The Business Runs Itself with Brad Larsen

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This is the age-old dichotomy of property management: providing a good service while keeping your sanity and making your business profitable. In the words of Bob Walters, if you remember him, he's the Australian guru, he said, do whatever it takes to delight your clients. And so great analogy because we try to do everything that you talked about and provide good communication and have good response times. At the end of the day, this is where remote team members are hugely valuable because instead of one person managing 100 homes, you could have a team of 3 people managing 100 homes and take that to whatever scale you want.

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 Brad Larson on the show. So I've been on Brad's show twice, actually. So I definitely owed him one. I wanted to bring him in here and turn the microphone around and ask him some questions about our industry. So Brad, you've been around a while. You've got a bunch of different stuff going on. You own and operate a management company. You've got a fantastically successful podcast with, I think, hundreds of episodes. You run a conference. You've got some products that you sell. We're going to dive into some of this, and I'd love to have you start by just giving like a 90-second background. For folks who may not be familiar with you and your, your story.

You got it. Yeah. So we own a property management company in San Antonio and Austin, Texas. We manage about 1,100 homes. We have a staff of 36 employees and we generate, you know, anywhere around $4.5 to $5 million a year in revenue. So we do pretty good business there. In addition to— I started the Property Management Mastermind Conference, the Property Management Mastermind Facebook group, and one of my proudest accomplishments was spearheading the Biz Dev Mastermind. So I, hired and trained Brian Hughes and then created him as a consultancy. And I've really enjoyed seeing him flourish as the Biz Dev Mastermind concept. And so, yeah, the biggest thing that we do is put on the conference, put out good content with the podcast that we like doing, and we've got several concepts of that going. So I appreciate having me on, man. Thanks for being, being a host.

Yeah, this is going to be fun. So, you know, I've been around the industry a while. We always chitchat at conferences. We get into some fun discussions. So I want to start by taking kind of a broad view, and we'll end up kind of zooming in, I think, as we go. But when you look out 2 to 3 years, and I think of you as someone who senses the trends and has been around long enough to have some context. So when you look forward 2 to 3 years in our space in property management, what makes you fearful? What makes you excited? Give me a sense of where you feel like we're going and the emotions that are attached to that as someone who's in the industry.

Sure. I mean, the next couple, 3 years could be some of the best times we've ever had in property management. So I'm super excited about it. I have minimal fears. I mean, you could talk about AI, you could talk about the big conglomerates coming in, you could talk about the roll-ups, you could talk about Wall Street money, you could talk about Zillow trying to replicate and do what we do, but it's never going to happen at a scale that will make us— it's like a mosquito on an elephant. It's never going to really hurt us at all. You might feel it, but it's never going to hurt you. And the other side of that is that we've been looking at this industry for— I've been doing this now for what, 12, 13 years? And we've just been on our knees praying for the recession, like, bring on the recession. And because what that means is people can't— if they can't sell their homes or they don't want to sell their homes, they're going to rent them. And with the population growth in some of these states, a lot of the red states have just boomed. And we're in San Antonio and Austin, the middle of a big red state. And so we're feeling really positive about the next few years.

Yeah. So property management famously is understood to be countercyclical, meaning it does better in a downturn and struggles a little during the boom times. You and I and a lot of people we know really built the bulk of our businesses during the boom times. I got started in 2013. Sounds like you probably got started maybe in the middle of the last recession. So it'll be interesting to actually go through a full market cycle and see if the old timers are right about how great things are going to be in a recession. Do you worry at all about— I've even seen for us, churn has slowed way down. Property owners are selling less, and we are getting those calls from the accidental landlords. I'm trying to think about what could be some of the other effects of a market downturn on a property management business. We don't really rely a lot on credit, so that's not an issue for us in terms of interest rates on— I mean, some businesses live and die by their lines of credit because they're very boom and bust or they have weird cash conversion cycles. Is there anything else you feel like maybe we're missing that could impact the business during a recession? Or maybe a different way to put this is you've got 5 or 6 different businesses really that you listed, we listed at the top, Are you concerned about any of those? Do you feel like they're all fairly insulated?

I think they're fairly insulated except for the Biz Dev Mastermind because it's a consultancy. But, you know, Brian runs that and I'm a silent partner in it. And that's, you know, people are always going to need his services. The one thing that's really odd right now is unemployment is super low. So in a typical recession, unemployment is very high. We have not seen that yet. So it's kind of, it's like we can talk about the weird market as far as the real estate market and, you know, the recessionary numbers and national debt and all the other things that are going on. But at the same time, I'm concerned with not being able to find quality people. And if we can find them, to retain them, because if the unemployment is super low, that means they can get a job anywhere. I mean, literally anywhere they can get it, they can go and get a job if there's, if the unemployment is like super low, but if If it's super high, they feel like, all right, I need this job, I can't leave this job. Makes them dig in their heels a bit more and focus on what they're doing. I guess that is one of the concerns that I have in this very weird recession, which is a low unemployment recession.

It is super weird. Yeah. And I'm trying to think about our team. You've got a bigger team than I do, and I'm trying to think about it. Like, have I noticed— we've had low turnover for our office team. I mean, we always are turning over maintenance techs more than I'd like, but the office team's been relatively stable. So I don't know. I hope that continues. If anything, that should even slow down further, like you were saying, as unemployment starts to tick up a little bit.

[Speaker:SHAWN_BILLMAN] Yeah. And one thing I'll add to that too is a great example is in our Austin office. Austin has the lowest unemployment in Texas. It's south of 3%, right? Maybe even 2.5% at a certain sector of that employment. And we attempted to hire a business development person, business development manager for 4 or 5 months, 6 months. And we kept, we kept changing it. We kept making it a hybrid. We kept upping the salary. We kept trying to do different things. Finally, I threw up my hands and said, heck with it, we're just going to do it from San Antonio and do our biz dev remotely. And if we need someone to drive up there and do an in-person appointment, we'll just suck it up and go drive up there and do it because we have an on-site office there. And I guess I'm trying to make a point is we gave up and it was because of the unemployment being so low.

It's like the opposite.

You couldn't find—

you hear about people like giving up looking for a job, but you gave up hiring.

Pretty much. We gave up hiring that position. And again, we have the same turnover you do with the field techs and some of the lower positions. That's kind of normal. But we actually threw out that one high-paying biz dev sales job. Because we couldn't find anybody to do it. You know, and we've had rotations of the property managers up there as well. But at the end of the day, that is the side effect of a low unemployment. I mean, some of these roles that we would normally hire for may be gone because we can't hire for, for it. And we said, heck with it, we won't even try to try to wait on it because we're kind of waiting. We're treading water thinking, well, let's just wait until we get a business development person there. Let's just wait. Let's just wait. And finally, like, heck with it, let's work around it. And that's what we end up doing.

Wow. I mean, if you're having trouble hiring a business development person with your audience and, and reach, man, that's— that really is saying something, because through your networks and your businesses and podcasts and Facebook, you're able to reach a lot of folks. So yeah, tough times out there in those high-growth cities where there's just super high demand for everyone who can show up and fog a mirror.

Yeah, I wouldn't let your audience, like, you know, be Chicken Little on that little caveat of a story just because it's kind of a rare occasion. If you're trying to still hire the basic, you know, property management field techs and people that help run the business, even high-level accounting or even a CEO, they're out there. It's just a matter of you might have to adjust your salary to attract them. And that's the thing, you know, one of the things that you mentioned in one of the questions, are property managers cheap? Can I skip down real quick?

Yeah, skip to that one. Yeah, that's a fun one.

This might be a good little, uh, segue into that because yeah, property managers tend to be a little cheap, and that's saying it kindly.

And we love property managers. We are property managers.

We are, we are. And as seeing it from the inside, the outside, all different views, they are tending to be a little bit frugal, a nice way to say it, and it sometimes affects them. They trip over the nickel to try and save a dollar and they fall flat on their faces. And so sometimes, yeah, it's a good understanding point of that because when you're— I don't want to raise my salary to X. I've been paying this other X, I've been paying that for years and years and years. Then they advertise that other X, the one they've been paying for years and years, and nobody replies. They're like, "Oh, well maybe I better up my salary." And they cringe when they have to do that. And it all goes back to revenue maximization. If they don't have the revenue coming in, they can't pay high salaries, they can't provide a high level of service.

Yeah, I had a question on here to ask Brad just to pull the audience in a little bit. And the question literally was, are property managers cheap? And the reason I wanted to ask you that, Brad, is because you've got a bunch of different lines of business where your customer is not a property owner, but your customer is a property management company. And I have a couple little things I'm doing that are similar. And I've just really observed that property management company owners are a little battle-hardened, a little weary, skeptical maybe with anything you try and sell them. Right. And when I look at things like what you can charge for a property management conference versus what I see other conferences charging, you know, $2,000 to $3,000 is kind of the minimum. For any type of a conference that I go to outside the property management world. And then you hear people complaining when, you know, broker-owner raised their price to $800 or whatever it was. So you've been on the other side of that. And it's an interesting phenomenon because as property managers, we want to talk a lot about fee maxing and, well, yeah, you know, the fees are going up and if your owner doesn't get on board with that, then sign Aura, right? But then when they're on the other end of it, I feel like there's no like connecting the dots as like, Yeah, you're the consumer to someone else's business, right?

Yeah. It's been a fun, interesting journey on that. So we charge $895 at the Property Management Mastermind Conference and just very similar to like a broker owner. I think they're both great conferences. I'm a big fan of NARPM, NARPM instructor and all that good stuff. Highly recommend them. Never have nothing but good things to say about them. But I will tell you that our reach is minimal. And here's what it's difficult to understand, and I've kind of learned this for the years. Is you could think we could reach the 100,000 property management company owners in the country. That's what I've heard before, is there's 100,000 different property management companies running around doing residential property management in our country. And NARPM's reach is only about 5,000 of those. So that's a 5%. If you want to double it for fun, call it 10%. Okay, 10%. So that's the only reach that we have is to 10% of the audience. A lot of the audience that jump into the Property Management Mastermind Facebook group they're non-NARPM. You know, there's almost 12,000 members in that group. There's 12,000 people in that group, and we screen them pretty good. If they come in and we're only seeing a fraction of what's out there, our reach as a trying to get to that client, which is a property management company owner and/or operator, it's very difficult. And so that's been a challenge for us because a lot of the PMs out there put their head down and they work and they don't know anything about anything. You know, they just don't have their radar on, and that's fine. That's no, that's no problem with that.

Yeah, they're not, you know, browsing social media looking necessarily to connect with other property management company owners. It may just not even be an idea that they think of. Yeah. And I think about, you know, the NARPM, something like 5,000 to 6,000 members, like you were saying. It's surprising that they haven't achieved more penetration because the value of NARPM I mean, they only charge, I don't remember, it's only a few hundred dollars a year to be a member. How are other property managers not getting on board with this? I'm curious, I wonder what sort of outbound prospecting that NARPM really does. What have you seen has been effective in growing the Facebook group? Is it just the organic, people just stumble on it through the Facebook algorithm, or do you do any paid marketing for that or anything?

It's all just organic growth. We've never done any paid marketing for it. And, you know, the, the issue there with NARPM is it's very difficult to reach some of those property management company owners that might be willing to join NARPM because a lot of folks treat a property management faction as a holding pen for their listings. They don't give a darn about making it run well. They don't really care about growing it. They've always used it as just like fattening up the cows before slaughter. And that's, that's a lot of real estate companies use it like that, or they begrudgingly do property management because they have a big investor that buys and sells a bunch of homes and they just, they're beholden to them. And so you'd be surprised that a lot of people don't look at a management company like you and I would look at it as a real business. They just kind of look at it as they own a job, they do the, you know, they charge X and they, their side hustle is property management. You understand that? You and I are, we have reverse psyche on that. Our side hustle might be sales, our side hustle might be a conference or a, or a Facebook group or a podcast. That's our side hustle. And our main business is property management. They're the opposite. They're completely different from what you and I look at. And it's hard for you and I to grasp sometimes.

Yeah, they use it like a loss leader for their brokerage. All they care about is getting listings and to maintain that relationship with the property owner. Like, yeah, I guess I'll manage your duplex for a couple of years till you're ready to sell or whatever. Yeah, totally. So along those same lines, I'm very curious to hear how you size up a potential business opportunity. So You've got a number of different businesses, and I'm sure you get tons of stuff coming across your plate. Hey Brad, why don't we partner up and do this? Hey Brad, why don't we, you know, have you ever thought about going into business doing this? Hey Brad, why don't you franchise? Why don't you run two conferences a year with me and we'll combine? Like, you must be getting a lot of this, and I'm wondering, when you're thinking about, okay, is this something worth like pursuing and going after, are you thinking like What's the profitability? What— how big could this get? Would it be easy to sell? How much involvement is it going to be for me? Do you have any, like, quick rules of thumb that you're using to gauge, or is it kind of a case-by-case? I'd love to hear you talk through how you think about this.

Sure. I do get a lot of opportunities that kind of fall in my lap, and the first thing you have to learn is learn how to say no. And sometimes that's a challenge because a lot of people come at you with all these different ideas. And to go, you know, one level nerd on you, in a prior life, I was an Army infantry officer, and we had a military decision-making process, MDMP. And so I've learned to actually put a Word document in front of me and just start going through, like, just regurgitate all your thoughts onto a Word document and keep refining it.

Now, what's MDMP? What was MDMP? What, what did that stand for?

Military Decision-Making Process.

Okay, got it.

All right, again, it's, it's totally like stupid the name of stupid, but it's all about regurgitating thoughts on paper and breaking down the implied tasks, specified tasks, your intent, your end state, your purpose. I mean, all those things that you would throw out there to include your players involved, your financial obligations. And that's really how you start to evaluate it. So I tell you, Peter, right now I'm really excited about potentially starting a roofing business. And so I'm going through this process right now in San Antonio, in Austin, to look at, okay, is it worth starting our own roofing company? And I think it is, and we're going to do it.

Wow.

And so, okay, there's a lot of opportunities for that because we have 1,100 homes under management, and let's say half of those need roof repairs, and those owners don't even know it. And because no one's offering them a free roofing inspection, you know, most of the roofers right now will do free inspections. At any time. Most of the roofing companies—

of course they will, because they're gonna— they're opening.

Yeah, exactly. They're gonna fly up a drone and they'll take a look at your roof and they'll take pictures and they'll give you a report and they'll tell you everything that you need to know about that roof. It's just a matter of, can you implement that side of the business into the property management side and provide that really exceptional service of giving them a free roofing inspection? Now, you don't have to force them to do the work with you. You don't have to force them to make an insurance claim. But a lot of those are going to be insurance claims. And so we feel we could capture that business either by subcontracting that out and/or going ahead and eventually getting our own crews to do roofing. So that's kind of been the exciting point as you look at the ancillaries around property management. And I've said this for years and years, property management is the epicenter of everything that goes around it— buying, selling, maintenance, roofing. Repairs. I mean, you name it, right? Sales as far as insurance sales, as far as mortgages sales, as far as you can get into the title business somehow. There's all these different silos that circle around property management because we control the asset. And that's what people need to understand. You are in such a fantastic industry. If you're listening to this, be excited about it and figure out different ways to make money around controlling the asset.

Very interesting. So you think about— this is a great example, and maybe we'll drive down this road a little bit. Thinking about starting a roofing company. And what about this makes you feel like it's worth going after? Like, what are the attributes of a roofing company as opposed to a plumbing company or another conference or starting another office in a different city in Texas? Like, tell me why it's attractive over other options.

It's got a lot of high margins, so there is a ton of profit potentially to be made inside of that roofing job. I know roofers will give 15 to 20% in a marketing incentive, which is an AKA kickback, right? It's the fancy term for kickback. So if you refer them a client that wants to do a roof and they contract with the insurance company for X thousands of dollars to do that roof, they're willing to kick that marketing incentive back to you of 10, 15, 20%. So it tells me, okay, this is after their profit. They still have enough meat on the bone to share that much with a referral source. That tells me there's a lot to it. And I've started to ask around people that are in the business, in the industry. I've got some friends that do it up in the Midwest, and there's a lot of opportunity for it. And so we have the staffing in place, we have the accounting, we have the people that can do it already, we have the infrastructure, is the point. And so we could potentially start offering this as a free service and then kind of figure it out along the way. I know that's a terrible thing to say in a business model, but Sometimes you have to jump in and figure it out as you go. We're not going to do it perfect in the beginning, but I'm driving down this road now to do the whole analysis of the model. I'm looking at joining their equivalent of NARPM, and they actually have a— there's a NARPM organization out there for professional roofers. And so you can join, you can join that and you can learn from them just like what we did with NARPM. That's one of my mistakes that I, that I made through Property Management World. I didn't join NARPM soon enough. And you've seen— you've been to conferences where you bump into somebody who's never been to a NARPM conference or never been to— and they, they join NARPM, they show up to a conference, they have zero doors under management, and you just want to like shake their hand and say, well done, smart move. Like, yeah, smart move to come here and learn from the very beginning how to do it right versus screwing it up and screwing it up like I did as you kind of like go with the punches. But I think that's going to be a really exciting opportunity for myself and my team because it creates other opportunities for them. In profit-sharing models and salaries and all kinds of really good stuff.

Yeah. Okay, great. So let's pretend that you've decided for sure you're starting this roofing company and, you know, you're a busy guy. I assume you're not going to be out there designing the website and inspecting the roofs like you're operating at a high level. So talk to me a little bit about how you stand up a new business, like from a delegation and management perspective. Step 1, step 2, step 3. I think the audience would really benefit from hearing a little bit about how you delegate and how you think about what are the high-value activities that I need to stay involved with, and what are the things that I can just write up a nice email to and that is now being handled by others?

Well, part of it is drawing that out, like I mentioned, and that open up a Word document and start going through that. Okay, you just mentioned website. That's going to be a bullet point that you need to address. In writing, in your thought process. And maybe that's hiring a third party. Maybe that's having one of your remote team members start up just a simple WordPress website. Maybe it's hiring PMW to do a full-blown awesome website. So just that alone, and that's why I'm talking about and drawing it out on a Word document. Okay, let's think about website. Let's think about starting an LLC and or any sort of like a corporation. Let's think about getting insurance. Let's think about staffing. Who's going to do what? Let's think about the forms you need that are involved in doing some sort of contracting for just getting a roof done. Let's think of the hardware you need. Do you need a drone to do an inspection? Let's take the software that you need to tie into that drone to do an inspection. Let's think of the ladders. Let's think of the signage. Let's think of the agreements. Let's think of the billing. Let's think of the invoicing.

I'm getting tired just thinking about all this.

That's my point. That's why you got to draw it out and realize, okay, you can't do everything at once. And so invoicing can go through our team at the accounting side and RentWorks. You have your CPA standing by. You probably already have a CPA. They can do some of the preparatory work for you. You may want to start another bank account. So you go to the bank you're existing with and start another bank account. I mean, it all starts to kind of formulate in your head as you draw it out, and that's where it becomes manageable. And so when you have it written out, it's like a business plan. It's nothing different than a business plan. It's just the way I think, because people think that you have to have a business plan before you can ever start. It's more along the lines of a running checklist.

Yeah. Or like an outline. Yeah. It's been my experience as well that this gets easier. Like, because when you started your first company, which for most of us was our property management company, you have no context for what it is to start and run a small business at all. And so you're learning everything the hard way. Like, you probably went to the bank, tried to open a bank account, and they're like, well, you need an EIN. And you're like, well, what's an EIN? They're like, well, you need to go take your LLC paperwork to the government. They're going to give you that. You're like, well, I don't have LLC paperwork. So now you're going two steps backward. But now that we've done all that, we're like, oh yeah, oh yeah. Now you go here, you do this thing on the form, you get it two days later. Then you go on the IRS website. Here's the link. You get your EIN right away. Then you go right down to the bank. I've already got a banker, just like you're saying. You can take advantage of a lot of your existing resources and relationships to really move fast and not incur a lot of startup costs and pain and time the way you did the first time around. So do you have someone on your team that's kind of like your number 2? Some people might call this like a chief of staff who can go and execute a lot of this where you're just like, I need you to do this, do this, do this, do this, do this. And they have some slack in their time to be able to execute your projects for you.

We do. And we have Melanie Thomas at the office. She's our CEO, if you want to call her that. And that's a rightful term for her because she runs everything. Really, RentWorks runs itself at this point. About 95-98% runs itself. I look at it, you know, a couple times a week. I get all the numbers, all the accounting, all the reporting's all set up and it runs. I go into the office when I'm around, you know, once a week just to say hello. But my team between Melanie and Amy, they just, they run the show. And that alleviates a lot of the headache for me having worked myself out of a job. I don't process lease agreements, I don't do walkthroughs, I don't, you know, I don't do screening, I don't talk to owners. And so the business runs itself, and it took a long time to build up to that point. To answer your question, yeah, I mean, if we get into this point where we're starting this actual new thing, then Melanie would oversee that. But it's not like I'm dumping a bunch of stuff on her plate. And she's also highly incentivized. I mean, highly incentivized, right? You cannot be afraid to pay your number two a pretty good chunk. And I would recommend any sort of profit share. And so Melanie has a profit share to where she gets a salary and then she gets a share of the profits at the end, which makes her pay attention to the gross revenue that we bring in and all the expenses. She's paying attention to that. And whatever is left at the end is the net and she gets a chunk of that. So she's highly invested in making sure we generate a lot of money and we don't spend a lot of money. I mean, that's common sense. And she's found things that have been irritating. I mean, we just recently— just, I got to tell you, Peter, we recently discovered that we had a maintenance person doing some dishonest things and that maintenance person was let go. And I don't want to mention names or get too deep into it because who knows, you know, who knows out there. But they had a shell company, they had a fake company they were funneling work to. They were executing work orders, they were putting in work orders for payment, and they were paying the shell company for work that was never completed. And this went on for quite a bit. I would say 6 months to a year. Melanie caught it because she did the spot check because she's incentivized on the—

and I bet if she hadn't been incentivized that way, she would have had no reason to dig into that. Yeah.

Yeah. That's the only way you're going to find that out is when an owner complains and saying, you know what, I paid X for that make ready and here are the pictures and nothing was ever done. Oh, really? You start looking around and like, oh my God, we already paid for that to XYZ shell vendor. And so yeah, I mean, things like this still go on even at a high-level company. We have monthly accounting oversight. We got CPAs that do quarterly and monthly reconciliations, but that's the kind of stuff that will slip through the cracks in any business. And I don't want to sound like we're perfect because I've got egg on my face to tell you that story because Even in a well-run company like what we have with great people, things like that slip through the cracks and bad things happen.

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Probably about 3 or 4 years ago.

Okay.

And I'm a dangerous person when I'm bored.

Classic visionary.

So yeah, you know, Scott Frisch said it really well, and I want to bring that up to add to your point just a second ago. He wrote The 40-Hour Work Year, and he was one of our guest speakers at PMMCon, the first one in Vegas. And he wrote The 40-Hour Work Year, as I mentioned, is a great read or listen. And he said, you got to find somebody that you're willing to accept that they can do 80% of what you can do, the 80/20 rule. And so you just have to be willing to accept that they're 20% of the time, they're not going to do it like you do it, but they're still going to find a way to get it done for 80% of that solution. And that's a mindset shift. The 40-Hour Work Year is a good listen because If you break down what you and I do, that might be fairly close. We do a quarterly meeting, so you do 4 quarters a year and you have an annual meeting. That's where he gets 40 hours a year in work is he attends a 2-day annual meeting and 3 quarterly meetings, and that's his work year. And everything else runs itself because he built it to that point.

Yeah, that's a great book. And it's been many years since I thought about or read that, but it's probably time for a reread. Okay, I want to move to one of your other businesses. So the Property Management Mastermind Podcast, fantastic show. As mentioned, I've been a guest on there. Tell me just briefly, how many episodes and how many years have you been doing that?

We're on year 6 now, and we're well above 150, 160 episodes, somewhere in there. And I end up doing about 1 a month to 2 a month, you know, anywhere from 15 to 24 a year. And a lot of it is I'm like the secret shopper for you and I. I don't want to interview people and talk about feelings and let's pat each other on the back and see how great we are. If you listen to the last few podcasts, especially when I get these vendors at conferences, I'm like, "All right, Mr. Vendor, Mrs. Vendor, sit down, tell me what you do. How's it work? What do you charge? How do I find out more?" That's kind of been the interviews recently, and that's kind of how I like rolling on a podcast because it's really self-serving. I mean, one of the interviews that we did with background resource guy, the FBI guy, we hired that dude in two different locations for background checks. And so it was kind of like the discovery call, if you will.

You're like recording the discovery call. It's great. So then I don't have to go and like, you know, book us Calendly and all that. I can just listen at 2x speed in the car. Yeah.

Yeah. And we like to interview the folks that have a lot to say about the industry that can predict and offer us good things. You see the podcasts out there or listen to them or see them or whatever, and they're just really non-eventful. And I know it's good content for them and their, their SEO world, but it's a lot of fluff. And I just, I just don't believe in that.

Yeah, I agree with that wholeheartedly. And I— folks may have noticed I haven't been recording for quite a while. I do these seasons where I try and pack 10 to 15 episodes of high-quality content, tight editing, super, you know, the best, the best guests that I bring on and I'm in alignment with you on that philosophy of quality over quantity. So you've been at it for 6 years, so that's a long time commitment. Even if it's only a few a month, that's a lot. So share, other than the sort of getting to interview vendors, like what are you getting out of it? How has it helped you? And it's been my experience that my work that sort of faces inward to the industry doesn't actually get me any clients for my property management business. Have you had a similar experience or just share a little bit more about that?

Yeah. So when I first started it, it really was— I didn't have any sort of like goals or I didn't have any sort of like agenda. I just kind of— I like talking about it, that kind of stuff. And I'm like, you know what, I'm going to start a podcast because I like talking to you. I like talking to these vendors and find out what they do and how it works. And it helps us as a property management company because I have my radar up looking at all the stuff that's going on in the world. And some of that I podcast on, some of that I don't. I didn't really have an agenda, but it did start to just morph into bigger things through the Facebook group. And then Todd Orchide poked the bear. He said, Larson, you need to go put on your own conference. And finally, I get— you can get anybody to do anything in this world if you call them blank long enough, right? You just keep poking the bear, right? And he did. And so I'm like, all right, dude, I'll go put on a conference. Let's see how it happens. And so now we're— we've done 4 iterations and, you know, next year is going to be the 5th in Nashville. And it turned out I had no agenda when I first started. I just kind of like doing it. I like talking to people about the industry, what's going on in the world. And we don't get clients from it. You know, we don't get property manager clients.

Totally different audiences.

Yeah, totally different audience. But, you know, at some point you never know what's going to pop up. I mean, somebody could just all of a sudden walk up to you and say, you know what, you've been doing this for so long. We want you to do this, we want you to do that, be a partner here, do this, do that. You know, help me get an opportunity to be a NARPM instructor. You know, I think just because they realize that I can actually put two sentences together and they figure, all right, this guy might actually know what he's talking about, and let him, let him go teach the other NARPM attendees in, in the instructor role. So good things will come out of it if you push towards it.

So perfect segue into the conference. I wanted to have you maybe give us a little taste of running a conference, and I've heard you talk about some of the good and bad on, on some of your podcasts. So running a conference is a daunting thought, right? You got to line up the hotel and the speakers and the sponsors and get people to actually sign up and figure out all the tickets and the little pamphlets and all this. Like, sounds like a lot of work. What's like the euphoric moment when— is it, you know, day one opening session? Like When is it super, super awesome fun, feel like you're on cloud nine? And what's the hellish, horrible, like you hate it every year part of it?

Good points. Yeah, really good. I'm going to use a Texas analogy here. You ready for this? You're going to like this Texas saying. It goes, you know how you end up with $1 million in the cattle business? Start with $2 million.

Yeah. Oh boy.

So it's a loss leader. All right, let me tell you this. Jordan and some of the other guys out there in the industry that have done conferences, some of the others that are out there, they, they're one and done. There's a few vendors that have tried, and you got to understand it's a break-even at best scenario just because property managers may not be willing to spend the money to do a conference.

We talked about ours has grown every—

yep, yep. Ours has grown every year. We've had higher attendance every single year, and that's documented, and we can show people that. Our audience has been both property management company owners, property management operators, in addition to the vendors, because the vendors want a good opportunity to meet those people. And the difference is we have a mastermind concept. And so you've seen it before, we've talked about it before. The difference is putting together like-minded people to be able to share and learn from each other, that whole mastermind concept, which is why the Mastermind Podcast, which is why the Mastermind Facebook group. It all goes in the same tone. The highlights and lowlights, as you would, the highlights are clearly just ending the conference on a high note and we have a really good opportunity to teach and bring people together. The lowlights is figuring out what to do next year and then realizing, oh my God, now I got to set it all up again. So I'm in that lowlight phase right now because I have to go find more speakers. I have to put together the content. It does get easier every year. I will tell you that. I have a really good conference organizer now, Carlisa, and she does all the work in the background. I pay for it, right? It does kind of suck. I got to write that check, but she does a great job in putting it all together. And at the end of the day, it's a break-even hope. I mean, you just hope to kind of break even, but I have a great time doing it. I really do. I like organizing the people. I like, you know, spending the time there at the hotel. I like meeting all the people and having a good time. And, you know, it is fun for me because if you look back and say, oh man, there's so much work, Well, we got to spend a week in a suite in Nashville this last conference, and we got to go down and hear live entertainment almost every night. It was a fun time. And so you just have to look at the positives of it.

Yeah. And I mean, you know, when I go to some of these conferences, it's like, these are all my friends, right? I mean, this is just a convenient way for them to all be in one place. You know, you can almost look at it like, well, for my convenience, they happen to all be in one city, you know, so I can just go and hang out with them. You know, works really well. And I think the longer you've been in the industry, the more true that is. I remember some of my early conferences. First conference I ever went to was a NARPM broker owner, probably would have been about 6 years ago, and it was Vegas. And I remember I knew nobody, literally zero. And so I would just sit down at random tables and chat those people up. And I remember at the time I would see folks who would not go into the sessions. They would hang out in the hallways and talk. And at the time I was always thinking like, huh, I wonder what's up with all these guys who are just hanging out in the hallways. Like, would they think they're too cool to be in these sessions? Or like, what's going on there? And of course now life has come full circle and I'm the guy who hangs out in the hallways and doesn't go in the sessions and knows like half the people at the conference. And it's really fun. So if this is your early days and you're listening to this, keep going to those conferences, man, because it gets funner and funner. The more people you know and the longer you've been going and the more involved you become in the industry, it just becomes kind of like a reunion.

Yeah, the learning curve on that. I remember this distinctly because one of the first conferences I went to was the NARPM Broker Owner, and I came back with, no kidding, 10, 12 pages of notes on a yellow pad. I was just like a note-taking nerd, and it gets less every single year. I could pull up documents now because I would take that yellow pad, I converted to a Word document, I would save it. And I would create action items out of it, almost like a to-do list or an implementation checklist. And every year it got less and less and less. So the learning curve shrinks, but there's always something you can pick up. And your goal when you go there is like, okay, I spent $3,000 to get here between plane and time and hotel and, you know, all the stuff that it takes. I'm going to find something that's going to make me $30,000 a year in business. Figure out what that is. Is that one new system? Is that saving One thing is firing a vendor. Is it hiring a vendor? I mean, what is it that's going to create that savings and/or revenue generation that's going to pay for that concert 10x? That's the mindset you got to walk into it versus like, hey, I'm just here to party, dude. Let's go. Woo-hoo! Find a way to recoup that cost.

Yeah, totally agree with that. 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 and 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, and 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. Okay, let's, uh, so last time you and I got on a podcast and hit record, it was your show. And one of the things that we kind of debated back and forth was starting a real estate brokerage. So I don't have a brokerage component to my business. All we do is just pure property management. And you kind of halfway convinced me during that episode. So it's something that keeps coming up, and that's how you know there's something there is that your mind just keeps coming back to it. So I wanted to ask you to give me the easy button, the Staples easy button for starting a brokerage with an existing sizable property management company, how do I stand this thing up? Not like the paperwork and the bank accounts and stuff, like more so who's the first hire? What do I tell them? Or, you know, what's those 3-step process to go, go down here?

There's 100% an easy button on this, and that's finding an agent. If you know an agent that'd be willing to play ball with you and take a split of, let's say, 50/50, and you could scale that split to where the more homes they sell with you under your faction, under your owners, the less they have to pay out. And so if they're 1 to 12 transactions, they might be at 50%. If they're 13 to 24 transactions, they're at 55%. And so that's what they would be taking home. But you brand it to like they're under your partnership. Call it a joint venture with Keller Williams or a joint venture with EXP, and this is my favorite agent from college, and give them access to your owners. And then they need to be calling your owners once a quarter. And I know that seems counterintuitive because the two easy steps are one, find an agent, and two, put that owner list in front of that agent and say, dude, get on the phone, lady, get on the phone, call these owners every quarter and offer them a free comparative market analysis. And if they are ready to sell, you turn around and we attempt to sell that to one of our investors. So there's a third step is you develop the investor list, hire the agent, put them in front of your owners, develop the investor list. So the ultimate intent behind that is never letting a home leave out of your inventory. You need to intercept that pass before it goes to the defensive end, meaning you need to find out if they're going to sell, intercept that sales concept, show them that you sell for a lesser commission, show them this is the benefit in selling with you. There's no time lost on the market. Show them you have an investor portfolio ready to go. 5, 10, 100 different investors that are willing and able to purchase that home and intercept that pass before it ever goes to market. That agent, you know, they're going to be thankful for the business. They need to see the bigger picture. They need to see that this can come with referrals. They need to see that anything that comes out of your faction, either from hook, crook, or other, goes back into your pocket. And if you can find that, that's the easy button without ever having to stand up a brokerage. You don't have to stand up your own brokerage.

So is this the agent that I'm looking to hire? Paint a picture of how experienced they are and like where they're at in their career.

They got to be mid-grade. They cannot be rookies. And for example, we were very lucky to hire Damian Van de Vender that he's doing our sales and he hired one of his close friends. Well, guess what? They were Air Force recruiters. They just retired. They both of them had 20-year careers in the Air Force as full-time recruiters. I cannot think of anybody else better in this world to talk to people than a recruiter.

Yeah, you never met a stranger, especially.

Yep, they've been professionally trained on how to talk to people. They understand the sales process. They understand the contact, contact, contact. They understand all of that. And so that's been very fortunate that we found somebody like that. Now again, mid-grade is my answer because you don't want the rookies, but you don't want the experienced agents. You have to work up a good agreement. There's, there's going to be a sort of a non-disclosure agreement where they can't give away your client list to somebody else. I mean, you have to kind of work it up a little bit and maybe there's a broker you want to approach to say, look, I need some training to bring on one of your agents. And then you have to have exceptions to the rule because they're going to want to sell to their grandmother. They're going to want to sell to their referrals at a different split.. And so it gets very muddy, right? How do you know that a sale is happening out of your portfolio? And it just gets a little muddy. So the best solution is absolutely bringing this in-house. Start your own little sales brokerage, have your own sales license, and put that person on a very strict agreement and make sure that every single sale that they do flows through your accounting. And that's how you police it. That's a little bit more difficult to set up than just hiring the eXp agent, the KW agent down the road. And say, look, look, person, you know, agent here, we're going to put on a 50/50 here. My owners go to work. I think that's— it's a little riskier than having the in-house.

Got it. Yeah, yeah, yeah. So with the, the split that you're talking about, do you recommend having different splits for if it was in-house versus it's their mother, or do you say just it's too complicated to track that, we're just going to split it down the middle and not worry about where it came from?

Yeah, it's too complicated to track. So put them on every single transaction that goes through the business is 50/50. Unless you figure out some sort of registration process. Like they could come to you and say, I'm registering this particular buyer, I'm registering my mother-in-law who's going to sell their home. You know, they could have the one-off exceptions with your business. But for the most part, the point of it is the closing's got to flow through you. They got to flow through you and then you can verify, hey, you just sold a property listed by Dynamic Properties, whatever the name is. That's one of your gigantic big owners. Well, there you go. That's a 50/50 split. No problem. They just sold a property listed by, you know, their mother-in-law again. And you know, without a doubt, okay, that's the one-off. That could be a freebie. That could be an 80/20, whatever you want to do.

Okay. Got it. I want to run one more thing by you. So this is an idea that pops up from time to time, which is the concept of a home property management. Some people call it like a, like a home concierge or property management for the house you live in. And there's actually a dozen or so companies that are trying this in different cities around the US. But the concept is if I'm a homeowner and I move into a house in an area that I've never lived in before, I don't know a plumber, I don't know a handyman, I don't know a roofer. And so when I need help with my property, I don't know who to call. I'm digging through Yelp reviews and taking a chance on calling a random phone number. The idea here is that you offer basically what we're already doing, which is property management, directly to homeowners. You say, "Hey, for $200 a month, sign up with us and we'll be like your landlord, except we work for you and you tell us what to do. If there's a leaking toilet or whatever, we'll get set up with access to your property. We have a network of trusted vendors and in-house employees, and we can come by and complete any repair or improvement to your home." very quick response times, and the fee is just X dollars per month plus like a 15% markup. Is this a concept you're familiar with? Is it interesting to you? Give me your, your reaction to this thought.

Been around for a long time. It's basically if you're in any sort of vacation market center, I don't know, pick some place in Lake Tahoe, great example. Okay, Lake Tahoe, California, Nevada border. There's probably a couple thousand vacation homes there. Where people go there twice in the— 2 weeks in the summer and 2 weeks in the winter, and they don't rent it out. They don't want to rent it out because they don't want people in their home. They're not— it's not a short-term rental type of a home. It's their home. It's their second home. And they need somebody to remove the snow. They need somebody to maintain the yard. They need somebody to come in and do a walkthrough once a week, twice a month, whatever it could be, just to verify no pipes have busted, change the air filter, add salt to the water softener, you know, make sure the thermostats are set correctly. I mean, just kind of all the above, maybe even doing a maid service, you know, once a month. They need that and they want that and they're willing to pay for it. So this service has been around for a long time. I don't know if what you're talking about is very prevalent in a lot of different markets just because there's Angie's List, there's all kinds of different concierge little websites out there that could find you a particular vendor that you might need in a drop of a hat. But I do think if more and more people are going to be willing to pay for it— now I'll tell you this, Peter, I would pay for it. Okay, now hear me out. If I would pay X a month for somebody to come fill my water softener, change my filters, you know, do whatever— I've got a guy that comes once a week to do my darn hot tub, you know, that sits outside. I've got a hot tub that I like, and it's a pool, hot tub, pool, all the same, you know, once a week service. So along the same lines, people are willing to pay for that if you come up with a list of services offered. And it could be à la carte. You know, they could say, I don't have a water softener, so I don't need water softener salt. It could be those types of scenarios to where they're only going to pick and choose. But I do think it's out there. And I do think millennials— no offense because you're a little younger than me— they're willing to pay for that. That is an amenity. That's an amenity that they're getting at the apartments. The apartment complexes are beating into these people's head They don't have to do a thing. You put your trash out, I'll take your trash to the curb. You see where I'm going? There's more services like that. They'll take their trash out, they'll take it to the curb, they'll do all the stuff that they got to do inside their home. Pest service, another one. They'll come do a quarterly pest service.

Yeah. Boomers would never, I feel like, because they're like, I'm not paying someone. Get out of your mind. I'm going to do it myself. But yeah, millennials and younger, they're kind of like totally different mindset. First of all, they don't know how to do any of that stuff and they don't have the tools. And second of all, they have a different approach to the value of their time, I feel like, where they're like, "Well, I'd rather spend an extra 2 hours a week on income-generating activities. Maybe that's my business, maybe it's my side hustle, maybe it's whatever, or an extra 2 hours a week with my kids versus cutting the grass, treating the pool, changing the filters, all that stuff." That trade-off makes sense to them in a way it never really would to those in the boomer generation. Just different worlds, totally different worlds that formed and shaped those mindsets and approaches to life, I guess.

[Speaker:SHAWN_BURRUS] No, I think that's a very valid business model still. Just a matter of how many rabbit holes you want to chase things down. The margins could be somewhat thin on that, but maybe not. I mean, and then you have to figure out, okay, where at $2,000 a month, F you, Peter, get out of my house. Right? At $2 a month, where do I sign? And so you need to figure out where that number is that people will be like, well, okay, you know, they think about it for a second and they just like jump on it. Yeah, that could be, that could be $50 a month, that could be $100 a month, it could be— and I do believe there's a markup for that, you know, they pay for the services that they're doing. Lawn service is another good one. A lawn service for 20 cuts a year in San Antonio could be, you know, $2,000. Right, $100 a cut, and you could negotiate with a lawn service to do it for $1,500 a year and you're paying— you're getting paid $2,000. So my point is, yeah, there's margins to be made. You can disclose top and bottom. You could do a preferred vendor discount where you make margins below the invoice and then you make a charge on top of the invoice. And that's really where you probably want to make your money. The monthly fee is to get them in the door. Where you're going to make money is on repairs and ancillary services. So if you look at it with that mindset, $10 a month, sign up here because people have talked about doing property management for free, right?

Yeah.

And you've heard this before. You've heard this before where escrow companies will do a closing for free because they want your title insurance. That's where they make their money. It's not the $300 they charge you to close escrow. It's the $3,000 you're paying for the title insurance. And so if you take that concept and apply it to this discussion, if you figure out, okay, if somebody would just be willing to pay me $20 a month, $50 a month, and then I can help them do all these services, that's where I'm going to make a decent amount of revenue. And it can lead to bigger things like home sales or full-blown management. So if you look at it like a lead generator, who cares what you charge per month? Figure out a way to make it worthwhile on the ancillaries in a future business.

I like it. Good sort of line of thinking and exploration of that idea there. Last question for today, Brad. AI. AI is a big topic right now. Are you using it in your business or personal life at all right now, or is there an area where you're exploring and you'd like to? Talk to me about it a little bit.

We're exploring the AI concept quite a bit, you know, the ChatGPT and some of the other modules that are coming out that are doing this stuff. And where it really honed in on me is we use remote team members and I want their emails and written correspondence to look and sound better, more professional. So we even talked about this on one of my podcasts where you could dictate something to ChatGPT in Spanish and then it would translate that and put it into a 500-word email. Like you could tell an owner in Spanish, We couldn't get somebody there to replace the, fix the whatever, the window, because they're 3 days out, blah, blah, blah. I'm just keeping you in the loop. And that could be converted into a very beautiful sounding email in English that would go to the owner to go back to that good communication. Because that's really what we do. I mean, we provide very good communication, but it's difficult for somebody in a second language, even though they speak great English. We've had lots of remote team members that grew up in the States and went to high school in the States. They speak great English, but they may not be the best writing professionals. I mean, we don't expect them to be Shakespeare in their writing skills, but if they can communicate the basics, okay, great. That's where I can see us as property managers really using ChatGPT along the same lines as descriptions of homes when you're marketing them. You know, you could spit out a description 3-bedroom home, 2-bath, you know, good neighborhood, good schools. And it spits out a beautifully orchestrated verbiage of something that sounds perfectly written and attractive in nature. Right. You know, just something like that. But as far as overall, like Terminator type stuff where they're going to come out and replace us as what we do as property managers, I don't see it ever happening. There's too many boots on the ground, stuff that has to happen. It's never going to really affect what we do as property managers. So again, I think we're insulated from that in a lot of different ways.

Yeah, you know, you bring up a great point about communication, and you highlighted there the importance of good communication with property owners. And man, I'll tell you, that's something I've really struggled with for 10 years now that I've been running the management company is You know, the owners pay you $100 a month, plus or minus, to manage their property, plus the ancillary fees. And I feel like there's something about this concept of like, are you paying me to manage your property or are you paying me to communicate with you? Like, I feel like the property owners get this idea that we're just standing around waiting for the phone to ring or for an email to come in and that they're paying for us to be available to answer their questions. And I just, I get so frustrated around this. And I've been back and forth and gone to both extremes here. It's like, dude, you're paying me to manage your property. Can you just let me do that? And you're not paying me to communicate eloquently with you and for a 1-hour response time. Like, you're not paying enough for that, quite frankly. You're paying for me to make sure the place doesn't burn down and get a good tenant in there and get the lease renewed. Have you struggled with this, or have you found a great solution to where the owners feel like they're being heard and getting response times that they like, but you actually have time to manage the damn property?

This is the age-old dichotomy of property management: providing a good service while keeping your sanity and making your business profitable. In the words of Bob Walters, if you remember him, he's the Australian guru, in one of his presentations that he put on 15 years ago, and this is— I listened to it back when it was recorded on CDs. I don't know if you even know what those are.

Of course I do.

You remember what a CD looks like?

I grew up listening to cassettes.

All right, all right, all right. You look so dang young. I always give you a hard time.

I'm 37. Baby face.

Yeah. Back to the Bob Walters analogy, he said, do whatever it takes to delight your clients. And so, great analogy because we try to do everything that you talked about and provide good communication and We have good response times. At the end of the day, this is where remote team members are hugely valuable, because instead of one person managing 100 homes, you could have a team of 3 people managing 100 homes. And take that to whatever scale you want. We built a pod in our system. We have 3 distinct pods in the homes that we manage. They all have like 300 to 400 homes under management, and they have teams of 2 to 3 to 4 remote team members that do nothing but client-facing emails and communication and tenant-facing communication. And so it all goes back to how do you provide good communication? And part of it is having enough people that can be there to reply during those banker's hours that we want to keep. Now, part of this too is training your owners and setting expectations up front. You've always heard this before. People harp on this all the time. You know, you have to set up proper expectations in the beginning. And that's a lot easier said than done because we want to provide that good communication. Where you're responding on a Sunday morning to an owner with a simple question. But sometimes you should refrain from that. Okay. Yeah, I know it's Sunday afternoon and they got a question. Don't respond until Monday morning. I know it's a Friday afternoon and they got just one little question that you could answer or, oh, okay, it's 7:00 at night on a Saturday and here's an owner calling you. Yeah, I'll just quickly take it. And, you know, you're setting the wrong tone. So if you take that mindset that you are a professional that a doctor would not answer your phone call at 7 o'clock on a Saturday evening, a CPA would not answer your phone call at 7 o'clock on a Saturday evening. If you take that mindset and get into those banker's hours terms, I think people are going to understand that you are the professional person. A lot of people talk about it. It's a lot easier said than done. You also hear people fib out there, and I know a very big voiced property manager who no longer is in the industry. And that person would say that if an owner called them on a Friday evening at 7:00, they would fire the owner. Right. If that owner wouldn't listen to exactly what was being told they were supposed to be doing, that person would fire the owner. And, you know, you hear stuff like that and we know it's crap. We know it's bull. Yeah. They get pushed around just like anybody else in the business. But again, going back to that communication side, if you have enough people that can cover down on the phones, cover down on the emails, and making sure that responses are being sent within a timely manner, you are providing a great service.

Love it. Great solution. Thank you, Brad. I'm going to wrap it there. This has been really fun and educational. For folks who want to follow along with your journey and what you're up to, where's the best place for them to do that?

Find us on the Property Management Mastermind website, and you can join the Facebook group. Inside of the, the Facebook group. Yeah, it is really, honestly, not to plug it, it's been a journey in that because I've had a remote team member, Jeanette, she's been the one screening those folks. So when people join that group, they get a yes or no to join, and if they look like some sort of creeper or fake or vendor, we don't let them join. And if they post junk inside the mastermind group, we delete it. And so if you want a question answered, go post it to a Facebook group. If you want to sell your property management company, post it to their Facebook.

Get ready for a lot of DMs if you post that.

No matter where it is, that's— it's a seller's market now. And of course, visit us at pmcon.com to learn more about the conference, and hopefully you can join next year with us.

Awesome. Thank you, Brad.

Yeah, appreciate it, Peter.

Thanks. 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.