How Donny Thompson Manages 1900 Units With 10 People

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We pay hundreds of, if not maybe 1,000 invoices per month. You have to input all that stuff, make sure it goes to the owner's account, make sure the tenants get billed. But now with AI, you know, we bought into that whole system. You take a stack of invoices and the system knows which owner it is, which tenant to bill it to.

To.

It's just crazy, the process that we have now. It used to be people, you know, now it's not. I mean, that's just the way it's going. Back in the olden days, I had to have a person for right around every 75 properties that we managed. And we grow consistently 10 to 15% per year, and I never add staff members. Just with all of the technology that just keeps evolving, it's just, you know, I think we've all heard this on the news, is that AI is taking over, and that's I mean, it's absolutely part of my company.

Welcome to Season 4 of Peter Lohmann's Podcast. This podcast is a show about all things residential property management, from property operations to sales and marketing to growing and managing your team. I'm your host, Peter Lohmann, co-founder of RL Property Management. For season 4, I have an exciting new guest each week. We go deep into conversation about problems facing professional property managers and the best ways to overcome them. Thanks for listening. Now let's go. Welcome back to Peter Lohmann's podcast. Today I am thrilled to introduce Donnie Thompson. Donnie is actually somewhat of a local competitor of mine, although we mostly operate and manage different property types from each other. But he is right here in Columbus. He's a good friend of mine. We've known each other for many years. And he's got some really interesting perspectives and practices that have allowed him to scale up to an incredible size with a very limited staff. I'm really excited to dive into this with you, Donnie. But if we could start by just having you give maybe 90 seconds of background, kind of who you are, what your company's up to, just so the audience has a little context before we get into the conversation.

Absolutely. Good morning, Peter. Thank you so much for allowing me to be on this with you. I've really been looking forward to this, and this is actually the first time I've ever done one of these. So this is an exciting experience for me as well. So yeah, a little bit about me. I'll just start from when I became a realtor, which is back in '05, is when I got my real estate license. And my very first client was an investor, him and a friend of his. And upon the closing, they were like, you want to manage this? I'm like, oh. What the heck, let's give it a shot. I'll figure it out. So over the next 4 or 5 years, I quickly realized that my niche was going to be property management. And I was actually mowing the yards, doing the service calls. Back then we had the big MLS books and I was also doing sales. So, so between like this '07 to about 2010 or so, I had a lot of people just start buying because of all the foreclosures and all that stuff. So I quickly grew it. From a couple properties up to, I don't know, maybe 65 to 100. And then as things just continually progressed, I went from, you know, 100 up to about 250 to 300. At that time, my son, which was 21 at the time, he came to me and goes, Dad, what do you think about me working with you? I'm like, that's all you had to say, son. So he joined me as more of an employee at that time because a lot of the responsibilities we have as property management, you have to be a realtor. So He went to Hondros, got his license, and then at that time we were about 350 properties or so. And it was almost a light switch came on and we just started just growing tremendously. And over the years, you know, we went from that one property back in '05 and we're pushing about 1,900 properties right now. So I mean, we're, uh, you know, year over year we keep growing. So I've seen a lot, I've done a lot, you you know, from being a grass mowing, tenant chasing landlord property manager up to where we're currently at, you know, within— my son and I are partners, and, and we have a tremendous property management staff, a great team, and I'm sure we'll get into a lot more of that later.

Yeah, so that's great. So 1,900 units, so that's big. I mean, that's, you know, I've seen some of the numbers, and that puts you certainly in the top 5% in terms of size of number of units managed. And one of the things that I've been fascinated by, and I'm, I'm excited to get in a conversation with you and dig into a little bit, is this is— you're, you're managing those units with a very low number of staff members. And I also want to paint the picture for those who aren't right here in Columbus and don't know Donnie. This is mostly— and tell me if you disagree— but this is mostly low-income housing type of product. Like, this is Class C properties in areas that, for example, we won't take management of. We actually refer a lot of that to you, and you end up picking up a lot of that work. Is that fair to say? It's mostly Class C?

Oh, absolutely. I always joke— I've even joked with you and our common friends— and anyone can manage A and B+ type properties.

I don't remember these jokes. You must be telling them to other people.

However, it takes special group of people or a special person to, like you said, manage like the B- and C-type areas. And that's— yes, historically that's our niche. I mean, that's, that's, that's what we focus on.

So to paint the picture even more clearly, what percentage of those, or how many units would you say are Section 8?

Uh, right now we're carrying a little over 400 Section 8 tenants.

400? 400 units.

Yes, thank you.

You know, that's more than half of my entire portfolio, right? Just for context. So, and for those of you who only have 250 units under management, you can imagine. Okay, so I want to dig into, so if you wouldn't mind, share what's the total team size at your company?

Okay, well, myself and my son, whether you want to, you know, we're also employees of the company. So, you know, we do particular job responsibilities. Various things within the company. So us two, and then we have 5 full-time staff members, and I have 3 leasing agents, which are basically just showing agents. They just go to the open houses. And then I have a couple of part-timers on top of that. So that's it.

Okay. All right, so that's, that's you.

You got a calculator?

You, your son, 5 full-time. So that's, that's 7 plus the 3 leasing agents is 10. And you said a few part-timers. So let's, let's round up and call that 12 full-time equivalent FTE employees for 1,900 units. So 1,900 divided by 12, so that's 158 units per person. The industry average, if you look at the NARPM benchmarking study that was done, I think was 47. So you're 3 times, 300% more efficient if, if you want to say it that way, than the average. So what's the secret? How are you managing that many properties, low-income properties no less, with such a small team size?

I noticed some things years ago. A couple of things happened. Number one, I'll start at the front end and work backwards a little bit. Once COVID happened, as many of us have learned, we learned how to do things differently. And one thing, I've always been a type of person, I'll sit back and watch stuff before I jump to conclusions or, you know, make changes or whatever. And then, when I do that, it's usually pretty quick. One of the things I noticed years ago, and COVID helped me correct this, was just how many people came to the office every day. I would watch my staff. You know, I used to— I had a lady used to work for us. Her name was Sally. And Sally, she knew everyone's grandkids' names. She knew who was in the hospital. She knew, you know, everyone. All of our tenants knew her. I think tenants just came to drop off their checks just so they could talk to Sally. And it wasn't a 10-second talk. Hey, here's the check. Hope you're doing well. See you later. They would be out there forever. So as I watched that, I was like, all right, so how can I gain an employee back if I don't have all these people? So we started messing around with stuff, and then shortly after, that's when COVID happened. So then we were forced to learn how to not have all that interaction with people. So that right there was my, my moment that I've been waiting on. Okay, never again will I have tenants. And at that time, we were probably only managing— well, only, but we were probably well below 1,000. So if you can imagine, you know, the first week of each month, we'd have a line out the door of people just waiting to drop off their checks and also talk to Sally. So once COVID taught us, hey, you got to do something different, that was my moment to say, okay, perfect, I'm going to blame this on COVID. I'm going to implement something different, and we're no longer going to allow tenants to come to the office. So that's what started just the freedom not only not allowing tenants to come to the office, but also no longer taking checks without charging the tenants. So if you can imagine having 1,000 checks coming to your office that you have to input all of those into the portals, I mean, it was just take— it was, it was one person full-time. So just that, just those two little things just saved me probably a person and a half, uh, you know, a full-timer and a part-timer just getting ready get rid of those two things.

Yeah, and I'm really glad to hear you say that because I run into a lot of my peers, maybe even some of you listening, who I've talked before— because we don't accept checks either and we don't accept money orders. We don't take payment at the office. We don't take payment mailed in. The only options that we provide are online payments for free, you know, ACH, or You can do it with a credit card for a fee, or you can take your cash and do the pay near me thing at CVS, Walgreens. I don't know, there's a bunch of like convenience store type places where you can take cash and pay your rent and essentially comes through as an electronic transaction on our end. So when we made that change, which was years ago now, and I was, I was singing the praises of how great it was, I had a bunch of people say, well, that would never work for us because we have a bunch of low-income properties. You don't get it. Right. And so you've made that change, and, and tell me about how it went. Like, what kind of pushback did you get, and how did you handle that?

Sure. So I just remembering back to that point, we all knew that it was going to be a huge transition for us. You know, a lot of our tenants were very personable with us. You know, they liked me, they, they like— at that time we had a much, much smaller staff, maybe just a couple. Not that we have a big staff, but we had, you know, we were short a few other people. And so we knew that that transition was going to be tough. It was going to be especially, you know, people that aren't used to using a computer or going to a Walmart or 7-Eleven, you know, to make those payments. And just, just the total automation of the whole thing. Hell, I carried a flip phone up until about 4 years ago. So even, you know, I myself, I had to make that transition to do stuff that would help expedite just all that process. I mean, I, for a year, I had people that were still driving 30 minutes to drop off their check here when there was a CVS right next to their house. So we really worked hard with those folks. It was a good 6-month process dealing with hundreds of tenants that just didn't understand that, that concept of doing that. And once we You know, we worked with them and worked with them and worked with them. But at the end of the day, you know, for us, it was just a huge success. And now, and now the funny thing is that the new people that we bring in as far as tenants, it's just a normal for them. They never knew the old days. Oh, you'll take— we can come to your office and drop off the check. So once you make that transition, you know, after a couple of months, everything going forward is a cinch. It's just the norm. There's no question.

Yep, I think I've found that to be true as well, is yeah, the new people coming in, they don't know any different. It's the same thing when you make a change, you know, with, with your employees. Like you make a policy change at the company and the old employees may gripe about it, but then you hire some new people, they never knew any different, so for them it's just normal.

Yeah.

All right, great. And the other sort of bold move that I associate with you, Donnie, is your position on phone calls. If I remember right, you don't allow residents to call the office. You provide other ways for them to communicate. Tell me about, again, how did you reach the decision to do that? And then how did you implement it? And what, how does it work now?

Well, same thing in, in my theory with people walking into the property, into the management company. I, I, I'm continually looking for ways to get rid of all the chatter and get rid of all the unnecessary— because we all know talking to someone live versus making them type it out into an email or text, it's a tenth of the time. I mean, because people tend to get more to the point versus all the other stuff that has nothing to do whatsoever with the point that they're trying to make. So that was another big process for us, and we wanted to be even better at our customer service, but we also wanted to cut down that time so that we could actually give better service to everyone in a whole, just because we're not wasting time on all the frivolous stuff that doesn't really matter on the topic that they're trying to point out to us. So, over time, we have really integrated all of our tenants Now again, new tenants, they're on board because they don't know about no-live-people. Oh, it's just, you know, they know who we are here in Grove City. It's not like we're, you know, out in California or, you know, in another country, virtual assistants. They're actually talking to us via texting or through emails. Now, what we try to convey to all of our tenants is like, look, we're going to keep it like this, not only to protect us, but to protect you. You know, because we're going to have everything in writing. And not only that, if I'm busy, guess what? Anyone on my team can pick up on that conversation and join in. So, and it's easier for us to transfer a conversation via an email or text, and we do everything through the system, through AppFolio. That's who we use as our management software. It's so much easier for us to see a history of a conversation. And, you know, and I tell the tenants all the time, look Yeah, I'm kind of holding you accountable, but guess what? You're holding me accountable. So, if I say I'm going to do something, or, you know, and that's your leeway into saying, Donnie, you told me, look at the text. So, we just tried to educate not only the staff, and it was a learning curve for them as well and for me just testing it out. But with everything that we do and the way that we communicate, and we communicate quickly. That was another key thing. You can't just let these damn things sit out there, you know. You got to act on them. And once the tenants see that trust, that, you know, yeah, you know, this is better because we're seeing the progression of how you're handling it. You bring in different people, you know, to maybe join in or whatever. So overall, I mean, and we do the same thing with our service calls, you know, we send out surveys after every single service call. And we're, we're close to perfect on every service call and the way that we interact with the tenants on the service calls. And there's no phone calls, everything's automated. You know, you, you send in your work order, we get right on it. We communicate through texting, through emails to schedule everything. And they just have— and, you know, I really— at the very beginning, some people may say, well, we can never talk to a live person. I'm like, "But look, you just made that statement 37 seconds ago because it's timestamps and I'm already talking to you. What more could a person ever want than that?" And they're like, "Well, you have a good point." So, we break those barriers and it seems to work very well with us. One thing I've learned years ago was the only thing that people want is a response. If they get a response in a timely manner, they see that the system works. So that's kind of the concept that we took on. We're quick to respond, we stay on it until it's resolved, and, and the tenants see the results.

I love that. So to summarize, there's no phone for residents, and I know you've said before that you do of course have a phone number available for property owners. Communication is text and email, and it sounds like you're doing all of that within AppFolio with their built-in tools for texting and emailing. That way there's a whole record of communication tied to that resident, to that lease that you can look back on. And yeah, I remember vividly when you first explained this about— and you were telling me how, just like you were saying, the residents were very resistant to this change, but once they texted and saw how quickly that you all were responding and how efficient it was, that they came on board and they got around— they you know, they, they got used to it and started to actually prefer it because it's— I remember you describing like every phone call is a minimum of 4 minutes. Like you never get off the phone in less than 4 minutes, but that can be literally a 10-second text message.

And you figure that up with, with approximately 1,600 tenants and all the issues, you know, we're doing 150 service calls a week. You know, I mean, how many of those conversations are we actually saving? By, uh, and the time.

So that's how you get to be managing 1,900 units with 12 people is take some steps in this direction. Today's episode is brought to you by AppFolio. The team at AppFolio gave me a lot of creative freedom with this sponsored spot, and I wanted to highlight a couple things that really impressed me about AppFolio. The first is they have been super early to AI. And if you want to learn more about how AppFolio thinks about AI and what the heck an AI factory is, which is an awesome internal phrase that they use that I think is one of the coolest things I've ever heard, go back last season and listen to the episode called What Is an AI Factory with Kat Allday. Kat Allday is the head of AI at AppFolio, and I did an hour-long interview with her to learn all about how AppFolio thinks about AI and property management. Basically what Appfolio has done is create a suite of products that they're calling Realm that are all AI-powered. And some of these have actually been around for years and are some of the favorite features of property managers who use AI. The newest AI product that Appfolio is coming out with is called RealmX. And if you haven't seen this yet or been on the beta for it, it is an incredibly powerful Conversational AI, similar to ChatGPT in some ways, but built specifically into your property management software that has access to your data and can actually answer questions and help you do your job. Learn more about AppFolio and RE/MAX at appfolio.com/ai. Thanks to AppFolio for sponsoring this episode. One thing that when I think about you, Donnie, and, and what you've built, It's always struck me, and you touched on this in the beginning, but you take time to, to really think about from a systems level how the whole thing is functioning. You take time to observe, figure out what's happening, and then you've never struck me as like being bound by what other people are doing, right? Like this idea of not taking checks or cash or money orders from low-income residents, or the idea of not having a phone number for residents. That's not something that you got the idea from someone at a conference. That was something where you were just looking out over at your business, seeing what was going on, and then coming up with a bold new idea and testing it. And I love that approach, and I wish I could— I want to provide some encouragement to listeners who are running their own businesses to be bold in the actions that you take. And just try stuff. Don't necessarily rely on what you're hearing on podcasts or what you're going to conferences and seeing. Like, have a little confidence in your own ability to, to look out at your business and do what's best for you. And if it doesn't work, you know, you repeal the policy and you go back to how things were. Donnie, for you, like, did that skill set always come naturally? Was that something you learned from one of your parents? Like, where did you get this ability to sort of observe and decide and then, you know, not be really bound by what others are up to.

You know, I used to— the way that I got into this business was I was in the printing industry, of all things, had nothing to do with real estate. And then I lost my job at that company. But one thing that I learned from— I've never been mechanically inclined. I think I changed my oil in my car one time, and I decided at point. That's something I would never want to do. But I learned from that owner of that company that he wasn't an electrician or mechanically a mechanic or anything like that. But as I observed him, he would always figure things out by just watching. And he would start at one end of a printer and work to the front end, and it was just a process of elimination. So, you know, he would get better at stuff, he would learn stuff. Obviously, I didn't get along with him at the end because I lost my job. But I've seen that, and I think part of that has kind of wore off on me as I watched how things were progressing. I'm real big on keystrokes. I'm always preaching at my staff keystrokes. If you've got to do an extra sentence, that's more time away from that particular thing. So, we're going to come up with a better way. And I've done the same stuff with all of our clients. You know, we have over 500 owners that we work for that own all these properties. And so every email, every text or whatever from an owner, I'm like, all right, so how can we take the same concept with the tenants and do the same stuff with the owners? So that was something I'm like, all right, so we got to start working on keystrokes. Let's come up with the top 5 questions owners ask us. And then what we did was I'm like, all right, we're going to make a freaking video. So someone asks you, you know, what's, what's, what's my water meters for a double? Oh, really? Okay, here. So Tammy and I did a video. So every time she— Tammy does all the PEMs and Guardian meters. So we created a video. It was 10 minutes that we went from start to finish on what exactly are the Guardian meters or the PEMs or whoever you're using. How do we install them? What's the cost? You know, what's the contract? So we, we do that. We did that video. So every time we get a question from an owner with a multi-unit property, instead of having to get on a phone call or shoot these long-ass emails, we send our little 10-minute video and they watch that. And then we tell them, if you're interested, let us know and we'll send you the contract. So we did that on probably 5 or 6 of the top topics that owners ask. And, and that, that right there, it's just the click of a button, drag the video in, and now we actually have those, all those videos in AppFolio because you can put those on the dashboard. So we, we guide all of our owners to watch these videos before you ask us a question, and then majority of the time we don't get those questions ever again.

Love that. Yeah, and the idea of like The keystrokes concept that you mentioned, the general principle being small repeated actions add up a lot over time when you're talking about big scale. So important. And that resonates with me deeply. You know, going back to my systems engineering days, I'm always looking for ways to make the system more efficient, to cut out unnecessary repetition or slack in the system. And I think It's easy to think to yourself, oh, well, this, this will just take 2 seconds. I'll just type this email and send it. It's really no big deal, but you got to think way out. Like, think 5 years of sending that email once every other week. How many times are you sending it? How long? How many minutes is that? I think my friend John Master has a saying that goes, minutes are hours and hours are pain. When you're looking at ways to make things more efficient and get your time back. So that's a great perspective that you bring. And I'm, I'm right there with you in terms of trying to find like, where are the areas that time is being wasted? Because in our business, property management, it's all about labor dollars. It's labor hours. It's really our only big true cost. We don't have big equipment we're maintaining. There's no large capital investments required in our business, but it's, it's actually the hours that we're paying for people's time. Is where all the money goes. So any savings there really just drops right to the bottom line.

Yeah. I mean, over the years, you know, as you're talking about that, I'm just thinking back, you know, I built all of this, you know, for the first 15 years I was doing this, I was figuring all this crap out. I wish I would have known then what I know now because I mean, technology, yeah, technology has helped out greatly. But all the time I have spent on the phone, I mean, one of the biggest, very first— and for all anyone listening that's brand new into property management, I get approximately right now 20 to 30 inquiries about property management per week. So that's from people, people like Peter, some of the other brokers here in town, other property managers that just send me just tons of leads because they just don't want to manage some of these properties.. And one of the things I did a couple years ago, every time I would talk to a new— no, this is a potential new client— 1 hour. They have all kinds of freaking questions. 1 hour. Back then, I was probably doing, let's say, maybe 10 a week. 10 hours a week on a phone call, on phone calls that I didn't know if I was going to get hired or not. It was just free. I, I've given the spill. And I was just— this, this is what kind of started me in doing all these videos. I'm like, there's got to be a better way. So I went out and bought a cheap camera, a cheap old microphone, and I told my son, I'm like, dude, I say the same stuff every single time. So I recorded a 13-minute video and anyone that wants to talk to me about property management, it's mandatory that they watch it.. And then if they watch it and they want to talk to me, those phone calls are typically less than 10 minutes because I answered all the most commonly asked questions. It was one take. I think I was in an old t-shirt. My hair was messed up. I don't think I shaved for a day or a couple or a week maybe. And I just, I stuck with that. And that thing's probably been viewed thousands of times, hundreds or thousands of times. Over the course of the last 2 years. And obviously it's worked to some degree because we've grown and, you know, people share it all over the place. Hey, I've seen your video on BiggerPockets, or— and I didn't mean for it to be like that, but it's just something that just kind of stuck.

And you've always been very forward-thinking that way, Donnie. I've always known that about you because I think video— you— this was years ago. I remember you first telling me about this video and I first watched it. And I think it's only just now in the last year or two that communicating with prospective owners by video is starting to catch on. So again, this was something where this isn't an idea you got at a conference. This was something that you just sat down and were like, listen, this is taking up a lot of time. How can we do this more efficiently? I find that people, they let fear really hold them back from trying some of these things. They're just so accustomed to doing things the way they always have done them. And they worry, well, what if the owner doesn't like the video? Or what if they feel insulted? And you just plow ahead. Yeah, whatever. We're getting a bunch of leads and we're just going to do this. And if it doesn't work and, you know, I don't sign any new owners up after a month of using the video, then we'll stop using the video. It's not, you know, it's easy. So I want to zoom in a little bit more on the low the low-income side of your operation, like basically how are you dealing with that? Because those properties are harder to manage for anyone who hasn't done this. They're actually harder to manage than a normal Class B property. And the owners want to pay you less, right? A lot of owners want to pay a percentage. And so the rent's lower, your fee's lower when actually it should be the other way around. A big part of that pain comes from dealing with Section 8. So for those who don't know, Section 8 is administered locally. So every city has like a housing authority, or actually it's usually in most cities there's 2 or 3 of them. In Columbus, for whatever reason, we only have one. It's called Columbus Metropolitan Housing Authority, or CMHA. They're the ones that implement all of the Section 8 vouchers and, and all of the payments and the inspections. They're in charge of all that for all of Columbus, and they are not easy to deal with. So how are you handling— I forget what you said, 500 or so Section 8 properties— how do you deal with CMHA? How do you just not rip your hair out? What, what, what's your secrets?

Obviously, you're one hour limit on this. We would never cover everything, but I've always kind of said in my mind that I hate dealing with Section 8 as a whole, but I love it as an owner of properties that have Section 8. I also love it for our owners. So with everything that you do in life, it's never always positive. There may be a little bit of give and take. You may hate doing a little bit of it to get to the ultimate goal. And obviously in property management, it's taking care of our clients. The owners and ensuring that they get paid every month. And, and one thing that, like I said earlier, that became aware to me, my niche was going to be lower income, you know, and, and that's just kind of where I fell into the life of property management. And then with that, you get a lot of Section 8 inquiries. And so we learned to— where I learned early on in all this to just figure out how Section 8 works. That was a big learning curve for me. But to fast forward to today, it has gotten better. You know, CGI is their, like, accounting team, or their boots on the ground, so to speak, for CMHA now. And that was a large, large impact on our company, just learning their, their new systems and how to deal with inspections and all that stuff. So with Section 8, you know, there is a lot of— it's probably better now than it's ever been just because we just have our systems. And it's just like taking on any other tenant. As long as you have your systems in place and you have different people doing different roles when it comes to a Section 8 tenant applying and then doing their paperwork and then doing the inspections, it's just all systems at this point for us. And it's actually pretty simple. Compared to what it used to be. But there are some headaches. But, you know, at the end of the day, and just referencing for my clients, which are the owners, at the end of the day, they just want paid. And one thing that I know beyond a doubt, that our Section 8 tenants probably stay 3 times longer than a regular tenant. So when you're an investor, I mean, your ultimate goal is to make money over the long haul. It's not to make money every single month. It's how much do you make over the entirety of a property and how long that tenant stays in that property. My goal has always been, and I see numbers as they start to get diluted as you absorb the cost of a turn and the lease-up fees and all that stuff, is you want somebody in a property for at least a year and a half. In my opinion, that is a good number for me to try to convey to my owners that, hey, you know, I'm going to do my best to keep a tenant in there for a year and a half because I think at that point you really start seeing a turn in your cost. You know, they just— over time, it just obviously gets diluted. So Section 8 tenants, you know, they stay for years. I mean, you know, sometimes obviously a tenant is a tenant, they'll, you know, they'll move after a year, whatever. But at the end of the day, they, they stay so much longer. So my owners don't give a crap how much I don't like dealing with Section 8. They just see their numbers. It's like, damn, this is pretty good. Because their tenants are staying so long, so that's less vacancy. It's no utility bills in the middle of winter. Yes, Section 8 does do their annual inspection and you have to do some repairs, but I always back-bill all the tenants for any above normal wear and tear, which is allowed by Section 8. A lot of people say, well, you can't bill Section 8. Oh no, they're regular tenants. We still hold them to the same account as anyone else. But it's just the longevity of a Section 8 tenant, which, which I would never stop not taking Section 8 tenants because I know my owners, along with myself, I have Section 8 tenants in some of my properties. It's a no-brainer. And Section 8 competes with the market. So it's not like you're having to give away your property. So competitive rates for rents, longevity of the tenant. I mean, you know, it's a no-brainer at the end of the day when you talk about income.

Got it. That makes sense to me. And how do you handle it when Section 8 requires repairs or even for a non-Section 8 property that it's obvious to you the tenant has reported a maintenance issue and repairs are definitely needed, but the owner doesn't want to pay for it? I know this comes up a lot with low-income properties. They're older, they're— they've been less well-maintained over the years. The property owners sometimes are harder to deal with. How do you What do you do when the owner's just like, no, Donnie, I'm not— that's more than— that's more— tell me if you've heard this— that's more money than I'll make in rent for a whole year. Uh, how do you— what's your response to that?

Well, those people are probably the people that have debt service, so if one thing goes wrong, they're profit— because they've taken all their money out beforehand, so they have no money to play with. So that's their own fault. But in the normal world, yeah, It really depends on what the level of what the tenant is asking for. If they're asking just for new stuff, just because they just want new stuff, we'll always go to bat for the tenant and say, hey, Mr. Owner, this is what the tenant's wanting. They want ceiling fans in a couple rooms. Can we do it? So those are requests versus an urgent service call, which would be, you know, we have roots in our sewage line. We got to bid for $3,000, you know, and the owner doesn't want to spend. Let's just go, let's go that route. So I mean, obviously you have different things, but let's just say that like Peter suggested, that an owner says, nope, I'm not doing it. So my very first response is, okay, look, the tenant— and let's pretend like the tenant hasn't called the city yet, city code violations, for, for an officer to come out. So my first defense is I'll say, look, number one, this is going to destroy your property. This issue is always going to be there. So you're going to pay less now than you will a month from now, potentially. So let's just deal with it. If they still say, nope, not going to do it, my next phase is, look, they will call the city. The city will come out and look at their complaint. But guess what, Mr.

Owner?

Not only are they going to go look at that clogged line, they're going to go through the basement. The first floor, the second floor, the attic, all around the exterior. So I'm going to go from a $3,000 repair to potentially double that because they're going to find so many other issues with the property. They're going to tear the hell out of this property. And then guess what, Mr.

Owner?

If you don't do it at that point, we're going to go to environmental court. Yep. Sure enough, here we are. So I'm going to have to hire an attorney. 'Cause I can't represent you because I'm an owner, because I'm not an attorney. So we're going to be paying, you know, Michael Cassone $250 an hour to go to environmental court, figure 4 or 5 hours at that. Plus, since I forewarned you about this, I'm going to charge you extra on your management costs because you're going to have to pay me to go stand before the environmental judge for them to tell me you have no choice, you have to do it. And then I'm going to call you back, you're going to incur all these extra bills. And there you go. So why don't we just, why don't we just do it now so that, you know, it's just the way that you explain stuff to owners versus, you know, I, you see my, my theory with all that. I just try to take them from the beginning to the end and, you know, try to show them this is the easiest route.

You're so good at like painting a picture of what it's gonna be like. Like I was even just like kind of getting the shivers as you were walking through that explanation of all the pain and suffering. All right, that's awesome. I love that as a technique. So that's your tip for the day of dealing with owners who don't want to spend money that's necessary at a property. Just walk them down the path, right? Hold their hand and walk them down the path of what's going to happen if they don't make the repairs that are needed.

How much new business should a healthy property management company expect? Is it 5 doors a month? 10? 30? Hey, it's Jen from RentScale, and this is a question we get asked all the time. But instead of taking my advice, why don't you check out the RentScale Business Development Scoreboard? We run the largest community of residential property management sales professionals in North America. Currently, our clients are in just over 70 markets., and we publish the community stats every single month. You could check them out at rentscale.com/scoreboard. You'll see the current past trends, and you will see all of the scoreboards with average doors closed, lead volume, and how many of these business development managers are on track to their quarterly goals. Again, check us out at rentscale.com/scoreboard. /Scoreboard. You'll also find video walkthroughs by me where I recap what trends we're seeing in the market in any given month. So who qualifies to be in this industry scoreboard? Well, like I said, we run the largest mastermind and community of residential property management sales professionals, and we call it Scale Club. In fact, Peter's BDN happens to be one of the members at the top 5 on the leaderboard this month. Peter knows that winners keep score and that top-performing salespeople always want to level up and know where they stand compared to their peers as they hone their craft. I'd be happy to tell you more about this amazing mastermind and coaching program for business development managers and owners who are still doing the sales themselves. If you just go to Renscale.com/scoreboard and book a time with me. Once we get you into this amazing community, you too can be featured on our business development scoreboard. Our Scale Club coaching program includes weekly accountability meetings, monthly training, and quarterly forecasting. It's essentially what your own sales manager would do with your BDM if you had a sales manager. But RentScale lets you crowdsource the cost of having the benefits of that sales manager, plus a trainer, and a coach, all at the fraction of the cost of one sales manager salary. Our clients tell us that they couldn't imagine hiring or having a BDM without us. So go to rentskill.com/scoreboard today and book a time with one of us to discuss how to get the most out of your business development efforts. And then one day, maybe when someone asks you how much a healthy property management company should be adding in new business, You'll be able to show them results on your scoreboard.

So I want to hear a little bit more about your, what some people would call like your tech stack. So I know you mentioned you use AppFolio. What are some of the other software products and platforms and vendors that you're taking advantage of to manage 1,900 units with 12-ish people? Sure.

So one of the other changes that we made when we did all this was, uh, I, I used to use Realtors to do all of our showings. We would do individual showings, and, you know, we had just so much just time involved in that. People don't show up, you know, they, they sit there for a half hour waiting on people and they don't show up. So this, this has been going on for a few years, and we, we actually bought into Tenant Turner and to do all of our scheduling. And for us, it's been a good fit in this— in the market that I'm kind of in. The more people you have at an open house, the better, or showing. We hate doing just one person at a time, uh, just because number one, it doesn't create excitement or, or an urgency for, for a potential applicant to apply. If they think there's a lot of people looking, that tends to push them into, oh, I better hurry the hell up or I'm gonna miss out on this place. And then also with the, uh, the applicants that we get, obviously we have a lot of denials. So that's one hard— that's one hard thing for me to convey to my new owners is like, look, you bought into a B- or C-type area. I didn't tell you to do that, but you did. So now I'm going to manage it for you, but I need numbers. You know, I— my house isn't in— you know, the one maybe that we're trying to rent out isn't you know, Grove City, Upper Arlington, Dublin, whatever. So we need numbers. 1 or 2 people are not going to rent majority of our properties. So when I— and I communicate with all of my owners on a weekly basis on their vacancy and we try to come up with different strategies or how many applications have we received or how many denials, are we getting nothing? So we just kind of formulated some plans to do whatever we can do to get multiple applications to be able to get someone approved. And then the next phase is just to get the hold fee, which, you know, we could approve 5 people but never get a hold fee, which is commonly referred to as a deposit. So we have, you know, so we integrated a tenant turner which communicates directly to each person that's interested in seeing the property. And then we continually push those people to verify they're going to be there. And so I have one virtual assistant. That's his job. One of his jobs is to push the people to come to the, to the showing just to try to get foot traffic. So other than AppFolio, we switched over to AppFolio back in 2017, which was a game changer for us. And just with everything that they've integrated into their system that we bought into, which another one of the big time savers has been the, uh, the scanning of the invoices and and getting all those logged in. So we, that used to be keystrokes. And now, I mean, we pay all water bills here. So, you know, we pay hundreds of, if not maybe 1,000 invoices per month. So you can imagine if we had to, which we used to do this and which I'm sure you did at some point, you have to input all that stuff, make sure it goes to the owner's account, make sure the tenants get billed. But now With AI, you know, we bought into that whole system. You take a stack of invoices and the system knows which owner it is, which tenant to bill it to. It's just crazy. I mean, and so with some of these things, the processes that we have now, it used to be people, you know, now it's not. I mean, that's just the way it's going. And, you know, you, you've kind of stressed the amount of people that I have, but Back in the olden days, you know, I, I had to have a person for right around every 75 properties that we managed. And we grow consistently 10 to 15% per year, and I never add staff members because just with all of the technology that just keeps evolving, it's just, you know, I think we've all heard this on the news and, you know, whoever you listen to or whatever, is that AI is taking over and that's I mean, it's absolutely part of my company.

That's awesome. So, so AppFolio is a big part of this. You mentioned Tenant Turner. What other software platforms or vendors are you using, if any?

We bought into Zillow to market all of our properties that are vacant. It's really— that's it. And then, of course, I'm on Section 8's affordablehousing.com. We market all of our properties on their website. So that's the only other thing I pay for is that.

What about, what do you guys use for your phones? I know that you don't do a lot with phones anymore, but what phone system do you use?

Well, we just have a Google voicemail and the tenants just call into our, our tenant line and they leave a message, which then we're notified immediately. There's a message in there. And then our, our procedure is once we see what that message says, we go to the tenant's portal. And then this is another kind of going back to our original conversation about phone calls and texting and emails. That's another way that we've trained our tenants is they say— they see— they know that they just called us in, and probably within less than an hour, sometimes immediately, we go to their portal, we text them from the system, hey, we see you just left a voicemail, what can we help you with? Or we see that you have, you know, you have a concern about a service call, please go to your portal, submit the work order through the portal. And so that's one way that we try to train all of our tenants. And once they see that, our phone calls are like minimal. I mean, our voicemails, very, very minimal because we've got just such a good handle on this and showing people, well, yeah, you called, but guess how we responded? We didn't call you. We did everything through the portal. We texted or emailed you.

And what about after-hours maintenance?

Do you use a service for that or do you have someone just on call? Yeah, and going back to a point that I made earlier, tenants just want to hear somebody's voice sometimes just to be assured that they're being heard and that they know that someone is taking care of them. We used to use AppFolio to do all of our maintenance scheduling. And one thing that I learned very quickly is as they had turnover, once you thought you had someone knowing exactly what you wanted. They would do something totally opposite. So one thing that they, that they didn't know about property management, you have to look backwards a lot on service calls because you never want to bill an owner for 2 brand new water faucets within 4 days. So that's kind of the trap that we fell into. But on the other hand, I also knew that the tenants wanted to talk to somebody. So in my mind, I was going to have to hire 3 people to work 24/7 in order to field the phone calls. I'm like, that's, that's not happening. So what we ended up doing, we worked out a deal with AppFolio that they only take our phone calls on service calls and they create a work order. They don't assign it, they just create it. And so number one, the tenant talks to someone.

This is for, for after hours and like weekends, for any time, any, anytime.

Yeah. So they, they take the work order, they create the work order, and then I have a a maintenance coordinator that he then, he just watches for work orders to come in and then he assigns them based on what it is. He looks backwards in the system to make sure this isn't an ongoing issue. Maybe we have to send out the past contractor because we feel like they just didn't do it right. So that way, you know, so that way a tenant's covered. You know, we pay, obviously we pay some kind of a fee for that, but at the end of the day, we are the ones that assign the work orders to the, to the system, to a contractor. And then it's the contractor and the tenant's responsibility. This is, this is another time-saving thing that I do here is that we do not communicate with the tenant and the contractor once a work order is established. The tenant is notified. It's their responsibility to contact the assigned contractor. And then it's also the contractor's responsibility to contact the tenant we make them two marry up instead of us saying, you know, you know how that can get. That could be a whole day. So we've removed ourselves from all service calls once they're assigned, and then it's everyone else's responsibility to make it happen.

And if I remember right, you do all your accounting in-house. You're not, you're not using an accounting service or anything for your trust accounting or your corporate accounting?

Well, at the end of the year, we do have a third-party CPA that that does stuff for a broker to bring all those numbers together. But as far as all the inputting and owner statements and everything, we do it just in our office.

And you don't have in-house maintenance, right? So you're using third-party contractors?

Correct.

Okay.

I've never had in-house maintenance. To me, that is a, um, it's a huge cost. Now, if I were— I mean, I guess everything's relevant with, with the majority of our property owners buying, you know, B- and C-type properties. Their numbers are very thin. So I know that if I— I've investigated this multiple times over the last 10 years. For me to buy a couple work trucks, buy all the tools, you know, you get insurance, you pay somebody to drive around, you know, all that training. I mean, I would have to be charging, you know, $70, $80 an hour for that to really work for us. Instead of doing it that way, I just pay our contractors $45 a flat fee for maintenance calls. So it saves the owner's money and, you know, it gets me out of that middle and having to raise prices and all that stuff. I just, I've just never seen a benefit of that because all of our contractors have been with us for years. Our turn crews that we have, they've been with me for, I think the lowest turn crew we've got right now is probably 4 or 5 years, or all of our service guys multiple years because we just feed them so much work. They have no reason to go anywhere else.

Got it. So these are all 1099 contractors that you have long-standing relationships with and have negotiated, sounds like, pretty outstanding pricing for your property owners. You are correct. Yeah. Yeah, that's, that's really impressive to me. And knowing the Columbus market and how tight it is, especially— I mean, it's getting a little better here this year, but you know, going back 5, 8 years, it was really hard to find contractors and handyman guys who would go out and do small jobs, even do turnover work. So I know that you must have invested a lot of time to find and keep these guys and keep them happy, because frankly, those rates are very low compared to what these guys could probably go out and charge. Yeah.

One of the things that I've seen The way that I was losing contractors, number one, it's just because the history of the kind of properties I typically manage. You know, you got a lot of drug dealers, potentially. Not a lot, some, as we all have ran into that. Bed bugs, roaches, just unhealthy way that sometimes people live and some of the neighborhoods, you know, some of my people didn't want to go into the neighborhoods. I've lost a lot of contractors that way. But one of the biggest things that I realized, you have to take care of your contractors. If you don't have good contractors, you're screwed in this business. That's just the way it is. So what we changed over course of time, we used to pay contractors once a month, and then we went down to twice a month. Now we pay them twice a week. So if So as long as they work, they get paid twice a week. I mean, what— that's a perfect job for anyone to have, and especially if you're in the industry of doing contractor work. You know, most of those guys, you know, in their net 20, 30, 60, 90 days— I mean, they can wait forever even if they get paid. So, uh, we have developed this. The contractors absolutely love it. Obviously, they get checks and they get ACH payments twice a week along with build detail statements showing them why they're getting paid. And that just keeps them motivated, man. They don't have to wait for Friday. We pay on Tuesdays and Thursdays. So, you know, we give all of our draws for all of our major turns, you know, on those days. So all of our turn crews, they have money constantly coming in, whether they're getting a draw on a job or they're getting a final pay on a job that they just got done with. So that's just why I think, you know, we do a lot of stuff outside of work with our contractors, but I think the pay thing really turned the tide for us. I mean, we haven't lost contractors for years.

That's great. Yeah, I think there's a lot of wisdom there, and you're absolutely right about— we, I mean, we live and die by our contractor Rolodex, right? As property managers, even if you have an in-house team, you still need a deep bench to call on when there's problems at a property and your crew is either tied up or it's outside of their area of expertise. You need roofers, you need plumbers, you need electricians, you need turn guys, you need, you know, all the trades, even all the weird specialty ones like masonry work and stuff like that. You gotta keep those relationships alive, invest in them, make sure that you have 2 or 3 for every single trade in case an issue comes up with one or they're busy. I believe that any time spent working on improving your vendor network or deepening relationships with your existing vendors, I mean, that is time well spent. I can't think of any, any time that would be wasted, you know, investing in those relationships.

Yeah, I don't know how many times myself and my son, we would go to the, the busiest Lowe's and Home Depots in town, and we would just walk the parking lots when we were having problems finding vendors.. And we would just walk early in the morning and then at lunchtime when everyone's there picking up their stuff, and we would just hand out flyers, 40, 50, 60 a day, just farming for contractors to come and work for us. And what would the flyer say? Uh, just basically, you know, just some bullet points, a property management company managing hundreds or, or a thousand properties or whatever. We pay weekly or we pay twice a week. I think at that time it was weekly. You know, work at your own pace. You have to have your own car insurance or whatever. But we just stuck to the basics, and we would just walk around and talk to people. And I think I still have several of those people still working for us for those years that we used to do that, because it used to be tight.

It was hard finding people to work. Yeah, it really was. Okay, that's great. All right, so last sort of tactical item I wanted to ask you about is utilities. So utilities are a nightmare here in Central Ohio. There's so many different utility providers and none of them are easy to work with. So how are you dealing with all the move-ins and the move-outs and the, the direct water billing agreements and the sub-metering?

And, and tell me a little bit about how you've gotten your arms around that. Well, sure. Well, sub-metering, I, I don't make it mandatory that all the owners do it, but I, I go down that long road again telling them what could happen if you don't sub-meter. And how much of a benefit that it is. And all— I'm going to say almost all of my owners that have multi-units have all done the sub-metering, and they're very appreciative of us for suggesting that. So that one's— that one we've already discussed. Yeah, the move-ins and the move-outs, obviously that's a big— that's a big thing on us. We do have a process in place. Once a tenant moves out, we do immediately call the gas and electric company and switch those over into the owner's name. And then we just get those invoices monthly until it's re-rented, and then we get our final bill from the owner's name and we pay that, and all that's done. So the gas and electric, obviously, um, the tenants will put those in their names because those, you know, they— those, uh, those accounts do stay with the tenant, unlike the water, as you know. So the gas and electric would follow the tenant. So if they don't pay it, you know, the gas company and electric company will find them or never let them have the service in their name. Now, unlike the water, which the water's always been a nightmare in Columbus, that's always been something, uh, that originally with us was a struggle because I don't know how many times over the years, you know, an owner gets stuck with, you know, $1,000, $2,000, $3,000, $4,000 water bill. Because the tenant would have a leak or, you know, whatever, or they just wouldn't pay the bill. They move out, you know, it was in their name and they move out and the city division of water, they won't go after the tenant. That becomes a permanent fixture on the old property and the owners have to pay it. So what we did years ago is I had to come up with a way, how can we somehow hold the tenants accountable for the water usage? You know, if it was a single-family home, you're stuck. I mean, it is what it is. And let's just focus on single families because the majority of all of our multi-units are, uh, are sub-metered. But a single-family home, uh, so what we did years ago is that we, we just made it a policy that the water was going to stay in the owner's name. And we get the water bill, we pay the water bill, and then we make that a a debt on the tenant's— on the tenant side. So let's just say we get a $200 water bill, we immediately put— we pay the water bill off so it's always paid current. And that also gives us the opportunity to monitor. Like, if, if we see a $500 water bill come in, we know something's going on. So we immediately contact the tenant and say, hey, you have a leaky toilet, you have a leaky faucet, do we need to send someone out? So that's one of our ways that we help the owners and, and plus the tenants. I mean, if it's a good paying tenant, they just don't know to call us maybe about a high water bill. So what we do is we put that on the tenant's ledger and then we send them the invoice and we give them 30 days to pay us back. If we don't get that payment, we do our 3-day notices that will be on the, the 3-day for, uh, non-payment of water. So that has that has shrunk down the, the chance, any kind of a chance for an owner to get stuck with, with a high-paying water bill. Now, obviously, if a tenant goes belly up and they just can't make the rent, we have to, you know, file on them, evict them. Obviously, there's a good chance there's going to be a water bill on there.

But, but it's at most, it's at most one quarter's worth, whereas in the— absolutely— other situation where in Columbus, when you put it in the tenant's name and it doesn't actually really go into the tenant's name, but they start getting the bill. Years can go by where the tenant is deferring the payment on a payment plan. They get all this grace period from the city. Suddenly the tenant disappears. The city calls the owner and says, hey, there's a $2,500 bill on this property. You had no idea really that it was building up that way. And so I can see how that makes a lot of sense. Where you just don't even bother with putting in the resident's name, just keep it in your name or the owner's name and just do it quarter by quarter. That way it's a little bit of extra work on your end for facilitating that bill entry and payment, but you're never going to get a situation where the tenant is a year plus behind on the bill.

Yeah, because once you sign that billing agreement, the tenant billing agreement, that gives them the authority to negotiate forever. So they may say, Mr. Water Guy, I can pay $10 a month on this $500. Okay, sure, go ahead. And we'll let you, you know, you'll pay $10, you know, and it just, it just keeps accumulating until you've got, you know, $4,000 water bill, and then you have a tenant in court, you're evicting them for nonpayment because they lost their job, and now you're stuck. So that kind of helped us out. And I think it, for the owners that have been with me for 10+ years, I think that they would absolutely agree it's a much better plan than what the billing agreement. Now, Section 8, you can't do that. Section 8 does not allow a third-party entity to pay bills. So if you have, if it's a single-family home, it has to go into the tenant's name. So you cannot get around it that way. So Section 8 tenants, Uh, it has to be in their name because you're not allowed to bill them for utilities.

All right, Donnie, this was great. I love that we got into some of the practical, tactical details of how you've scaled up your operation and, and dealt with a lot of the challenges that this business can throw at us. For anyone who might be interested in learning more about you or your company, where's the best place they can do that?

Oh, they can just shoot me an email. I live on my computer. It's Donny, D-O-N-N-Y, at erarentscolumbus.com.

And then plus Peter, he knows me well, so he knows how to get the whole running. All right, well, thank you so much, Donny, for coming on the show.

This was great. Well, I appreciate you for allowing me to do this. It's been a blast.

Thank you, Peter. I hope you have enjoyed this episode. 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. Mm-hmm.