Special: Peter on The Barstool Investor Podcast

Welcome back to Owner Occupied. We're nearing the end of season 3, and for the next few weeks, you're going to hear syndicated episodes where I was the guest. I thought it would be fun for listeners to get to hear some more from me on the other side of the mic. I got special permission from these folks to republish their episodes in my feed. So thank you very much to them. Today, you're going to hear an episode of the Barstool Investor hosted by Anish Patel, who happens to be a property management client of ours here at RL Property Management. He's an experienced investor with 18 units in Central Ohio that we manage for him. Anish is a great interviewer and we go deep on a lot of topics I think you'll find interesting. I'll leave it at that and let Anish take it from here. Please enjoy this episode of The Barstool Investor on owner-occupied. Welcome back to season 3 of Owner Occupied on operational excellence in property management. Owner Occupied is a show about property management in the real world. I'm your host, Peter Lohmann, co-founder of RL Property Management. For season 3, I have a different guest each week and we go deep into conversation about what actually works when trying to grow and streamline your property management business. Thanks for listening. Now let's go. No, Peter, seriously.

Thank you for spending this time with us today. I know you're a busy man with a young growing family and a new baby as well. So really appreciate you, your willingness to chat with us. And for those who are watching their first Barstool webinar, Barstool Investor is just a community of like-minded individuals who share a passion for real estate. We're really a community of those who are just trying to get started and also those who have actually done quite a bit within the space as well for some time. And really our mission is to just help educate and inspire. And we felt that a really good way to do that is by involving, you know, very accomplished investors and just other players within the real estate space to speak in this webinar forum. So then that way you can all learn from their learnings over time. So Peter, again, thank you for joining us today. You know, I think what would be helpful is if you could just start with a brief background for the audience.

Yeah, absolutely. Thanks for having me. It's always fun to chat with other real estate folks and share a little bit about how I got to where I'm at, and hopefully that's valuable for other folks looking to take a similar path. So my background really is engineering. I have a degree in electrical engineering and worked as a control systems engineer for my first 5 years out of college. So I graduated from college in 2007 and then My best friend from high school, um, he and I had actually met in Boy Scouts. We both went through Boy Scouts together, both became Eagle Scouts, stayed in touch. Um, he went to OSU here in Columbus and I went to another smaller school, but he was a year ahead of me. So he graduated, got a, got a job at an engineering firm locally, and he was able to help me get a job at that same firm when I graduated. So I moved out here to Columbus, started working as an engineer, and he and I had always been kind of business-minded. We'd had like some goofy attempts at businesses, even back when in high school, we tried to do like a vinyl record to CD conversion business, and we did like 3 of them ever. So we immediately started reading all the classic books that I'm sure a lot of folks in your audience have read, like Rich Dad Poor Dad. Millionaire Next Door, even The 4-Hour Workweek had come out right around that time, I think. And we wanted to start investing, start making money. And so we saw a great opportunity in real estate during this time. So we bought our first rental property in 2008, the end of 2008. It's a single-family rental, it was a foreclosure. It's, we actually still own it. It's up near Ohio State campus area. So it's a student rental. And so we, we bought it just classic. We went over there nights and weekends, got our hands dirty, did all the work ourselves to basically flip it and get it ready for rent. And then we rented it out and we were self-managing during this time. We were, you know, for the next few years we slowly added about one single-family rental to our portfolio per year. While we were both working as engineers at our day jobs. So this went on for several years. And as we started to get more properties, you know, we looked into property management, but it seemed like everyone we talked to, because during this time we were going to a lot of these like real estate investor meetup groups. I think we even ran one for a while. And in talking with other investors, everyone like hated their property manager. No one had anything good to say about any of the local property management companies here in central Ohio. So we were like, hey, we're looking for an exit from our day jobs. We already have this small portfolio. We had like 5 or 6 single-family rentals. What if we just started a property management company? Because it seems like that's really a need here in Central Ohio. So we looked into what would that, you know, what it would take to do that. We got licensed and we partnered up with a broker friend of ours and Then in 2013, I quit my day job as an engineer and started RL Property Management. And when the day I quit, which was— we actually just celebrated our 10-year anniversary. It was in like March or April of 2013. We had no clients. All we had was our existing portfolio of rental units, which, like I said, single digits. Wasn't much there. And so day one, I'm in my apartment. We didn't even have an office yet with a computer, trying to put together a Squarespace website and trying to figure out how do I go find property owners to hire me to manage their properties. So muddled along and, you know, it was months before we got our first client. We finally signed our first client. He paid us with like a Chase QuickPay. So I have like a screenshot of that email when it came through as like our first revenue for the business. And just grew from there. So a year into it, when it, when it actually seemed like it was going to be viable, my business partner then quit his job and came on board full time. And then he and I built it side by side, eventually with a team all the way through to, to where we are today. Now, about a year ago, my business partner and I bought another small company that he now runs as CEO. So he's out of the day-to-day here at the management company, but He and I are 50/50 in everything, all the properties, all the businesses that we own. So that's kind of the quick version of my backstory and happy to talk more about any part of that, whatever you think is going to be useful for your audience.

Yeah, no, Peter, that's absolutely an incredible story and really kudos to you for the 10-year anniversary. I think there's some stat out there that shows how few companies that get started really even last that long. So I think that's a huge testament to the systems that you've put in place and the, you know, sustainability of your business. And yeah, it sounds like both you and your partner were very business-minded. You always had aspirations that seemed to go beyond having a W-2 job. But was there a specific moment or, you know, catalyst that where you just decided that, you know what, I'm not going to be a W-2 employee engineer, I'm going to make the jump. Maybe you remember a turning point in your life or something like that that really inspired you to take that leap.

It's hard to point to a really specific moment. I have a few vivid memories of this time. One of them is from the book Rich Dad Poor Dad. He talks about the four quadrants in there and I won't get them exactly right, but it's like employee, self-employed, business owner, and investor, maybe. Maybe you got that right.

Yep, that's right.

How you move from the quadrants and that really made an impact on me and I was immediately like, I want to move to the right side of this quadrant. I don't want to be self-employed. I don't want to be an employee. I want to be a business owner. And, you know, I was, you know, however old I would have been, 22 or 23 at the time. And the beautiful thing about being that young is that you think everything's easy, especially when you're an engineer. And so you're like, oh yeah, how hard can this be, right? And as anyone who's ever started a company will knows or will quickly find out is very difficult. But nevertheless, it really made an impression on me. I was like, I don't want to work for other people. I don't want to be adding to their enterprise value. I want to build something of my own. So I have that really vivid memory. And another vivid memory that I had of the time was just being bored out of my mind working as an engineer. It was, I'm kind of an extrovert and it's a very introverted activity. Um, I also like the work was just turning the crank. Like every project was exactly the same as the last project with just very minor differences. So I would just get the next project, same as the last project, turn the crank for a few months, that project's done. Next project, same as the last project. So never felt like we were really making any progress, uh, or that I was, you know, there's a great phrase about like, you ever hear someone say, oh, I've got 15 years of experience, blah, blah, blah. And it's like, well, do you really have 15 years of experience or have you had 1 year of experience 15 times? And that was what I felt like I was getting. I thought I had 1 year of experience and I was getting that over and over at my engineering job.

Wow.

That's—

no, that's— that's— I've never heard of it phrased that way. That makes a lot of sense. And it sounds like you also took the leap to start your own property management company. Before you had a lot of properties, or maybe I misheard that, and before you had any clients. And so yeah, I guess if you could just walk us through what was that decision-making like? What was that moment like? I mean, if you've been willing to share, how many properties did you have at that moment? And what gave you the confidence that, you know what, I'm just going to go all in here?

Yeah. So my partner and I together had 5 or 6 mostly single-family rentals, I think at that time, and we did not have any other properties. So in Ohio and in most states, you have to be licensed as a real estate broker or working as a licensed agent under the supervision of a real estate broker in order to manage property that you don't own for a fee, which is basically what property management is. And so I wasn't really able to build up a bunch of properties without having, being licensed and everything else. So when I, at the time I quit my job, yeah, we had zero clients other than the 5 or 6 properties that we owned ourselves. So that was definitely a leap of faith. I had some money saved up from working as an engineer and my partner was able to give me like a stipend to help cover my living expenses during this time. Which I thought was super generous of him until then, like later he was like, oh, and by the way, like I'm setting up a draw monthly to get paid back for that stipend I paid you a year ago. I was like, oh, okay. I didn't realize that was like a loan. Right. Right. Um, so yeah, I thought that was funny, but you know, that was, that was generous, uh, I guess. Um, and w— you know, gave me a little bit more confidence that I wasn't like fully full burn every month of all my monthly expenses.

No, that makes sense. And another thing that you mentioned in your journey was that, yeah, there was that aha moment where you would host meetups or go to meetups and it seemed like everybody complained about their property manager. And I think that personally, this is something that I've experienced as well and where you say, oh, how hard could it be? You just give it to a property manager and then you can walk away. And then you realize that not every property manager is built the same and Many property managers are very good at advertising themselves as well. So I guess for the audience, what were some of those examples that, what were the common complaints that you kept hearing from other investors and what might be some of the red flags or things that investors should be looking for when seeking a new property manager?

Yeah. So the complaints are always the same ones about property managers. Management companies and property managers. The classic ones are they never get back to me, right? I never hear back from my property manager. How many of you have heard that or have experienced that, right? You sent, you sent an email like, hey, why was my disbursement, you know, lower this month? 5 days goes by, you hear nothing, right? Or you call, no one answers. You leave a message, no one calls you back. So that's probably the most common one. You hear a lot of complaints around just like performance of the property. Hey, it's taken them way too long to find a tenant, or it's taken them forever to get the unit turned over and ready to rent, or they don't do a good job collecting the rent, or I've had this tenant in there and he hasn't paid rent for 5 months, but they haven't evicted him. So a lot of just like the kind of blocking and tackling of managing a rental property. And you also hear a lot of complaints around the financial reporting. I don't understand my owner's statement. It doesn't add up. I feel like, you know, even extending as far as I feel like my property manager is ripping me off or, you know, spending money that doesn't need to be spent at the property. Lots of like he said, she said when the tenant is involved, you know, my tenant is telling me that the property manager was never there, but they billed me for, you know, they, claim they were there that day. And, you know, a lot of that type of thing is common. So, you know, when we were hearing all these complaints over and over, we were like, well, what we really thought was, how hard can this be? You know, what's the problem? What's wrong with these idiots, you know, managing properties?

I'm sensing a theme here.

Yeah. Well, it turns out that when you have a whole industry that's kind of hated or underperforming, there's usually some systemic problems that's driving that. It's not just a coincidence that all the stupid people become property managers. It's that property management is actually really, really difficult. And there's some almost intractable issues and problems and kind of conflicts that are intrinsic to the nature of managing property that you don't own that make it really hard to make everyone happy. And so it turns out that a bunch of those people probably have unrealistic expectations. A bunch of those property managers probably are kind of bad. And then there's a bunch in the middle where it's kind of like you're only getting one side of the story and maybe there was a mistake made, but the property manager has actually tried to make it right. And like the property owner overpaid and now they're kind of taking it out on the manager and there's all these like complexities and, um, conflicting. One of the hardest things about being a property manager is that you are, you are in the middle. You really have two customers and their interests are opposed, right? You've got the property owner who wants maximum rent, minimum expenses, and you've got the resident who wants minimum rent and maximum amenities and instantaneous response times. And you're in the middle and you have duties and obligations, you know, legally and morally and ethically to both of those parties. So very, very hard to do amazing and make everyone happy. And that's the business I decided to start and grow.

So here we are. Yeah. So, and then I guess, you know, how— so there's a couple of questions I have that came out of that. So you mentioned some of the, you know, some of the issues, the complaints that people consistently seem to have about their property manager. If someone is entering a market where, you know, your property management firm doesn't exist, let's say they're trying to start up in Florida or Alabama, how might they, what would you suggest to prospective investors around how they might diligence that property manager? What are some red flags that they should look for? Are there specific questions that they should be asking?

Yeah, so there's a few things you can do here. I'm not going to cover the obvious ones. Of course you should look at Google reviews and call and talk to them and check their response times and stuff like that. You would that with kind of like any vendor you were looking at hiring. With property managers specifically, one thing you can do is go on their website and look at their properties that are listed for rent. This is super powerful. There's a few things that you can pull out of this. One is how many listings do they have? And that's going to give you a sense of their size. So if they've got like 2 listings, and you're trying to bring them 50 units, you're probably going to be their biggest client. And that is not necessarily a great thing because you're going to, you may overwhelm them with the volume that you're bringing. On the other hand, if you've got one single-family rental and you go on their website and they've got 59 listings, you're going to be a small fish in their relatively big pond. Now that doesn't mean they're not going to do a great job. Maybe the reason they got so big is because they're excellent, but it just, you might want to look into that. So that's the first thing is like how many listings. You also want to look at what are the types of properties that they have listed for rent and are they similar to your properties? Ideally, you want like a one-to-one match. You want the types of properties that this manager is managing to align very closely with the types of properties that you have, because they're going to be experts at that, right? If it's all Class A stuff that they have listed and you're bringing them a C-class property, And that's not going to go well at all and vice versa. Right. So you want to match there and same thing with like property types. So single family versus multifamily location, like all that stuff, you're going to want to try and find a match so that you can just slip right into their systems and processes. And they obviously have figured out how to manage that asset type. Okay. So the other thing you can do with the rental listings is you can go check them out. So if they're listed for rent, you can do like secret shopping and just literally go and pretend you're a tenant who's interested in renting the place. See how their leasing team is, like how responsive are they to phone calls? How easy is it to schedule a showing? You know, if you do schedule a showing and take a tour, you know, was the leasing agent on time? Were they friendly? Were they professional? Did they follow up after the showing? Like, and then how well did they prepare the property for rent? Like, how would you feel if this was your rental and they were listing the rent, the rental in this condition to prospective tenants? So a lot of information to be gathered from that rental listing section of the property management website. And you could even go so far as doing some skip tracing to get a hold of the property owners who own those properties that are listed for rent, call them. And say, hey, looks like you use XYZ property manager. I'm thinking about using them too. I know you're busy, but would you mind taking 2 minutes? Can I just ask you about how your experience has been with them? I think that's a great way to get an unbiased view because of course you can call and ask for references, but what's the point in that? They're just going to give you references that are going to rave about, about the company because of course they are. And even if that's only 50%, right? 50% of their clients hate hate them, you would never know that because they're not going to put you in touch with those people. So yeah, there's a few ways you can kind of get clever with that stuff.

Wow. That is really practical feedback.

No charge for all that info. This is all free.

That's great. No, that's really wonderful. And yeah, I mean, you know, I don't think I've ever actually done any of those tactics. So that's, that's something that I'll be taking as a learning. And then, and then, you know, you also mentioned that it's an industry that's very challenging., and you decided to take it on. And, and, you know, as, as someone who does, you know, work with you, like, I can, I can definitely attest to the fact that it's been a very different experience relative to other property managers that I've worked with. Um, but for anybody that's listening to this conversation and is contemplating, hmm, maybe, maybe I should start my own property management firm, you've already said that it's not for the faint of heart, but what are some little things that, you know, if someone's setting out to do to do this, to like actually start up their own property management firm that they should consider or implement in order to have a successful business?

Yeah, I mean, there's a lot to talk about there from a high level. First, you need to understand the licensing requirements in your state and make sure that you're— you have that all set up correctly, whether you need to be an agent or a broker working under a broker or what have you. And then you also, you need to get really specific about the types of properties that you want to manage. So one thing I didn't mention is when you're looking at a potential property management company and you're looking at their rental listings, one of the things you want to look for within their rental listings is a consistency of asset type. If the property manager has a 30-unit multifamily and a duplex and a Class A downtown and a Class C junkie property in the bad side of the tracks. Like, they're all over the place. And so they're not going to have developed efficient systems and processes because how could you when you're managing 15 different types of properties in all over the city, right? So, so you need to be thinking about this. If you're thinking about starting a management company, what are the types of properties that you want to manage? The fewer, the better, right? Like the more narrowly you can define what you're going to be great at, the easier it's going to be to scale up, right? The saying is niche down to scale up. And it's counterintuitive because you're going to feel like, well, if I'm only managing like Class B single-family, like, and I— and a guy with a Class A 20-unit comes to me, I'm supposed to say no to that? Like, how does that make business sense? But it actually does, counterintuitively, because in the long run, if you just say yes to everything, you're going to be pulled in a million different directions. You're not going to do a great job at anything. And it makes your job harder in every dimension, marketing, sales, operations, financial modeling, and forecasting. Like all this becomes really difficult when you have too many SKUs, you know, that's what they would say in like the e-commerce, right? Is like too many different types of products and services that you're trying to offer. Um, so if you get really narrow and specific there, it then becomes really easy during conversations with potential referral partners, which is a big part of growing a property management business, they say, oh, what do you do? What are you up to these days? Oh, I'm a property manager. Okay, great. What types of properties do you manage? Right. Which is more memorable? Someone says, what type of properties do you manage? Oh, we manage everything. You know, anything that you have, we'll manage it. Or, yeah, you know, we've really narrowed in on 10 to 50 unit Class A on the northern half of the city. So if you know anyone who has that type of property, that's really what we've zeroed in on. That is compelling, right? That gets someone's attention and they're like, oh wow, like this guy's really specific with what he's trying to do. And it also helps them. It's much easier, weirdly, to think of someone who owns a 10 to 50 unit Class A on the northern part of the city than it is to just think of someone who owns real estate, right? Like it's like, do you know anyone who owns real estate? You're like, oh, I can't think of anyone. It's like, someone asking you what's the last book you read, your mind just goes blank. Um, so the more specific you can be, just everything trickles down from that. I don't know how far you want me to go on starting a management company because I could probably talk for like 8 hours on that, right? I'll pause.

No, I think— no, I think that's, that's really good. And I'm sure we should probably have you write a book actually, um, uh, on it because I'm sure that the, you know, the details are never-ending. But I think what you just outlined there is probably relevant to anything, not just property management, right? It's starting your own business. It's being a real estate syndicator even, right? How many people do you hear that as investors that, "Hey, yeah, I'm interested in single-family, but also short-term rental, but also multifamily. And then, hey, I just learned about self-storage and travel nurses." I think as a fellow Charlie Munger fan, right? He often says, "You want to stay within your circle of competency and you have to know what your circle of competency is as well." Because for any decision, it's either, "Yes, I know how to do that." or no, it's not a good idea, or I don't know enough about it. And, and I love the phrase that you shared as well, which again, I'd never heard this one, but niche down to scale up. I think that's exactly right. There is efficiencies and economies of scale that are gained once you actually, you know, define, you know, what your focus is. So I think that's all, that's all very, very well said. You know, I also want to just pick your brain a little bit on like, as a former W-2 employee, right? And someone who is an engineer, I would love to understand, you know, how, if at all, you feel like you've been able to leverage some of the skill sets and learnings that you gained as a W-2 employee as a real estate player. And I think the reason why I want to ask this question is because I often hear other investors that are saying, hey, what do I know about real estate? What can I really bring to the table? And I think corporate America often trains people to think that, oh, you can only be a product manager that works at Google, for example. But there's actually transferable skill sets. So I just love for you to be able to share that with the audience as well, because sometimes these definitions and these specific roles and titles are artificial, right? And at the end of the day, I am a firm believer we're all just trained to be problem solvers. But would love to hear from you, you know, how you've basically leveraged your background in your current career.

Yeah, absolutely. So, you know, my engineering background really prepared me well for property management. It's a lot of, of how do you break down a problem and analyze it and problem solve. That's been really helpful in property management, which is just nonstop problem solving. But not everyone's going to have that to fall back on. I think more generally, I learned a few things at my W-2. I had two different engineering W-2 jobs for two different companies, both pretty small. One was I really got clear on how it was to be an employee and what I liked and what I didn't like in a manager and in an employer. And I actually took notes. My partner and I took notes on here's what you need to provide W-2 employees if you want high performance from them, you know, full autonomy, the tools they need to do their job, you know, trust by default. Like we had a list of things that we swore that when we started our own company and we, if eventually we had employees, which at the time seemed like a crazy fantasy that we would ever make enough money to have employees, um, we, we wanted to do this for them. We wanted to treat them the way we had wished we had been treated as employees and the way we felt was proper, um, to have an employee and employer relationship. And like one of those things was, you know, a lot of employers, they, they want, they want to cash in on the family metaphor and, oh, you know, we're family here. And so they want you to kind of work hard as if you were family. But then when there's a downturn, you don't, you don't get to just stay on payroll because you're quote family. They're going to let you go, right? So they don't, they don't fulfill their end of that bargain. And so you can approach that in a couple of different ways. But the way we approach it is we're never going to pretend that we're family, right? It's more like a sports team analogy where I'm not— I didn't come up with this. This is, you know, I've heard other people talk about this. It's a sports team, right? We're going to assemble a group of high performers. We're going to work well together, but there may come a time when you need to part ways or we need to part ways and bring in someone else who better fits the team. And it's not necessarily personal and there's no expectation of like an infinite employment.

Right.

So, so that's something we took away. The other, the other thing is I was able to see how business worked to a certain extent because I didn't grow up in a small business really. You know, my mom, uh, did run her own business out of our house, but it wasn't like, um, it wasn't like a main street, even as big as a main street business with employees and such. It was like a family farm. Um, so being able to just observe, like, you know, how you set up a small business and how it operates, even to the small amount that I was privy to as a, as a relatively low-level engineer. Was still interesting and useful to me, observing how the owners acted, how the managers acted, how the employees acted. How do you run payroll? How do you hire? How do you train people? Like, how do you lay out an office? Like, I don't know, just random weird little stuff like that, that was helpful versus if I would've just tried to start from zero, like right out of college.

No, wow. That's really well said. And you know, I think as you were talking, like, You know, it sounds like how, you know, you seem to have an idea of how you like to show up for your employees. You know, I wanted to ask also, how do you expect investors to show up for you? So, you know, are there certain investors that you would just never work with or, you know, cut ties with because you feel like they're just not a good customer? You know, and I think relatedly, As a follow-up question, how can investors ensure, like, set up their property manager for success? Like, are there ways and things that the investor can do? And maybe it's doing less, quite frankly, and— but I'll allow you to answer that, um, to make sure that the property manager is teed up. So I'll— yeah, two-part question.

Okay. Yeah, um, you know, we definitely take a close look at, at our, our clients, so the property owners, the property investors, As much as they're interviewing us during the sales process, we're interviewing them. And we actually turn away over half of property owners who approach us to work with us, usually because their property is in an area that we don't service, but other reasons too. Big one is going to be unrealistic expectations. Some property owners, if they don't have a lot of experience with real estate, And maybe they just took a high-dollar course or went to a seminar and just bought some property sight unseen. And they're just talking about, you know, well, the rent's $1,000 and your fee is $100, so I'm going to get $900 every month, right? And just, you know, no concept of the operating expenses and capital expenses associated with running a property. So that's one thing is it just if we can tell right off the bat, we're not— we're literally not going to be able to meet their expectations. Anyone who's just outright rude and/or mean to team members, either during the sales process or even once they become a customer, you know, that's a non-starter. My employees are just honestly way harder to replace than my clients. And so I'd rather lose a client than lose an employee, as harsh as that may sound. It's just, this is our day-to-day, right? We work, live, work here in Columbus, most of us, or even some of us around the world. And we're not going to— this isn't a retail store. We're not going to just take abuse just because you had a bad day, right? That's just not going to fly. I don't know, maybe that's the wrong attitude, but that's how I've always been. And so, and we, you know, we, I would say every year We've got, I think we've got about 230 property owners who, who own the 600, 700-some units that we manage. And I would say every year we end up parting ways with maybe 1 or 2 that we decide like, hey, this just isn't working out. But it takes a lot to get to that point. You're not going to accidentally send an email and suddenly we fire you. Like, it's a pattern of just Absolute ridiculousness. You know, there's the old, you know, the 80/20 rule, right? Like, so it really is true that 20% of our clients take up 80% of our time. And it's even worse. I mean, there's probably like 2% of our clients that take up like 50% of our time just because nonstop questions, nonstop complaints. Hey, why did your guy charge $50 to cut the grass? I've got a guy who charges $40. I need you to call me right away. Like, just you know, just total mismatch in terms of the value that we're offering versus what, what they're expecting, I guess. What was the second part of that question?

Yeah, the second question was, so how can investors set up their property manager for success? What are things that they can do to help them, you know, to make sure that it's a positive and productive relationship? Yeah.

So I think first is going to be providing the property manager with as much information about the property as you can. Everything from inspection reports to anything you know about the tenants, the history, the lease, of course. You know, even better would be like the utility companies, the trash company, like a lot of these kind of nitty-gritty details that seem kind of stupid when you're buying a $600,000 asset. You know, people, I think they get annoyed like this property manager is asking me about the water company. Like, isn't that what I hired them for? But It's actually kind of really hard to find a lot of that info out if you don't know it already. It's really weird. Maybe it's an Ohio thing, but so just, yeah, as much communication and information as, as, as you can give us, especially in that first like 30 to 60 days, is really crucial. So like responsiveness and being available for us, that's going to help us set your property up for your success in the long run, which is what we're trying to do. There's— it ends up that the work related to property management is super front-loaded. So that first 30 to 60 days, we are putting in hundreds of hours, you know, on a larger asset to get it all set up, get familiar with the property, get familiar with the tenants, read through all the leases, get everything set up on our systems, right? And then over time, things get easier because the property is kind of like settling into a groove within our company. And so that means the property tends to perform better over time and we tend to need less from the property owner as time goes on. And also we start to become more profitable and you start to become more profitable as the whole thing just kind of settles into a nice cadence. And we've got residents that we've screened in place and maybe we've had 1 or 2 turns that have, you know, caught up the deferred maintenance and CapEx items and stuff like that. So I would say patience would be a huge one on the part of property owners. These things take time to work. And so being responsive when we need something and then patience on performance-related items goes a huge way. And then the biggest one, maybe the last thing is just giving the benefit of the doubt. So like inevitably, and I, whenever I don't talk to customers too much these days, but whenever I do, one of the things I tell them is, You're going to find a mistake. I guarantee we are going to make a mistake and you're going to find it and you're going to be mad and you're going to call me. I'm telling you this now, it might not happen for 2 or 3 years. When that happens, I promise you 2 things. One, we're going to make it right and we're going to be polite and professional about it. And 2, we're going to look into how it happened and try to fix our systems so it doesn't happen again. So all I'm asking from you is give us the benefit of the doubt and engage in a respectful two-way dialogue when you do find a mistake. And this is going to work really, really, really well.

Wow. All very, very well said. You've clearly, you know, thought through this quite a bit. You know, I think, you know, I want to make sure that there's enough time for Q&A. But, you know, just a few, few additional questions. I don't think we ever got— how many doors do you currently manage today?

Yeah, we're like 600-something right now. Okay.

And, and, you know, that's starting obviously from zero, you know, not too long ago. Right. And, you know, that's, that's a decade being in business. So I guess as you scaled, you know, from zero to 600, you know, how, what, what was your— was it all through word of mouth or like how did you, how did you really scale, you know, this business? And also, you know, what I've read and heard in multiple places that a company transforms quite a bit every time it,, you know, grows by another 10x and maybe it's even a lower multiple than that. So I don't know if you could speak to that a little bit further as well.

Yeah. So in terms of growth, there's no real like secret sauce here. It's, it's kind of— so property management kind of falls into the category of like a home service business. It's like a plumber or like a house cleaner or something like that. So a lot of those same marketing channels are going to work pretty well. Like Google Reviews is huge. Really, really big. SEO, right? So when someone searches Columbus property management, we tend to be in the top 2 organic search results. You can do paid Google results. So you show up even, you know, in the paid results there for that search term. Definitely referrals. So existing client referrals and then a lot of real estate professional referrals. So anyone who's involved in a real estate transaction, lawyers, Realtors, brokers, CPAs, title company people, lenders, all those people are in a position to refer their clients to us if they work with investor clients. And so we work at developing and maintaining those relationships. We do— what else do we do for marketing? Yeah, it's, it's just a lot of little stuff that adds up over time. Just consistently doing, consistently showing up. A big one is showing up at like the real estate investing groups around town. I did a lot of that in the early days. I would go to every real estate investor meetup group I could find and just, you know, introduce myself and get to know people. And I think a big mistake people make here is that they go to these events, which is great, but then they show up and they're like, Hey, I'm Jeff. I run a property management business. Do you own any real estate? Right. And it's like, they're just pushy about wanting— it's super obvious that they're there to get business. And that's very off-putting if you've ever been on the other side of that. So what your goal is, is if you go to these meetings, you're there to make friends. That's the only reason you're there. You're there to make friends and provide value. And if you do that over time, the business will come. So go, go into there, like recite that to yourself in your mind when you pull into the parking lot. I'm just here to make friends. I'm here to meet cool people, hear what they're about and what they're up to, and try to help them if I can with advice or, you know, introductions. And then trust me, they will figure out what you do. And if it makes sense, they will reach out about managing their properties. So that's a big one.

I love that. And I think that's networking 101, right? You know, you're here to make friends and relationships first. So yeah, I would love to, you know, that's a really good lesson. I'm starting to see some really good questions come into the chat and allow them to actually ask it directly. But, you know, as I kind of just land my plane, you know, Peter, you clearly have a really solid business mind. I mean, I think just in terms of, you know, how to think about, managing employees, how to think about customers, how to think about scale. What types of resources would you recommend to others that are trying to start their own businesses, whether it be a real estate investment, whether it be their own property management company, or whether it even be a company that's, you know, outside? I guess, are there certain books that you, you know, or, you know, podcasts or other types of resources that you recommend to anybody?

That's, um, yeah. So the number one book I recommend to anyone looking to start a business or who's running a small business with under a million in revenue is a book called The E-Myth. Um, actually this book had been recommended to me for years and I ignored it because I thought it had something to do with like, um, online businesses. Like I thought E was like email or like dot-com stuff. Actually it has nothing to do with that. Entrepreneur is what E stands for in The E-Myth. And the book is all about the mindset shift that it takes to go from being a, what they call a technician in the book, which is someone who's actually doing the work. So in the property management world, that would be the person who's showing the units and, and screening tenants and doing the property inspections, like moving from that to being a business owner who hires people and designs the system to ensure the work gets done. That mindset shift is very difficult for a lot of— for everybody, actually. I'll just say that. It's hard. It was hard for me. It's hard for everybody. And so a lot of people tend to get stuck. And you see this with a lot of Main Street businesses like bakeries and hardware stores and like the owners, like working in the business, like making the bread and working the register.

Right. And that's—

if you love doing that, great. By all means, do that for the rest of your life. But if you want to grow a company that's going to generate life-changing wealth, you need to sort of graduate from that role. And there's a big problem with that in kind of the culture of America, which is like very infused with this Puritan work ethic about you have to work hard and your results are directly correlated with your amount of hard work and effort. And that's actually not true at all. Your results are completely disconnected from the amount of hard work and effort, there's no correlation. There's people who work hard who make no money, and there's people who work not at all and make tons of money. So you need to figure out how to sort of disconnect those concepts in your mind so that you give yourself permission to level up within your business and hire employees and design systems and, and be able to scale up. Um, so that, that's a book recommendation for anyone who's, who's in that phase. If you're over a million in revenue and looking to grow your business, I always recommend the book Traction, which is all about a system called EOS, which is like a way of running a small business more effectively as you grow.

That is awesome. Thank you. I'm actually listening to Traction right now and I'll email it to my list. So I'm going to ask you one last question, which is, Peter, Who else would you recommend we bring on to this webinar?

Oh, hmm. Hmm. Well, so tell me a little bit about your audience. Yeah.

So, you know, Barstool Investor, it's a community of just, you know, largely newer investors to real estate, but also includes some more experienced investors as well. It's sometimes, you know, there are also individual individuals who aren't even in real estate, but, you know, they trade options. And, you know, we have one individual that even has his own hedge fund. So it's pretty diverse, but in general, largely newer real estate investors.

Okay, gotcha. So if you haven't, I would consider bringing on some of those real estate professionals I was talking about who are involved in transactions. Those people tend to have a lot of value to add CPAs, broker, not maybe not brokers. Everyone hears from brokers enough. Like even like title company people or mortgage brokers. That's an interesting one. Not a captive mortgage servicer, but a true mortgage broker who has the ability to source debt from multiple banks and— I don't know, getting outside my area of expertise, but yeah, those are always really valuable. And if your audience is predominantly in a specific geographic area, bring someone in from that area who services that area.

Awesome. Thank you. And actually, sorry, one last question. RLPMG, Peter Lohmann, if you could just give a little bit more about the property manager firm, and you've obviously shed a lot of light around your approach to business and how you manage clients, but for anybody who's looking to potentially work with you, what's your scope, geographic scope, and how might they be able to get in touch with you?

Yeah. So RL Property Management, we're just Central Ohio, so Columbus and the neighboring suburbs. We generally focus on Class B properties. We do both single-family and small multifamily. And that's really all we do. So we don't do brokerage, we don't do association management, we don't manage large apartment buildings like 100+ units. So if you have a nice asset in Central Ohio and you're looking for good management, you can check us out. Our website is rlpmg.com, or you can find me. I'm really active on Twitter talking about real estate and property management. I've got a website and an email newsletter as well, and a podcast too that I'm getting ready to start back up. What's the Twitter handle?

@pslohmann.

Okay. If you just search Peter Lohmann Twitter, it should be like the first one. Got it.

Perfect. And there it was, the very specific description of what you do to bring us full circle. So yeah, with that, thank you so much, Peter. I'm going to open it up for the Q&A. It looks like we do have one question from Seth, and it looks like he's in a loud area, so I'll ask on his behalf. Increasingly, I hear that property managers are the best sources for local off-market acquisition opportunities.

True?

And assuming so, what advice do you have for out-of-state investors who are interested in getting to know you but not immediately hire you? And it sounds like you already answered the latter, so more the first part of the question.

I am not a great source for off-market real estate deals. I have literally never heard of an off-market deal, taken it to a client, and had them buy it. In fact, I find that Property managers can sometimes be the last ones to know when their property owner's getting ready to sell an asset. So I hear this a lot too, and maybe that's true for other property management companies, but that hasn't been my experience. Part of that might be because we don't do brokerage, and so our property owners just aren't naturally talking with us about when they go to sell their assets. And, you know, the second part of your question is relevant. I would say you got to be a little bit careful when you don't yet own a property, but you want to talk to a property manager. It's kind of like the guy who walks into the car lot and he's like, I'm not going to buy today. I mean, I mean, you know, I'm looking like 6 months from now, I'm going to be buying a car, right? And, you know, the guy, the salesman's just kind of like, dude, like, I don't— come back to me when you're ready to buy a car. Like, I don't know what you want me to tell you. Unfortunately, there's just not a lot of value we can provide there. And I know folks just want us to chat about the market all day long, but that's not an income-generating activity for our business. So I tend to try to keep those conversations fairly short. So yeah, I mean, certainly you want to have a property manager lined up before you close on an asset. And if someone calls me and says, hey, I've got a 10-unit under LOI, they've got my attention for sure, and they're going to get as much time as they want. But if they say, hey, you know, I'm just kind of looking around, I might buy here, I might buy in Boise, I might buy in North Carolina, you know, how do you like Columbus? I just kind of like, listen, dude, I don't, you know, I'm probably the wrong guy to ask this because I'm, I've had like 10,000 of these conversations, so I'm like jaded about it. But our sales guy should love these conversations. So if he's listening, definitely pay close attention when a customer calls.

There you go.

Cool.

Harmon, it looks like you got a couple other questions. Did you want to chime in?

Yeah, sure. Hey, Peter Lohmann, customer here. I had a question about, you know, you talked— I think it's clear that you do a lot of process engineering as a part of your, your operations. Can you give some advice to, you know, a real estate investor about how they can be more diligent about, you know, systematizing their kind of ad hoc processes that they might be doing right now?

What would be some good advice?

And then kind of a related question, do you have any VAs as a part of your process?

Yeah, absolutely. I'll take the second one first. Yeah, we do have VAs here at RO Property Management. We call them RTMs, short for remote team member, because really they're way more than assistants for us. They're full-fledged team members who just happen to be located internationally. So I think we have 4, 3 or 4, and we've got about 23 or 24 total employees just for reference. And we've got a maintenance department that's, that's a good chunk of that. But yeah, absolutely highly recommend taking advantage of international talent. There's, there's an incredible, there's an incredible world of very talented people. Who just happen to not live in the United States, who are, who would be delighted to work for you. And the wages that you have to pay them for it to be almost life-changing money for them would, would amaze you in that it's not very much. And so the first, the first question about processes, yes, I am kind of known in the property management circles for my work with processes and systems. And so my advice for like a real estate investor who's trying to nail down their processes briefly is that I would identify maybe 2 to 3 core processes that you find yourself doing on like a weekly basis, like a few times a week or multiple times a month. And document those. So take, take, take some time and identify what's the trigger. Like, when does this— what— how do I know this needs to happen? And maybe it's a— maybe the trigger is just a day of the week, or maybe it's when I get this email from my accountant, or maybe it's when my broker says there's an interesting property or whatever it is. So what's the trigger? What are the steps to the process? And literally write those out. You can just start with a piece of paper or you can just do it in Word or Excel. Like, what are the main parts of what needs to happen every time in this order? And then what's like, how do I know when it's done? Like, what is the, what is the completion step? And does that completion step then trigger something else? So start by documenting that for your like 2 to 3 core processes and, and use those checklists. A great process is really kind of like a glorified checklist. Checklists are incredibly powerful. Um, there's a great book called Checklist Manifesto., that's extremely, extremely, um, relevant actually. Um, it's about like doctors and pilots, but it has a lot of relevance for anyone who's running a business. Um, so if you, if you design these really good processes, which are basically checklists and then run them every time you do the thing, like actually print off a clean copy and check it off as you go, a couple of things are going to happen. One, The first time you do it, you're going to find all kinds of mistakes. You're going to be like, oh, typo here. Oh, actually, I don't do that until after this. Oh, I forgot this one step. Oh, actually, in this case, we don't need to do this. We need to do different things. So I need to have like a little check here at the beginning. So if this is like a fair housing, it's actually a different thing. Um, and so make those changes to the source document. Then the next time you print it off, you're going to be really happy. You're gonna be like, oh, this is great. I made all these changes. Now it's like running nice and smooth. Right. And if, and you're going to end up making a lot of changes over time, which is great because you're never done with a process. Once you've really got that nailed down, you now have the ability to leverage and scale because you can pull someone in and have them execute that for you. If you've done a good job with, with, you know, and there's all, you can get really fancy here with software and video recordings and screenshots, and there's an unlimited ocean of, of ways to sort of take this to the next level. But that's kind of where I would start. And if you consistently do this as you grow your business, you are very quickly going to be able to level up and scale because you're going to keep kind of moving up the stack while you pull folks in who are more entry level and can execute a well-written process but don't know how to do a whole underwriting, right? They're just going to know, oh, I just like follow these steps and if I have a question, I ask him and So that's kind of like the core of it.

That's a great response. Thank you, Peter. Harmon, do you have any other questions?

I see a few in here. Yeah, Peter, separate question. We'd just be curious to get your take on, you know, you've kind of mastered like the property management game, so to speak. But, you know, you've also picked up just a lot of general business learnings along the way, you know, like process engineering we just talked about. How to run and grow an SMB. Have you thought about expanding into adjacent industries or verticals? Maybe those could be an add-on to RLPM, or maybe they're just completely different businesses. Would just love to understand your thought process on this.

Yeah, so people keep telling me this. So if anyone has a job opening for CEO of a Fortune 500 company, I'm all ears. But yeah, take that more seriously for a minute. So yes, I think the short answer is yes. So one of the, one of the things that we've expanded into is, is I mentioned we have a maintenance department, so we have in-house maintenance that we use to service the properties that we manage. It's basically 7 handyman-type guys who are highly skilled and very experienced. And so they're able to go out to the properties we manage and execute a lot of the day-to-day maintenance requests and unit turnovers., for our clients. And so we're able to pay them X and bill them out at Y, and Y still being below the market rate for what it would cost our clients to go out and hire a handyman off, off of, um, just pay, basically paying retail prices, right? So, so they're still experiencing a saving, but we're, we're able to make a little bit of profit on the spread there. And so that's, we've done that for years, then it's, it's grown and it generates a lot of revenue for the business. There are a lot of opportunities in property management to expand in other areas. You can do brokerage, you can do association management. You— so any of the vendors that you regularly hire as a property manager, those represent opportunities to compete with your vendors, right? So we could hire a plumber, we could hire an HVAC guy, assuming we had enough volume to sustain like a full-time plumber or a full-time HVAC guy. Which I don't know that we're quite to that level yet, but there's some ways you can kind of split up that work. So yeah, I mean, I think the way I think about this is like, there's a lot of things we could do that would make money, but there's an opportunity cost to any activity that you undertake. And so, I mean, there's a lot of things I could do to make more money. I could do— I could go home and cut grass after my daughter goes to bed, right? Like, there's a lot of ways you could make a little extra money, but What's the return on brain damage, right? And what's the— what are you not— what are you saying no to because you said yes to this one tiny little thing that's going to make you a few extra thousand dollars a year, right? So it gets crazy when you own a business because there's a part of you that's still like, well, shoot, if I can get an extra $50,000 a year, like, yeah, we are absolutely going to start running like a Tub stopper replacement, handcrafted business on the side for all of our clients. Cause they're always, the tub stopper's always missing. Like you could come up with wild ideas that would make tens of thousands of dollars a year. Um, and as an individual, you're like, that's real money. I mean, if I had an extra $10,000 a year in my personal bank account, that would be big. But when you're running a company, an extra $10,000 or $20,000 is like a rounding error. And like by the time it runs through all the expenses and taxes and da da, and it gets to me and it's like $10, right? So, you got to really think about, is this worth the time and effort to drive down this path? Or should I really wait and be patient for something where I can take a big swing, right? Warren Buffett talks about a fat pitch, like wait for that fat pitch. Well, if you're distracted chasing balls all over the field, You're not going to be at the mound when the fat pitch comes. And so part of the challenge here is figuring out when I'm sizing up an opportunity, which a lot of opportunities come across my plate these days after 10 years of banging my face against the wall, is it worth taking a swing? Right? And then there's no easy answers there.

Great question. Thank you, Peter. I'm not going to forget return on brain damage.

I think that is— that's another one I stole.

Probably from someone on Twitter.

I love it. I love it.

Well, yeah, I recognize that we probably don't have much time left for another question. Maybe one last one in case anybody else wants to chime in.

Is there anybody else with another question? I haven't been able to keep up with the chat, but I think there were some that came through there.

It's lively, Peter. You got a lot of fans. Well, you know, Peter, again, thank you so much for the time. Thank you everybody who also joined. I think there was a lot of wisdom that was shared with, you know, today. And, you know, for those who joined late, there will be a recording that will be shared, you know, after this. And so you'll have an opportunity to relive all of Peter's wisdom.

But Peter, thanks again, and I hope you have a great rest of your day. Thank you. This was fun. I appreciate all the great questions and Hope everyone got some value.

Thank you.

I definitely did. Take care, everybody. Thank you for listening to Owner Occupied. 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.