, why would you not refi, put some debt on that thing so that you can write off the mortgage interest? It'll be more tax efficient. He goes, well, because then I'm going to, my $2,000 is going to only be $1,000. Okay. Well, now it's $1,000 a month. Month, right? You lost the other $1,000. $1,000 a month. But you could refi $50,000 out, buy the next duplex, right? And do the exact same thing. Now that duplex cash flows $2,000 a month. 2 plus 1 equals 3. You were only cash flowing 2 before, plus that $1,000 a month. Like I said, it's more tax efficient. You're not paying taxes anymore because you're writing off the mortgage interest. So I just started getting really good, Peter, at like realizing and paying more attention to like debt management. You know, that's very risky. You do not want to be overleveraged, obviously, but I find you don't want to be underleveraged either, especially if you're scaling. So just something for investors to think about if you're using your own capital.

Okay. So it sounds like the steps are, right? We like steps. The steps are find a property that is a great price because basis matters. You said that. So pay a great price and maybe in the beginning you're buying kind of like junk that you're going to take on because no one else wanted it. Maybe later on you can buy something that's a little bit nicer. So step 1, buy the property at a great price. Step 2, fix the property, potentially even getting started before closing if you're tolerant of risk and have a lot of experience with a high emphasis on speed and resident experience. And then after you've executed your plan, because you put a plan together before you buy every property, refinance and get, sounds like roughly all your money back out, plus or minus a little bit depending on the deal, and then repeat. That's so, just keep doing that.

Emphasis on speed. Exactly.

They don't all work that way, but yes. Over time, you sort of behind you are accumulating a massive pile of units that cash flow every month, even after the refi.

Is that right? So that's what people don't get is like, they see like, once you get the snowball going, when you execute the refi event and you only own 10% of the deal, you're only getting 10% of the refi. If you own 100% of the deal, you have 100% of the cash flow, 100% of the refi. So it's very, very difficult in the beginning, which is why most people don't do it. Like nobody after 3 years of investing wants to be like, I own 7 units. I did 3 years of real estate investing. I own 7 units.

I think a lot of people look at it and be like, man, that was like, I can't, that's like, moving so slow, but I owned 100% because they're, because their buddies, to be clear, because their buddies have all taken syndicated, they've taken investor money and they own quote 250 units after 3 years. But what you don't hear is that they actually own between 2 and 9% of each of those deals or whatever it is.

That's exactly right. And it's more sexy to put on Twitter that you own, you know, 100 doors. You don't have to say how much of those doors you own. But it just, you know, you start getting caught up in like telling your story so that you can accumulate more capital from other people. I just never worried about any of that. Like, I, like, I just worried about like, how do I just do a really good job with the properties that I currently own? And if I do that, I can create my own value in that and then be able to keep that forever. And after you stack that, I mean, if you own 100% of 50 units, you are set for life. Like, like you don't have to actually— you don't have to do— you don't have to have 4,000 units. Like, but it's the money. You start realizing like the money comes once I, like, I didn't have, maybe I did it wrong in the beginning. I just didn't have anybody to ask. And I'm actually really like, one of the things I'm not great at is, is marketing and social media and I just don't like it. So I didn't have the skill to do it and I didn't know anybody. By the time I had enough and I had no experience, like, who's going to be like, this guy works at Target, I'm going to give him my money to buy a 50-unit apartment. By the time I could actually ask people for their money, because like, damn, this guy owns 100 doors, like he's doing something right. I realized how freaking hard it was to buy these apartments, to reposition these apartments and operate these. I'm like, I can find the money. There's not a return that would, for at least me, that would be fair to me. If someone would give me a million dollars and I'd be like, no way. Because I have to do all the work. The work, the, Finding the money to me is easy compared to like actually operating the property. And I will say this, Peter, obviously, you know, things I learned over time, I don't want to gloss over this because everyone's going to be like, oh yeah, I just buy a property, create a great business plan, spend a lot of money on renovating it, then it will go from $5 million to $10 million, and then I'll just go to the bank and I'll refi the money out. I get it for those guys listening, like it doesn't always work that way, but there's so many other different levers you could pull, right? It's not just about renovation. Sometimes there's opportunity in just the way it was previously being managed. I've utilized seller financing as well before too, where you can figure out how to get into the deal or finance the deal differently. In real estate, what's really cool about it is there is, if you're not just focused on finding the money and it's just not there, then you start focusing on what are the other strategies around, you know, buying the deal, financing the deal, operating the deal, reposition the deal. I just think I've spent more time on those levers than I have on, finding other people's money.

I think that's been super clear through the whole podcast. Your focus on operations is amazing. I've learned so much today. I know we went a little bit over. Thank you for your time today, Logan. If folks want to follow along with your journey, hear more about this, maybe get into some more of the details that we didn't have time to cover today, where can they go do that?

Yeah, you can hit me on Twitter or Instagram as well too. Just comments. I'll try to answer it when I get some time. Otherwise, you can hit me on my email at logan@loganrankin.com.

And Logan, you've got a great YouTube channel too. I'll give a shout out for that. So anyone who's listening to this would get a lot from subscribing to that. So thanks again, Logan.

This has been awesome. Appreciate it.

Thanks for having me on, Peter. If you like the show and want to get connected to the community, you can follow me on Twitter @PSLohmann and subscribe to my email newsletter on my website, peterlohmann.com. I try to share as much valuable property management content as I can on a regular basis. Thanks again for listening and have a great week.