Starting & Running a Remote PM Company with Kelsey McRichards

Peter Lohmann's Podcast. Peter Lohmann's Podcast. Peter Lohmann's Podcast, brought to you by LeadSimple.

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Sometimes I feel like our industry is sort of likened to like the used car salesmen, and we talk about this as a team all the time when we are onboarding new clients that have what we call an inherited tenant, where the assumption of those tenants is, especially if that's getting handed off from another management company in our area, is that you are terrible people, you are going to treat me terrible, and you are going to provide terrible services. And we have to work really hard in the beginning to sort of signal to them in a number of different ways, get ready for a different experience, get ready for a different kind of communication and engagement from your property management company. I'd love to raise us out of mediocrity as a whole.

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. Welcome back to Owner Occupied. Today I have with me Kelsey McRichards, and I am thrilled to introduce her to the audience. We've got a bunch of great stuff queued up to, to talk about today. Welcome to the show, Kelsey.

Thank you.

Let's start like I normally do and have you give maybe like a 90-second background on yourself just so folks have some context, and then we're going to dive right in.

Sure. So I'm currently the owner and CEO of Honest Property Management, which is based out of Maine. And this is the company that my husband and I started about 7 years ago as a side hustle while we were both working W-2 jobs in healthcare and caught the bug during the Great Resignation, wanted out of those W-2s, love everything to do with real estate investment and property management. So I was the first to leave. I got, I guess I drew the, what is it? The long straw? Short straw? I'm not sure. Short straw. I won, so I got out first and started working on this full-time. And in the process, we ended up moving down to North Carolina, but we still have this company in Maine that we're managing. So we are remote, a remote company. But when I quit my job, we were about 30 doors, and currently we've almost hit the 150-door count.

So love it, we are super— that's perfect, that's exactly the right amount of context. So You quit— Sorry, you started while you were at your W-2, which is I think something a lot of people who are looking to get into property management wonder about. Is that possible? And that's different than what I did. We share the fact that we both drew the short straw and I was the one who had to take the leap and quit my W-2 first out of my partner and I and prove it out. And then once it was working, he came on board as well. But unlike you, I actually didn't really start doing anything while I was at my W-2. I decided to jump feet first. Maybe that was stupid. It worked out. But the only thing we did prior to me quitting was I did go get my real estate license, and then we just had a small handful of properties that we owned that we were obviously self-managing. So what was it like to start a management company while you were at your W-2? How many years did you run it while you guys were both at your W-2?

So we did that for about 5 years and mostly because most of our, the properties we had in our portfolio were ours. So, you know, it was, you know, I, it's probably a thin line between were we being property managers or were we self-managing? We did have what we call true clients, you know, clients that were paying us to manage their properties. But I think always in the range of something like 2 to 5, never, never more than that during that period. So it was, it was small. And there were times where it was like, great, and like, hey, we can keep doing this forever. Let's keep our W-2 income and all our benefits and look at all this, you know, extra cash we're making on the side. Isn't this wonderful? And then there were times where we're like, we cannot do this. This is breaking us. It is breaking us individually. It is breaking our marriage. Like, we have to— like, we are either in or we are out. Like, we cannot Yeah.

And is that what finally led to the decision to go all in? Was it, it's just too much to do both at the same time?

It was, and it was partially driven by, by COVID. So during, you know, that 2020 year, the area in which we manage had a huge influx of people that were taking advantage of some downtime and found what we had found, which is it was a phenomenal area to invest in.

Maine is vacation land. That's, that's the slogan, or at least it used to be.

Yes, people discovered this little area which we had previously— I felt like we had an advantage on because it was undiscovered.

What is the area?

So we are in Central Maine, which we define— it can be defined in different ways depending on which part of Maine you are from. We define it as the area, if you know Maine, from Freeport up through Waterville. Freeport is known as the REI capital of the world, if you like REI. Or, and then Waterville, some people know it because that's where Colby is. So that's our— and it's kind of up the I-95 corridor. That's our area. So during COVID the investors started coming into this area and our phone started ringing off the hook for our services and property management in a way it had never done before. And when we started looking at— we had to actually turn it down. We just We were not, we were already at the breaking point with our jobs and we could not take those clients, but we started, I was tracking it and we started looking at the numbers of what our business could be if we were saying yes to those people instead of no. And then that was the decision is that what is the point of existing if we're just going to turn down all the new sales calls that come in and be stressed out with our existing portfolio? We need to make this call either we're in or we're out. I was burnt out at my job at that point, so we decided to go all in and that's how we got here.

Love it. So you, you really, you truly followed the demand and that's a, I mean, that's fantastic. That's a luxury I think a lot of people don't get to have, which is you already knew there was a big demand for your services in that area. In fact, you were getting calls and emails. And so for you, it was just a decision of, do we want to go, do we want to turn on the spigot basically and just start saying yes to these? So obviously you did, and then once you turned that on and you started taking those opportunities seriously, did it go how you thought it would? Or, or like, did a lot of those folks end up turning into clients pretty quickly?

Yeah, we have stumbled into this geography, which has been fantastic. So again, with all of the investor growth that's coming in a large portion from out of state, there is a lot of demand for property management services. And for whatever reason, there isn't a lot of competition in this area. So there are other players. I would say the quality is sort of mixed and we stand out as an offering because our website looks professional. We have more than a 4-star rating on Google. I, I get people all the time who call to say, well, I was looking in this area And, you know, you didn't come up in that geography. So I expanded my area and I expanded my area until I found you because you had 4 stars. I don't want to work with anyone with less than 4 stars. You guys look exactly like what I'm working for. Can we go with you? So our, our closing rate on sales calls, when someone decides to hire a property management company, they actually go all the way through with it. We are upwards of 90% on that close rate just because, like, we, we have the benefit of not a lot of competition. So Yes, that has been very beneficial for growing our company.

Yeah, there's a great marketing book I like, and one of the lines in there is, go where they ain't. It's, you know, which kind of what you guys have done. You've gone, you know, you're not, you're, you're not in big, you're not in a big city, and you're in a fairly unpopulated state, but because there's no competition, or virtually no competition, you're able to pretty much capture almost all of the demand that's you know, in that area.

Yeah. Yes, that's right.

Okay, love it. So I want to zoom in a little bit on your experience starting a management company remotely and then continuing to run it remotely. You've kind of done the— I don't know what's the word for trifecta, but when there's only two, like you started it while you're at your W-2 and also you're running it remotely, and that's kind of the dream. And if someone comes up to me, and I actually get people asking me this all the time, like 'Can I start a management company while I'm still at my day job remotely?' And I'm like, 'No, I don't recommend that. That sounds really hard.' You actually have done it, or, you know, very closely followed that path. So share a little bit about what that's been like, how you did it, how's it going?

Sure. Well, unlike some of those questions, we actually didn't intend to do it that way. We, we were physically living in Boston, but again had invested in Maine because that's where we saw the opportunity. And as we started to have a family and Boston was no longer the right setting for us to raise our family, the assumption was always that we'll move to Maine where the business is. Like, that's where we're going. And we at some point got very real about making that change. And we spent a lot of time in Maine and a lot of weekends there and looking at different towns, even looking at schools. Like, we were all the way at that phase, but I am from Los Angeles. I had already spent 10 years doing Boston winters, and kind of in the 11th hour, I was like, I, I don't think I can do it. And even though we were sort of thinking about eventually long-term we'd leave our W-2s, that was always sort of a, like, we'll do that at some point. It was still like on the maybe 3 to 5 year horizon because at that point we hadn't reached our breaking point with doing both. And I was immersed in my professional world in healthcare. I was in, in senior management. I had gotten promoted many times in 5 years. I was sort of thinking, well, maybe someday I'll run a hospital. Maybe that's where I'm going with this career. And I hadn't fully committed to necessarily letting that go. And so when I looked at some of the opportunities in Maine, I felt like that was going to pull me to— I wasn't going to have access to those professional opportunities if that is what I wanted to continue. So all of that being said, in the 11th hour, I said, I can't move here full-time. So we city shopped and we ended up in Charlotte, North Carolina as the place that we wanted to continue our professional careers and raise our family. And we made that move sort of thinking, well, that probably pushes us in the direction of needing to close up shop in Maine. Maybe we'll reopen down in North Carolina. That move coincided with the pandemic. We moved to Charlotte maybe 3 or 4 months before the pandemic. And what was a beautiful thing for us, if there, if there could be a silver lining with COVID is that suddenly everyone was remote. So owners that called our sales line, it didn't bother them that I was in North Carolina remote managing my company in Maine. Our employees weren't bothered by the fact that we were doing remote management because everyone was doing remote management. So that, that I sort of wonder sometimes, could we have sustained that move had everyone, had the world not shifted to remote management at that point in time? But it did. And so people weren't questioning that as much as we thought they would. And then because those sales calls kept coming in and kept coming in, we kind of just ran with it and, and it, and it just, it worked for us. Now, that being said, I do think that if you are going to do remote management, it absolutely forces you to do a few things that truly every, every business, every small business, not even just property management, should have in place.. And so, that forcing function can be a great thing if you're able to do those things because it's going to force you to move your business in the right direction, or it can super work against you if you don't have the experience to do those things and then you attempt remote management.

Yeah. I mean, there's, there's no question that it, it really does force you to get your systems and processes in order because you can't just swoop in and save the day. You're hundreds of miles away. And that, I love that as a forcing function. And it reminds me a little bit of me taking my month off every year. It's a forcing function. It makes you step up and really systematize your business. I was chuckling a little bit about you describing the decision to move to Charlotte. For those who aren't familiar with Northern New England winters, they are brutal. Not just in terms of cold, but snow. And then also the, the days are very short. And so if you have seasonal affectiveness disorder or you just don't like the dark, it's not a great place to be. It's lovely to visit. Um, and I feel a little bad, but yeah, it's like living there. I don't know. It's not for everybody.

Yeah. And my thing with kids is that we spend so much of our time outside and I don't even necessarily mind being out in the cold, but I was sort of just done with the schlepping, like the hats, the gloves, the coats, the scarves, the whatever. Like, I just want to be able to go out.

And with kids, it's like times 100.

Yeah. Yes, yes. And I just, I didn't want to do it with— I mean, and our kids are little. They're, they're currently 6, 4, and 1. So I, especially with little kids that would need me to do all the things for all 3 of them, I just, I didn't want to do it.

Love it. So that's great context. And You know, you touched on it, you've been using global talent, you know, remote team members, VAs, whatever you want to call it. So was that something you had in place from the beginning or were you engaging local talent there in central Maine? Love to hear a little bit about that.

A big part of what has made this remote management work is that our entire team does have a remote feel to it. So it's not like it's just me hanging out in North Carolina, missing in action while the rest of our team is all sitting together. In a, you know, in an office in Maine. We don't have that structure. We don't have a brick-and-mortar setting for our company at all. We do have global talent, but they have only been added in the past year. So that's a fairly new addition to our team. But what's great is that because our onsite team members, and onsite being the folks who live in central Maine, they are all structured as remote employees, our property managers, property assistant, our maintenance technician, We're small, so we still, we just have one for now, but you know, but they, they all have that same remote work setup. And so when we have our weekly kickoff calls for the team on Monday morning, everyone joins the same way. We are all sitting in different locations. We are all on Zoom. And the cool thing about that in terms of the team embracing the global talent is that because we all show up to work and connect in the same way, And no matter, even the people that live in Maine, they almost never see each other because the work, it just doesn't overlap in a way that you would need two people on site at the same time. Right. So we all connect through phone calls and text and, you know, our, our project management software and Zoom calls. We all do that in the same, in the same way. So I think that has made it easier for the team to embrace the global talent, for the global talent to feel like they are truly a part of our team and to support the overall sort of company ethos that we are a remote management team.

Yeah. And do you go, do you make any sort of deliberate effort to cultivate the culture? That's one thing that I think is a challenge with remote team members is it can, it can be hard to foster a deliberate sense of culture or values when you're not interacting with someone face to face every day. So, do you guys, like, do you have any type of weekly fun or like check-ins on Slack or I don't know, I've seen companies like approach this in a few different ways, or do you just kind of, is it like all business and it just kind of ends up working out?

We, it's not all business. So, we, we do have a weekly team meeting and it's Monday mornings. It's how we start every week, sort of, it's our way of getting organized and regrouping as a team before we kind of all go our separate ways with our tasks lists and responsibilities and all those things. And I would say probably once a month at that team meeting, we take a break from the usual agenda. And I, I like to play games. So actually just this week we did a Family Feud style game where I asked some questions like, why would our owners, you know, pick Honest Property Management as the best property management company they could hire? And we had the blue team versus the red team trying to guess whatever answers I came up with to answer that question. And, you know, when we gave out like Starbucks gift cards at the end for the winning team, which even our remote employees can use. And so, you know, we'll do fun, fun games like that. We also have, we don't use Slack, but we have a similar way of chatting. And so people will share pictures of their kids, or sometimes at that team meeting for a while, we rotated through every team, share pictures or share something from your personal life that we don't know about you. And people shared photos of food they make, if they like to cook, or knitting projects. Or someone on the team, she's an incredibly talented oil painter, so she shared photos of her gallery. Maine is a big art world, so she gave us a virtual tour of her gallery. So we do things like that to really connect with each other and feel united.

That's great, and I bet that goes a long way. And it's something I wish we did more of even in my company, even though we are mostly, uh, centrally located. We do have remote team members And that's not a thing that comes naturally to me. So it's something that we really need to get a fractional HR person in here who's got that really kind of bubbly personality who can sort of bring folks together and organize games and help people feel connected. Because my natural tendency is just to go all business. And I think it can be off-putting, quite frankly, to certain— I mean, a lot of different people, but especially people who really want to connect more on a human level first, which I totally get.

Yeah, I will say my natural tendency is to be kind of all business first too, and it has taken work over many years to remember to take a break from that sometimes. And I will even tell employees, like a common thing I have, so I am very much a systems and operations person, and I know you are too, Peter. And so one of my defaults in terms of being a thinker in that way is that I naturally assume that every problem is a systems problem. And if you're not a systems thinker, when someone describes a problem, the assumption is it's a people problem and I am being blamed, or you're, you're trying to figure out whodunit kind of thing. And so I always tell my team, when I'm describing a problem, my default is thinking there's a system to fix. I am, I am not blaming people. I am not. But that, that is just one of those things too, where I have to be really careful about how my going in to describe a problem because I might accidentally— someone might think I'm accusing someone and I'm not.

Yeah, you really nailed that. That has so been my experience and my reality when I interact with team members. When there's an issue, just like you, I immediately assume it's a systems problem. And I'm like, okay, now how did this happen? And I'll start sort of interrogating to get the details so I can have the whole picture of where the breakdown occurred. But I think some people think that I'm interrogating because I want to figure out just how guilty they are or something.

Like, yeah, they assume you're on a man or a woman hunt. Yeah. And you're not.

Not at all. Not at all. And I— sometimes their reactions will confuse me because I'm like, they'll like start defending this. I'm like, shut up, just tell me what happened so I can fix it. Like, this isn't— I'm not attacking you. Like, why are you getting all weird and and defensive. It's actually kind of annoying. I'm not, I don't know. There's definitely something interesting there. There's probably like a predictive index culture index trait that you and I are both like 3 standard deviations high or low on that is correlated with this. Uh, today's episode is brought to you by PayProp. It's one of the most tedious parts of the job and something we're all saddled with reconciliation. It can take hours, a lot of back and forth, and manual double-checking, but it's a massive part of the business and it's unavoidable. But what if there was a product that did all of that for you so you don't have to think about it? What if you were done within the first week of the month instead of being fully reconciled by the third or fourth week of the month? It sounds way too good to be true, but PayProp makes this possible. PayProp is a bank-integrated rental payment platform in the truest sense, Many products claim to be bank integrated but aren't really, and that's why reconciliation takes so long. But PayProp provides live bank data by constantly communicating with each client's uniquely created trust account. So every time you sign into your PayProp account, you're seeing balances reflected accurately in real time. And this is really cool because of the platform's relationship with the bank, your accounts are reconciled in real time as rents come in. Let's say John just paid his rent. The platform applies that rent to John's account right then. That means you and John—yes, PayProp has a tenant portal—get an actual snapshot of his account status anytime you want. No more delays waiting for batched payments. No more delays because you have to manually go through everything. With PayProp, it's done for you. When all is said and done, with PayProp, You're cutting your admin work by 60% or more every single month, leaving you with more time to grow your business. Sticking with the main theme here for a second. So you're managing— this is really interesting to me— you're managing across a relatively large geography of relatively small towns. And this is quite different from probably 95% of property management companies that I'm familiar with who are typically in a larger city and, you know, population of half a million or a million or 3 million, and they're very focused on that one area, but you're managing in a, in a very different geography is the best way to describe this. How's that been? And if you were starting over, or like, was this something you would recommend? Now, we talked, touched a little bit on the, on the idea of kind of go where they ain't. I love the idea that there's not competition, But is that when we, when we weigh that on the scale, right? Is that enough to offset some of the challenges that I know must be present when you're managing in small towns in a spread out geography?

Yeah, there's a, there's a few things now we've touched on, and I do think that a key to our success is that for us, they all exist together. Right. So it's the fact that we are in a place where there's low competition. It's the fact that we already operate in a remote basis where I strategically hire our property managers based on where you live. Like, I will advertise and say I am only accepting applications if you live in this zip code because I need more coverage on the north side, or I need more coverage centrally or south, or whatever it is. All of those things together, and, and the fact that like You know, it's not ideal that we're as spread out as we are, but that's sort of a symptom of being where property managers aren't. Like, I think those two things kind of go together because if you go to any major city, like, you're going to find that competition. So it's just kind of, I think, inherent. But by having that remote structure, by having our property managers physically spread out to cover that geography, and by not having to really compete for— I mean, we do have to compete, but we're competing with ourselves, if you know what I mean. So So like, I think that it's, it has been very successful for us. And I think if you can replicate that, it is lucrative, I would say go for it. But I would caution against just trying to pick out one of those things like being the remote team in a dense city that has all like local people like that. I don't know. I mean, I haven't lived that. So maybe that's doable. But I don't know, to me, it does feel like this works for us because we have all those pieces together. One of the things we do have to do that I'm sure other companies don't is that we have to have a lot of contingencies in place. And by that, I mean, in a pinch, who am I calling? And I am constantly thinking about that list. And it's not just our employees, right? Like, so I always think about vendors we have a good relationship with, or people we've met along the way, or cleaners that we've used that might be interested in extra income. Like, I maintain an active list of, okay, it's a weekend, my number one person who I'd call, like our employee, is on vacation, I can't do it myself, it's in this part of our territory, who am I calling? And I want at least 3, if not 5, names. Because if people aren't on call, oh, I'd love to help you, but I'm actually out of town too, or I can't, my kid is sick. So I need at least 5 names in every part of our geography. Who could I call that would help me in a pinch if something happens and I can't rely on our regular employees or vendors or whoever? So that is probably unique to us that I've got, I've got those lists and I routinely maintain and update them. But that would also be a key to making this work.

Yeah, property managers live and die by their vendors. That's a saying that I think my business partner coined that and I repeat it often around here. You, there's— you just have to have great vendors in this business. Even if you live in the area and it's all centrally located, even then, I mean, you like, just as the business owner, you can't be going out and changing out hot water tanks and meeting tenants to let them in if they lock themselves out. Like, you gotta have this great Rolodex of vendors. And it's not a set it and forget it situation, just like your processes, which we're going to get to shortly. Your vendor list is— there's like vendor depreciation, right? Like your vendors, the ones that were good become bad or move away or go to jail or whatever. And you have to continuously be finding new people, staying in touch with them, building that relationship. Some vendors you find them, you'll have them forever, right? Like we've got a few vendors that we use weekly that started right— I found them right when we opened our business and they've been with us ever since. And that's great, but that's more the exception than the rule. So I think an area that I see gets overlooked is people, property management company owners aren't as focused on vendors as they need to be. They just sort of assume that someone is taking care of this. It's been my experience that no one takes care of this and you need to do it yourself or make it part of someone's job description and literally have KPIs around, okay, how many new vendors did you call this week? How many new vendors did we try out this month? You know, how many plumbers do we have that we can call after hours, right? Like, This is super important for property management, even if you have an in-house maintenance team.

Yeah, I totally agree with you. And actually, it was our maintenance manager who proposed a process like this, along with my husband, who tends to do more of the maintenance side. So the two of them put together— we use Asana currently for project management. So in Asana, they created this vendor grid And they meet once a month to kind of talk about any vendors who they've recently used with or any times they needed to hire a vendor and they felt like there weren't good options on the list. And they're constantly like adding updates and tweaking this list, even marking preferred vendors or do not use vendors for certain properties or owners. And I was a little— I was skeptical in the beginning. I will tell you, to me on the surface, that sounded like a lot of time that I wasn't necessarily sure was going to yield results, but that is their world. They were sure that this would add value. So, you know, I said, whenever someone's got that kind of conviction in their space, my response is go for it. Let's just try it. No harm in trying it. And it has turned out to be a beautiful thing and really helped us in a lot of ways that when you need to then call someone, it has shortcut that time to getting the right person for the right job and making sure we've got people to call. So it's been a nice value add that they came up with.

Yeah, that's great. So let's dive into— we talked a little bit about how you and I share a systems and process mentality, and that's kind of our default over, you know, thinking maybe there's a people problem. I've heard little bits and pieces of your— of your— some stories from your healthcare background. You had kind of a hardcore operations role at a pretty major healthcare provider. This is super interesting to me for some reason. I'd love to hear a little bit about that and what are some of the lessons you took away from that? How is property management similar? How is it different? Yeah, let's dive in.

So let me start with the obvious part first. I specifically worked in hospitals and my job was being an administrative leader of clinical departments. And in that role, it's actually a lot like being a small business owner. Now, I never thought about it that way at the time. But as I started switching my thought process into, okay, I'm about to go do property management full-time, I'm about to make this transition, what can I translate? I realized that there were all of these parallels. So clinical departments have their own leadership structure. So in the last position I was in, I was responsible for the entire clinical division of the company in which I— so everything reports up through, through that channel. And then I'm reporting into someone who covers multiple instances of clinical departments across the entire hospital. So, that was essentially my role. And in those orgs, I had anywhere from 250 to 350 people reporting to me in the last 7 years of being in that career. So, you get a ton of experience managing teams and people when you're doing that, but also being in that leadership role over this department, that department, again, it's got its own leadership structure where you're kind of at the top of it. It has its own P&L reporting. So when a hospital is looking to see like, how are we doing, they're looking at each of those departments as their own business to pull their weight on their P&L. So you've got that that separate out its own operations, revenue management, cost accountability, human resources, the hiring, the firing, everything in between, data analytics, setting 3 to 5 and 10-year strategies. Which is everything a small business owner should be doing for their business. So as I was making the shift, I was like, oh, like, I've kind of been running a small business this whole time. And I never thought about that way, didn't really realize it. So that, that was helpful. And then of course, the operations, I was in an operational role. So that, that was a huge piece of it. And your job as an admin is to make things run smoothly for the employees and the clinical staff in your, your department. A huge thing I have pulled out of healthcare operations and translated into property management is something out of project management and process improvement, which I spent a lot of time on, called embedding the solution. I'm not sure if that was something that you used in, in your engineering background, but essentially what that is, is that because healthcare is already completely overloaded with processes, no matter how much value a new piece of software or a new process will bring to a physician or a patient or both, if you cannot seamlessly integrate that innovation into an existing work, if you require even one extra click, no one is adopting it. There is no bandwidth anywhere in the system for, yeah, just go over here and click this button. It sounds so easy, and why wouldn't you do that if it's going to bring all this value? The answer is that they are too overloaded. It's just not feasible. They have already done that so many times that now they cannot do that anymore with all the innovations in healthcare that are out there. And so where that really helps me in property management is when I'm thinking about designing our new process and procedure. Now granted, we are in this mixed out as healthcare, but this is still helpful because each process you design, you can't do it in a silo. It doesn't help you if you have designed this one workflow as efficiently as possible and it's beautiful in and of itself. And then you have 10 workflows like that side by side. But when you try and do all 10 at the same time, you can't do all 10 at the same time efficiently. And you start to break down because you're over here doing one thing and then you move over here to do another. And you move over here to do another. So where that embedding the solution in your existing workflows helped me is that we're designing the whole workflow as a company. I often get asked by owners, hey, can I, do you have any à la carte services? Prospective owners like, hey, do you have any à la carte services? Can I just hire you for this? Can you just hire you for this? And one, that's like not a great business strategy. So the answer should be no, but even if I were tempted to say yes, I can't because all of our processes are so linked. I literally can't split out just the maintenance piece or just, you know, the tenant communications piece or just the rent collection. Like it's all, everything is tied, tied together. And so I think having that mindset of like, yes, I can design this one thing over here, but how am I going to do that? So it's adding as little work as possible overall for the team. Really helps keep us a lean, mean machine. Love it.

And that is so real, so real about like the clients who want to do some weird one-off thing. I've got the exact same response, which is I can't— even if I wanted to, I don't know how I would do that in a way that would guarantee consistency and quality of service because, because that's not built into our process. So I understand you want to be notified every time the tenant reports a maintenance request, but that's not part of our maintenance process. And if I added it, like, there's no mechanism for me to add it for just one property, right?

And if you add it for everyone, that's just an unsustainable, like, potentially amount of work.

And this is baffling to owners, and they hate it. And I, I don't, I don't know what to do about that because they just, they're like, well, what do you like? Why? I'm telling you right now, just "Can you just text me when you get a maintenance request? That takes 2 seconds." And it makes my head explode. I don't know what to say. And I'm so 10 years into it that there's no way for me to respond politely. I don't know the words to say or the tone to use to communicate to them that that's not feasible. And it's a perfectly reasonable request from their perspective. I get why they're asking and I wish we could do that, but I don't, I don't know. Like, what do we do? How do you, how, like, how do you respond or how do you set expectations around this?

Well, so on that one in particular, we have been trying some new things in that space because that is a common thing that owners want. And sometimes they even just expect it. And so then they get upset when, you know, when they realize that that's actually not standard. And so we have played around with it, but going back to this theme of it can't be a huge lift for us because that's not sustainable, we have tinkered with this to say, how can we get the owners this piece while it is as little work for us as possible? And so we have developed a somewhat automated process where our maintenance manager or maintenance technicians they are trained to document their updates in the system in a way that can be lifted and copied and pasted. So yes, they are documenting internally for our eyes only, so we know what happened, but we train them to draft it in a way that could be copied and pasted for an owner. And so then a final step that our tenant communications person does that is making sure that that task was closed out with the tenant, that the tenant knows This is now done. So if you still have any problems, you know, let us know, because that would be a new issue, or, you know, just let you know we fully resolved it. So we have a little automated thing that she triggers that goes out to say that. And so we've, we've now lifted that language where she, at the same time, she can easily just copy and paste it and send a similar trigger off to the owner that this, this was done. It's templated. It is a little work. So I don't want to make it seem like you can do this with just pressing a button. She does have to press more than one button and she does have to draft a little language in there, but it is maybe, it is, I think, under the 2 or 3 minute mark per maintenance request. And we balance that with how much value are we then giving to our owners or getting back as a company by providing the service. But when we first started it, I think it was taking us like 20 minutes. Minutes, right? And so that was clearly like, that's not going to work. Like, get it, cut it down. So we, we time it and we say, okay, that, that design doesn't work. What— let's tweak it and tweak it again and tweak it again. And so even though we're currently at 2 to 3 minutes, I'd love to get it down to 30 seconds. So we're still not done tinkering, but that, that's the kind of evolution that we go through when trying to get these processes while still serving the clients. But certainly there are things that clients can ask for where the answer just has has to be, has to be no. Like, we might talk about this later, we are still currently in the Airbnb space. We are working on exiting out of that, but I've had an owner say, well, I want to know about every question that you get from a guest who might book. And that's, that, that for us was, there's, I, I tried to make them appreciate the volume that we get and just that that is not, not feasible. So there's still going to be times to say no. But if we feel like we can explore it to try and come up with something feasible, that's the process we'll go through.

Yeah, it's tough. This is an area that I think our industry really needs to make some strides on is how do we, how do we define our scope of service in a way that makes sense for the client and is still feasible for us to actually execute on? And the flip side of this coin, which I don't think gets talked about very much, is when you do build out your systems and processes, yes, they lock you into a certain way of doing things, which means you can't make exceptions. But the other side of this is you may be surprised to find that there's certain things you can adjust for one-off clients that is no impact on your business whatsoever and is completely seamless. I'll give you an example. So we have occasionally a property owner will ask if they can have a different maintenance approval limit. So instead of, you know, if it's a $500— if normally their plan includes a $500 maintenance approval limit, meaning we have to notify them of anything over $500, let's just say that they wanted like a $350 approval limit. So that's actually really easy for us because that maintenance approval limit is simply a field in Airtable that the maintenance coordinator looks up Every time they go to process a maintenance request from a resident, because we have 3 different plans anyway, so there's already a bunch of different maintenance approval limits and we have some old people who are on older plans. So I'm like, yeah, no problem. So we just changed it to $350 in the Airtable record for their— for that client. And now it's like every time the maintenance coordinator goes to process a maintenance request, they look it up, there it is, and it works perfectly. It's It's literally no extra work on our end. And there's other things like that where it's a one-time change in a piece of software that is now done and taken care of forever. I don't have to think about it. I don't have to remember it. I don't have to modify a process. All I have to do is change a record in a database or, or something along those lines. And what I think that allows us to do is unlock different customization that can be useful and valuable to clients. And we, we could probably start talking more about that and sharing with clients, like, pick your own maintenance approval limit, right? I don't know, I'm just— I'm making it up, but there, there's probably some value there that we could unlock. That's— that we're current— it's kind of new for us because the industry is, is only just now getting really on board with processes and systems.

I think that's like a great illustration of what I was talking about with that term embedding something in the solution because you already have that functionality. It's easy to say yes to. It's not a big lift, but any time you do get into something that's a big lift that takes you out of the current solutions you have available, then it's, then it's more difficult to accommodate those, some of those requests or some of the new things that you might, you might want to do. I do spend a lot of time thinking about the scope of services. I certainly would be helpful to the industry as a whole if, you know, the owner as the customer would sort of understand what it is that a property management company does. But then at the same time, I think about that, that it would like make it so much easier if like people under, like, just like, you know, understand business. Like you wouldn't go into like a Target store expecting them to, I don't know, maybe that's a bad analogy, like change your tires. Although they're not doing that today, maybe they'll do that in the future. I don't know. You know, but it's like, they're clearly the expectation of like, what that store does and does not do for you is, is like understood. Or same thing, like if you're going to like a landscaping company, like that does like consulting on services for that, you wouldn't expect them to like give you like consulting services on what to do with the plumbing in your home, right? Like it's very clear like what, what that is. And I think we could tremendously benefit from that. But then of course the cynic in me thinks, well, as soon as you define it, you're gonna have property managers— and being honest, you and I might be two of those property managers— that's like, aha, well, if this is the industry standard, I'm going to be more competitive by saying like, well, these, you know, the standard's not to offer this, we're going to offer it to set ourselves apart, right? So then I think like it's just not— the cynic in me thinks you would never be able to achieve it because you're always going to have people come trying to then compete against whatever an accepted standard is. But it is, it is certainly an interesting thought, thought exercise, and I do spend time thinking about it.

Yeah, and there's a lot of property managers who are resistant to the idea of standardization because they feel like they're, they're able to differentiate by offering what makes them uniquely valuable to their clients, right? They kind of— what you were saying, like, well, you know, I'm never going to adopt a standard. Like, our— my whole thing is that I, I put my clients first and they do whatever they ask and blah blah blah blah blah. So yeah, I don't know, it's— I mean, we're, we're, we're making some strides in this area around like the NARPM accounting standards and the metrics, a lot of that's internal-facing stuff. Even just things like the terminology is not even standardized. Like, what do you call, you know, a leasing fee? Well, I call it a lease-up fee. I call it a leasing fee. I call it a letting fee. I call it a, you know, sign-up fee. So even just getting the terms defined would be, would be a big step in my opinion.

Yeah, I totally, I totally agree. I also sort of daydream sometimes that, you know, maybe when we're talking about standards. It's not so much to, you know, bring every— like the top and bottom to some sort of place in the middle. Maybe a standard is just about setting a floor, some aspirational floor about what property— every property management should be. And the reason I daydream about that is because sometimes I feel like our industry is sort of likened to like the used car salesmen. And we talk about this as a team all the time when we are onboarding new clients that have what we call an inherited tenant, where the assumption of those tenants is, especially if that's getting handed off from another management company in our area, is that you are terrible people, you are going to treat me terrible, and you are going to provide terrible services. And we have to work really hard in the beginning to sort of signal to them in a number of different ways, get ready for a different experience, get ready for a different kind of communication and engagement from your, your property management company. And I would love if we didn't have to work so hard at that. And if the owner part of the equation, that consumer, would know how to pick a higher quality property management company, because it was sort of understood that if a company doesn't have such and such and such in place, yeah, maybe they're a cheaper option, but they're they're not likely to have great, great quality. And I think if we could figure that out and define that, it would kind of lift this profession out of sort of this general feeling that it can be kind of a mediocre, like a mediocre industry. Like I'd love to raise us out of mediocrity as a whole. And I do think something like setting that floor could, could help with that as long as that could be then translated into the brains of prospective clients. And I think that those are two individually very difficult pieces to accomplish. So it'll probably continue to be just a daydream for now, but if anyone wants to tackle that, NARPM or otherwise, I'd, I'd benefit for sure.

Yeah, I mean, the way— what's interesting here is that property management in most states is a fiduciary activity, meaning we are legally required to act in the owner's best interest. In the client's best interest. Examples of other fiduciary service-based businesses: doctors, lawyers, accountants, engineers, financial advisors. These are all high-trust, high sort of quality professions where it's the, the general public views those folks as professionals, and they understand that if someone is able to call themselves a doctor, there's a minimum set of standards they can expect. Even if that person graduated bottom of the class, there's still some minimum expectation from the public as to the quality of service that they're getting, the knowledge of that individual, the expertise. And what's interesting is that those professions have lobbied successfully at the state level to protect their trade profession titles. So engineer, something I'm very familiar with, you can't just call yourself an engineer in most states if you're not a professional engineer and you have the appropriate licensing and education. So you can't just go around saying, open up a shop and say, I'm Engineer Peter, right? That's actually protected under state law and they go after it very aggressively. Same thing with doctor, same thing with lawyer. You can't just hold yourself out to the public as a doctor or a lawyer. Without a really serious and rigorous, uh, set of criteria that has to be accomplished. But property manager is not protected in that way. You can call yourself a property manager. There's no protection around that job title. And even for those that are licensed, the licensing is such a joke in most states that there's really no minimum expectation of service. The public isn't even aware of the fact that property managers have to be licensed at the state level. That's how bad it is. That's how unrigorous the licensing and credentialing process is. Imagine if property managers were held in that same regard or that same esteem as the other fiduciaries that I listed off. Like, that's the vision. That's the future that I see is the industry has to step up and actually lobby for regulation. Ironically, I think that's counterintuitive to a lot of people because most of us are fairly pro-capitalism, pro-free market, but actually the way forward is actually more regulation here if we want to raise the reputation of the industry as a whole. Basically, I'm agreeing with you. The industry has a reputation problem. The used car dealer thing really hits home. I've heard that before. Today's episode is brought to you by Second Nature. Most property managers can't survive on management fees alone, which means you need new revenue streams. But if you just charge an owner or resident without bringing new value, why would they continue to use your company? There's a better way. We need to create new value and create a rising tide for all boats so residents, investors, and managers win. The most powerful place to start is a resident benefits package or RBP. It's a collection of ancillary services and products that professionalize an experience residents pay for and stay for. SecondNature is the industry leader in this space, and I'm a happy customer, by the way. Their RBP hits triple-win outcomes like ensuring 100% of residents have renters insurance, air filter delivery, rewards cash and credit score bumps for on-time payments, on-demand pest control, more perks customized to your portfolio and needs. Residents get convenience and higher levels of service. Investors get protection against risks and costs, and managers get a new profit center they can use to build their business. Second Nature is the only 5P National Vendor of the Year because it is fully managed by them. So that means less work for you and your team. Thank you to Second Nature for sponsoring this episode. You and I connected through, I think maybe originally through Twitter, we started having conversations and you've actually come on board our Property Management Business in a Box as an affiliate. And we had a really great early few sessions around pricing for your property management business. You were looking to redo the pricing and restructure how you price out your services. So we had some great conversations And you eventually rolled out a totally new pricing structure. Love to hear how that went. How was the reception from your clients? How has the reception been from brand new clients who weren't familiar with your old pricing? And maybe a little bit about what changed and what went well and what you maybe would do differently in terms of how you set up your pricing with where we eventually landed.

We were just way undercharging. I mean, I've heard you say many times, like, you cannot survive only on your management fee, your monthly management fee. And that's basically where we were. I mean, we had a few other charges in place, but, you know, it wasn't a sophisticated model. And part of that, again, is because we didn't— we started as self-managers and we kind of organically started picking up clients. And we knew that if we were going to expand our services to like really do this full-time, like, we just didn't have a pricing model in place for that. So that was why that was priority number one for us. It's like, we have to have a way to charge for everything else that we do, and we didn't. So that was a huge problem. So that one of the things that was key for me is that I wanted to keep the pricing exceedingly simple because of all of the feedback on the owner side that they hate surprise charges, they hate the feeling of being nickled and dimed. And my sense was that— and this is my hypothesis I, you know, you could argue with me, but I, my hypothesis is that it comes from a place of having a very long list of possible charges that an owner just can't remember. And so when they are charged for that thing, even if it is on the Chargemaster, it, it does sort of surprise them that, oh, oh, that charge exists for that, etc. So I wanted to keep it very simple, but our biggest hurdle was that like, I— we just didn't know, like, what, what do people charge for? How, how much do they charge? Like, we just felt like we were attempting to come up with new pricing in a vacuum, and that felt very uncomfortable. And so we wanted the confidence to say, okay, this is all within industry norms, and this is generally thought as if you charge in this way, you will be profitable by the end of the day. Like, I didn't want to roll out a whole pricing plan to only find that we were still running at margins. Like, that would be a terrible outcome, um, because it is a lot of work to roll out a brand new contract and brand new pricing. So what I loved about our conversation is that you, over the time that you have spent in this industry, had a lot of that knowledge that you could share with us. And so that gave us some information and a lot of confidence about how to move forward with something that should kind of right the ship, um, financially. So that was a huge hurdle. I mean, and we had what we had been toying around with this for 3 or 4 months. And I think we had a really good, a long conversation with you, but a really good conversation with you. And at the end of that conversation, we had clarity. So that, that was fantastic for us. So once we had that clarity, we had to completely rewrite our contract to support the new pricing structure. And, you know, there was a few things in that other terms of how we operate we needed to update as well. As we were doing this full-time. And then we gave our— well, let's see, is when we wrote that, that went into effect immediately. There was like no delay between that being drafted and like the next call that came in literally 20 minutes later. I was like, great, here's your pricing. I don't have the contract. I'll send that to you later this week. As I'm like literally drying the ink on it. But I was like, as soon as like we had that, that working model, I was like, we're done. I'm not offering the old pricing to one more client. And so that went into effect immediately. And then for all the existing clients, I, I'll tell you, I was afraid. I was really afraid that they were spoiled in terms of how much we were undercharging them, and that just because of the jump that they would leave. On the flip side, I also— that was fear talking. The, the rational part of me thought, they know we've been undercharging. No one is going to be surprised that we are upping this. They're going to probably wonder why it took us so long to, to fix this and be grateful that they got this low pricing for as long as they did. And even if like they don't love the new pricing, again, we, we don't have a lot of competition. And I know that that competition in some ways was even charging more than all of our new pricing. So I'm like, where are you gonna go? You don't like— like, where, like, where are you going to go if you don't like this? I mean, maybe you can save a buck, but you're gonna sacrifice like a lot on quality. So the rational part of me knew that. And so I kind of had like fear on one shoulder and rational on the other shoulder, like arguing back and forth as we were going through this implementation. But I tried to quiet the fear and listen to the rational part as much as I could. We ended up giving our owners, I think, 3 months' notice, which I think is a luxurious amount of time. That part was probably more driven by fear. I just didn't want to deal with any pushback or whining really. Oh, that's not enough time for me to budget for this, whatever. A thing I did, which took a lot of time, but our owners loved is I did two rounds of introducing it. The first round was, here's the new contract and here's a one-page summary that describes the key changes. This is going in effect on June 1st, right? And that was just a, that, that went to everyone all at the same time. But the second thing I did, which was more time intensive, that really paid off was then as we got closer to the start date, I said, here's how you need to budget for this start date. Here's what your specific management fee is changing to. Here's the additional amount that we are pulling out of the reserve. And this is the actual dollar amount that you need to prepare for on this date to be withheld that isn't normally withheld from your, your distribution. And the owners loved that. And I do think that that was a big reason why, you know, people were really on board with the change is I really prepared them for it and they appreciated that level of personalized communication. We didn't lose a single client. So it went into effect June 1st, didn't lose a single one. Everyone, you know, I got almost no pushback. No, I got pushback from someone who like totally misunderstood what the charges would be. And then as soon as I clarified, and who's like, oh, okay, I'm good. So that maybe thinks, oh, maybe, maybe we didn't charge enough. So actually, as we get, you know, we're gonna look at that at least once a year and reset our contract in January. And already we're planning, I think, to increase, not a lot, but a couple items where it still feels like maybe we're undercharging as we were just trying to bridge this gap between the old and the new. But, but yeah, I think it was overall super successful transition. Our margins look a lot healthier. I mean, we're 2 months in, You know, or not even— we haven't even finished out July, but of course I'm already looking at it and it looks good, you know. So I feel like we're 2 months in and time will tell, but it's definitely been a huge boost for us.

That is so great to hear. And there's like 2 points I want to make on this. One, the process I recommend around pricing and management contract changes in general is do it annually Try not to make piecemeal changes throughout the year for the sake of your own sanity. What I do is I keep a text document where every time I think of a change I want to make to the property management agreement, whether that's pricing or a new fee, or I want to add some language or remove some language, I'll save it to a text document and then all throughout the year. So I'll end up with maybe 5 or 10 items that I want to update or change or increase., and then in December I'll sit down with the management agreement, you know, sort of the, the one true Word document. I'll make all those changes, I'll highlight them, and then I will proceed for the next calendar year to use that version to renew all of the owners onto. The reason I do that is because when you send a new contract for signature, the owners want to know what's changed. And if you've made piecemeal changes to your agreement all throughout the year, Your answer is going to be, I don't really know because I made random changes all through the year and I don't know exactly what version of the contract you're on versus when I made the changes. But with this method, you can say, oh, changes are highlighted. It's very easy and it just keeps things much simpler. And also I've toyed back, I've gone back and forth on the idea of like, do you change your fees only every 2 years or should you do it every year? Sometimes I think I don't want owners to expect an increase every year because it might make them grumpy. But then if you only do it every 2 years, you're kind of letting too long lapse between increases, especially for us because we're on a flat rate instead of a percentage. So the other thought I had there is the, the thing you said I think is most impactful is that our conversations gave you the confidence to move forward. And as I'm remembering what we discussed, All of your ideas were great. It's not like I came in and said, "Oh, this is bad. Don't do this. You need to do this." It was honestly like you reviewed what you had in mind and I might have made one or two minor suggestions, but overall I was just like, "Yes, proceed." And I think I gave you one or two ideas on the actual implementation. And this is a theme that I've really come to, it's a pattern that I've recognized with a lot of my, I do a little bit of coaching. So with some of my coaching clients, with our Property Management Business in a Box affiliates, or even just with myself, is that thoughtful business owners tend to have great ideas. Like, they generally are thinking about the context and the downstream impacts and the second-order effects, and they just need a little nudge. They need someone who's been there before or someone who knows that person to just say, yes, this looks good, go ahead. And if it doesn't work, I'm sure you can just roll it back, which true in 99% of the cases in business. So there's that confidence piece. If you don't have someone in your life who you can turn to with ideas and they can give you the confidence to move forward, highly suggest trying to find that person or work with a coach. Doesn't have to be me. Work with somebody who can just help get you and nudge you over these little hurdles. Because honestly, the faster you can cycle through these, the the faster you're going to get to your end goal or whatever you're trying to achieve. It's almost never about the quality of the decision-making in small business. It's all— instead, it's usually the velocity of decision-making that is holding you back from reaching your dream or your, your goal, your target.

Does that resonate with you? Yeah, I think there's so much, so much truth in that. I don't know if you will appreciate this characterization, but as an affiliate member, I often think of you as being on our board, like you are a board member. And if that is the relationship, then truly it is the responsibility of, you know, the CEO or whoever is, you know, you're interacting with to do all the work. Like, right? You don't— you don't— the board doesn't do the work, right? The board reviews and provides input. And so when I think of it as like that kind of context, it's like, yeah, I've done like 90% of the lift, but I need that second brain, right? Like, and we talk about this as a team all the time, like, please, like, share, share your input. Like, many brains are better than one brain, especially when, you know, I really appreciate the values that you bring to your company and how you think about small business. So I feel very confident in how you're going to, like, the types of feedback that you're going to give me to help guide my business. Like, I'm the one doing the work, but I need that external person to make sure that I haven't missed anything because I'm too far down in the weeds or, you know, I haven't picked my head up to look at it from like the 30,000-foot view. And I think that's really, really important. Just like you said, whoever that is, whoever that is for your company, you've got to have that person. And I feel very fortunate that I have you.

So yes, I agree. Well, thanks so much, Kelsey. I really appreciate those kind words. And it's been really fun watching the growth of your business. I mean, let's highlight your growth has been really impressive, right? You've grown to almost 150 units, you said. And when we first started talking, not like I'm responsible for all this growth, but not for nothing, when we first started chatting, you were around 80, I think. So you've almost doubled and I would attribute that almost 100% to you and your team and, and the systems and processes that, that you all have put in place.

So congrats on that. Thank you very much. Yeah, we're excited and we're, we're got a foot on the gas. We hope to grow a lot more in the next year to 2 years.

So we'll see. Love it. Well, this has been great, Kelsey. If folks want to follow along with you and your journey, is there anywhere they can connect with you?

Sure. I am on Twitter. @TheKelseyMCR is my handle. I will say I wasn't on Twitter at all. And my husband, who again is my partner in our business, he, he was like, there's this guy on Twitter. His name is Peter Lohmann and he is putting out a lot of great content. And it was really you who pulled me into Twitter. And then I discovered the rest of WeTwit and SMB. But yes, so I do try. I mean, I so appreciate that people out there are putting out value and I'm, you know, I'm a younger property management company. We're fairly small for now, but to the extent that I can contribute to that culture that's there, I love doing it. And I think especially where I am pulling things from my healthcare background that maybe people in this group haven't seen as, as much that are translating really well into the property management world.

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. Mm-hmm.